Escalating competition for talent has made it substantially more challenging to attract, retain and motivate employees, while competitive markets have made it more important to control compensation costs. During this spotlight webinar, Dow Scott, professor of human resources in the Graduate School of Business at Loyola University Chicago, will examine five ways to increase the effectiveness of your compensation programs: Align your business strategy and compensation programs. Understand employee pay preferences. Communicate pay information effectively. Utilize incentive pay strategically. Evaluate pay programs to achieve continuous improvement.

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5. Slide 5 of 14
The Professor of Pay
Quinlan School of Business
Institute of Human Resources and
Employment Relations
Dow Scott, Ph.D.

6. Slide 6 of 14
Five (5) Ways to Increase
Reward Program Effectiveness
◆ Purpose: Examine five ways to increase the
effectiveness of your reward programs.
◆ Agenda:
1. Align your business strategy and reward programs
2. Understand employee pay preferences
3. Communicate reward information effectively
4. Utilize incentive pay strategically
5. Evaluate reward programs to achieve continuous
improvement
© Copyrighted material – do not share without my expressed permission

7. Slide 7 of 14
Business strategy is the broad principles that guide
day-to-day decisions for obtaining a competitive
advantage
Ø Operational excellence –a price or
cost-based strategy
Ø Product/service leadership – an innovation
based strategy
Ø Customer intimacy –a solutions-based strategy
Link Reward Philosophies, Policies and Programs
1. Align Bus. Strategy and Rewards

8. Slide 8 of 14
1. Identify competitive strategies and performance
drivers for each major business units
2. Clarify reward philosophies and goals
3. Determine how employees groups or occupations
contribute to the competitive advantage
4. Construct reward programs to align with the
business strategy and performance drivers
5. Communicate reward philosophy, program design
rationale and mechanics to employees
Alignment of Pay Programs

9. Slide 9 of 14
◆ Effective pay program are not just about
alignment; they must attract, retain & motivate
◆ Do pay preferences differ?
– Gender
– Race
– Age
– Nationality
◆ Research says DEFINITELY yes, but demographics
are poor predictors as to how preferences differ
2. Employee Pay Preferences

10. Slide 10 of 14
◆ Review research and ask employees; but be
careful how your frame your questions
◆ Employee survey should:
– Be confidential; possibly using an outsider to conduct
the survey or interviews
– Require reward choices (i.e., framed as conjoint study)
– Obtain a representative sample of current and potential
employees (attracting may be different then retaining)
– Analyze and interpret data correctly
– Communicate to employees that you are listening
◆ Applying the findings – different reward packages
have different costs and different outcomes
Understanding Pay Preferences

11. Slide 11 of 14
◆ Pay Communications is like weight loss;
“we all know we need to lose a few pounds but . . .”
◆ More than reward appreciation, it communicates
company values and how employees can contribute
◆ Three major elements of reward communication:
– The why
– Program mechanics
– How much do I get
3. Compensation Communications

12. Slide 12 of 14
Communicate Effectively
Develop
and
Package
Content
Identify
• Purpose
• Audience
• Information
Determine
• Media
• Messengers
Deliver
Monitor, Evaluate, Modify

13. Slide 13 of 14
◆ Integrate communications in program design
◆ Determine what employees want to know
◆ Tailor communications to specific audiences
◆ Gain line manager support and involve them
in communicating pay information
◆ Communicate through a variety of media
◆ Evaluate communication effectiveness regularly
Reward Communications Best Practices

14. Slide 14 of 14
◆ Align program goals and metrics
◆ Involve managers and participants in program design
◆ Recognize the dark side; monitor, monitor and monitor
◆ Determine if it is “risk sharing” or “reward for excellence”
◆ Frequency and timeliness matters
◆ Use recognition to underscore the incentive message
4. Utilize incentive pay strategically

15. Slide 15 of 14
◆ Major investments demand rigorous evaluation;
benchmarking is just not enough
◆ Is pay a cost or an investment?
– If pay is a cost, the obvious goal is to minimize it
– If pay is an investment, the obvious goal is to optimize it
◆ Reward optimization requires
multiple perspectives
5. Evaluate Reward Programs
Perception
Understanding
Behavior
Results

16. Slide 16 of 14
1. Setting goals and objectives
2. Identifying evaluation criteria and performance targets
3. Selecting an evaluation methodology (e.g., time-series)
4. Collecting and analyzing data
5. Interpreting findings
6. Developing and implementing improvement strategies
Rigors Reward Evaluation

17. Slide 17 of 14
Improve Reward Program
Effectiveness by
1. Align your business strategy and reward
programs
2. Understand employee pay preferences
3. Communicate reward information effectively
4. Utilize incentive pay strategically
5. Evaluate reward programs to achieve continuous
improvement
Articles providing additional information can be obtained upon request.

18. Slide 18 of 14
PDI is dedicated to helping our clients
create a competitive advantage
through people. We are committed to
providing quality and personalized
service.
We support our clientele through:
§ Customized evaluations and
assessments of specific HR
strategies, policies and programs.
§ Development of “state of the art”
customized HR programs and high
performance organizations.
§ Employee involvement at all levels,
thereby fostering commitment and
accountability for results.
§ Linking HR programs to
organizational performance.
Dow Scott, Ph.D. is a Professor of Human
Resources in the Quinlan School of Business
Administration at Loyola University Chicago
and President of Performance Development
International; a management consulting firm.
Dr. Scott’s consultation and research has
focused upon:
§ Compensation and incentive pay
§ Attendance improvement
§ Team and HR development
§ Recruiting and staffing systems
§ HR program and policy evaluation
About Dow Scott.
Performance Development International, LLC
Dow Scott, Ph.D.,
Loyola University Chicago
dscott@luc.edu; 312.915.6597

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