Reward management - Environment #rewardstrategy #rewardandrecognition #swotanalysis #pestlee #management #employeeengagement
Reward management consists in a complex process built on a clear strategy, philosophy and guidelines. Michael Armstrong and Stephen Taylor (2020) define reward management as a balanced compound of strategies, policies and practices with objective of appreciation of personal and team reached goals. (Michael Armstrong and Stephen Taylor, 2020, P. 473)
According to Michael Armstrong and Duncan Brown the strategic view over the reward system is necessary because: company goals and reward, if reached, offer an overview over the future, “a sense of purpose”, designs the process of it, steps and accountabilities and alignment between company goals and efforts, with rewards. (Michael Armstrong and Duncan Brown, 2001, P. 6). According to same authors, the strategic approaches to reward could consist into remodeling one or more of the following changes: changing the pay design, the pay plan, the performance management processes, increasing flexibility, etc. (Michael Armstrong and Duncan Brown, 2001, P. 7).
One of the first things that one should do before starting to work on a reward strategy, is to analyze the company environment, but also to observe everything that surrounds the company factors (analyzing the "interior world"). Establishing the ground environment is important for a deeper understanding of the needs you have within your organization. With the same importance and efficiency is analyzing the “exterior world” – industry, salary benchmarking, labor code, political and social environment.
In order to collect detailed and useful information one can use two well-known systems: SWOT and PESTLEE.
SWOT provides valuable inputs regarding the company culture and general reward practices, but also regarding the employees’ feed-back about them. This is how during my experience, I managed to analyze and extract the best received practices, the ones which motivated people constantly and I extracted the items that proved to bring low to no effect over people motivation.
Strengths – what do we do well? What are the unique approaches that we have had and are highly appreciated by our team? What others consider as being a strength regarding our reward system? In my experience, answers to these inside questions are revealed by the recurrent one on one meetings between HR and each employee.
Weaknesses – Most common are: lack of constant feedback, unclear image regarding business objective, often changings into roadmaps, often changes into organization chart, no remote working opportunities, work from home opportunities with limitations.
Opportunities – Most common are: a lot of internal promotion and learning opportunities. Another opportunity would be, during the pandemic lock-down, most of us, had to implement and observe the benefits of remote or work from home – we realized people are more productive when working from home. This “forced” experiment showed us that people can work in teams, even from distance and the results were amazing – business growth. Another opportunity can be implementation of constant and recurrent feedback, as a KPI.
Threats – In a pandemic context, we can react efficient: we implemented and offered continuous work from home program, remote teamwork activities, people were more productive and the business growth.
Opportunities and Threats could also be linked with the external environment and I collected extra details about them via the second tool. As stated above, for the purpose of initiating a reward strategy, it is essential to perform a research analysis showing internal and external factors that can influence decisions in reward management. PESTLEE is an analytical tool that uncovers the big picture of a matter you want to evaluate. This tool comes in handy in my activity and can cover the factors of influencing the decisions regarding reward process, such as:
- Political: Changes into tax legislation (the increase of employment taxes)
- Economical: Alignment with market benchmarking, inflation and exchange rate (growth trend)
- Social: Promoting a culture of teamwork
- Technological: Offering latest work equipment and technologies
- Legal: Alignment with law requirements; offering tax deduction for IT personnel
- Environmental: New, modern and practical workspace; social sustainability
- Ethical: Establish, communicate and promote organizational values and culture
The reasons behind these factors are numerous and trending on our local employment market, but some, also on international level. The law regarding tax legislation is pending in Parliament and will bring a lot of changes in salaries and benefits; the inflation in Romania is very high so every year it is important to take it into consideration; same for benchmarking – it is very important to sustain the market trend in terms of salaries and benefits, as the employment market and competitivity are increasing constantly. Social, technological and environmental factors became very popular amongst employees, lately. Offering a new modern workspace and facilities, working with latest technologies and promoting team bonding activities are benefits that most employees value and expected, as default. Offering tax deduction (for certain positions) and having a healthy set of values within company, are also essential benefits.
All these factors and trends are impacting the reward decision and should be taken into consideration in any company reward process. It is mandatory to start with this kind of research over the market and within company, to align it with the business needs and to improve the reward management process, periodically. The business drivers for making reward decisions within the research might be connected with:
- A fast-growing curve, in a short amount of time
- Important changes were made as part of the transition from start-up to mid-size corporation
- Business performance increased exponentially
- Industry specifics
- High competition within the same industry
- Market performance objective: e.g.: becoming number one provider of services
Another key towards an efficient reward strategy is using several sources of reward intelligence. For example, use salary surveys, benchmarking, labor market statistics, internal satisfaction survey and exit interviews. In my practice, I check these metrics annually in order to stay in touch with latest news and trends. These reward intelligences are relevant in order to keep yourself updated with salaries and benefit packages, with the objective to strengthen your employment brand place on the market.
All this data should be analyzed each year and presented to stakeholders in order to sustain reward strategy with changes into salary increases and updates to the benefit package. Next step is to schedule a meeting with line managers and present them the market trends, reward process and procedure and receive feedback and inputs. A meeting with stakeholders is mandatory to collect different information about business goals and to align them with the planned reward strategy. Final step is for stakeholders to analyze the proposal and confirm the budget modifications.
In conclusion, it is essential to start a reward strategy by knowing your “surroundings”: apply some analyzing tool (whatever fits your activity) and find out about latest internal feedback (through surveys, exist interviews) about the reward strategy, check market trends, benchmarking, specific industry trends, etc. All these factors are impacting decisions together with the established business drivers and set base for the reward strategy. The objectives of reward strategy should be aligned with budget, making it affordable, aligned with business objectives, fair, transparent, challenging and motivating for employees. (CIPD, 2020)
Good luck :)!
Aida Dinu