Ch11 Reward Strategy

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Reward strategy is a declaration of intent that defines what theorganization wants to do in the longer term to develop and implementreward policies, practices and processes that will further theachievement of its business goals and meet the needs of its stakeholders.

Reward strategy provides a sense of purpose and direction and aframework for developing reward policies, practices and processes. It isbased on an understanding of the needs of the organization and itsemployees and how they can best be satisfied. It is also concerned withdeveloping the values of the organization on how people should berewarded and formulating guiding principles that will ensure that these

values are enacted.

Reward strategy is underpinned by a reward philosophy, which expresseswhat the organization believes should be the basis upon which peopleare valued and rewarded. Reward philosophies are often articulated asguiding principles.


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You must have some idea where you are going, or how do youknow how to get there, and how do you know that you havearrived (if you ever do)?

Pay costs in most organizations are by far the largest item ofexpense they can be 60 per cent and often much more in

labour-intensive organizations so doesnt it make sense tothink about how they should be managed and invested in thelonger term?

There can be a positive relationship between rewards, in thebroadest sense, and performance, so shouldnt we think about

how we can strengthen that link? The real benefit in reward strategies lies in complex linkageswith other human resource management policies and practices.Isnt this a good reason for developing a reward strategicframework that indicates how reward processes will be linked toHR processes so that they are coherent and mutuallysupportive?


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Reward strategy will be characterised by diversity and conditioned both bythe legacy of the past and the realities of the future. All reward strategiesare different, just as all organizations are different.

Similar aspects of reward will be covered in the strategies of differentorganizations but they will be treated differently in accordance with

variations between organizations in their contexts, strategies and cultures. Reward strategists may have a clear idea of what needs to be done but

they have to take account of the views of top management and beprepared to persuade them with convincing arguments that action needsto be taken.

They have to take particular account of financial considerations the

concept of affordability looms large in the minds of chief executives andfinancial directors, who will need to be convinced that an investment inrewards will pay off.

They also have to convince employees and their representatives that thereward strategy will meet their needs as well as business needs.


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Reward strategy should be based on a detailedanalysis of the present arrangements for reward,which includes a statement of their strengths and

weaknesses. This could take the form of a gap analysis, which

compares what it is believed should be happeningwith what is happening and indicates which gapsneed to be filled.

A diagnosis should be made of the reasons for anygaps or problems so that decisions can be made onwhat needs to be done to overcome them.


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1.Astatement of intentionsthe reward initiatives that it is proposedshould be taken.

2.Arationalethe reasons why the proposals are being made. The rationaleshould make out the business case for the proposals, indicating how theywill meet business needs and setting out the costs and the benefits. It

should also refer to any people issues that need to be addressed and howthe strategy will deal with them. 3.A planhow, when and by whom the reward initiatives will be

implemented. The plan should indicate what steps will need to be takenand should take account of resource constraints and the need forcommunications, involvement and training. The priorities attached to

each element of the strategy should be indicated and a timetable forimplementation should be drawn up. The plan should state who will beresponsible for the development and implementation of the strategy.

4.A definition of guiding principlesthe values that it is believed should beadopted in formulating and implementing the strategy.


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Broad-brush reward strategy Specific reward initiatives


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A broad-brush reward strategy may commit theorganization to the pursuit of a total rewards

policy. The basic aim might be to achieve an

appropriate balance between financial and non-financial

rewards.

the development of the employment relationship andthe work environment that will enhance commitment

and engagement and provide more opportunities for the

contribution of people to be valued and recognized.


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Documents

Ch11 Reward Strategy