Rewards management fails to keep pace with business needs

Reward and performance management programmes are failing to keep pace with business needs, according to research from Towers Perrin.

The survey found that despite shifts in the business landscape, including globalisation, the emergence of ageing populations, technological advances, and skill and labour shortages, most companies have made minimal changes in the design and delivery of base pay, and their incentive and performance management programmes.

Rewards, Challenges and Changes Research 2007, found that 43% of human resource and compensation executives at midsize and large organisations in 21 countries said that their performance management programme was only somewhat or not at all effective. In addition, 68% of the 637 managers surveyed, admitted that they had no formal method of measuring the return on their investment in rewards.

Worryingly, 42% of respondents felt that their performance management systems did not effectively equip managers to identify, develop and reward high flyers or deal with poor performers.

When customising reward programmes, most respondents (79%) do this for sales positions, very few extend this approach to other functions or roles.

With regard to performance management, 90% of respondents report that there had been changes in this field in the last three years. For the vast majority, the nature of the changes are technological, typically involving automating aspects of the process to enable employee and managers self-service online.

Jim Crawley, principal at Towers Perrin, said: “It’s certainly easier to implement technology than teach managers to have meaningful performance discussions, but an effective programme requires both. Our data confirms what amounts to a pattern of tweaking at the edges of programmes, rather than creating the more systematic and integrated approach required to address the scope, intensity and magnitude of change on the business side.”