289 Reward Management

REWARD REWARD MANAGEMENTMANAGEMENT REWARD REWARD MANAGEMENTMANAGEMENT

It is concerned with the It is concerned with the FormulationFormulation and and ImplementationImplementation

ofof StrategiesStrategies and and PoliciesPolicies that aim to Reward people that aim to Reward people

FairlyFairly, , EquitablyEquitably and and Consistently Consistently in accordance with their in accordance with their

value value to the Organizationto the Organization..

Reward Management

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

• The AIM of Reward Management is to SUPPORT the Achievement of the Organization’s Business Goals.

REWARD MANAGEMENT

• Reward Management adopts a Total Reward Approach, which emphasis the importance of considering all aspects of Reward as a Coherent Whole that is Integrated with other HR Initiatives designed to Achievethe Motivation, Commitment, and Engagement of Employees.

RM Processes and Activities

• THE BUSINESS/ HR STRATEGY:The Starting Point of all the Reward Policies and Practices

• REWARD STRATEGY:It determines the Direction in which the RM Innovations and Developmentsshould Go to Support Business Strategy, the Priority to the Initiatives and the Pace at which they should be Implemented.


• GRADE and PAY STRUCTURE POLICY:

(a) BASE PAY; The Fixed Rate of Pay. It expresses the intention of the organization on the degree to which it wants Pay Levels to be Competitive ( relating it with the Market Rate).


• CONTIGENT PAY:It is related to PERFORMANCE, COMPETENCE, or SERVICE.

• VARIABLE PAY: Bonuses or Cash payments that will be contingent on Individual, Team or Company Performance


•MARKET ANALYSIS:Identifying Rates of Pay in the Labor Market for making informed decisions.

• JOB EVALUATION:Establishing the Relative Size of Jobs within the organization


•GRADE STRUCTURE:The Sequence or Hierarchy of Grades or Levels

•PAY STRUCTURE:Ranges of Base Pay that are attached to Grades in job. They provide Scope for Pay Progression


• EMPLOYEE BENEFITS:It includes the provisions of Pension, Sick Pay, Holidays, Company Cars etc.

• NON-FINANCIAL REWARDS:They do not involve any Direct payments and often arise from the Work Itself, e.g., Achievement, Recognition, Autonomy,Scope to Use and Develop Skills, Training, Career Development Opportunities, High Quality Leadership.

RM Processes and Activities: Non-Financial

Rewards

-Achievement -Recognition -Autonomy -Scope to Use and Develop Skills -Training -Career Development Opportunities -High Quality Leadership


• PERFORMANCE MANAGEMENT:

Processes based on Shared Understanding that -Define Expectations -Assess Performance against those Expectations -Provide for Regular Constructive Feedback -Inform about Contingent Pay Decisions


• TOTAL REMUNERATION: The Sum of Base Pay Contingent Pay (Value of ) Employee Benefits

• TOTAL REWARD:The Sum of Total Remuneration and Non-Financial Rewards.

Compensation System: Eight (8) Dimensions

1. PAY for WORK and PERFORMANCE:It includes money that is provided in short term (weekly, monthly etc.) that permits employees for the Payment of Desired Goods and Services. It is comprised of following Components: Base Pay Premiums, Bonuses, Allowances.


2. PAY for TIME NOT WORKED:Since last 4 decades workers have enjoyed more Days Off with pay for Holidays and paid time off for other wide variety of Reasons.--Increases Labor Costs--Enhances Quality of Work-life Opportunities


3. LOSS OF JOB-INCOME CONTINUATION:

4.DISABILITY INCOME CONTINUITY5.DEFFERED INCOME6.SPOUSE (FAMILY) INCOME

CONTINUATION:7. HEALTH, ACCIDENT, and LIABILITY

PROTECTION 8. INCOME EQUIVALENT PAYMENTS

The Compensation Program

1.BASE WAGES and SALARYThe After Tax amount on our Paycheck determines the Kind and Quantity of Food, Clothing, Housing, and Transportation a Worker can AFFORD.- Leisure activities are also restricted by the Base Salary.


2. WAGE and SALARY ADD-ONSIt includes Overtime pay, Shift Differentials, Premium pay for working on Weekends, Holidays, Stand by…..


3. INCENTIVE PAYMENTS

- Payment for Specified OUTPUT

-rising domination of Service Jobs


•4. BENEFITS and SERVICES

Time off with pay, Retirement pay-affect current and Future standard of Living

NONCOMPENSATION REWARDS

• These rewards have an almost Infinite number of Components that Relate to the WORK SITUATION and so to the Physical and Psychological Well-Being of each Worker.


