1. Reward Management
Managing Human Resources

2. Definition of Reward
Management
“Reward Management is concerned with
the formulation and implementation of
strategies and policies that aim to reward
people fairly, equitably and consistently in
accordance with their value to the
organization”
(Armstrong and Murlis 2004)

3. Shift in Jobs & Reward Systems
1960s & ‘70s
– manual workers, piece-rates/wage drift,
measured day work, incomes policies
1980 & ‘90s
– service/knowledge workers, PRP, shares
2000s
– Reward management
– PRP 1998 20%, 2004 32%, 36% 2007
– “Total Reward”

4. Objectives of Reward
Management
Support the organisation’s strategy
Recruit & retain
Motivate employees
Internal & external equity
Strengthen psychological contract
Financially sustainable
Comply with legislation
Efficiently administered

5. Basic Types of Reward
Extrinsic rewards
– satisfy basic needs: survival, security
– Pay, conditions, treatment
Intrinsic rewards
– satisfy higher needs: esteem,development

6. Reward Options
Base pay--fixed or minimum wage/salary
Plussage--capability, qualification
Premia/Overtime
Performance related pay
Indirect pay--benefits, non-cash, shares
Non-monetary: recognition, advancement
“Total Reward” Pay, non-pay, flexible
hours, cafeteria benefits

7. Rewards by Individual, Team,
Organisation
Individual: base pay, incentives, benefits
– rewards attendance, performance, competence
Team
– team bonus, rewards group cooperation
Organisation
– profit-sharing, shares, gain-sharing

8. Motivation theories I
Maslow’s hierarchy of needs
– Physiological, safety, social, esteem, self-
actualisation
Herzberg
– Hygiene, motivators (e.g.,sense of
achievement)
McClelland
– Learned needs

9. Motivation theories II
Vroom’s expectancy theory
– Valance: attractive outcome
– Instrumentality: performance results in desired
reward or achievement
– Expectancy: effort will lead to level of
performance
Equity theory
– fairness judged by comparison--internal,
external

10. Determining Reward: Job
Evaluation
Ranking of jobs by relative worth to the
organisation
Non-Analytical
– whole jobs, paired jobs (matrix), job
classifications
Analytical
• components, factors, competencies
• points rating(e.g.; 1-10)

11. Pay & SHRM
Achievable organisational objectives
Clear link between pay and objectives
Contingency model:
– Vertical fit--alignment of pay systems &
business objectives
– Horizontal fit--pay and HR practice support one
another

12. Use of Reward Management
(CIPD 2008)
Written Reward Strategy 33%
Total rewards approach 29%
Key factor in salary level
– market rates 31%,
– ability to pay 22%
Key factor in pay review
– organisational performance 53%
– inflation 44%

13. Incentive plans (CIPD 2008)
Individual 60%
Business results 51%
Combination 50%
Team-based 27%

14. Performance appraisal: MAJOR
GOALS
Improve performance
Increase motivation
identify training/development needs
manage careers
set levels of reward
control

15. APPRAISAL METHODS
OUT IN
“Rank & Yank” Psychometric Scales
Critical Incident 360º Appraisal
Frequent Review
Role of line manager

16. WHO DOES APPRAILSAL?
“…owned and driven by line-manager”
(Armstrong, 2006)
360º Appraisal
– Managers (alone 180º)
– HRM personnel
– Peers
– Subordinates
– Self
– Customers (540º)

17. PSYCHOMETRIC SCALES
BARS--Behavior Anchored Rating Scale
– Anonymous questionnaire
– 1-7 “unacceptable” to “excellent” behavior
BOS--Behavioral Observation Scale
– Anonymous questionnaire
– 1-5 “never” to “always” behavior traits

18. Use by HR Practitioners
Annual Appraisal 83% Twice-yearly appraisal
Personal development 24%
68% Subordinate 20%
Self-appraisal Continuous
45% assessment 17%
Coaching 360° appraisal 11%
39%
Competence
Assessment 31%

19. Problems with PRP
Objectivity
Psychological contract & equity
Inhibits open discussion of training needs
Time consuming
short-termism
“PRP is not a silver bullet” (CIPD)
Shift from ‘performance” to ‘contribution’