How rewarding is your reward strategy?

updates + insights » How rewarding is your reward strategy?

The challenges of attracting and retaining talent are shining a spotlight firmly on performance-based compensation programmes. The employee benefits that truly matter to people have changed, unfortunately most reward strategies have not.

Traditionally, we’ve thought of reward strategies as how businesses remunerate their employees. With the move to a more strategic approach to human resource management and the idea that your people are the foundation of your competitive advantage, there’s been a rethink and major shift in reward policy and practices. We’ve moved from reward strategy to total (or strategic) reward.  

A total reward strategy encompasses compensation and benefits that recognise performance, this includes monetary, beneficial and developmental rewards aligned to specific business goals. It combines remuneration and benefits with individual growth opportunities and employee aspirations to foster engagement and create a motivated work environment (or culture).   

Total reward strategy =
Remuneration (salary, variable pay, pay transparency/equity) +
Benefits (flexible working, health care, wellbeing, recognition) +
Developmental (career progression, learning & development) +
Culture (supportive leadership, freedom and autonomy, meaningful work/sense of purpose)

Is “reward” still relevant?
Some may question the relevance of performance-based rewards in a modern workplace but it's important to remember the value of a reward strategy, rather than looking at it as a relic of HR past. Importantly, it sends a clear message to all employees about what the organisation values in terms of “performance” and how this drives decision making. It is also a powerful tool for increasing productivity and improving performance.

A global pandemic, globalisation, workforce generational change and the future of work are creating real workforce change. Forward thinking organisations are accepting that work and the workforce are changing and are questioning what the implications are for the future. Including understanding how they were rewarding their people in the past and what they need to do going forward.

So, what does it look like now?
One of the big learnings for organisations who have started on their journey towards a total reward strategy is the realisation that they are significantly out of touch with what employees wanted or valued the most. This includes understanding what fits different age groups/demographics/career lifecycles and the expectations of the wider labour market. The idea of offering flexible working as an employee benefit five years ago would be viewed through a totally different lens in today’s COVID world. Similarly, a Millennial workforce will have totally different expectations when it comes to what the employee experience looks like (by 2025, Millennials will make up 75% of the global workforce).  

Where to from here?
Developing a total reward strategy that is meaningful and benefits both employees and the company requires consideration of a few key areas.

This starts with assessing your current approach to determine its effectiveness. This also includes collecting data and insights to understand your employees and workforce segmentation. It means you’ll be informed and making evidence-based decisions.

When designing a total reward strategy that works best for your workplace it’s likely that you’ll need to customise your offering. That may mean getting a bit creative. People are individuals and like choice, think in terms of deals or reward bundles. Understanding what drives your employees will help inform how you reward them. While customising or personalising programmes can add complexity (and cost), you may find that the 80/20 rule applies where 80% of the offering is standard and 20% is flexible.

Implementing a total reward strategy requires clear and effective communication and ease of use. Think in terms of how you market a new service or product offering to your customers. You don’t just put it on the shelf and hope for sales. If your people don’t understand what is available to them and can’t readily access those benefits, you’ve failed.

Remember that your total reward strategy will not stand still and will require monitoring, measurement and continual change. Your reward strategy needs to be as agile and dynamic as your organisational strategy.

Need help? Decipher Group is a leading organisational design and human resources consultancy. We know how to help businesses develop, initiate and maintain the platforms, processes and systems to support a positive and engaging workplace. Reach out to us today.

The Decipher Team      

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