New and Improved Rewards at Work - Research Paper Example

New & Improved Rewards at Work Introduction The landscape of corporate world has transformed greatly in the past century. This transformation from industrialization and scientific approach to humanistic approach has affected organizational strategies greatly which also includes changes in compensation policies. Where earlier emphasis was on providing monetary rewards for employees’ inputs, present-day employers use innovative measures to for boosting employees’ morale. However, it is important to identify how such innovations can provide a competitive edge to employers in attracting and retaining potential talent and whether these benefits can be introduced uniformly throughout the organization. Another purpose of this research paper is to identify if equity-based compensation is better than creative approach and vice versa. This examination can further help in understanding if these two approaches can be combined to devise an effective compensation structure. Innovation in Compensation Strategy The compensation strategy acts as one of the major criterion for an organization’s progress as it is directly linked with employees’ productivity and retention of best talent. With changes in organizational landscape during last century, employers have altered their reward policies with reference to human factor (Jones, 2008). Human relations approach emphasizes on using non-traditional and non-monetary benefits to make an organization’s rewarding policy more compelling (Hersey & Blanchard, 1977). Rewarding talent along with accountability for work acts as the gist of compensation plans. During past few decades, the focus of compensation packages has shifted from economic benefits to suitable work environments. As a result, many new work regimes such as flexible working times, frequent breaks, mini-cinemas and TV rooms along with in-house sports activities, have been added into organizational policies (Fogleman, 2012). The question arises as to how innovation in work plans can provide competitive edge to the organizations and help them attract and retain potential talent. Where compensation policy allows employers right reward for desired performance level, employees’ expectation plays a vital role in determining effectiveness of such compensation policy. Ideally, employee compensation is expected to improve employee motivation level, enhance creativity and persistence and also providing help in retention (Fogleman, 2012). In order to do so, employers are coming up with innovative strategies that can present them to be better employers and help them attract talent with desired skills inventory. The effective compensation is the one that fosters equality, provides administrative controls to the management, and pays for contribution along with fostering reward valued behavior. This is the reason why employers are going beyond legal requirements and providing benefits that appeals to human side of an employee and satisfied their emotional and social needs (Wing, 1997). The total reward program is an organization’s tool for gaining an edge over other employers. While accepting job offers, employees consider monetary compensation, perks offered learning and career progression and work environment. What can be a suitable amalgam of these four elements is dependent on values of the employees, characteristics of particular demographic segment and also skills borne by the employee. On the other hand, employers provide rewards that align well with organizational strategy and potential. These organizations tend to have a competitive advantage when they can attract and retain potential talent without incurring excessive costs. The innovative approach allows employees to distinguish between mainstream and preferred employers and helps in making alliance with them. First criterion of effective compensation is market competitiveness. Usually, average compensation ranges are known to the employees working in a same industry. Where most of the employers offer market competitive packages, it is nature of intrinsic benefits that provide weight-age to compensation strategy. A competitive compensation plan needs to include base pay, variable benefits, opportunity for career growth and learning and flexible reward model to pay off extra initiatives taken by the employee. Furthermore, reward policy needs to exhibit management’s philosophy and also alignment with strategic goals. It should address social needs of the employees while responding to industry trends and labor market practices. The compensation strategy tends to provide competitive advantage to an employer if they can attract and retain top talent by keeping the rewards costs less while providing innovative benefits that is flexible in nature and allows employees to remain motivated. Where world has turned into global market and organizations have become more competitive in their pursuit of attracting suitable workforce, they are required to have better and innovative approach that would appeal to the workforce. According to Quinn and Rivoli (1991), employees tend to join employers that satisfy their emotional needs through their management approach. However, such system works when market is stable. On the other hand, a strict and hierarchical model is preferred when market is volatile and uncertainty prevails. In such scenarios, employers and employees tend to adopt risk aversion and minimize cost at the same time. In addition to market environment, fairness is another element that attracts talent and helps them in staying with an organization for a longer time (Kogleman, 2012). It is important to note that requirements of employees will keep on varying therefore following one kind of compensation pattern will lead to reduction in motivation gradually. Hence, it is important that employers can identify eminent changes in non –monetary trends and foster changes that comply with organizational policies and cultural norms (Wing, 1997). Another major benefit of innovative and flexible compensation approach is to foster a competitive environment within an organization that allows employees to set goals for themselves while maintaining work-life balance. Innovative reward approaches like online shopping; brining a pet to work makes employees feel less controlled and makes them their own boss by increasing authority and accountability. This