Reward week 1 bus681
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Reward week 1 bus681
- 1. Compensation and Benefits/Reward Introduction
- 2. Learning outcomes 2 To understand and be able to explain the following: ďThe definition, nature and context of reward ďThe content and objectives of the reward relationship ďThe theoretical context to reward
- 3. Why study aspects of management? 3 ďâTheories are important. They contain our basic assumptions about key relationships in business life. Theories tell us what to look out for, what our first steps should be and what to expect as a result of our actions. Saving us from going back to first principles at each stage, they are actually short- cuts to action.â ďWhittington, D. (2001) What is Strategy â and does it matter? Thomson Learning
- 4. What is Reward Management? 4 ďReward management is an umbrella term covering:- design, implementation, maintenance, communication and evolution of reward processes which help organizations to improve performance and achieve their objectives. (Armstrong and Murlis, 1994) ďTwo questions:- ďĄ How much should be paid (rewarded) to each employee? ďĄ What form should the payment (reward) take ?
- 5. Dimensions of reward 5 Reward 3-dimensional External:- Market (labor pools/skills shortages) legal requirements - min wage, equal pay Companyâs reward strategy governed by dimensions: strategy positioned according to actual behavior and corporate values on relative importance of dimensions Individual:- Internal:- performance job evaluation competencies negotiation teams corporate performance
- 6. The content of reward management 6 ďDirect financial reward in the form of base pay and incentives/allowances. ďIndirect financial reward in the form of employee benefits and conditions. ďNon-financial reward in the form of job satisfaction, career development and good working environment. ďReward strategy takes a holistic approach to these three areas.
- 7. Types of reward 7 Group related Security driven Tradition driven Lifetime jobs Non-money related Cost of living increases Money related Corporate prestige Perks Employability driven Contribution driven Training & development Performance pay Personal career plans Merit bonuses Individual related
- 8. Objectives of reward strategy 8 ďCongruence with corporate values and beliefs ďLinked to business strategy ďDrive and support behavior at all levels ďFit desired management style ďProvide a competitive edge in HR terms ďReflect market realities (Armstrong 2002)
- 9. Determinants of Reward Strategy 9 ďCorporate Culture ďBehavioral factors ďEconomic context ďLegal context ďPolitical context ďSocial context
- 10. From backroom to boardroom? 10 ďIn the past, pay and benefit administration largely governed by the outcomes of collective bargaining. A backroom function. ďToday, the management of reward is increasingly seen as a key HR function linked to the strategic objectives of the employer.
- 11. The context of reward in the 21st century 11 ďIncreasing global competition ďTrend to lower levels of trade union membership and less collective bargaining and pay regulation ďIncreasingly individual employment relationship ďChanges in the psychological contract at work - more insecurity and uncertainty ďDiffering views of whatâRewardâis
- 12. Key trends since the 1990s 12 ďGrowing inequality in pay - incomes of higher paid have increased much faster than the lower paid. ďGrowth in financial participation schemes ďGrowth in regulation of reward - particularly in Equal Pay and Hours and Holidays, minimum wage, increasing casual and part-time workers protection.
- 13. The New Pay Philosophy 13 ďNew Pay ideas originate in USA (Lawler; Schuster and Zingheim; Gomez-Mejia; Mahoney) ďInfluenced by HRM literature - new pay based on concept that management of people must be strategically focused. ďPrescriptive or descriptive?
- 14. The New Pay Philosophy 14 ďChange to pay systems which are contingent on business strategy and circumstances ďTrend away from âjob relatedâ pay to âperson relatedâ pay. ďShift away from stable, seniority based systems to more variable and âat riskâ pay. ďMove away from fixed benefits to flexible (cafeteria) benefits
- 15. Traditional vs New pay 15 Traditonal pay New pay Focus External constraints Business needs Fairness Objectives Recompense for time Enhancement of given up loyalty and commitment Determination Collective bargaining Management Approach Evolutionary, ad hoc Rational, strategic Basis Job based Person based Time based Performance based Demarcations? Diff conds for diff groups Harmonisation Wage and salary based All salary based Many grades Few grades Flexibility? Fixed benefits Flexible benefits
- 16. Reward systems - the major components 16 1. What are the objectives of the reward system? 2. What is the corporate strategy that provides the foundation of the system? 3. What techniques are used to link strategy and objectives. 4. The four main strategy areas are: 1) internal 2) external 3) rewarding employee contribution and 4) administration. (Milkovitch and Newman 2002)
- 17. Key debate - Best practice, best fit? 17 ď Best fit (contingent)? ď âNew payâ concentrates on alignment of reward strategy with business objectives for each individual company i.e. it is particular, contingent to an organization; it is best fit ďĄ Makes sense? ď Best practice? ď Best practice looks to find approaches which are âuniversalâ in value in terms of recruiting, retaining and motivating i.e. to produce competitive advantage. ďĄ Counterintuitive?
