Pay and Workforce Reform

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Total Reward Strategy

The total reward strategy must identify how an organisation intends to position itself in the competitive employee market to achieve the fundamentals of people management:

• recruitment
• retention
• development
• motivation

Both the remuneration aspect, (the pay and benefits), and the performance aspect, (the leadership of the employees), contribute to the success of these fundamentals. It is recognised that pay alone is a blunt tool and that more underlying management practices can have a more powerful influence on the success of the reward program.

How do we design a reward strategy? Use the flow chart below as a guide, but recognise that this is going to be an incremental process, and that the result will be more of a planning blueprint than a tablet of stone. HR and reward strategies change as the internal organisation and external market changes.

Total Reward Strategy Development Map

Key Elements in Total Reward Strategy Development

• Building a good understanding of the organisation's strategy, goals, priorities, capability to deliver and sustain changes in total reward practice and key measures of success
• Understanding what motivates people and how they contribute to organisational success, the competences and capabilities required and the values and culture needed to secure high performance
• Understanding current HR strategy and the way key HR programmes are focused
• Understanding how current total rewards are perceived by staff and the leadership group, where the gaps are with what is needed for the future
• Analysis and diagnosis of what to keep and what to change and the related communications and capability issues
• Creating and agreeing a total reward philosophy which underpins and sets criteria for effective total reward strategy development
• Building a set of total reward programmes, policies and practices for planned implementation.
• Setting a process for evaluation and review against the success criteria set for each programme to enable continuous performance improvement.

We stress the importance of effective consultation and communication throughout as a well as the development of HR and line management capability to implement and sustain the total reward approaches adopted

Components of Effective Reward Strategies

1. Clearly defined goals and a well-defined link to business objectives;
2. Well-designed pay and reward programmes, tailored to the needs of the organisation and its people, and consistent and integrated with one another;
3. Effective and supportive HR and reward processes.

Source: Brown, D (2001) Reward Strategies: From intent to impact, CIPD, London, quoted in Chapter 3, Armstrong, Michael and Helen Murlis (2004) Reward Management: A Handbook of Remuneration Strategy and Practice, Kogan Page, London

Case Study

For a real example, read the Insurance (pdf, 30Kb) case study.