Total Reward Strategy - Essay Example

?Running Head: essay Arguably, improved performance is very much related to the ‘Reward and Motivation' policy of an organization.  Using a case study that was discussed in the seminar critically examine the importance of these links in a private or public sector organization [Name of the Writer] [Name of the Institution] [Name of the Professor] [Course] Introduction Improved performance is the biggest necessity in business today. This feat comes after combining the abilities and motivation of employees with opportunities available. Defined as the AMO Model (Harrison 2005:99), performance has been linked to the organizational objectives through these three attributes. While opportunities which are made available to the employees constitute a different category altogether; the amalgamation of abilities and motivation of employees is achieved through judiciously planned and implemented performance management and reward system in organizations. As such, delving deep into aspects which link reward and motivation with enhanced employee and organizational performance is of prime importance in contemporary business practice. Rewards defined Armstrong (2009) asserts that rewards emanate as a constituent of strategic human resource management which subsequently form the basis for competitive strategy. Employees are appreciated and rewarded for their creativity, innovations and commitment. This fosters a sense of satisfaction, motivation and consistency in work. It ultimately establishes link with quality management proposition of the organization and leads to enhanced performance, better customer service and greater value for money. Total reward strategy Earlier, rewards constituted only financial aspects of pay, share ownership and tangible benefits. However, with increased prevalence of intangibles in the employee satisfaction criteria, incorporating retention strategy within human resources strategy and developing employer-employee relation on informal lines, total reward strategy now includes learning, career planning and development, cooperative environment and quality of work as cornerstones to better employee performance and commitment (Figure 1). Figure 1: Total Reward Components Performance management theories and models are replete of mention and contribution of rewards as means of giving due credit to employees for their contribution and efforts and develop the trust and cooperation factors by nurturing a high performance work system in place. Jiang et al. (2009) summarize the theoretical basis behind rewards linked to higher motivation and consequently high performance. Taking examples of motivational theories propounded by eminent researchers like Maslow, Herzberg and Adam’s, the author has anchored the fact that total rewards strategy serves two major purposes- with the help of extrinsic rewards; basic amenities requirements of workers are fulfilled which suffices the monetary and future security needs of people. With the help of intrinsic rewards in terms of learning and positive workplace, individual growth is encouraged which satisfies the career development, recognition, status, leadership and work-life balance criteria of employee retention. As a result, squarely growth and improved performance is achieved in terms of satisfied internal (employees) and external customers and higher productivity from all the resources used by organization. Case of Holiday Limited Company The development of reward system at Holiday Limited Company (HLC) highlights the urgency to introduce rewards strategy as a means to retain and develop talents within the organization and bridge gaps between expected and perceived service quality for customers. HLC, being a service intensive company was in greater need to implement rewards strategy and reap its benefits in terms of improved performance through increased motivational level (Analoui 2007:246). However, the implementation and conceptualization of rewards strategy at HLC suffers from certain limitations and flaws (Refer to Appendix 1 for complete facts of the case). Taking reference from horizontal and vertical integration models in reward and performance management (Smith 2006:39); the one implemented at HLC was more inclined towards achieving vertical fit as compared to horizontal fit. Its reward strategy was conceptualized primarily to achieve business objectives with no recognition to personal objectives and career goals of employees. Allen & Kilmann (2001) try to establish links between reward, rhetoric of quality and performance of an organization. In their opinion, the reward system should first comply with the policies and strategies of human resources to develop, retain and motivate them which will then be aligned to the organization’s objectives and strategies. Fisher (1994) segregates the types of appraisal schemes in four categories. Correlating the characteristics of reward and appraisal system at HLC, it matches with the performance target setting and review quadrant where appraisals are hierarchical in nature. Standards are set keeping in mind the entire organization and objectives and then apportioned between departments and functions of the organization. Though an effective means of appraisal for education and qualification-intensive companies; this system was faulty to implement at HLC. Reasons are seasonality of workers which restricted their attainment of levels because of short work tenure and high emphasis on qualifications like NCQ which low skilled occupational workers cannot think to achieve. The Total Quality Management (TQM) philosophy in general calls for continuous improvements in the processes and