What role does reward play in a talent management strategy?

In a fast-moving economy, successful businesses take an approach to people management that ensures their organisation is fully stocked with the best talent: that is, those employees who are willing to put their all in to support their employer and contribute to the success of the business.


If you read nothing else, read this…

  • Reward can be used to reinforce the organisational values that are important to an employer.
  • If behaviours are important to an employer, it should consider the way in which results are achieved, not merely that targets are met.
  • Reward can be used in every part of a talent managment strategy, from attracting individuals to an organisation, through to employee retention and development.

To be a top-performing organisation, an employer must attract and retain high-potential staff with a talent management strategy that is clearly aligned to the business’ objectives. But what role does reward play in this? Is it enough to simply offer staff the highest pay grade, or to reward only results and not behaviours, in the hope that the business succeeds?

Reward plays a vital role in ensuring that an employer’s values and aspirations are communicated and conveyed through its employees. 

Advocate employer values

For an employer to position reward effectively in a talent management strategy, it must first consider the values that are important to the organisation and then mould a reward structure around this. For example, it should look at the way in which results are achieved, not just that targets have been met. Ian Gooden, chief executive of talent management consultancy Chiumento, says: “For this to be true, behaviour becomes very important. It’s not just about delivering objectives or KPIs [key performance indicators], sales numbers or other metrics: are people actually achieving those results in a way that is compatible with the organisation’s values?”

Many reward structures are created in a way that does the opposite and rewards the metrics. For example, a typical bonus scheme will see everybody get a bonus if the organisation hits profit targets. “Very often, that means that everybody gets the same bonus irrespective of how they’ve behaved,” says Gooden. “That sends a message, whether intended or otherwise, that behaviours are discretionary.”

Reward can be used as a conduit to signal to employees what the organisation is trying to achieve and what it needs from staff in terms of performance, skills, values and attitudes. Charles Cotton, performance and reward adviser at the Chartered Institute of Personnel and Development (CIPD), says: “Also, how it will reward and recognise employees who demonstrate those performances, behaviours and skills that are required by the organisation to be successful.”

Recruit, reward, retain

Once a potential employee has initially been attracted to an organisation, how reward is positioned as part of the employment deal can be a huge factor in recruiting that individual. Mark Quinn, partner and business leader for talent and reward at consultancy Mercer, says: “[Pay and reward] is more important in the recruitment process than in the ongoing process partly because when people move organisations, they don’t know what it’s like to work there. The nature that pay plays in the decision is a risk-mitigation point. In a sense, for the individual, it mitigates the risk of going somewhere they don’t know.”

A reward strategy can be influenced by the approach that an employer takes to talent management; some will develop talent in all employees, while others will focus on high-potential staff and top performers. But, whichever direction an employer’s talent management strategy takes, its reward approach must be clear. Michael Rose, director of management consultancy Rewards Consulting, explains that employers need some alignment and consistency between their talent management strategy and the messages they are giving through their reward system. “It’s a question of [employers] making sure that they are looking at both what people are doing in terms of output and what they are achieving, but the real issue is around their behaviours and the extent to which they’re displaying behaviours that are important to enable them to develop within the organisation,” he says.

Retaining employees with the X-factor

Once an employer has successfully attracted and recruited that talent with the X-factor for its business, the next stage in the talent management cycle is to ensure staff are happy to remain at the organisation, while continuing to contribute to the business’ results. Employees are motivated by different factors, and structuring a reward strategy that reflects this is a challenge. “The danger is assuming the same benefits have the same impact on everybody,” says Gooden. “Reward is a very personal thing. Motivational types change over time for all sorts of reasons, and what we highly value at one point in time, we might not value two years down the track.”

Research by recruitment firm Robert Half UK, published in August 2015, found that the top reasons an employee will leave an organisation are for a better work-life balance (30%), further career advancement (29%), higher remuneration, including salary, bonus and benefits (27%), better location (11%) and a better corporate culture (6%).

With this in mind, employers can promote an employment deal that incorporates pay, benefits and development opportunities in order to retain key players. Quinn agrees: “What tends to be more important [than pay] in organisations are those issues around the manager they work for, the culture of the organisation, and the intrinsic nature of the work that they do.”

