Reward Strategy: getting started

I am always discussing with clients the importance of taking a strategic position on reward before making changes. I believe that Reward Strategy is key. But what is it and how do you get started?

In Reward Management, Armstrong and Murlis say that reward strategy “…clarifies what the organization wants to do in the longer term to develop and implement reward policies, practices and processes that will further the achievement of its business goals. It is a declaration of intent, which establishes priorities for developing and acting on reward plans that can be aligned to business and HR strategies and to the needs of people in the organization.”

A definition I like is, “an approach to reward based on a set of coherent principles in support of the organisation’s aims.” But we know that most organisations don’t have a reward strategy. According to the CIPD 2010 Reward Management survey, only just over 1/3rd of participant organizations have a reward strategy.

It is the totality of what we do that is important and all of the elements of reward carry messages. Professor Shaun Tyson (Human Resource Strategy, 1995) talked about just that. He said, “Monetary rewards may not motivate in the long term, but they certainly symbolise the value corporations attach to specific behaviours – for example rewarding long service, interpreted as loyalty, or rewarding performance above other attributes.”

The main problem very many people have is how to get started. I was running some reward workshops recently and participants found the idea I suggested of developing a simple ‘Reward Framework’ as a great way to start. What I mean is a simple statement giving some of the organisation’s beliefs and principles on reward:

  • reward compared with other things about working in the organisation
  • what internal equity means
  • market position 
  • organisation’s ability to pay/profitability
  • the relationship between base pay and variable pay
  • position on benefits 
  • recognition and reward

This can be covered in less than a page of A4. Going through the process will raise the relevant issues that need to be agreed which will give you the framework within which you can develop change. The framework can be used as part of the change management process. If you are one of the majority of organisations without a reward strategy. Try it. It’s a great way to start.

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