1. ENHANCE DIGNITY and SATISFACTION from WORK PERFORMED

2. ENHANCE PHYSIOLOGICAL HEALTH, INTELLECTUAL GROWTH and EMOTIONAL MATUARITY

3. PROMOTE CONSTRUCTIVE SOCIAL RELATIONSHIP WITH COWORKERS


4. ALLOCATE SUFFICIENT RESOURCES TO PERFORM WORK ASSIGNMENT

5. GRANT SUFFICIENT CONTROL OVER THE JOB TO MEET PERSONAL DEMANDS

6. OFFER SUPPORTIVE LEADERSHIP and MANAGEMENT

TOTAL REWARD•Employees and Potential

Employees have become much more sophisticated Customers of Total Reward Offerings and more Questioning of what They Contain.

• Total Rewards are All of the Employer’s Available Tools that may be used to Attract, Retain, Motivate and Satisfy Employees

Total Reward• The Total Reward concept

Emphasizes the importance of Considering All Aspects of Reward as an Integrated and Coherent Whole. Elements of Total Reward:-Base Pay-Pay Contingent on Performance Competence or Contribution-Employee Benefits and -Non-Financial rewards- which include intrinsic rewards from the Employment Environment and the Work Itself. They are LINKED TOGETHER in Total Reward.

Elements of Total Reward:

-Base Pay -Pay Contingent on Performance, Competence or Contribution -Employee Benefits and -Non-Financial rewards-which include intrinsic rewards from the Employment Environment and the Work Itself. They are LINKED TOGETHER in Total Reward.

TOTAL REWARD

•The Aim is to Offer a Value Proposition and Maximize the Combined Impact of wide range of reward Initiatives on Motivation, Commitment and Job Engagement.

TOTAL REWARD•Total Reward covers not only Traditional, Quantifiable elements like Salary, Variable Pay and Benefits, but also more Intangible non-cash elements such as:

TOTAL REWARD Total Reward covers…. -Scope to Achieve and Exercise

Responsibility-Career Opportunities, -Learning and Development, -Intrinsic Motivation provided by the Work Itself and -Quality of Working Life provided by the organization

TOTAL REWARD• The Monitory Values in the

reward package still matters but they are not the only Factors. Cash is a weak Tactic in the overall reward Strategy; it is too Easily Replicated.

TOTAL REWARD

• Creating a Fun, Challenging, and Empowered Work Environment in which individuals are able to use their abilities to do Meaningful jobs for which they are shown Appreciation is likely to be a more certain way to enhance Motivation and Performance.

TOTAL REWARD A Model by Duncan Brown and

Michael Armstrong: (A) Transactional Rewards

(B) Relational Rewards TRANSACTIONAL REWARD - Financial in nature and - Essential to Recruiting and Retaining staff- can be Copied by Competitors

TOTAL REWARD RELATIONAL REWARDS

- Concerned with Learning & Development and Work Experience- Essential to Enhancing the Value of Transactional Rewards.

Real Power is in the Combination of both the Transactional and Relational Rewards.

Total Reward: The Hay Group Engaged

Performance Model• Hay Group developed a Model which also

focuses on High Performance Workplace along with Transactional and Relational Rewards

• Six Key Elements:1. Inspiration and Values2. Future Growth/ Opportunities3. Tangible Rewards4. Quality of Work5. Work/ Life Balance6. Enabling Environment


Performance Model1. INSPIRATION and VALUES

(i) Quality of Leadership(ii) Organizational Values and

Behaviors(iii) Reputation of the

Organization(iv) Risk Sharing(v) Recognition(vi) Communication

The Hay Group Model INSPIRATION and

VALUES QUALITY OF LEADERSHIPThe Leadership Style and Behaviors

fostered and used in organizationshave a major Impact on the Values of the organizations and the Way it Behaves.

A Ruthless Boss creates an organization filled with Negative Underachievers who ignore Opportunities


VALUES QUALITY OF LEADERSHIP• Leaders are the Sources of Important

Rewards such as --Recognition thru Effective Feedback --Providing the Scope to carry and Meaningful Work --Providing Opportunities for Development and Learning

• Leaders are there to Motivate people and secure Engaged Performance.