increased responsibility pushes employees to align their personal needs with organizational goals. The critical analysis of software industry indicates that companies strive for potential talent according to their business strategy and philosophy. For example, SAS, Google and Microsoft require similar resources however they follow different tactics for doing so. Where Google focuses on fun-oriented and second home culture, SAS tends to help employees let go of their domestic responsibilities and healthcare issues through services like on-site daycare and clinic. On the other hand, Microsoft provides variable monetary benefits in the form of bonuses etc (McGrawHill, 2012). Relationship between Innovative Benefits & Job Profiles It is important to note that innovative intrinsic benefits are tied with employees’ preferences that are changeable. With changes in job roles during past few decades, personality profile needed for particular jobs has also evolved and became specialized. Due to this specialization, employers are forced to maintain relevance between job roles and incentives provided with general compensation. A simple case can be increased participation of women in workforce during after 1930s. It could be seen that requirements vary along with gender. Where men would be more concerned with increased base pay, bonuses and in-house games at work, women would be more willing to have a daycare service and transportation provided by an employer. Furthermore, flexible working hours and home-based jobs also address needs of employees that find it difficult to follow traditional working hours. In addition to employees’ preference, requirements of certain jobs also play an important role in deciding these benefits. Employers are required to perform an on-going analysis of emerging trends in compensation and correlating them to job profile. For example, being a doctor requires physical presence whereas writing or newspaper editing can be done from a remote end. Hence, identifying specific demographics suitable for a job and then designing an incentive plan would be more beneficial. Other benefits like stocks, savings, and discounted prices also appeal to variety of workforce. Considering example of Starbucks, it can be seen that this company has considered needs of different segments and has devised its incentives plan accordingly. Paid leaves along with complete insurance for part-time workers and tuition fee reimbursement after one year of service are the perks that appeal to students’ more than senior workforce. Hence, Starbucks manages to attract young and energetic individuals for its barista job which constitutes most of its workforce at a market competitive base salary with exceptional perks (Starbucks, 2012). Although benefits like free coffee does not provide material value to the employee however it makes employees feel as valued as a customer and an opportunity to enjoy product of an esteemed brand without any cost. Equity Based Reward System versus Innovative Benefits Many organizations give stocks and equity to its workforce. Although this concept was more oriented towards engaging upper management however with the passage of time, organizations like General Electric and even Starbucks share stocks with their usual workforce. Question arises if sharing equity will motivate the workforce and to what extent. And if it does, can it be replaced with innovative rewards like laundry and bill payment at a work place, discounted or free merchandise etc. Critical analysis of equity based system indicates that this approach can be effective in fostering long-term commitment and ownership in the workforce. On the other hand, employees feel more powerful and participated in decision making when stocks are shared with them. However, what motivates employees varies from employee to employee due to social, economic and cultural factors. Therefore, equity based options can only motivate a certain segment of people (Cloninger, 2011). Share in equity has more incentives at senior level management instead of middle and tactical workforce. According to Robbins (2004), “You want people emotionally invested in the company's success. You can get that investment by giving them meaningful work in service of a worthwhile goal. Hire people who believe in what you're doing and match them to jobs. If you want to reward their commitment, then give them stock, but make it crystal clear you're rewarding their innate involvement, not trying to buy it”. Therefore, such options are suitable for a workforce that desires and strives for ownership. Similarly, innovative approach can only address needs of a certain segment in a work force. Simple explanation can be given by the fact that not everyone owns a pet, have kids or believes in online shopping. Therefore, not one approach can be applied universally. Analyzing needs attached to a certain demographic segment and devising appropriate compensation plan would do the needful. Key Elements of Integrating Innovation in to a Traditional Total Rewards Program The traditional reward system includes base pay, standard benefits like health coverage etc, variable performance based pay, bonuses and retirement plans. Some organizations provide equity-base options whereas other attempt to amalgamate innovate measures into their compensation policy. It is important to note that monetary benefits act as the primary stimulator f or the workforce. People want extrinsic compensation for the work that they do. According to Maslow’s hierarchy of needs, satisfaction of primary needs is the first level employee satisfaction (Heneman & Coyne, 2007). From there onwards, level of needs vary and thus require different treatment. The contemporary innovative practices such as flexible working hours, personal internet usage, availability of TV and games at workplace, childcare, personal workplace independence etc are some of the benefits that satisfy emotional and social needs of the employees. It is important that employers identify a suitable combination of tradition rewards system and innovative approach (Cloninger et al., 2007) Traditional monetary system acts as industry standard that every market player has to follow. Variations in levels can be named as being underpaid and overpaid affecting employees’ motivation level accordingly. While integrating innovative plans into traditional compensation structure, its uniformity