means of proceeding with an activity and differentiating it with respect to varied demands. This feat was achieved by The Royal Bank of Scotland Group (RBS) in its effort to link its reward strategy with both internal and external fit (Refer to Appendix 2 for complete facts of the case). Evidence is in the form of placing ability and competency based appraisal as priority than written or figure based criteria (Analoui 2007:60). It deployed the contingency approach (Wilton 2011:241) as precursor to its reward strategy implementation which strived to align the policy features and components with the specificity, cultural environment and unique characteristics of its employees and nature of jobs. As a result, RBS succeeded in aligning its three basic and strategic human resources functions of selection, appraisal and reward and extract benefits from their synergistic effect. Another stark shortcoming in the reward strategy implemented at HLC was its failure to provide for cross-functional training and growth of its employees to perform multi-skilled jobs. Jobs raking high on hierarchy levels were able to get training and development opportunities because they already possessed basic qualifications and full time employees were in a better position to succeed through the appraisal levels because of 12 months work tenure. As such, they received the opportunities of job enrichment and job rotation as a result of enhanced skill sets (Born & Molleman 1996). At the losing side were workers ranking low in the hierarchical set up of the organization. On one hand, they were already disadvantaged in terms of basic qualifications which compelled them to start over with the same level again and again every season. Secondly, because of lack of training and any sort of job rotation; they were trapped in job redundancy and boredom. Thus, neither the compensation element nor the working environment aspect of total rewards strategy was working in their favor. Clear reflection was seen in terms of disillusionment and non-relatedness with the reward philosophy conceptualized at HLC. Workforce at HLC was diverse and seasonal at the same time. Equity sensitivity matters more in context of diverse workforce (Wheeler 2002) because varying standards, targets and policies result in greater discomfort, frustration and perceptions of inequitable returns for inputs for different people. HLC operated in the hospitality industry and as such, had both low as well as high skilled workers functioning. Also, seasonality of its business gave rise to employees having different job objectives- permanent staff requiring more of intrinsic benefits because of stability of pay while low skilled and seasonal workers aiming to maximize their pay structure. The reward strategy at HLC, however, was lacking in addressing two important components- flexibility and synchronizing with the retention strategy at the same time. Every year seasonal workers have to start from the same level of appraisal they had left in the previous year. Thus, leave apart intangibles, even tangibles were not apportioned sufficiently for their performance and contribution year by year. This gave birth to unrest, resistance and hostility towards reward strategy in the minds of employees. Comparing the reward strategy at HLC with Adam’s equity theory (Kinicki 2009:175), it lacked the basic tenets of equating inputs with outputs. For seasonal workers who worked for only 5-6 months at HLC, even completion of five levels of appraisal program was not possible. Low skilled workers like cleaners were in graver situation as they were educationally and technically less competent than their other counterparts. Thus, the component of flexibility and differentiation of reward strategy as per different hierarchical levels in the organization were not duly accounted for at HLC. Conclusion Analyzing the way reward system was planned and implemented at HLC and RBS, it becomes obvious that reward is definitely linked to motivation and subsequently performance of employees. However, implementation mode and technique decides the eventual fate of the strategy. At HLC, the reward strategy was lacking operational effectiveness and was not designed to meet the needs of its diverse workforce. Devoid of differentiation, flexibility and separate performance targets for different hierarchy level jobs; the reward system created more of discomfort, reluctance and skepticism in the minds of employees. Due to such flaws, neither cost advantage was accrued, nor could any kind of motivation be generated among employees. Contrasted to this was the case of RBS which through careful planning, understanding of TQM tenets and use of strategic human resource practice, paved way to successful reward, motivation and performance achievement despite involvement in high risk mergers, takeovers and tie-ups with financial giants. It is, therefore, recommended that HLC should revisit its reward and appraisal implementation program with a fresh and collaborative perspective, taking into account personal goals and aspirations of all full time and part time employees. This can be achieved by conducting counseling sessions with the employees, knowing about their perceptions of the reward system in general, and their expectations from HLC in terms of pay and perquisites and then finalizing the appraisal and reward system. Appendix 1 Case study: Holiday Limited Company (HLC) Company background This case study is concerned with the development of a reward system in Holiday Limited Company (HLC) a large organization operating in the UK. The study will discuss the reward strategy of HLC and relate the factors contributing to the design of