VALUES ORGANIZATIONAL VALUES AND

BEHAVIORS

• The CORE VALUES of an organization has a great Significance as a basis for creating a Rewarding Work Environment

The Hay Group Model 1.INSPIRATION and

VALUES(iii) REPUTATION OF THE

ORGANIZATION• People want to work for a

High-Reputation Employer. (iv) RISK SHARING

(v) RECOGNITION


Performance Model2. FUTURE GROWTH and OPPORTUNITY

(I) Learning and Development beyond Current Job

(II)Career Advancement Opportunities(III)Performance Improvement and

Feedback


Performance Model3. QUALITY OF WORK

(I) Perception of the Value of Work(II)Challenge/ Interest(III)Achievement(IV)Freedom and Autonomy(V)Workload(VI)Quality of Work Relationship


Performance Model4. ENABLING ENVIRONMENT

(I) Physical Environment(II)Tools and Equipment(III)Job Training (Current Position)(IV)Information and Processes(V)Safety/ Personal Security


Performance Model5. WORK/ LIFE BALANCE

(i) Supportive Environment(ii)Recognition of Life Cycle

Needs/ Flexibility(iii)Security of Income(iv)Social Environment


Performance Model6. TANGIBLE REWARDS

(i)Competitive Pay(ii)Good Benefits(iii)Incentives for Higher Performance(iv)Ownership Potential(v)Recognition Awards(vi)Fairness of Reward

STRATEGIC REWARD• Reward Strategy is the

Declaration of INTENT, which establishes PRIORITIES for Developing and Acting on Reward Plans that can be Aligned to Business and HR Strategies and to the Needs of People in the organization.

STRATEGIC REWARD

• Thus the AIM of Reward Strategy is to Support the Corporate and HR Strategies and Align Reward Policies and Processes to Organizational and Individual Needs.

• Four Arguments for Developing Reward Strategies: pg. no.30 ( Class Assignment)

STRATEGIC REWARD• Reward Strategy is concerned with the

Direction the organization should Follow in Developing the Right Mix of Financial and Non-Financial Rewards to Support the Business Strategy.

• It sets out 1. Guiding Principles-(Reward Philosophy)2. Intentions- ( this is What we propose to DO.)3. Rationale- ( this is Why we Intend to do it.)

STRATEGIC REWARD: Features of Reward

Strategy• REALITY OF REWARD STRATEGY:

-danger of RS Promising much but Achieving Little

• CHARACTERISTICS OF RS:All RSs are Different just as all org. are different thus all RSs are characterized by Diversity. -RSs are conditioned both by - the Legacy of the Past and the Realities of the Future.

STRATEGIC REWARD: Features of Reward

Strategy

• RS AND BUSINESS STRAGEGY• RS AND HR STRATEGY• RS AND LINE MANAGEMENT

CAPABILITY• RS AND EMPLOYEES

STRATEGIC REWARD• Any Strategy must have following major

Elements;1. There must be Strategic Objectives that define- What the Strategy is Supposed to Achieve?2. There must be a Plan of Action that sets out- How the Objectives will be Met?

STRATEGIC REWARD• Basic Strategic Planning Question:

1. Where are We Going? 2. How are we going to Get There?

3. Why do we want to get there anyhow?4. What Values or Guiding principles should we adopt in Implementing the Strategy?

STRATEGIC REWARD: GUIDING PRINCIPLES

They Express the Philosophy of the organization- its Values and Beliefs-about—How people should be Rewarded?

• While defining Guiding Principles the Employees should be… communicated and Involved in order to Increase Understanding about the Basis of Reward Policies and Practices.

STRATEGIC REWARD: GUIDING PRINCIPLES

FUNDAMENTAL VALUESGuiding Principles may

Incorporate or

Be Influenced by1. Fairness

2. Equity3. Consistency

Strategic Reward: DEVELOPING REWARD

STRATEGY•Analyze Business Strategy and

Business Needs•Develop HR Strategy•Develop Reward Strategy•Guiding Principles•Define and Justify Intentions•Prepare and Implement Plan•Train

REWARD POLICIES• Reward Policies provide

Guidelines for the Implementation of Reward Strategies and the Design and Management of the Reward Process.

REWARD POLICIES A. Levels of Reward

B. Market Rate and EquityC. Attraction and RetentionD. Relating Rewards to Business PerformanceE. Total RewardF. Contingent RewardsG. Assimilation PoliciesH. FlexibilityI. The Role of Line ManagementJ. Involving EmployeesK. Communicating to EmployeesL. Transparency

REWARD POLICIES A. LEVEL OF REWARDS

The policy on the Level of Rewards indicate whether the Company is a 1. HIGH PAYER, 2. Average Rate Payer 3. Below the Average Rate Payer

It depends on the Extent to which the organization Demands HIGH LEVELS of PERFORMANCE from its Employees.

