Many organizations continue to acknowledge employees as the most critical assets. They have adopted reward schemes to attract, retain, and motivate staff to derive maximum benefits from their knowledge and expertise (Afsar et al., 2018). Reward strategy focuses on the design and execution of reward programs and practices to support and advance organizational goals (Gilmore & Glennon, 2020). Corporations seek to get the most value out of rewards, reward management, pay, and risks. As they engage the employees, organizations balance other stakeholder interests, especially those of shareholders and customers, to drive value and maintain a competitive edge in the market. HR departments should progressively innovate ways of rewarding employees to make them feel part of the organization and give the best they can. Satisfied employees can align their goals with those of the organization for mutual benefits. Benchmarking with the best practices in the industry can be an effective way of rewarding staff members to make them feel appreciated and enhance the retention rate. Numerous studies focus on reward management and how organizations can use it to enhance performance and drive value (Malik et al., 2019; Osborne & Hammoud, 2017; Smith et al., 2019). The report investigates the reward environment of an organization the researcher is aware of, focusing on the context and key perspectives informing decisions, reward principles, and line managers’ role in determining the appropriate actions.
Context and Key Perspectives
Internal and External Factors
Organizations need to consider various forces affecting the reward strategy in the internal and external environment to make appropriate choices. The stakeholder theory can be an appropriate framework for evaluating the internal factors determining the organization’s reward choices. It involves determining all the key players’ input in developing a reward strategy (Malik et al., 2019). Organizational capabilities, such as financial strength, determine the strategic reward choices. Top management balances shareholders’ and employees’ interests to ensure that rewards do not hurt corporate profits. The dynamics of costs versus revenue play a critical role in determining rewards (Gilmore & Glennon, 2020). The finance team should regularly update the management team to ascertain various employee rewards’ financial viability. Internal staff unions play a vital role in determining rewards offered to employees because they have the power to negotiate (Malik et al., 2019). Other employee factors, such as turnover, may also determine the reward schemes. For example, a firm experiencing a high labor turnover can review its salaries and bonuses to increase the retention rate.
Organizations operate in complex and dynamic economic, political, technological, social, environmental, and legal environments affecting their operations. Therefore, PESTEL analysis can help identify various external factors informing the reward decisions. Governments develop laws and regulations requiring organizations to provide specific benefits to employees, such as pension contributions and medical insurance covers (Gilmore & Glennon, 2020). Some jurisdictions have a minimum wage, specifying a threshold that all employers must meet when compensating their employees. The country’s economic condition also determines the reward choices an organization makes. For instance, workers in developed nations earn higher salaries than those in developing and underdeveloped countries. Organizations are likely to give higher bonuses and related rewards in times of good economic performance. The environment in which an organization operates also determines the rewards. For example, an employer may try to match the competitor reward programs to avoid losing the best talent.
Impact of Business Drivers
Business drivers play a vital role in determining the reward decisions an organization makes. For instance, the number of products sold in a given period determines the revenues generated and profits, thus influencing bonuses and other rewards (Osborne & Hammoud, 2017). All other business drivers, such as the number of stores, salespersons, and operational costs, determine influence rewards because they affect an organization’s income and financial stability. An organization should consider improving employee rewards every time it adopts a new business driver to boost growth. For example, promoting current staff members to take on leadership roles in a new store can boost their motivation and enhance performance. A promoted employee feels that the employer values his/her efforts and may work harder to gain more benefits. A firm should leverage economies of scale to cut operational costs and share the benefits with employees by enhancing rewards.
Gathering and Presenting Reward Intelligence
Organizations need to gather reward intelligence to develop competitive remuneration systems meeting or exceeding employee expectations. Intelligence is not freely available or requires a certain degree of filtering, processing, and structuring to make it relevant and usable (Panghe, 2021). HR departments should ensure that reward decision are data-driven and well documented for the employer and the employees’ benefit. In the age of big data, HR professionals should use technology to gather relevant data to guide critical decisions, including reward strategies and policies. Working with data scientists and other experts can help gain meaningful insights from data. There are multiple ways of gathering reward intelligence to find efficient and reliable information to meet specific organizational needs.