the reward system, the motives behind the implementation of the system and how the organization implemented the reward system. It is important to remember that this case is based on the company’s operations during the 90s’. Then HLC comprised of a number of Holiday Centers across the United Kingdom. This case will focus on Calm Holiday Centre located in North Wales, which catered for approximately 10,000 customers each week. It employed over one thousand, two hundred employees of which over one thousand approximately, were employed on a seasonal basis. Only one hundred and fifty personnel were employed on a permanent basis. The workforce was diverse in terms of age, gender, ethnicity, and physical abilities and disabilities. The season usually commenced Mid February, offering short breaks and specialist functions. The main holiday season extended from May to September. During September and November short breaks and specialist functions were once again offered. HLC also opened for a ten day Christmas and New Year period. The staffing levels varied during the off peak holiday seasons, maximum staffing levels were only maintained during the peak holiday season (May-September). Approximately one third of the seasonal personnel were local. In relation to the reward system implemented, it was usual for both local and non-local employees to return to seasonal employment year after year. It was also not uncommon for personnel to be employed for between ten and fifteen years on this seasonal basis. However, the majority of personnel worked for a single year or up to five years seasonally. The company had been in operation since 1936, with the Calm Centre operational from 1959 and competitive for many years with a strong and clear market leader position. However, as a mature, if not declining company, during the early 1990’s, HCL introduced off peak holidays in the form of short breaks (Monday to Friday and Friday to Monday) which was a movement away from the traditional full week holidays. Despite the changes in the UK holiday market, and even with emergence of cheap holidays abroad, the short breaks were extremely successful. HLC was one of the first operators to introduce these short break holidays, the industry soon followed suit. Reward Strategy HLC introduced a company-wide Appraisal Based Recognition Scheme in which team members would have the opportunity to work towards various levels of recognition. This reward system included a customer care and training package. However, it was only applied to the seasonally employed personnel, though originally it was intend that all personnel, permanent and seasonal would participate in the scheme. Central to the introduction of the ABRS was the intention of seeking and achieving the then highly recognized accreditation of Investors in People Award. The reward system was to become the major vehicle for achieving the Investors in People Award. The company publicized and promoted the benefits of the reward system to team members as follows: Benefits for team members: Increased levels of confidence for team members in carrying out their jobs. Through target setting, team members are able to see how they contribute to the organization achieving its goals/targets. The motivation to continually develop their own abilities through training, leading to better employment and promotion prospects. The reward system was a competence-based payment scheme which linked pay to the achievement of specific behaviors, attitudes and the attainment of required competences, and this system concentrated on both past and future performance and was linked to the strategies of the organization. Additionally, the basis of the competence-based payment system took the major form of ‘progression within scales’. There were five scales (or Levels); Level One’ was automatically awarded following completion of ‘Company Induction’, which involved mandatory attendance of company Health & Safety Training, Employee introduction and familiarity with Customer Care Training, Departmental responsibilities, company objectives, codes of practice and details of the reward system. Mandatory attendance of ‘Company Induction’ ensured that the company fulfilled its legal obligation in relation to Health & Safety Legislation; consequently, no team member was able to progress to ‘Level Two before obtaining Level One. For subsequent levels certain criteria in terms of grades had to be achieved. These were mainly focused on assessment of performance (past) and performance against targets. ‘Immediate Targets’ were future objectives which would be assessed at the next appraisal. The appraisal form included a section (Action Plan) for the recommendation of any training or development required for the current position. The appraisal form also included sections for assessment comments by the team member’s ‘team leader’ (Manager - who was not necessarily the appraiser) and the team member being appraised. The appraisals were to be conducted no sooner than once per month. For short term length of contract perspective this time period was realistic, bearing in mind that many employees would only be employed for five or six months in total. Therefore this time scale allowed for progression through the system to be achievable. Implementation of reward strategy The management of seasonal employee performance was linked to the strategic goals of reducing customer complaints by means of improved performance; thereby increasing customer satisfaction. This aspect of performance was also linked to a company initiative ‘Let’s Solve the Problem Now’, which fostered teamwork relationships and the training and development of staff through A