reward

1. REWARD MANAGEMENT
1 Reward management defined
2 Aims of reward management
3 Reward management processes and activities
4 Reward strategy defined
5 The components of total reward
6 Total reward framework
7 Why have a reward strategy?
8 A structure for reward strategy
9 Reward gap analysis
10 Reward philosophy defined
Contents

2. 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.
It deals with the design, implementation and
maintenance of reward processes and practices
that are geared to the improvement of
organizational, team and individual performance.
REWARD MANAGEMENT DEFINED

3. AIMS OF REWARD MANAGEMENT
• Create total reward processes that are based on beliefs about
what the organization values and wants to provide rewards for.
• Reward people for the value they create.
• Align reward practices with both business goals and employee
values.
• Reward the right things to convey the right message about what
is important in terms of behaviours and outcomes.
• Facilitate the attraction and retention of the skilled and
competent people the organization needs, thus winning the war
for talent.
• Help in the process of motivating people and gaining their
commitment and engagement.
• Support the development of a performance culture.
• Develop a positive employment relationship and psychological
contract.

4. REWARD MANAGEMENT PROCESSES AND ACTIVITIES
Non-financial
rewards
Employee
benefits
Market
rate
analysis
Business/
HR strategy
Reward
strategy
Grade and
pay
structure
policy
Grade and
pay
structure
Total
remuneration
Total
reward
Improved
performance
Job
evaluation
Performance
management
Contingent
pay
Learning &
development

5. Reward strategy is a declaration of intent, which
expresses what the organization wants to do in
the longer term to develop and implement reward
policies, practices and processes that will further
the achievement of its business goals and meet
the needs of its stakeholders.
REWARD STRATEGY DEFINED

6. THE COMPONENTS OF TOTAL REWARD
Transactional
rewards
Relational
rewards
Base pay
Contingent pay
Employee benefits
Learning and development
The work experience
Total
remuneration
Non-financial
rewards
Recognition, achievement, growth
Total reward

7. Pay and Benefits are termed as
Transactional Rewards, because they have the
character of a financial transaction.
Learning and Development and Work
Environment are termed Relational Rewards,
because they are designed to bind staff more closely
to the organization.

8. Compensation
Base Salary
Variable Pay
Job Evaluation
Performance Management
Paid Time Off
TRANSACTIONAL
(TANGIBLE)
RELATIONAL
(INTANGIBLE)
TOTAL REWARD FRAMEWORK
Development and Learning
Training
Career Development
Learning Experiences
Succession Planning
Work Environment
Work/Life Balance
Leadership
Performance Support
Organizational Climate
Adapted from Duncan Brown and Michael
Armstrong (1999) Paying for Contribution
Benefits
Health Care
Retirement
Savings
Other Insurance

9. The top two quadrants, compensation and benefits,
cover the areas that we traditionally think of as rewards the
employer provides.
These are sometimes referred to as transactional
rewards because they include the tangible results of the
agreement between the employee and employer.
In this agreement, or transaction, the employee agrees to
provide time, labor and skills in return for salary and benefits.
Therefore, these rewards are readily viewed in terms of having a
monetary value, such as the employee's base salary or
Performance management.
Transactional rewards play an important part in an employee's
decision about where to work and whether to stay with an
organization.

10. The bottom two quadrants, development and
learning and the work environment, cover
areas that are increasingly recognized as critical
contributors to employee satisfaction.
They are sometimes referred to as relational
rewards because they tend to represent the relationship
(vs. the transaction) between the employee and
employer.
They are important additional rewards that can
significantly enhance an employee's desire to remain
with an organization.
These rewards:
 can emphasize the importance of the employee to the
organization;
 can influence the employee's sense of loyalty;

11.  are rarely seen in terms of their cash value, but can have an
equally important impact when an employee is trying to decide
whether to accept other employment or remain with an agency.
 represent those program areas where agencies have the greatest
amount of flexibility to design programs specific to the needs of
their employees.
To many employees, a supportive and engaging work
environment is at least as important as health care benefits and
pay. For example, dependent care support, flexible work
schedules, opportunities to telecommute, flexible leave programs,
meaningful employee involvement, and well-trained supervisors
providing quality leadership may make all the difference in the
world when a person with a hard-to-find skill is considering your
job offer or when an employee with valuable institutional
experience is considering a competitor's offer.

12. WHY HAVE A REWARD STRATEGY?
 The first question to ask is: what motivates people to
work? Why spend time and talent in the service of an
organization, even if its your own organization when self-
employed? Because there is some ‘reward’ to do so.
 At face value, people work because they gain an income to
spend on their individual, family and community
needs. Some needs are the essentials of life, what humans
needs to survive physiologically. Maslow defined the
hierarchy of needs with fundamental physiological needs at
the base and rising through safety, social needs and
culminating in the need for self- fulfillment.

13.  Two other theories of motivation are important to
consider. One is goal theory as developed by Latham and
Locke which states that both performance and motivation
are higher if mutually agreed, challenging and monitored
goals are set and feedback given on achievements.
 The second is Equity Theory which suggests that people are
more motivated when they are treated equitably and de-
motivated if they receive or perceive inequitable treatment.
 This connects to the ‘felt-fair’ concept that pay systems are
fair if they are felt to be fair .
 Extensive research and studies on reward strategy has
shown that people are complicated and motivation is a
complex process. What is clear is that while financial
reward is important, for most people other factors are also,
and can be more, important.

14. These can be brought together under three sections:
 Equity – the perception of being treated fairly both in
comparison to others and in terms of the effort and skills
brought to the role
 • Self- fulfillment – that people are recognized for what
they do and encouraged to reach their potential through
effective learning and development processes and given
feedback on their performance
 • Organization culture – roles are clear and organizational
and personal values are in alignment so that employees
engage and enjoy work (as much as is possible)

15. Another way to consider the necessary components of
rewarding people is to view them as individuals, within
their team, in the organization and generally in the
workplace:-
 • Recognition – being appreciated, not taken for granted,
having a voice
 • Work/life balance – accepting and encouraging that there
is a world beyond the workplace
 • Organizational culture – being able to engage and fit with
the organization in terms of its values and how things are
done
 • Employee development – being enabled to develop
personal skills and understanding for current and potential
future work
 • Environment – having a ‘good place’ to work in terms of
physical layout, equipment, health and safety and security

16. A STRUCTURE FOR REWARD STRATEGY
• A statement of intentions (Business Strategy)
• A rationale (Developing HR & Reward strategy)
• A plan (Steps to develop the above strategies)
• A definition of guiding principles.

17. DEVELOPING REWARD STRATEGY
Analyse business strategy
Develop HR strategy
Develop reward
strategy
Guiding principles
Define, justify
and agree
intentions:
• total reward
• job evaluation
• grade/pay structure
• contribution pay
• flexibility
Analyse present
arrangements
Assess needs of
stakeholders
Consult,
involve and
communicate
with employees
Consult and
involve senior
management
and line
managers

18. REWARD PHILOSOPHY DEFINED
The set of beliefs that underpin the reward
strategy of the organization and govern the
reward policies that determine how reward
policies operate.