Salary surveys from dedicated HR consultancy firms remain the most common form of rewards intelligence. They are useful because they provide qualitative and quantitative data relating to the market, which can be used to develop advanced comparisons and customize jobs (Panghe, 2021). An employer should use a salary survey providing information about the competitors to develop a competitive reward system. Surveys from reliable consulting firms, such as PwC, Korn Ferry, and Towers Watson are available online (Panghe, 2021). They may not respond accurately to specific business needs but may inform an employer about the competitors’ payment systems and other rewards. It is critical to evaluate the frequency of collecting data and the validation period before availing it publicly.
In most cases, the data is collected annually and availed several months later after validation. In some dynamic situations, the long process makes the data obsolete by the time it gets to the users (Panghe, 2021). It is critical to ascertain the validity and reliability of data before using it to make a reward decision. For example, a salary survey report developed five years ago may not be useful when designing a remuneration package for employees. Organizations should only use recent surveys because they provide relevant information that may reflect the current market trends.
Local surveys can also help collect reward intelligence data to understand a given labor market. Compensation differs significantly across geographies, especially in jobs requiring a physical presence, but globalization has changed the trends because of the increased remote work (Panghe, 2021). Therefore, an organization establishing new subsidiaries may need to conduct local surveys to get specific compensation and other employee rewards in given settings. The information gathered in a local survey may be analyzed and presented in an insightful report. An employer may use the HR department to conduct the survey or outsource the consulting firms’ services. Designing effective survey instruments can help acquire useful data. However, there are instances when an HR department may have to conduct confidential interviews because some information may not be provided through mailed questionnaires. Ethical research practices, such as ensuring respondent privacy and confidentiality, are critical success factors. For example, an interviewer should seek all respondents’ consent and specify how s/he intends to use the acquired information.
Recruitment data can be a critical source of reward intelligence, especially for organizations with an applicant tracking system. Some organizations record reward data obtained from candidate discussions on spreadsheets or databases and align their reward schemes with the industry averages (Panghe, 2021). Different candidates provide varying data because rewards differ based on their current work settings, education, and experience, among other critical indicators. Freelance recruiters and other recruitment agencies provide crucial information relating to employee rewards. Reward intelligence from recruitment data can provide knowledge of the factors attracting candidates to an employer. For example, people may be applying to work in a given company to get a higher salary. Asking all applicants to disclose their salaries in the current work settings during recruitment can help an organization create a useful database indicating the current reward levels. Setting rewards slightly above market averages can attract and retain the best talent.
Job advertisements published in newspapers, job posting sites, Glassdoor, Linked In, and other media publications are critical sources of reward intelligence. The ads may contain a detailed description of the rewards package, especially for entry-level jobs (Panghe, 2021). An employer can also participate in job fairs to gather information about the labor market and candidate expectations. Public information, free reports, and informal networks can provide meaningful reward intelligence. Organizations such as PwC, BCG, and Deloitte provide insightful reports about the labor market (Panghe, 2021). These organizations are likely to publish such reports to obtain the latest information that can provide useful insights. There are numerous social media groups where professionals provide advice, but there are restrictions on the kind of data an individual can get. Friends and acquaintances from other companies can also provide useful information. It is critical to be honest and transparent when collecting the data and specify its purpose. Asking the consent of respondents is essential before collecting the data.
Apart from the salary surveys, most of the information exists in unstructured forms, making it critical for HR professionals to have analytical skills to gain meaningful insights from data. Large amounts of data can be overwhelming, making it challenging for a professional to make sense of it (Panghe, 2021). An organization should stick to what is essential when gathering reward intelligence to avoid the risk of obtaining too complicated non-informative data. Some useful information relates to the base salary, long-term compensation plans, annual guarantee payments, tax waivers and facilities, and types of support offered in special situations. Information relating to other employee benefits, such as cars, gym, cafeteria, and flexible and remote working plans, may also be crucial.
