HR357 Employee Reward Nick Creaby-Attwood

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HR357Employee Reward Nick Creaby-Attwood

• What is reward?

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Lecture-based, tutor led sessions
Lab-based, student led sessions
Week 1 What is reward?
Week 2 Introducing FastCat and reward strategy
Week 3 Alignment
Week 4 Job-based vs. person-based alignment
Week 5 Enhancement Week Internal alignment
job-based
Directed study Online quizzes, directed reading,
consideration of reward practices within own
organisation, familiarisation with software
Independent study Learning sets will provide an
opportunity to develop skills and share
knowledge. Learning sets will be able to meet
virtually via Blackboard.
Week 6 Internal alignment person-based
Week 7 Competitiveness
Week 8 External competitiveness for FastCat
Week 9 Integrate internal and external
structures
Week 10 Employee contributions
Week 11 Recognising performance
Week 12 - Administration
Assessment Group assignment design a reward
system Proposals must be based upon the current
state of knowledge about reward Evidence of the
practical implications of proposals will be
required
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Forms of reward
Total returns
Relational returns
Total compensation (transactional returns)
Recognition and status
Learning opportunities
Employment security
Challenging work
Benefits
Cash compensation
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Forms of reward
Total returns
Relational returns
Total compensation (transactional returns)
Recognition and status
Learning opportunities
Employment security
Challenging work
Benefits
Cash compensation
Long-term incentives
Base pay
Merit/cost of living
Short-term incentives
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Forms of reward
Total returns
Relational returns
Total compensation (transactional returns)
Recognition and status
Learning opportunities
CHOICE CAFETERIA STYLE ???
Employment security
Challenging work
CHOICE CAFETERIA STYLE
Benefits
Cash compensation
Income protection
Allowances
Work/life balance
Long-term incentives
Base pay
Merit/cost of living
Short-term incentives
Adapted from Milkovich and Newman 2002, 8
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Aspects of the reward deal
HIGH PAY LOW COMMITMENT Hired Guns (Stockbrokers) HIGH PAY HIGH COMMITMENT Cult-like (Microsoft)
LOW PAY LOW COMMITMENT Workers as Commodity (Employers of low-skill immigrant labour) LOW PAY HIGH COMMITMENT Family (Starbucks)
TRANSACTIONAL LOW TO HIGH
(Adapted from Milkovich and Newman, 2002 49)
LOW TO HIGH RELATIONAL
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The pay model
STRATEGIC POLICIES
TECHNIQUES
STRATEGIC OBJECTIVES

• SUPPORTING THE WORKFLOW
• Performance
• Quality
• Flexibility and change
• Costs
• FAIRNESS TO EMPLOYEES
• COMPLIANCE

INTERNAL STRUCTURE
INTERNAL ALIGNMENT
Work analysis
Evaluation/ Certification
Descriptions
PAY STRUCTURE
EXTERNAL COMPETITIVENESS
Market definitions
Surveys
Policy lines
INCENTIVE PROGRAMMES
EMPLOYEE CONTRIBUTIONS
Performance based
Seniority based
Merit guidelines
ADMINISTRATION
Planning
Budgeting
Communication
EVALUATION
(Adapted from Milkovich and Newman, 2002 13)
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How do we make reward strategic?
THE NEW PAY
HIGH COMMITMENT
BEST-FIT (CONTINGENCY) APPROACHES
BEST-PRACTICE APPROACHES
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Best-fit approach to reward
What business should we be in?
Corporate objectives
Business unit strategies
How do we win?
HR strategies
How should HR help us win?
How should reward help us win?
Environment
Strategic reward decisions
Reward systems
Employee attitudes and behaviours
Competitive advantage
Milkovich and Newman 2002, 30
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Ideal type strategies
BUSINESS RESPONSE
HR ALIGNMENT
COMPENSATION SYSTEMS
STRATEGY
Committed to agile, risk taking, innovative people

• Reward innovation in products and processes
• Market based pay
• Flexible generic job descriptions

INNOVATOR increase product complexity and
shorten product life cycle

• Product leadership
• Shift to mass customisation and innovation
• Cycle time

COST CUTTER focus on efficiency

• Operational excellence
• Pursue cost-effective solutions

Do more with less

• Focus on competitors labour costs
• Increase variable pay
• Emphasise productivity
• Focus on system control and work specifications

• Customer satisfaction incentives
• Value of job and skills based on customer contact

CUSTOMER FOCUSSED increase customer expectations

• Customer intimacy
• Deliver solutions to customers
• Speed to market

• Delight customer, exceed expectations

Milkovich and Newman 2002, 31
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Four steps to formulate a best-fit strategy
Assess total compensation implications Competitive
dynamics Core culture and values Social and
political context Employee/Union needs Other HR
systems
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Four steps to formulate a best-fit strategy
Assess total compensation implications Competitive
dynamics Core culture and values Social and
political context Employee/Union needs Other HR
systems

• Fit policy decisions to strategy
• Objectives
• Alignment
• Competitiveness
• Contributions
• Administration

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Four steps to formulate a best-fit strategy
Assess total compensation implications Competitive
dynamics Core culture and values Social and
political context Employee/Union needs Other HR
systems

• Fit policy decisions to strategy
• Objectives
• Alignment
• Competitiveness
• Contributions
• Administration

Reassess the fit Realign as conditions
change Realign as strategy changes
Implement strategy Design system to translate
strategy into action Choose techniques to fit
strategy
Milkovich and Newman 2002, 34
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How do we know what our objectives are?
Importance of consultation and communication
Senior managers dont have all the answers
The debate of different viewpoints provides a
balanced understanding of corporate objectives.
Management will learn about the variables that
are associated with performance improvement
Management will learn about what motivates
employees
People will understand and become committed to
the strategy
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Best-fit or best practice?
Success
Reward system
Strategy
Environment
Environment
Reward system
Strategy
Success

• Success is not derived from a clever strategy
  determined at the top but by having rewards
  that attract and retain the best human resources
  available
• It is the people that are the source of
  competitive advantage and the basis of good
  strategies

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High commitment management and reward

• Emphasises the need for a moral commitment to
  organisations
• This is about the perceived mutuality of
  interests between employees and their employers
• This can be achieved through adopting reward
  practices which foster high trust relationships
  and intrinsic work satisfaction sharing success
  but protecting from failure

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The New Pay

• Pay levels driven by market forces rather than
  internal comparison
• Pay rises driven by performance
• Reward set in the context of a psychological
  contract characterised by risk sharing between
  employer and employee
• More pay dependent on performance
• More emphasis on employability than job
  security

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What do we mean by Best practice and does it
work?

• Performance bonuses and share options are
  important (Becker and Huselid 1997)
• Bundles of high performance work systems
  (gainsharing, competitive pay levels, training,
  team working, and participation) are more
  effective than isolated initiatives (MacDuffie
  1995 Arthur 1994 Ichniowski et al 1998)