Your REWARD STRATEGY can be a powerful tool

You can utilise your reward strategy to achieve the organisation’s strategy.

A total reward strategy aims to provide an integrated approach for reward management that effectively attracts, motivates, engages and retains the talent required to achieve the desired organisation results. To align reward practices with organisation strategy to ensure they serve the organisation objectives. To adhere to legal, ethical and best practices standards and to reflect corporate governance and citizenship.

What are the objectives of the reward strategy?

? It needs to support and be derived from the organisation strategy;

? Driving sustainable improvements in organisation performance;

? Brings about and reinforces cultural and behavioural change;

? Keeps the payroll costs under control;

? Joins together all parts in a mutually supportive way to support the organisation strategy from which it is derived;

? Integrates with other HR policies and practices;

? Impacts the culture of the organisation and behaviour of individuals; and

? It has a clear line of sight between individual efforts and improved corporate performance.

How do we then align the reward strategy?

? Total reward encompasses everything the employees’ value in their employee relationship;

? Total reward elements include Remuneration, Benefits, Work-life benefits, Performance and recognition, and Development and career opportunities;

? It is a holistic approach that aligns with the organisational strategy and the people strategy;

? The people strategy drives productivity by attracting talent and the reward strategy is complimentary and enables employees to manage their lives more easily;

? Reward programmes are best designed and implemented after the alignment of the people and organisation strategy;

? Aligning the organisation strategy, people strategy and total rewards requires education, communication and commitment from the organisation leaders and their teams;

? Reward programmes need to be selected that complement the organisation’s values and culture; and

? Conducting of a stakeholder analysis with Shareholders, Management, Employees, Unions, Customers, Remuneration and Audit Committee, Regulators and the Community.

What is the power of alignment?

? A strategic partnership starts emerging between Senior Management and Human Resources;

? It bridges the gap between the workforce skills and future required skills essential for achieving the organisational goals;

? Managing the change will ensure greater performance expectations and accountability; and

? Human Resources serves as a change agent helping to reveal workforce synergies with everyone focussed on achieving the organisational goals.

What are the causes of misalignment?

? Compartmentalised thinking from HR leaders - HR professionals exclude remuneration input or include reward professionals too late

? Sensitivity of reward programmes - Leadership may be reluctant to make adjustments that could reduce accountability or impact internal and external equity dynamics

? Lack of flexibility in core policy - Reward policy over-controlled by experts to create consistency rather than have the flexibility to respond to differentiated organisation needs

? Legacy of reward and metrics complexity - Trying to emphasise too many things and lack focus on profitable and sustainable growth

What are the effects of misalignment?

? Individual performance targets compete with the goals of the organisation strategy

? Roles and responsibilities are confused or continue to be aligned around an old organisational design

? Decisions are made to optimise performance in one division contrary to the needs of the larger organisation

? Organisations are slow to act and burdened with internal conflicts

? Leaders resist change

? Employees start to question the possible economic impact on them

The Galbraith Star Model

This model aims to align the structure, process, people and rewards within the organisation strategy.

What are the common mistakes made when formulating the reward strategy?

? Starting at the end – Be clear about the kind of employee behaviour which will be required by the organisation strategy.

? Having no success criteria – The key element of having a reward system that contributes to the delivery of organisation strategy is the existence of a clear set of principles that support the chosen approach.

? Trusting the organisation strategy – Organisation strategy that is not clear enough or changes often makes aligning of the reward strategy all the more difficult.

? Equating complexity with flexibility – The pursuit of flexibility has frequently resulted in more complexity. Overcomplicated reward systems violate the simplicity requirement. Simplicity is critical for employees and managers to link performance and reward.

? Confusing speed with haste – Doing too much too quickly and too frequently results in cultural, financial and employee relational difficulties.

? Focusing only on excellence – This ignores the fact that the success of the organisation depends on the efforts of 80% of employees who are performing satisfactorily. Reward systems should allow the organisation to reward improvements in performance among the majority.

? Ignoring proper pay architecture – Organisations then end up debating about 5% of payroll costs when the reward is linked to performance. The grading structure or pay architecture then doesn’t get the proper focus.

? Failing to get real buy-in – Reward can be a very powerful instrument in organisations. If organisations, however, fail to achieve the proper leverage from it, it is often because not enough buy-in was received beforehand.

? Having too much faith in line managers – Avoid designing a reward system that is beyond the capacity of the average line manager.

? Failing to integrate reward with the other components of HR – This manifests itself in mild frustration that reward strategy is not leading to the expected results.

“First published in HR Future (December 2020)”

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