Key Reward Principles
The total rewards principle covers all the tangible and intangible aspects of work that staff value and may be part of the overall reward strategy (Gascoigne, 2019). Tangible benefits are concrete, visible, and easy to measure, such as financial remunerations and incentives (Graham & Cascio, 2018). Intangible benefits are less observable and difficult to measure in numerical or financial terms. They emerge from the social environment, such as leadership and relationships with colleagues. An effective rewards scheme should feature tangible and intangible rewards to boost employee motivation and drive value in an organization. Collaboration at all levels of a firm is critical to designing and implementing an effective reward program.
Strategic reward refers to the design and execution of reward policies and practices supporting organizational and people’s objectives and staff aspirations (Graham & Cascio, 2018). There is a significant link between strategic and total reward because many employers may use the latter to inform their tactical approach to reward. For instance, numerous organizations combine innovative learning programs and flexible working plans with traditional pay and benefits schemes in staff recruitment and retention to realize strategic goals. A firm should regularly review its design policies and practices to reflect market trends. A total rewards approach balancing tangible and intangible benefits can promote extrinsic and intrinsic motivation in the workforce. It can also help attract and retain the best talent, which is critical to innovation and change.
Organizations face complex workforces characterized by diversity in race, gender, and age. Total rewards can partly affect employee empowerment leading to beneficial cultural implications (Gascoigne, 2019). For instance, some staff members, such as millennials, may be interested in flexible working hours. Therefore, a rewards scheme addressing various staff members’ needs will nurture an empowered workforce and maximize value to the employer. The benefits will motivate an organization to regularly review the rewards scheme to capture various staff groups’ needs and desires. Outsourcing HR experts’ services can help design a vibrant total rewards program, responding to employee demands. An organization that meets or exceeds employee expectations is likely to promote performance and realize its strategic goals and objectives.
Equity, Fairness, Consistency, and Transparency
The implementation of reward policies and practices should adhere to ethical principles of equity, fairness, consistency, and transparency. Unlike in the past, when contracts detailing an employee’s pay were strictly private and confidential, progressive companies embrace complete pay transparency (Gascoigne, 2019). For example, an organization can ensure salary openness by disclosing the formula used to calculate an employee’s salary. The practice motivates staff to work harder and seek career growth, which drives organizational performance. Thomas (2019) argues that employers have to ensure pay transparency to meet the rapidly changing workplace demands and employee expectations.
Current political campaigns indicate that organizations need to focus on transparency in all reward schemes. Legislators are likely to develop laws requiring employers to disclose their salary scales to protect workers from discrimination in remuneration. For example, there are concerns that workers with the same qualifications and doing the same job may earn different salaries because of discrimination based on gender, race, ethnicity, and other demographic features (Gascoigne, 2019). Transparent reward programs can address such disparities because no employer would want to be seen as discriminating. After all, such a reputation can demotivate job seekers.
Transparency can provide a sense of fairness and equity to an employer brand. Equity refers to the extent to which the rewards an employer gives are a reflection of the local market’s reality (Graham & Cascio, 2018). Employee turnover studies indicate that the perception of whether compensation is fair relative to peers and the market is more influential than the absolute value in determining whether people will leave their organizations for pay-related issues (Thomas, 2019). Fairness is too complex to be quantified, but reward incentives and practices should be equitable. They should also be consistent to ensure that employees understand what to expect for their service to an organization.
Extrinsic and Intrinsic Rewards
Organizations strive to push employee contribution to sustain good performance and survive the competitive markets. Understanding the factors driving employee motivation is crucial to realizing strategic goals and objectives (Malik et al., 2019). Successful organizations have used extrinsic and extrinsic rewards to motivate their workforces and derive meaningful benefits.
