Total Rewards Approach to Reward Management - Essay Example

TOTAL REWARDS As organisations face greater competitive pressures, what evidence is there that they are adopting a total rewards approach to reward management? Ensure that you support your answer with recent private/public sector case examples. Your name ………………………….. Course ……………………………….. Date of submission ………………………….. Introduction Human capital, and more specifically knowledge and talent, is obviously one of the most vital, powerful and productive assets in an organisation. Human Resource Management, today, is giving greater emphasis on the significant roles that people can play in an organisation and suggesting various effective strategies that can considerably help them become high performers and thus to bring business success. Reward management, motivation, knowledge management, high performance working and collaboration are thus some of the major HR strategies that are basically designed and developed to bring quality working environment and ensure smooth running of the business. The main issue being discussed in this piece of research is Total Rewards and its importance to today’s competitive business environment, giving empirical evidences to show how organisations are adopting this HR strategy and how far they are successful. This paper considers Total Reward system adopted by Royal Bank of Scotland, one of the largest international financial service provider, and explains how it found a way to create successful working environment for its people. Total Reward’ is an HRM strategy to Rewards Management, based on holistic approach to giving rewards and facilitating better working environment, rather than relying solely on ‘pay and direct benefits’ that have long been the basic tenets of traditional compensation practices (Rumpel and Medcof, 2006, p. 27). The basic notion of Total Reward is that employees’ needs, no matter which hierarchy they belong to, must be fulfilled by integrating various HRM tools like motivation, rewards, incentives, pay, recognition and better working environment in order to encourage them to perform well and help the organisation achieve its specific goals. Total Rewards as an HRM strategy The concept of Total Reward gives greater emphasis on the importance of considering and incorporating all aspects of reward as a coherent whole. A number of reward and related elements like basic pay, pay based on performance or on contribution, employee benefits, non-financial rewards including intrinsic rewards and the work environment itself are virtually linked together or are integrated in the Total Reward system (Armstrong, Murlis and Group, 2007, p. 12). According to WorldatWork (2007), Total Reward is the monetary and non-monetary returns offered to the employees of an organisation in return for their works, efforts, time, talents and outcomes (p. 4). The Total Reward system, according to WorldatWork (2007), integrates five basic elements, that are 1) compensation, 2) Benefits, 3) Work-life, 4) Performance and Recognition and 5) Development and Career opportunities (p. 4). These elements can attract, motivate and retain talented workers to bring business success. For instance, giving monetary or non monetary rewards and facilitating better working condition and development or career opportunities will be more likely to motivate employees and if they are motivated, they will be more likely to stay back in the organisation, that in turn resulting knowledge share, knowledge transfer between workers. Total Rewards not only motivates employees to perform well, but also to be retained and to create a positive working environment for all the employees. Armstrong (2002), based on WorldatWork’ s definition of Total rewards found that employee satisfaction is a significant matter of concern in Total reward system (p. 8- 9). WorldatWork has considered optimizing employee satisfaction with rewards as a basic element included in Total Rewards. Employees are generally satisfied when they are provided monetary or non-monetary rewards and are motivated or encouraged to be retained. Basic Components of Total Rewards Armstrong (2002) identified three major components for Total Reward system. Compensation represents foundational rewards that are primarily financial and satisfy employees’ financial needs. Benefits are those that can satisfy protection needs of the employees. Work experiencing or performance management rewards are those that can meet relational needs, binding the employees to the organisation more strongly (p. 9). Mathis and Jackson (2007) also described three basic components of the Total Reward system, as depicted below: Why organizations adopt Total Rewards: Most importantly, people, their skills, experience, knowledge and talent are critical sources of competitive advantages (CIPD, 2002, p. 3). A business can attain sustainable competitive advantages only when its people are above average performers. People with more knowledge, experience, skills and talent are normally found to be better performing and more productive than others. There has recently been a number if changes in the workplace including high