Opportunities to develop and progress their career is a vital retention factor for employees, and is also recognised by employers, according to the Global talent management and rewards study, and the Global workforce study, published by Towers Watson in 2014. Offering employees a managed career path will help to retain key talent within the organisation, but it is not as simple to structure a reward strategy around this. A talent management strategy needs to be flexible in the way it identifies people, presents opportunities, gives feedback and understands the drivers that are important to them, and it can be difficult to align reward to this. “An organisation should develop some reward statements: what its belief system is on reward,” says Rose. “For example, if it believes strongly in identifying talented people and therefore having some relationship between people’s progression, development, contribution and performance, then it probably should have some link to pay.”

A talent management approach, therefore, needs to be strategic and clearly aligned to the values and behaviours that the organisation considers important. Reward can be used to support this approach by indicating to employees the skills and attitudes it needs.

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Case study: Bibby Financial Services’ values underpin reward strategy

Bibby Office

As a family-owned organisation that has been in operation for more than 200 years, Bibby Financial Services recognises the importance of organisational values that are firmly ensconced within all aspects of the business.

The invoice finance specialist has a set of five organisational values, ‘Being Bibby’: powered by people; putting customers first; positive energy; ambitious challenge; and we work as a family.

These values are reflected throughout the entire employee lifecycle and are made use of in its reward strategy. Vicky Smith, reward manager, explains: “We pull everything from our values throughout the employee lifecycle. Our values touch somebody in the job advert, through recruitment, to the offer letter, the induction all the way through to when they start with us, and they see our Your Rewards portal.

“We use the values to strengthen our total reward offering, and mention the terminology in a lot of our literature and communication.”

The ‘we-work-as-a-family’ value and family foundations on which the organisation was built are echoed in its flexible benefits scheme. for example, it offers health screens to employees and partners, as  well as critical illness insurance.

Its ‘powered-by-people’ value is also a key factor in Bibby’s benefits offering. Feedback is very important to the organisation, and it encourages staff to share their views through various methods including blogs, the intranet and the chief executive’s roadshows, which are held in each of its 18 locations in the UK.

It was on the back of this feedback that Bibby introduced three new benefits to its flex scheme for 2016: will writing, money boost and a cancer-risk health screen. “People gave us the feedback that these are the benefits they value. It’s really important to us that we don’t just pay lip service to that, and that we do listen to that feedback.” says Smith.

Viewpoint: Creating a broader motivation strategy

Vlatka Hlupic

Employees can be motivated by both extrinsic and intrinsic factors. Extrinsic motivation is well known to employers. It relates to monetary compensation and other perks, such as private medical insurance or a company car, and is normally part of HR budgeting and strategy. This standard approach to attracting and motivating staff is used by most organisations, but it only works to a certain extent.

What many employers do not understand sufficiently is intrinsic motivation. In addition to monetary compensation, what really drives top talent is a sense of purpose, passion for meaningful work that can make a difference, the ability to learn, grow and develop in the workplace, and the opportunity to interact with interesting people.

In addition, top talent wants autonomy, the ability to experiment with ideas and a caring organisational culture that is not based on hierarchical commands and controls, paralysis by unnecessary bureaucratic processes, and excessive rules and regulations that stifle creativity and innovation.

International research confirms that knowledge workers and top talent share certain characteristics and have special needs and aspirations. They are highly skilled, intrinsically motivated and often ignore corporate hierarchy. They need to be treated as associates or partners rather than subordinates, and benefit from organisational cultures where authority is based on knowledge, not formal power. They perform best in environments where they have autonomy, manage themselves and take responsibility for their own productivity.

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Four decades of scientific research into human motivation (Daniel Pink, Drive:  The surprising truth about what motivates us, published in 2011), reveals a mismatch between the evidence and most business practices. While carrots and sticks worked successfully in the 20th century, financial incentives alone are no longer enough to motivate people for today’s challenges. It is much more effective to give workers a sense of purpose, mastery, and autonomy over their time and their tasks. This is explained by our deeply human need to own our lives, learn and create new things, and do better by ourselves and the world.

Vlatka Hlupic is professor of business and management at the University of Westminster, a management consultant and author of The Management Shift