National Certificate and Qualifications (NCQ). Prior to the implementation of the system, all permanent employees who were responsible for conducting employee appraisals attended a course of instruction and received written information relating to the administration of the scheme. Discussion There were diverse reactions to the implementation of the reward system. The employees’ acceptance to this new reward programme was varied. For example, a significant number of employees who had worked for the company previously adopted a very skeptical approach, and in some instances this was an understandable situation. Particularly, in the circumstances in which an employee’s starting hourly pay was lower than normally received. The company was rigid in its approach and insisted that these employees progressed through the system to attain their previous hourly pay. From the company’s perspective, control of costs is fundamental to the performance of an organization, therefore, the company’s stance on requiring these anomalous situations to be accepted was understandable for two reasons. Firstly, the company’s requirement to control the wage costs and secondly, the company’s determination to introduce the new reward system applicable to all seasonal employees. Other returning employees did not see why they had to undertake appraisals for jobs that they had been employed in season after season and often remarked ‘if I am not good enough then why re-employ me?’ In these circumstances it was not surprising that the company faced hostility, obstructions and de-motivated personnel. Levels of motivation are affected by the extent to which future job possibilities are congruent with self esteem and self worth. The short term difficulties were overcome, in the main, by correct administration of the system resulting in employees receiving positive feedback on their performance and their value to the company. Additionally, the training and development of personnel, which positively contributed to the company’s objective of increasing customer satisfaction levels, was confirmed by reduced customer complaints, and this was communicated to the employees. However, in the long term, as these employees progressed through the ABRS further problems arose. The system was designed to accommodate short term contracts and thus capped at Level Five, for those employees (returnees) who were able to reach Level Four quite easily. The attainment of a NCQ, in order to qualify for the Level Five, was in the majority of cases either impractical or undesirable. Not all departments were offered the NCQ programme, or the individual was unable, due to literacy abilities, to embark on a programme. In many cases those who commenced the programme realized that it was time consuming and had no desire to complete the programme. The inability and no-desire factors were primarily associated with the low skilled occupations such as cleaners, waiters and gardeners. These employees once again became disillusioned with the reward system. Other individuals felt it inappropriate to complete an NVQ when they already held a recognized qualification which was of a higher level than an NCQ. On this point the company revised its criteria and subsequently accepted recognized qualifications in place of an NCQ, providing evidence of a qualification was fully supported. For those employees who worked for the company for the first time, and particularly for those jobs which presented a variety of work, the reward system worked extremely well in the majority of departments; employees received regular appraisals, feedback, mutually discussed objectives and appropriate training, and therefore recognized their development. However, for some departments the system was not effective, primarily within the departments which required employees of very low levels of skill or with no variety in their work, i.e. cleaners. For these individuals there were very few prospects of advancement, training was limited (apart from Health and Safety issues), the work was often carried out in isolation from other team members or the jobs were tediously repetitious. Perhaps for these individuals, job rotation may have provided more incentives. The second year of operation of the system presented further problems. Specifically, returning employees voiced their disapproval at commencing the season on the starting basis of Level One again and its corresponding lower pay level. Consequently, the company agreed that all returning team members would commence their employment at the same status and pay level that they had achieved the previous season (although, attendance to company induction was still mandatory). This decision significantly impacted on the wage costs of the company and to a degree affected recruitment decisions too. As each department was allocated a wage budget, which was controlled by the manager of the department, in certain instances, specifically those departments which had a high percentage of returning employees, they were restricted in either the numbers of employees, or levels of status of employees they recruited. Furthermore, and more disappointingly, it became apparent as the season progressed, that certain high employee volume departments, deliberately did not progress their personnel within the system because of the cost implications to their budget. Additionally, managers faced more challenging problems for the returning seasonally employed personnel, particularly with regard to the setting of achievable performance targets. However, for those who employed multi skilled labor the problems were significantly reduced by managerial collaboration. It became standard practice