Future Strategy 2006 – Total reward pitches perks

In a total reward ethos, perks need regular repackaging and with money not always the main driver, intangible benefits need to be highlighted, says Laverne Hadaway

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Despite being a concept that dates back to the 1960s, total reward has attracted a great deal of attention as of late. Technology has arguably brought fresh life to the concept, enabling employers to communicate the true value of benefits packages to employees through total reward statements made available online.

But experts say that if the concept is to continue to create the buzz it has done in recent months then it will have to be continually refreshed.

Dr Bruce Thompson, senior lecturer in reward at Middlesex University Business School, says: "It’s not actually a new concept. It just needs to be repackaged every now and then because financial reward has a limited lifespan."

Although the term total reward can mean different things to different people, it generally brings together four main facets: financial rewards, such as salary and bonuses; employee benefits such as pensions and holidays; intangibles such as the work environment, career development and learning opportunities; and the communication of these benefits.

Thompson says that employees can become jaundiced about its implementation and often feel pushed into it too quickly. "You can do anything provided you consult properly. But implementation has [historically] been so poor and so often schemes have had to be relaunched." He points out that only 12% of organisations have consulted their employees about changes to their reward system.

Dr Lynn Thurloway, lead tutor in organisational behaviour and HR management at Henley Management College, agrees that employees have become more cynical about total reward since the concept was introduced in the 1960s with the dual realisation that intangible benefits need to be highlighted to staff and money is not always the main driver in the workplace. "People are much more cynical today, so total reward depends on its implementation. It needs to be seen as an integral part of the human resources strategy. It can’t be seen as a magic solution and it must be tailored to the company’s needs. Sometimes, it can become so complex that the employer cannot work out what is important," she adds. If a scheme is integrated well with a company’s strategy and values, she suggests it can be a good way to change the idea of what people work for.

Colin Evans, group reward manager at BT, believes that total reward statements can play a part in this process by helping to explain the total employment package to employees. Thompson also applauds the use of total reward statements arguing that they put a financial value on the perks that employees enjoy. "People don’t know how much their pensions are worth. Ideally, such benefits should be low cost to the employer and of high value to the employee. All too often, it’s the other way round," he says.

Although pensions are simply part of the benefits aspect of total reward, their peculiar issues and problems cause them to stand out. Thompson argues that the public sector does not do enough to publicise the value of the pension package on offer as part of total reward. But even the private sector may have to reconsider its approach in order to reflect the pensions changes and the move away from final salary to money purchase schemes. "Should total reward levels be reviewed differently because of the type of pension provided to an individual or can differences be ignored as historic, as each employee accepted their particular pension arrangements when they decided to join the company?" queries BT’s Evans.

Thurloway believes staff are being softened up to work longer and that pensions are likely to recede into the background pushing other aspects of total reward to the fore in the future, such as employee development, learning and training.

Whatever changes take place, she adds employers will still turn to total reward where they are committed to investing in their people to reap a competitive advantage or where they are going through an organisational restructure because the concept allows packages to be tailored towards different groups of people.

Other industry experts are generally optimistic about the future of total reward. "Total reward will develop in terms of communication and more companies will want to inform their employees of what’s on offer," says Evans.

Thompson has a similar perspective: "I think there’s a better understanding of the need to get the non-financial side of things right. Companies are more aware." He also points out that the success of total reward can depend on the economic health and wellbeing of the firm and even the country. Possible redundancies, for example, can make it difficult to launch a total reward scheme. But Thurloway admits that not every organisation will get it right. "Some organisations won’t do the hard work required to tailor total reward. Ultimately, it depends on the value the employer places on employees. So many organisations say that they value them, but don’t do anything to show it," she says.

Where those employers are already working hard to incorporate total reward into their structure, they theoretically stand to reap the benefit in the future from a committed workforce.