When I think about an integrated reward strategy, the first thing that comes to mind is the differences between the parts of reward. They all cost money but they do different things. So, for example, death-in-service benefits do something very different and carry different messages to a cash incentive plan. We need to recognise these implicit and explicit messages and think about how they relate to each other.
I believe that the art is to develop a frame of reference that can see both the forest and the trees. Organisations need to be clear what the different parts of reward are for, what the total cost is and how they can get best value from the overall reward spend. They need to look at how we can deliver best value to the organisation and employees. Examine how each part works and what it is contributing. Does it help attract people, support talent management, help engage people or reinforce key messages about what is important like aligning with goals and values? That is a strategic approach.
But many organisations find themselves at what seems to be hostage to their history. Typically, their reward system has just sort of grown, mostly by adding bits on and not reviewing others. But while the business will surely have changed a lot, and the change is only accelerating, the reward systems may have been left behind.
So what is the solution? First, I ask some pretty simple questions such as: what is basic salary for? Why does the organisation have benefits? What problem are bonuses trying to solve? While the question are simple, the answers can be difficult. Employers need to drill down to get underneath the superficial.
Second, review what the current parts of reward actually do compared with the answers to the questions, that is, what is the gap?
Finally, develop a plan to change and communicate, maybe over a couple of years.
Michael Rose is director at Rewards Consulting