Reward fundamentals: The same but not the same
Joris Wonders, May 15, 2017
I think Reward needs to be MUCH bolder and braver than this. Yes, absolutely, 'roles, objectives and hierarchies are more fluid than they used to be, career paths are less linear, etc, etc' so the ...
Read More Jon Ingham
May 16, 2017 07:58
The three fundamentals of reward are ever-evolving and merit serious attention and thought
The more things change, the more they stay the same. This saying exists in a similar vein in several languages. While unexciting it's very true.
Or is it? On the face of it yes (in reward at least). For all the disruption and innovation around us the three fundamentals are the same as ever: reward strategy, job levelling and architecture, and base pay. They still sit at the root of everything, and organisations have to keep them in sight and get them right.
But look deeper and the three fundamentals have not stayed the same. In name yes, but in substance they’re very different. So how to manage with the fundamentals in a fast-changing world?
Total reward strategy
It is a commendable human and organisational desire to want to complete things. To design a beautiful reward strategy, implement it wonderfully, communicate it fulsomely, and watch the organisation flourish. Except it can’t happen like that. A good reward strategy is only ever a work in progress.
In particular, in the current work environment, four key things have to be constantly scrutinised:
- Who is your reward strategy for? In the past reward strategy has focused exclusively on traditional employment relationships and those on the payroll. Yet work is increasingly leaving organisations and being carried out by contractors, agencies, freelancers and partners. Some organisations may be using hundreds of freelance or contracted staff, from IT specialists to cleaners, and issues range from incentivisation to reputational risks around pay. Reward functions should therefore consider a more active involvement in setting ‘beyond payroll’ reward strategy.
- The workforce. There is now a mass of generic data around what attracts and engages employees of all demographics, but organisations must also explore the specific dynamics in their own sector, business and workforce. Knowing what people are looking for is good for a business, but tailoring a successful reward strategy means knowing what your own people (or potential people) are currently looking for.
- Organisation strategy. It is easy to get immersed in the intricacies of plan design and lose sight of the bigger question: does it contribute meaningfully to the business’s current strategy and goals? The reward strategy has to evolve to keep pace with and support the wider goals.
- Communication. This has always been part of reward strategy but is often neglected in practice. And here too trends and requirements are evolving, as transparency rises up the agenda and information channels proliferate. More than ever communication planning has to be integral to reward strategy. If you don’t communicate effectively about it your workforce may hear a different version of it somewhere else; and developments in technology now enable us to communicate reward with far greater impact than has ever been possible.
Job levelling and architecture
Research we did last year showed that the majority of large corporations in Europe have an organisation-wide system for job levelling. But systems can vary greatly in terms of age and fitness for purpose.
Given the scale of the task involved in re-designing job levelling and architecture, organisations tend to leave things as they are for fear of rocking the boat. As a result, job levels may not align with the talent or rewards agenda, or may not reflect an environment where roles, objectives and hierarchies are more fluid than they used to be, and where career paths are less linear.
Adding to the new pressure to get this right is the fact that HR solutions and software such as SASS mostly require an underlying job levelling and job architecture. If a business is going to have its job architecture embedded in its HR tools and technology that architecture needs to be fit for purpose, both now and in the future.
And, how do you know whether a re-levelling exercise, or a new methodology and approach is really needed? Rather than rush in where you have previously feared to tread, a first step is to identify pain points and assess how things are working, looking at areas such as: methodology; implementation; governance; alignment with other HR areas such as talent and reward; and feedback from managers and employees. 'Healthcheck' tools can be an invaluable resource to help with the exercise.
Base salary management
This has always been fundamental – so fundamental that it doesn’t get talked about very much, obscured behind trendier topics such as variable pay and pensions. Nevertheless, it is likely to be an organisation’s biggest cost, and it may be time to rethink it.
Most organisations still make pay decisions based on past performance. Yet their critical thinking around rewards and talent probably focuses (or should do) on the future – on skills needed, retention concerns, employee potential, and so on. There is a disconnect here. The traditional direct base pay increase link to performance rating is surely in need of a rethink.
It is easy enough to take your eye off the fundamentals as other more urgent or newer developments grab your attention. But just because they’re part of the furniture it doesn’t mean they're static. They’re changing just as fast as everything else, and may well require urgent attention.
Joris Wonders is a director at Willis Towers Watson