proportion of women participation, dramatic increase in lone parents and retaining of older workforce. These social and demographic changes show that Total Reward is becoming increasingly important since workforce is becoming increasingly diverse (CIPD, 2002, p. 3). In today’s complex living contexts, people are looking for ways to balance their work and leisure, family and community time. Employees have unique needs and these are to be recognized by the employer in order to satisfy him (CIPD, 2002, P. 3).. Total reward system encourages employers to identify varying needs of employees and take strategic measures to fulfill their needs. Many companies have recently recognized importance of facilitating work-life balance. CIPD (2002) found non-monetary motivators as significant reason why organisations increasingly adopt Total Reward system to manage its rewards. Money is not the only motivator, but non-monetary rewards like career opportunities, knowledge development, learning atmosphere and intrinsic motivation too play significant roles in motivating employees. By adopting total rewards, organisations use competency levels of self-management, social awareness, self awareness and relationship management as well (Armstrong, Murlis and Group, 2007, p. 12). Rumpel and Medcof (2006) emphasized, based on a research conducted by Kochanski, Mastropolo and Ledford, that reward of the work itself, career opportunities and unique work environment have greater impacts on attracting and retaining skilled and talented employees than do pay and cash compensation have (p. 30). These empirical evidences show that Total Reward system is becoming increasingly important because not only monetary, but non-monetary rewards, also play more significant roles in motivating employees towards becoming high performers. Total Reward system Implemented by RBS The Royal Bank of Scotland (RBS) is one of the leading international finance service provider, with more than 2000 branches and employing more than 150,000 people worldwide. RBS has become a model company for implementing effective Total reward system and to be recognized itself as ‘employer of choice’ (Armstrong, 2007, p. 45). The fundamental approach of RBS is that its total reward system is designed to focus on overall content and value of the pay and benefits and how these support the needs of its employees. According to the total reward as adopted by RBS, pay is just one element of the total package. Another important element is Value Account, which is made up of basic pay for non-managerial staffs and basic plus benefits funding for managers (Armstrong and Brown, 2006, p. 30). The RBS Total Reward package includes pension funding, health and medical benefits and paid holidays. Employees are granted general holiday allowance with an option to buy or sell days. Employees are also offered lifestyle benefits like discounted shopping vouchers and services such as mortgage, personal loan etc (The times 100, 2010). Apart from these, the Total Reward package of RBS offers results based payments. Money is an incentive to go to the work, but pay alone cannot motivate people to contribute more. At RBS, recognition of good performance of its employees remains to be an effective motivator. Employees at RBS are highly motivated to bring better outcomes due to the reward system, in which pay, benefits and performance management are integrated, that in turn help establish a better working environment. Conclusion This piece of research paper has highlighted underlying principles and HR concepts of Total Reward system, addressing major evidences to show how important is total reward system and hoe organisations are increasingly encouraged to adopt this strategy. The empirical evidences from the example of Royal Bank of Scotland explains how it adopted the system, with various key elements being included and how it found a way to the success through Total reward system. References Armstrong, M (2002), Employee reward, Illustrated third edition, CIPD Publishing (Chartered Institute of Personnel and Development) Armstrong, M (2007), A handbook of employee reward management and practice, Illustrated edition, Kogan Page Publishers Armstrong, M and Brown, D, (2006), Strategic reward: making it happen, Illustrated edition, Kogan Page Publishers Armstrong, M, Murlis, H and Group, H (2007), Reward management: a handbook of remuneration strategy and practice, Fifth revised edition, Kogan Page Publishers CIPD, (2002), Total Reward, Illustrated edition, CIPD Publishing- Chartered Institute of Personnel and Development, Mathis, R. L and Jackson, J.H (2007), Human Resource Management, Cengage Learning Rumpel, S and Medcof, J. W (2006), Total Rewards: Good fir for Tech-workers, Industrial research Institute Inc The times 100 (2010), Motivating through Total Rewards, Motivation at RBS, The Times 100 case studies, Retrieved from http://www.thetimes100.co.uk/case-study--motivating-through-total-reward--106-258-4.php WorldatWork (2007), The WorldatWork handbook of compensation, benefits & total rewards: a comprehensive guide for HR professionals, Illustrated edition, John Wiley and Sons Read More