Reward your people! March 2012

Reward your people!

by Toronto Training and HR

March 2012

Contents3-4 Introduction to Toronto Training and

HR5-6 Definition7-8 In the beginning9-11 Elements of a reward system12-14 Base of rewards15-16 Totally rewarding17-18 Reward equity19-20 Questions to ask21-24 A successful reward strategy25-26 Comparison of employers’

and employees’ views on motivational rewards

27-28 Strategic reward management

29-30 What recognition needs to be31-38 Points to consider with non-

financial reward39-42 Pay and benefits during an

economic downturn43-44 Reward & recognition on a

modest budget45-46 Primary variables of

executive reward 47-48 Typical executive reward

frameworks49-50 Concerns when designing

executive rewards51-52 Expatriates53-54 Case study55-56 Conclusion and questions

Introduction

Introduction to Toronto Training and HR

• Toronto Training and HR is a specialist training and human resources consultancy headed by Timothy Holden

• 10 years in banking• 10 years in training and human resources• Freelance practitioner since 2006• The core services provided by Toronto Training and HR

are:- Training event design- Training event delivery- Reducing costs- Saving time- Improving employee engagement &

morale- Services for job seekers

Definition

What is reward management?

In the beginning…

Extrinsic and intrinsic rewards

Elements of a reward system

Elements of a reward system 1 of 2Base pay and variable pay (‘pay at risk’)

Additional pay like:Individual performance-related payBonusesIncentivesCommission

Elements of a reward system 2 of 2Service-related pay

Skill-based pay (knowledge-based pay)Competence-related payAllowancesContribution-related pay

Base of rewards

Base of rewards 1 of 2

CHOICES UPON WHICH TO BASE PAY ARE:The job basedPerson basedSkill based

Base of rewards 2 of 2

PERFORMANCE AND INCENTIVIZATION:Questions to askTypes of incentivesInternal v externalCentralized v decentralized

Totally rewarding

DefinitionsTangible and intangibleReward elements

Reward equity

Quick pollFairness-does it matter?Frequency of employee concernsView of senior managementCriteria impacting reward fairnessDrivers in determining rewardsPerceptions of reward fairness

Questions to ask

How do we set the necessary level of expenditure on employee reward?How can the substance and process of employee reward be used, if at all, to influence employee work attitudes and behaviours?

A successful reward strategy

A successful reward strategy 1 of 3

KEY PRINCIPLESRecruit and retain the right peopleInvest in themAgree clear objectivesSet standards and examplesThe paybackLink reward to the organization’s success

STRATEGIC ISSUES IN THE DESIGN OF REWARD SYSTEMSBase of rewardsPerformance and incentivization – scope for progressionMarket positionInternal versus external comparisonDegree of pay hierarchyCentralized versus decentralized reward

STRATEGIC ISSUES IN THE DESIGN OF REWARD SYSTEMSReward mixProcess issuesReward systems –consequences/integrationPerformance-related pay

Comparison of employers’ and

employees’ views on motivational rewards

Comparison of employers’ and employees’ views on

motivational rewardsAttractionRetentionMotivation

Strategic reward management

Create a positive and natural reward experience Align rewards with business goals to create a ‘win-win’ partnershipExtend people’s line of sight Integrate rewardsReward individual ongoing value with ‘base pay’Reward results with variable pay

What recognition needs to be

VisiblePrevalentMemorablePersonal and spontaneous

Points to consider with non-financial reward

Points to consider with non-financial reward 1 of 7

Evolution in employment systems is reported as creating the conditions under which what is included in the effort-reward bargain needs to be rethought, especially when managements wish to secure discretionary effort and a sense of identification among employees for whom ‘pay and benefits’ provide only part of the employer’s consideration

While flexible benefits may go some way to addressing workplace diversity issues, ideas grouped under the logic of ‘total reward’ are promoted by commentators as building blocks for still further customization, with the prospect of achieving a distinctive employment proposition

Definitions of non-financial reward are multi-faceted and often complex, requiring dissection of the elements to facilitate detailed cost-benefit analysis while simultaneously seeking to promote holistic ‘employment experience’ value greater than the sum of the parts

To interpret and evaluate the alternatives and possible consequences of a total rewards approach, it is helpful to apply multidisciplinary theoretical issues

Research findings suggest that senior managers and total rewards policy designers need to pay particular attention to front-line managers if expectations from investment in employee engagement using total rewards are not to be misplaced

Unpacking the total reward portfolio may bring tensions to the surface between the reward elements and their management, which managers need to reflect on carefully and be clear about what may be needed to mitigate/compromise on before committing to strategic decisions that may be deemed unsuitable for the organization, its principals and/or workforce members

The ethical and moral dimensions of ideological initiatives intended to secure voluntary identification between individual employees and the organization need to be understood and acted on in framing policy choice and their detailed application

Pay and benefits during an economic downturn

Pay and benefits during an economic downturn 1 of 3

In bad times, a business strategy must be seen to be fair, so have a two-way conversation with employees to ensure the package appeals to allAs things improve set rewards based on people’s impact on the organization

Be creative and consider non-financial incentives if money is tight, perhaps linked to improving work-life balanceKnow when you should reward your best people financially, however tough business isEnsure the rewards drive future skills and performance so they add value to both the individual and the organization

When trade improves scale-up your benefits to renew the psychological contract you have with your employeesDon’t ignore the need for effective workforce planningAnalyze what the downturn told you about which benefits your employees really appreciated and which do not need to be reintroduced

Reward & recognition on a modest budget

Advancement opportunitiesOfficial letter of appreciationCertificatesPaid time offLunch with the CEOTeam lunch or dinnerPublic photo displayHandwritten notes of thanks

Primary variables of executive reward

Fixed compensation independent of firm performance, versus variable reward (tied to a performance measure)Current compensation accruing at the end of the year versus deferred compensation accruing in later years

Typical executive reward frameworks

SalaryAnnual performance incentive bonusShare optionsShare awardsPension

Concerns when designing executive

rewards

Concerns when designing executive rewards

The internal environment unique to each organizationThe range of stakeholders with an interest in the organization, its governance and consequencesThe external environment that is likely to comprise factors outside the control of the organization and its managementDisclosure and transparency

Expatriates

DefinitionTypical length of assignmentHome-based salary build-up plus foreign service premium added to cash supplements for hardshipsCost of living adjustmentHousing allowanceForeign assignment allowance

Case study

Conclusion and questions

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