Reward Strategy – What are the Challenges of Implementing the Strategy?

Findings from this year’s CIPD Reward Management survey reveal that only 35% of employers have a written reward strategy. This may come as a surprise given that 90% of employers have a business strategy and for the same group, 64% have an HR strategy. Is there a mismatch between the rhetoric of ‘strategic reward’ and the challenges of implementing the practice?

In some organisations, including smaller companies, the business and HR strategy may incorporate reward i.e. what and how the organisation wants to reward and how this fits into the ‘bigger picture’. Of course, while some organisations do not have a documented strategy, this does not prevent effective reward practices. Experience and evidence shows that size does make a difference where over half of the large companies (5,000 employees or more) have a written strategy compared to 20% for small organisations with less than 50 people.

What do we mean by Reward Strategy?

At the very least, it needs to connect the different reward strands into a coherent strategy. An effective strategy ensures that employees are rewarded for delivering your organisation’s goals and strategies in the culture and environment in which it operates. Clear communications on what your organisation wants to reward and what it doesn’t will need to form an integral part of a successful implementation.

What prevents organisations from implementing a successful strategy?

According to the 2006 Reward Management survey, the overriding inhibitor is the skills and abilities of line managers in implementation. Other key reasons are insufficient communication and the attitudes of employees, line managers and the top team.

In the wider world of reward, they have been the subject of dissent by academics such as Professor John Purcell who referred to some as ‘an illusion in the Boardroom’. However there is evidence that when successfully implemented, they increase shareholder value.

How can you develop a reward strategy? Read the Tips section below for more details.

Just News

Is length of service a justifiable criterion for higher pay rates? The recent decision by the European Court of Justice (ECJ) following the tribunal brought on 'equal' pay grounds has raised challenges for the new Age legislation introduced this month. In the case of Cadman v HSE rewarding experience that "enables a worker to perform his duties better" was considered to be a legitimate objective of pay policy unless the employee can show that there are "serious doubts" about the reason for the extra pay or reward. This decision and its caveat will raise challenges on the future handling of reward based on length of service.

How many people earn the National Minimum Wage across the European Union? 1st October 2006 saw the adult National Minimum Wage (NMW) in the UK increase from £5.05 to £5.35 an hour. While this rise has received strong media coverage, this pay rate accounts for less than 3% of full-time workers in the UK and 1.4% in USA. This is a sharp contrast to countries such as France, Romania and Luxembourg where 12% or more full-time employees receive the National Minimum Wage.

Website of the Month

Each month, we give you a quick round up of a website. For October, we’ll have a look at www.cipd.co.uk.

While the CIPD website is well known by most HR Professionals, how many take full advantage of the website resources? We'd like to highlight some specific areas of the website – Pay & Reward, ‘Communities’ and the CIPD London based Reward Network. The first one offers a range of free resources from employee benefits, reward strategy, equal pay to the national minimum wage. If you haven’t looked at their fact sheet resources recently try the one of Total Reward – it is well researched, clearly defined and talks about what a Total Reward scheme would include. Other fact sheets cover popular topics such as the Flexible Benefits fact sheet which has been updated to incorporate the latest thinking and current practice.

Free to download are the annual CIPD Reward Management survey and the CIPD Recruitment, Retention and Turnover survey. It is interesting to see how widely these surveys get reported by recruitment providers as well as Reward & HR practitioners gathering evidence to support approval of a business case.

If you would like to join online discussions on reward or other HR topics, try out the Communities part of the website. Online discussions, which are only accessible to members, provides a useful way to tackle a basic question such as ‘What salary surveys would you recommend for the insurance sector?’ to challenges such as ‘How can you use reward to increase level of employee engagement?’

Finally, check out the CIPD Reward SIG (special interest group) which meets in London four times a year, where you can network with other Reward and HR professionals and discuss issues with an expert guest speaker.

9 Steps to Developing your Reward Strategy

Step 1 Clarify key organisational issues that impact reward policies and practices. Establish rationale for introducing the strategy – be clear on how it will benefit your organisation and employees. How does it fit with HR and business strategies and your existing reward?

Step 2 Identify critical success factors (CSF) of your organisation.

Step 3 Review your existing reward practices.

Step 4 Get input from your employees and other stakeholders. Ensure that the input is representative across the organisation.

Step 5 Set reward goals. This will be based on the outputs of steps 1 to 4 described above. This step will account for the requirement of the reward strategy to fit your organisational culture and goals.

Step 6 Review external trends and practices. This review needs to be wide ranging, taking account of government policy, economic indices etc.

Step 7 Assess organisational fit. Take account of existing your HR and reward practices in relational to organisation culture and planned reward strategy.

Step 8 Review and get approval for the proposed reward strategy incorporating stakeholder feedback prior to approval.

Step 9 Communicate and implement your reward strategy.

Please note that this advice is provided as guidance only. If you need specific advice on developing a reward strategy for your organisation, please call us on + 44 (0) 1367 710 618.