for managers of different but reliant organizational activity to engage in the training of employees from other departments. The benefits were mutually appreciated by both the management and the individuals. However, for those individuals engaged in low skilled positions no such opportunities were made available. As for the enhancement of company productivity, in the early years, the system overall did facilitate improvements in the standard of service provided and the company did achieve its main objectives, namely, reduction in the number of customer complaints and achievement of the ‘Investors in People’ accreditation. With regard to the projected benefits to the employees, many employees received training that would have otherwise been neglected with the consequence that levels of confidence did raise and the feedback employees received enabled them to appreciate that their contributions were essential to the organization achieving its goals. Appendix 2 Case Study: Contingency approach to SHRM within the NatWest Retail Bank The Royal Bank of Scotland Group (RBS) is one of the world's leading financial service providers and one of the oldest banks in the UK. Following the takeover of the National Westminster Bank in 2000, the Group has continued to develop its business around the globe and, in addition to its strong UK presence, it has offices in Europe, the USA and Asia. By the end of 2002, it was the second largest bank in Europe and the fifth largest in the world by market capitalization. During the 1980s the Group diversified, setting up an innovative car insurance company, Direct Line, in 1985 and acquiring Citizens Financial Group (established 1828) of Rhode Island in the USA in 1988. Both were to prove highly successful ventures. During the early 1990s the RBS refocused on its core business of retail banking, acquiring the private bank of Adam and Company (established 1983) in 1992. It launched Direct Banking in 1994, which quickly became Britain’s fastest growing twenty-four-hour telephone banking operation, and in 1997 announced the UK’s first fully-fledged on-line banking service over the internet, as well as joint financial services ventures with both Tesco and Virgin Direct. In 2000 the RBS acquired National Westminster Bank plc, in the biggest takeover in the history of British banking, to create a huge group, with a highly diversified portfolio of services for personal, business and corporate customers. The National Westminster Bank had been formed in 1968, when National Provincial Bank (established 1833), along with its subsidiary District Bank (established 1829), and Westminster Bank (established 1836), agreed to merge. After the merger of the RBS and NatWest the businesses of the two groups were combined, and the enormous task of integrating their IT systems began. Scheduled to be completed in 2003, it was the largest project of its kind ever attempted, and was finished in November 2002, four months ahead of target. NatWest's retail bank continues to operate as a distinct and separate brand on the High Street. The role of HR strategy within NatWest to select, appraise, reward and train NatWest staff could be viewed as very characteristic of the contingency approach as it places great emphasis on selecting the right type of employees for job roles identified in the marketplace, appraising the selected candidate after six months and constant training to ensure that individuals within the organization fit into the external strategy of the organization. Take, for example, the introduction of a relatively new position within NatWest of customer advisor since its takeover from the Royal Bank of Scotland. The bank could be said at the time of the takeover to be in a precarious position as it was under severe pressure for the brand of NatWest to become more productive in its branch network, increased deregulation meant that customers were able to switch brands more easily and increased competitiveness within the retail banking industry meant that customer loyalty was decreasing. Also the Royal Bank of Scotland was under pressure from its own shareholders to increase profits as a result of the takeover. Prior to the takeover of NatWest, the Royal Bank of Scotland had increased customer loyalty and sales through their own version of their Customer Advisor role and therefore had the confidence that this same practice could be applied to the NatWest Brand. These external pressures for greater profitability, alongside the practical experience, resulted in a change in the organizational structure to include the role of the customer advisor as a vehicle to produce increased sales. However, this was not all; other changes in organizational structure were needed to accommodate the increased focus on a sales approach. Managers for the first time were put under greater pressure from regional management to achieve sales targets (these were not so apparent before the Royal Bank of Scotland takeover) and were appraised more on their ability to achieve these targets and not so much on the previous criteria such as balance sheets or cost minimization. The relationship between the external influences and the internal fit, in reference to the organizational structure, has been correctly identified. However, the question raised is; what about the changes which ought to be introduced into the HRM practices in order to ensure the ‘fit’ to the external changes? The contingency approach, suggests three strategies related to the HRM functions that form the basis of the fit for a business strategy; these include selection, appraisal and reward. References Allen, R. 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