- 18. Looking at Old Issues in a New Way ď Best Practise vs. Best Fit (Schuster and Zingheim, 2002; Brown and Christie, 2005) ďĄ All encompassing offerings are seen as Best Practise ďĄ Focus should be on best fit for the organisation AND its employees ď Employer - Understand Yourself ďĄ Organisations need to understand what they need to succeed ď Employer - Understand Your Employees ďĄ True performance success is gained through employee involvement and seeking the employeeâs direct voice (Walton ,1985; Lawler, 1986) ď HR can assist by bridging the gap, by understanding the business AND becoming an employee advocate so as to understand the employees (Legge, 1999) ďĄ Rewards can then become that which meets the needs of both ďĄ Rewards becomes more than Total Rewards, it becomes a Total Relationship approach (Schuster and Zigheim, 2000)
- 19. Reward Elements Examples Reward Elements: Work Experience Elements: Basic Salary Company Bonus Opportunities for career advancement Personal Bonus Job-orientated training Profit Sharing Stock or Share Options Other training available Sales Incentives/Commission Performance appraisal Long Term Incentives Private Medical Cover Merit pay increases Private Dental Cover Opportunities for job enhancement Private Vision Cover Health Screens/Physicals Employer is âpeopleâ-focussed Defined Benefit Pension Positive leadership Defined Contribution Pension Supportive management Critical Illness Cover Life Insurance Positive colleague interactions Recognition Scheme Great work Long Service Awards Company Car or Allowance Work/life balance Petrol Allowance Flexible working practices Mobile Phone On-site Crèche You feel âinvolvedâ Childcare Vouchers You trust your employer On-site Cafeteria On-Site Coffee Bar Your employer trusts you Luncheon Vouchers Open and honest communications On-Site Life style/Concierge Tube or rail pass benefits Stakeholdership On-site or discounted parking Company is growing Wellness Programmes On-site or discounted Gym membership Company is successful Shopping Discounts Company has a positive image Employee Assistance Programme Salary sacrifice Bicycle purchase Company has a positive reputation Company has a clear vision Company has a clear set of values (Source: Schuster and Zigheim 2000)
- 20. References 20 Perkins, S. & White, G. (2010) Employee Reward: Alternatives, Consequences and Contexts. CIPD: London Thorpe, R. & Homan, G. (2009) Strategic Reward Systems. Prentice Hall: London White, G. & Druker, J. (2009) Reward Management: a Critical Text. Routledge: London
Hinweis der Redaktion
- This is a general introduction to the concept of compensation and benefits, but using the more broad term â reward â as mentioned in the guidance.
- Learning outcomes
- Reward is one of many aspects of management that you have probably covered in your Masters degree. So why do we study these varied aspects of management? By studying these varied aspects of management, we hear about various theories of how various stakeholders act. By studying these organizational and management theories we obtain a greater sense of what works and what doesn â t, without having to go through the research ourselves. So theories of management provide â short cuts â on how to understand the workplace.
- Reward management is an umbrella term covering the many steps in the process of implementing compensation and benefits strategy. As a rule there are two main questions that need to be addressed.
- Reward is 3 dimensional in that it is affected by external aspects, individuals, and internal aspects. A company â s reward strategy will take these into consideration, and will make an assessment of how important each is to the success of the organisation. For example, if the organization requires highly skilled workers and there is a skills shortage of available workers, reward strategy may be affected in regards to higher wages to attract scarce talent. Strategy is a mix of the behaviors of these dimensions and how important they are to the organization.
- There are 3 key areas of reward: direct financial, indirect financial and non-financial. Each organization needs to holistically assess the mix of these three areas to ensure success of corporate goals.
- Rewards are varied â they fit on two continuums: non-money to money related and group related to individually related.
- The objectives of the strategy have to fit the organizational â style â and objectives, reward the right behaviors, ensure attraction and retention of needed talent in reference to the market (industry norms and availability of talent in labor market).
- Said in another way â Reward Strategy is determined by the culture of the organization, what behaviors it wants to reward, the economic environment externally and within the company, the legal constraints, the political context (are unions involved), and does the strategy fit in with social norms or even support external social issues?
- Traditionally, pay and benefits were more collective, in that unions negotiated terms of employment. With the emergence of HRM, reward is now more strategic and managed internally through HR or a Reward Manager. The modern issue with this, is that unions were more employee focussed advocates, whereas it is argued that HR is too much of a corporate function to be a true employee advocate.
- Reward is transitional in that the workplace is changing. Global competition has made the labor market and global one â especially for high skilled and professional workers. Reward is increasingly negotiated by individuals not collectively; unions less involved. The psychological contract has become more insecure and uncertain â workers are motivated by varied individual choices â so how do employers address these varied desires? Even the definition of what is a reward is changing â workers may make decisions based on non-traditional rewards such as career development or training opportunities.
- Some key trends â pay is becoming less equal in regards to pay at the top is inflated while pay at the lower levels is too low. Growth in bonus, profit sharing and stock incentive schemes. Growing government interventions through regulations which influence pay.
- There is an emerging theme of â New Pay â from the US which is influenced by the need to create a strategy of how people are paid. However, how does this fit with the need to address individuals? So there is this growing tug of war between having a set strategy for all employees, with the need to address individuals who may dictate their own terms due to high skills or shortage of skills in the market. Who wins? And how do you create strategy based on this?
- Aspects covered under this new philosophy include pay systems which only pay out if certain goals are met, become focussed on person-related pay and the skills that person has, there is less focus on seniority and more pay is available through increased performance and bonus achievement, a move away from a set offering to a set of choices.
- A comparison of traditional pay systems versus the new pay philosophy.
- The major components address: what are the objectives of reward (performance?/compliance?); what drives the system (a desire to be employer of choice?/quality?/efficiency?); how is it implemented (higher pay vs. lower pay/higher bonus potential); how does it fit internally, in comparison to the external market, how does it reward employee contribution, and how is it administered through HR or management?
- The big debate in HR/Reward is: Do you create a strategy which works uniquely for the organization OR Do you follow what other organizations are doing? Sometimes â Best Fit â strategies are hard to sell to potential employees if they are very different to competitors. Sometimes â Best Practice â at one organization does not work within the business or culture of another. Which is the best way?
- Looking at it a new wayâŚthere is a growing message that Best Fit is the new Best Practice! Employers need to know their business and their employees â and HR/Reward managers bridge this for the organization by understanding the business and employees.
- As a last example of how diverse reward is becomingâŚit is not just pay, benefits and a 401k!
- References