The Future Of Rewards Management

Predicting what the future of rewards management will be is difficult. Futurists may have the confidence to take a stab, but I prefer to offer an opinion about what the future should hold.??

The history of rewards management includes a very long list of short-lived fads.? The literature contains a blizzard of articles heralding success by organizations using a “new” approach.? 100% of the results are positive, according to articles and consulting brochures, thereby leading practitioners to quickly adopt the panacea.? But there are three underlying flaws in doing this:??

1. The literature is biased.? No one rushes to document their failures and broadcast them to the world. And academic journal editors have no interest in publishing accounts of research studies that did not produce the expected result. This is unfortunate, since failure can generate learning and new insights.
2. People do not study history.? Most of the “new” approaches are retreaded approaches of strategies and methods that were used in the past.
3. Emulating competitors for talent can at the best make you equal to them.?

The problems created by the rush to emulate could have been avoided by basing decisions on evidence that is relevant and valid, not just easily accessible in pop literature.? If practitioners understood scientific principles underlying the validity of evidence, they would improve their batting averages.?

There are two types of validity:

1. Internal validity (the research is well designed), and

2. External validity (the results are generalizable across contexts).?

Recent claims that external rewards reduce intrinsic satisfaction are an example.? The evidence for this is based on a single lab result several years ago. It suggested that people will throw tennis balls at targets longer if you don’t pay them. The study used a convenience sample (not a random sample), was conducted over a short period and used insignificant rewards. The design was such that it might have been internally valid. But it lacked external validity (generalizability). It would not transfer well into the real world. Organizations often pay people to do things they would not do for recreation, which means the field context bears little resemblance to the lab context.? In fact, further examination of the body of field research shows that in fact external rewards, if fair and tied to performance, increase intrinsic satisfaction. The lesson in this is that practitioners not only need to base their decisions and recommendations on evidence, but that they use evidence that is valid in the context within which rewards are administered.

The second change in future rewards management should be the avoidance of assuming the cause of undesirable results is always related to rewards.? Employee attitudes surveys generally tell organizations their employees are somewhat dissatisfied with their pay.? But what is critical is to determine why.? Few organizations follow up on surveys showing pay dissatisfaction by asking “are you paid too little for what you are doing or too little for what you can do?”? If it is the latter the problem is an underutilization/career management problem, not a pay problem.? Throwing more money at employees will not fix the problem… it will just raise costs.

This does not say that defining, measuring and rewarding contributions to organizational effectiveness is not a critical pre-requisite for workforce effectiveness. It is one of the most important factors impacting decisions relative to joining and remaining with an organization. If rewards are not equitable, competitive and appropriate it will impact employee satisfaction and motivation. Yet there are other factors that have an impact: opportunity, meaningful work, fair treatment and conditions of work.

Pay equity is in the spotlight now and must be considered when designing and administering pay. Organizations need to make a commitment that three things will influence someone's pay rate: 1. the value (internal and external) of the person's role, 2. how competent that person is relative to role requirements and 3. how the person performs relative to standards. Allowing individual characteristics to have an influence is illegal and immoral. Once that commitment is made each organization must ensure it delivers on that policy commitment.

Bottom Line: Rewards management should be guided by the mission and objectives of each employer and by the context within which each of them must function. Greek philosophers advised: "know thyself" and "to thyself be true." Strategies must fit the current context, and they must be executed effectively. Changing strategies is often required to sustain alignment with the context, especially when the environment is as turbulent as it has been recently. Rather than being driven by the assumption that what worked well at a different time and in a different environment the right approach is to use an "inside - out" mindset to decide what is likely to produce the desired results in the current context and at the current time.

About the Author:?Robert Greene, PhD, is CEO at Reward $ystems, Inc., a Consulting Principal at Pontifex and a faculty member for DePaul University in their MSHR and MBA programs. Greene?speaks and teaches globally?on human resource management. His consulting practice is focused on helping organizations succeed through people. Greene has written 4 books and hundreds of articles about human resource management throughout his career.

• Strategic Talent Management: Creating The Right Workforce
• The Most Important Asset: Valuing Human Capitol
• Rewarding Performance Globally [with Fons Trompenaars]?
• Rewarding Performance: Guiding Principles; Custom Strategies?(2d Edition)