Frank Hobson Consulting

practical human resources support

Developing a Reward Strategy

Reward Strategy - have you got one

The CIPD recently published its annual reward management survey. In general the picture it draws supports other survey findings that there is a wide variety of reward practices out there. In reward, fit is everything - what works for one may not necessarily work for another.

CIPD surveys provide good monitors of HR trends but care is needed to use them as a benchmarking tool. The level of detail is sometimes limited and the distribution of the participants very broad. Surveying a widely distributed population appears to add accuracy but many aspects of reward are ones where the size and sector of an organisation are key determinants of what will work. Although the average workforce among the 500 organisations surveyed is 3,000 the median is only 480. So check you are comparing yourself with like enterprises.

This year the survey finds that an ever-increasing number of organisations say they have a formal, written reward strategy. Have you got one? What does it say? Do you need one? The obvious answer is 'yes'. A well-written strategy will guide your pay and benefits decisions and the senior management commitment that should come along with it gives HR much needed authority with those boy-executive middle managers who do not think pay policy applies to their section.

However, developing a reward strategy is not as straightforward as you might wish. Some of the linkages between what your organisation is trying to achieve and how you structure pay and benefits are often remote, complex and work on different timeframes to the rest of the business.

Then there is the honesty question. It is not practical to have a formal reward strategy and then not publicise it but not all business strategies are equally palatable. Publishing a strategy that declares your intention to recruit and retain high performers and to be an upper quartile payer is fine. Stating publicly that you will pay below the median (someone has to; or there is no median) because the work is simple and your profit margins are slim is less easy to present.

In practice, most organisations can find a way of spinning their strategy so that it sounds warm and employee-friendly. What really matters is that you understand your employment market. What sort of staff you need? Where will you find them? What will others pay them? What proportion of their career can you, realistically, provide? Then ensure your systems support your conclusions. It is all too easy, from the safety of the HR department, to end up with warm, all-embracing, employee-friendly policies that do not actually deliver in a cost-efficient way.

Take, for example, the question of high performers. Everybody says they want them, but what do you really mean? A postal worker who spends 30 years delivering everything through the correct doors is a high performer (especially in London). So, in a different sense, are those high-powered Oxbridge graduates that the City institutions fight over each year.  

If you are a medium-sized organisation you probably do not have enough jobs and vacancies to satisfy the career needs of an ambitious high flyer. So do not try; aim for a share of the careers of several of them from time-to-time. Be realistic and do not have too many service-dependent benefits, perhaps.

There is not room here to discuss all the possible elements of a reward strategy but I hope to have illustrated some of the subtleties in the process. A well-written, fully agreed strategy is a valuable tool in supporting the business and improving the standing of the HR department.

Back in the HR cocoon, the CIPD survey finds the most commonly reported priority for the reward strategies is to support business goals. Sadly, the two most common measures used, by HR departments, to assess the effectiveness of their strategy were staff surveys (82% of respondents) and HR benchmarking data (71%). The two least common, at 15% and 13%, were surveys of manager views and business benchmarking data. Carts and horses spring to mind.

Frank Hobson

Back to list of articles