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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 remuneration (the pay and benefits) and performance (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.

                                                                              © Hay Group

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 (2006) 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 5th edition, Kogan Page, London

Case Study

For a real example, read the Insurance [PDF, 30KB] case study.