There are various extrinsic rewards motivating employees to provide the best performance and drive their organizations towards success. They are the tangible benefits an employer gives the employees as compensation for the services rendered (Malik et al., 2019). The benefits are usually financial and may include salaries, bonuses, and pay raises. External rewards were useful in pushing worker performance in the earlier years when work was routine and bureaucratic (Pang & Lu, 2018). Following rules, regulations, and procedures were paramount at the time. Although a focus on intrinsic rewards has escalated in recent years, many workers continue to value extrinsic rewards, and unfair pay can be a significant de-motivator.
There are various intrinsic rewards for improving employee contribution and sustained organizational performance. A sense of meaningfulness is a critical factor in determining an employee’s productivity in a given work setting. It defines the importance of the purpose a worker is trying to fulfill (Bailey et al., 2019). Employees should feel that they can accomplish something useful that matters in the larger context of things. Those feeling to be on a path worth their time and energy have a strong sense of purpose and direction, motivating them to do their best and supporting organizational growth.
A sense of choice is a critical intrinsic reward giving employees the freedom to choose what to accomplish in their jobs. Many employers provide clear job descriptions defining what each staff member should accomplish (Alshathry et al., 2017). They also assign supervisors to monitor every employee’s work and provide an appropriate appraisal. However, a significant change has occurred according to which staff members must work under minimum supervision and drive innovation in their organizations (Afsar & Umrani, 2019). Therefore, workers in current settings feel they own their work and decide what to do at a given time to realize individual and organizational goals.
A sense of competence is a valuable intrinsic reward making employees feel that they are handling their work activities well. Motivated workers feel that their performance meets or exceeds personal standards, which should amount to quality work (Bailey et al., 2019). They also develop a sense of pride and satisfaction in handling tasks, making them feel obligated to deliver the best. Both the employee and the employer benefit from the intrinsic reward.
A sense of progress is a positive intrinsic reward through which an employee feels encouraged that his/her efforts can accomplish something valuable. They also feel that their work is on the right track and direction, giving them confidence about their choices (Bailey et al., 2019). Such employees strive to maintain high-performance standards critical to an organization’s success.
Implementation of Reward Policy Initiatives and Practices in the Selected Organizations
The organization selected is among the most admired globally because of its innovative products. It also offers employees financial and non-financial benefits to accommodate their different tastes and preferences. It implements reward policy initiatives and practices to meet employee needs at all levels of Maslow’s hierarchy, a theory of human motivation defining five categories of needs dictating a person’s behavior. They include physiological needs (food, shelter, clothing, health, and reproduction), safety needs (physical, financial, and emotional stability), and love and belonging needs (friendship and family needs). Others include esteem needs (accomplishments and respect), and self-actualization needs, which entail fulfilling an individual’s potential (Maslow, 2019). Merit determines the performance pay for staff at management and other levels, reaching up to 25 percent of the base salary. The objective is to compensate employees who strive to do their best to realize the corporate strategic objectives.
The company offers employees a range of products at discounted prices to boost their motivation and enhance their ability to sell. For instance, staff members owning the devices understand their functionalities, making it easier to explain and demonstrate how they work to potential customers. The organization rewards volunteers, encouraging employees to uphold new programs and drive change. The corporation does not micromanage staff, which has enhanced job satisfaction and nurtured leadership skills in the workforce. Most of the people working for the company require minimal or no supervision. Many people have claimed that their jobs are rewarding because they are part of a big project helping solve people’s problems. The culture encourages newly hired staff to be enthusiastic about their roles.
