Build robust reward

This article is brought to you by our sponsor Hewitt.

To build value into total reward strategy, it is essential that it is integrated with HR plans, communicated effectively and is important to employees, says Martha How, head of reward at Hewitt Associates

Fresh thinking was on the agenda when Hewitt Associates was invited to make a presentation at a recent client away day on the subject of total reward innovation. The client demanded: “Don’t give me all that stuff that the others are saying, we want something real. I don’t want US research studies, we’ve done just about everything. We want to know what we’re not doing!” This is indeed a challenge when reward can be described as the oldest profession in HR, where pay and benefits is our currency and where the law, taxation, cost control and a basic human sense of never being well paid is our landscape.

We shared the results of a survey of more than 50 top UK companies, undertaken by Hewitt last summer, which showed that over 70% of senior HR managers said their reward programmes and policies were strongly aligned to business strategy and thoroughly monitored. However, 60% rated the effectiveness and “stickiness” of reward in their business to be much weaker, self-scoring reward in the business poorly for communication, line manager understanding, performance-related reward and alignment with other HR policies. Our client agreed with the findings – that many businesses have fully aligned strategies, but most struggle in making reward really count at the “coalface”.

We went on to present case studies of a number of clients that have managed to develop “sticky” reward strategies. These included an energy company which has made changes to its pension scheme in the context of a total reward review. Instead of just focusing on the pension changes, which were difficult enough in their own right, total reward communication was introduced together with a new targeted rolling retention plan and a revised approach to variable pay. The fact that the line managers were fully involved in the design and development of the new plans helped ensure that when implemented they resulted in a positive impact on the business.

In another case, a service business implemented a job evaluation system consistent with the businesses values and competencies and a classification system which was based on the job evaluation system. Job evaluation was used sparingly to handle equal value concerns and the measurement of new jobs. Classification was used to build pay grades and support organisation development. Nothing new here you might think except that line managers greeted the classification matrix with enthusiasm and, according to management, the new pay bands “made sense at last”.

In a third scenario, a financial services company which already has a flex plan, is developing an employee wealth creation proposition which includes tax-efficient employee loans targeted particularly at graduates, individual savings accounts (ISAs), mortgages, share plans and wealth education programmes. This organisation like many, experiences recruitment and retention challenges and is seeking to produce a more differentiated offering with an employee wealth proposition that is relevant to all.

For reward to build value and strategic alignment, strong design is crucial but to make it stick, sound fundamentals are really what make the difference. In these case studies the fundamentals were: joined-up reward and HR strategy, strong and relevant communication, and actions important to employees.

The views and opinions in this article are those of our sponsor, Hewitt, and do not necessarily reflect those of

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