Guest opinion: Align reward with business and staff

By John Purcell 1st August 2006 12:00 am 3rd November 2015 6:35 pm

There is compelling evidence that badly-designed or poorly-installed HR policies are often more damaging in reducing employee commitment than having no policy in place at all.

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Employees are placing increasing importance on how their manager, and not just their organisation, rewards them. This poses several challenges for HR, not least how to work in partnership with line managers to ensure effective policies are developed and implemented fairly. So what should be taken into account when deciding how best to reward individuals? On one hand, it’s important to link reward with performance, but on the other, care must be taken to avoid a problem whereby reward is so closely linked to individual performance that a dog-eat-dog culture is encouraged in a way that destroys any possibility of team working.

Offering incentives or reward on the basis of high individual performance to employees who are required to work closely with or share knowledge with others in their team is all wrong as it encourages people to work against the needs of the business. So if rewards and incentives are to improve not just individual, but also organisational performance, it is essential that policies are developed in a way that does not introduce deadly combinations whereby the merits of one end up cancelling out the benefits of another. This happens all too often when a new policy is added on top of another, which is a prevalent problem in far too many organisations. Initiatives to improve work-life balance are inhibited by a long-hours culture, training is out of kilter with employees’ appraisals and reward is based only on past performance and not the future contribution required.

A failure to think through the sort of messages HR policies send to employees about [expected] behaviour and [commensurate] reward can be very damaging. Presenting employees with conflicting expectations and inconsistent implementation breeds cynicism and withdrawal, the exact opposite of what is intended. A five-year study conducted at the Work and Employment Research Centre into the link between people management and organisational performance, found compelling evidence that badly-designed or poorly-executed policies were more damaging in reducing employee commitment than having no policy at all. This was particularly the case with appraisals, which were either poorly done or not done at all by some line managers. In order to ensure joined-up thinking when it comes to policies designed to bring out the best in people and that this doesn’t do more harm than good, there are three fundamental rules: link policy to overall business strategies, view employees as customers of the HR function and take action to ensure successful delivery.

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What is often forgotten is that the purpose of most HR policies is to create conditions where employees can improve their performance by building their abilities, motivating performance and giving people the opportunity to contribute. For policies to have this effect they must resonate positively with employees. Part of our research involved asking over 1,000 employees, across a wide range of organisations, how satisfied they were with the HR practices they were exposed to and how committed they were to their organisation. There was a clear link between how satisfied they were and their loyalty to their employer. This then impacted positively on the extent to which they were prepared to stay with their employer and go the extra mile. The upshot is that any HR policy has a strong impact on performance.

For most people, most of the time, it is the line manager who delivers policies. It is therefore essential that line managers are supported in delivering this and differentiating between results and behaviour. It surprised us that even excellent organisations did not consider how line managers could be helped to be better at people management. All too often, rewards were geared to performance targets, such as sales or revenue and costs. But there was no incentive to be better at managing staff, even though this was critical to better performance. Only by developing joined-up reward policies that don’t conflict with one another, recognising the employee as a consumer, and getting line managers on board, can employers improve performance in a way that also encourages loyalty from their workforce.