Although the organization has adopted remarkable reward policy initiatives and practices, there are critical issues it needs to address to ensure better outcomes. For instance, some staff members have cited historical engagement issues requiring the adjustment of the reward and recognition system. The organization needs to facilitate employees’ work-life balance to align their interests with Maslow’s hierarchy of needs. Providing flexible and remote working programs, encouraging breaks, reviewing workloads, and offering volunteering opportunities are strategies the company can use to promote work-life balance (Smith et al., 2019). Communicating with employees regularly about their welfare and taking their suggestions about possible improvements can also promote work-life balance.
Some employees have also expressed concerns that they do not feel like they are part of the company. The company provided restricted stock units to most staff members in the previous financial year. Adjusting the reward programs to fix the issues can reinforce its intentions to attract and retain the best talents. For instance, the management can consider offering company stocks to all employees at discounted prices. As shareholders, employees will be motivated to deliver more than when they are just treated as people compensated for their efforts through salaries. An organization served by people who own it is more likely to realize its objectives because of the communal effort and intrinsic motivation for success (Afsar et al., 2018). Considering employee views in critical decision-making, such as departmental promotions, can also enhance belongingness and facilitate success. The management should improve the current reward initiatives and practices and address the emerging issues to promote a system.
Role of Line Managers
HR professionals should design and execute a reward strategy and a total reward approach to help organizations get the maximum value for staff members. Organizations should maximize profits from existing capabilities to survive in their respective industries. They also need to recognize that what works currently may not necessarily work in the future, indicating the need to engage employees to facilitate the realization of strategic goals and objectives (Osborne & Hammoud, 2017). The reward scheme an organization uses can determine the engagement processes’ success. For instance, a good reward program can create a strong workforce to implement new projects and realize success. Line managers need to collect data from employees to capture their needs and aspirations in developing reward programs.
Current studies indicate that reward programs achieve the desired results because they are well implemented and not well designed (Osborne & Hammoud, 2017; Panghe, 2021). Successful execution of reward schemes cannot be left to the HR managers alone. The process can benefit significantly from the relationships between line managers and their employees. For instance, communicating the reward program’s purpose to the employees is a critical success factor (Gascoigne, 2019). Line managers are the most useful communication agents between the top leadership and the subordinates. They shall communicate the program’s intentions, relay employee feedback, and help to make improvements.
Any reward program should attract, retain, and motivate employees to offer the best service to drive organizational success. Line managers can better use available tangible and intangible rewards, such as non-monetary recognition programs, career advancement opportunities, and attractive work environments, to motivate employees (Osborne & Hammoud, 2017). An organization should equip line managers with the relevant tools to ensure effective reward policies and programs. The suggestions they make should improve rewards to make an organization competitive in attracting the best talent.
Line managers are responsible for developing and setting goals for their subordinates. They also provide coaching to ensure that their employees have the knowledge and skills required to effectively perform a given task (Osborne & Hammoud, 2017). Line managers should have a say in determining how performance is rewarded because they understand the value employees add to an organization. Staff members trust the line managers more than the HR or senior management because they view them as doers. Therefore, it is critical to involve them in reward decisions to ensure that workers are confident that their interests are considered.
In summary, the organization selected has a vibrant reward scheme that can attract, retain, and motivate staff because it seeks to meet employee needs at all levels of Maslow’s hierarchy. However, the company can improve the reward program by enhancing work-life balance because there are significant concerns about the issue. An organization’s reward system depends on a broad range of factors that may be within or outside management’s control. Internal factors, such as financial strength and staff unions, determine employee rewards. External factors, including government rules, regulations and competitor activities, also influence the reward strategies and practices. Business drivers are also critical determinants of reward choices because they affect the organization’s revenues and profits. Acquiring reward intelligence is critical to understanding market trends and the development of employee competitive reward strategies. Salary surveys, job advertisements, and local surveys are some of the ways through which organizations can gather relevant data. The organization should adhere to the ethical principles of equity, fairness, consistency, and transparency when using a total rewards approach. Line managers will play a vital role in implementing a rewards scheme because they shall communicate its purpose to the employees and collect relevant feedback to improve it and achieve better results.
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