and relevance to a certain segment should be ascertained. Furthermore, these innovative plans should address employee recognition and appreciations needs as well. According to survey conducted by worldatwork.org in 2010, “The vast majority (94%) include at least compensation (base salary, incentives and guaranteed payments) and benefits (retirement and medical) in their definition of total rewards. A subset (still a majority of 59%) includes compensation, benefits and work-life programs (e.g. flexible working times, options to take extra vacation) in their definition of total rewards.” This explanation is further strengthened by segregation of total rewards into compensation, benefits and work experience (acknowledgement, work-life balance, culture, career development, work place environment) (awlp, 2006). According to Gilbert et al., a total rewards strategy should entail a suitable remuneration that is sustainable and affordable by the employer. Furthermore, it should connect business strategy to high performance culture along with providing maximum return on rewards investment. Rewards plans are the foundation of employer branding. Taking example of Starbucks and Google, it can be seen that they are attempting to create a ‘second home’ experience for their employees. The major element that act as a decisive factor while designing a total rewards strategy is clear understating of economic, geographic, regulatory, political and social context of the organization and issues that may arise in the given settings. It is important that addition of innovative approach to tradition reward system should ensure a holistic, well-integrated, measureable, uniform reward system that is well-aligned with organizational strategy. Hence, the reward structure should be market competitive whereas other benefits should reflect organization’s philosophy and their approach towards employee recognition. Recommendations The total rewards programs intends to keep employees motivated and loyal to the organization while keeping them focused towards their jobs, eventually achieving organizational objectives. In maintaining satisfaction amongst employee suggestions related to total rewards program are immensely important. The recommended process for collecting employee suggestions is a total rewards survey that should run alongside employee satisfaction survey. In this survey probing questions related to total rewards survey shall be presented to the employees. The efficiency of current total rewards practices is questioned and introducing new rewards suggested by employees is evaluated. The process initiates with employees suggesting new total rewards through feedback boxes, based on this feedback the most suggested total reward shall be included in the questionnaire where if majority of employees agree, than such reward shall be made a part of total rewards program. Similarly if there is a change suggested by employees in the total rewards survey, than such change shall be implemented. It is imperative that before introducing or making a reward available for selection in the survey, leadership team should evaluate financial implications on the organization and acceptability of reward in accordance with organizational vision and mission along with its values and long term objectives. Once a new total reward is approved and agreed upon by employees such reward shall be introduced with details covered in the total reward policy, communicated to the employees. The communication of this change should reach all managers and leadership team, without whom implementation and execution of new reward would be impossible. Conclusion The critical analysis of contemporary compensation and rewards practices indicate that compensation policy plays a vital role in attracting and retaining potential talent required for organizational development as it acts as the basis of its employer branding. There are many theoretical models that support satisfaction of individuals’ needs other than extrinsic compensation. Therefore, employers use innovative strategies like internet shopping, games at work and brining pet in office to motivate employees. Where every employer is expected to provide compensation equals to industry standards, such innovative benefits helps in attracting top talent. However, devising an appropriate compensation plan using innovative approach can be tricky as individual needs of the work force may vary greatly. Therefore, it is important a traditional reward approach should be combines with innovative rewards to address their extrinsic and intrinsic requirements simultaneously. References Alliance for Work-Life Progress. (2006). What is Total Rewards, Retrieved from http://www.awlp.org/awlp/about/html/aboutus-whatis.htmlQuinn, D.P. & Rivoli, P. (1991). “The Effects of American- and Japanese-Style Employment and Compensation Practices on Innovation”, Organziation Science, 2(4): 323-341. Cloninger, P.A., Ramamoorthy, N. & Flood, P.C. (2011), “The Influence of Equity, Equality and Gender on Organizational Citizenship Behaviors”, SAM Advanced Management Journal, 76(4): 37. Fogleman, S.L. (2012). Creative Compensation, Retrieved from http://nature.berkeley.edu/ucce50/ag-labor/7article/article33.htm Gilbert, K. & Cornish, S. (n.d), Aligning Your Total Rewards Strategy With Your Business Goals, Retrieved from http://www.ceoforum.com.au/article-detail.cfm?cid=6274&t=/Ken-Gilbert-and-Sally-Cornish/Aligning-your-total-rewards-strategy-with-your-business-goals Heneman, R.L. & Coyne, E.E. (2007). Implementing Total Rewards Strategies, Retrieved from http://www.shrm.org/hrdisciplines/benefits/documents/07rewardsstratreport.pdf Hersey, P and Blanchard, K. (1977). Management of organizational behavior (3rd ed). Englewood Cliffs, NJ: Prentice-Hall. Jones, I. (2008). The Human Factor: Inside the CIA's Dysfunctional Intelligence Culture. New York: Encounter McGrawHill Education. (2013), Compensation Strategy, Retrieved from http://answers.mheducation.com/management/compensation/compensation-strategy Starbucks Inc. (2012). Your Special Blend, Retrieved from http://assets.starbucks.com/assets/7343fbbdc87845ff9a000ee009707893.pdf Wing, S. (1997). “Implementing Innovative Staff Compensation Strategies”, CUPA Journal, 48(1): 17-19. Worldatwork.org. (2011). Total Rewards Implementation and Integration, Retrieved from http://www.worldatwork.org/waw/adimLink?id=41032 Read More