REWARD POLICIES B. Market Rate and

Equity• The relative Importance attached to

Market Rates and Equity

• The Policy needs to be Formulated on the Extent to which Rewards are Market Driven rather than Equitable.

• Any organizations that have to Attract and Retain staff who are much in demand and where market rates are therefore High, have to Sacrifice their Ideals of Internal Equity to the Realism of the Market Place.

REWARD POLICIES: C. ATTRACTION AND

RETENTION• The overall policy should be to become the

Employer of Choice.

• The Attraction policy will need to be based on a Competitive Remuneration Package. Analyzing the Factors for Specific Occupations or Categories of Employees that are likely to AFFECT their Decision to Apply for jobs and to Accept them when Offered.

REWARD POLICIES: C. ATTRACTION AND

RETENTION

• The Market not the company will ultimately Determine the Movement of the Employees.

• Any company cannot shield its employees from Attractive Opportunities and Aggressive Recruiters.

REWARD POLICIES: D. RELATING REWARDS TO

BUSINESS PERFORMANCE• This reward policy refers to the

LINK between Business Performance and PAY.

E. TOTAL REWARDContingent Rewards + Non-Financial Rewards-both types of rewards are regarded as being Equally Important

REWARD POLICIES: F. CONTINGENT REWARDS

• The scope for the Use of Contingent Rewards related to Performance

G. ASSIMILATION POLICIESThe Introduction of New or Revised

Pay Structure means that policies have to be Developed on how Existing employees should be Assimilated into it.

REWARD POLICIES: H. FLEXIBILITY

• The Extent to which Reward Processes should operate Flexibly

THE PSYCHOLOGICAL

CONRACT• Managing Reward is about managing

EXPECTATIONS of Employees and Employers towards each other- that create Employment Relationship.

• Employment Relationship is defined by Two Types of Contracts1. Transactional Contract2. Relational Contract

THE PSYCHOLOGICAL

CONRACT TRANSACTIONAL CONTRACT

• Expressed in Formal Contracts of Employment

• May be Written or Unwritten• Specify Terms and Conditions of

Employment -well-described terms of Exchange

• have basis in law• expressed in Financial Terms• specified Performance Requirements• also called Economic Contract

THE PSYCHOLOGICAL

CONRACT RELATIONAL CONTRACT

( PSYCHOLOGICAL CONTRACT)

• Less well-defined or not defined• It is Implied rather than Stated• Not subject to Agreement• It is used to refer to all those aspects of the

employment Relationship which are neither well-defined nor clearly Understood.

• And these Relational Aspects of employment exert greatest influence on the Motivation, Commitment, Morale and Job Satisfaction.

THE PSYCHOLOGICAL

CONRACTCHARACHTERISTICS OF

PSYCHOLOGICAL CONTRACT

MOTIVATION: PROCESS

• The process of Motivation can be initiated by 1. Recognizing an Unsatisfied Need 2. A Goal is then Established ( in order to satisfy that need) 3. A Course of Action is determined which is expected to Lead towards the Attainment of Goal.

MOTIVATION: PROCESS

• Employees can be Motivated by Rewards and Incentives which will… Enable them to Satisfy their Need or Provide them with Goals to Attain.

• The Needs of Individuals and Goals associated with them Vary so widely that it is very difficult if not Impossible to Predict how a particular Reward will AFFECT individual Behavior.

MOTIVATION: TYPES• INTRINSIC:

-It is Derived from the CONTENT of the Job. -Motivation by Work Itself in so far as it Satisfies People’s Needs

• EXTRINSIC:- this is What is done to People and for People, to Motivate them.- It may be Increased Pay, Praise, or Promotion.

MOTIVATION:NON-FINANCIAL

REWARDS• ACHIEVEMENT

• RECOGNITION

• RESPONSIBILITY

• INFLUENCE

• PERSONAL GROWTH

COMPENABLE FACTORS• Compensable Factors are paid for,

Measurable Qualities, Features, and Requirements that are COMMON to many different kinds of jobs.

• Theses factors are a Combination of Qualities, Features, Requirements of a JOB that, when Taken Together Form a Coherent WHOLE.

COMPENABLE FACTORS• This Coherent Whole provides Reasons for

and Determine the Amount of MONEY to be paid to someone to Perform a Specific Task.

• Universal Compensable Factors:1. SKILL

2. EFFORT 3. RESPONSIBILITY 4. WORKING CONDITION

COMPENABLE FACTORS 1. SKILL:

The Experience Training Education and Ability Required to Perform a Job under consideration

289 Reward Management

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