Total Rewards System: WorldatWork - Case Study Example

Assignment 3 For Dr. Larry Byrd HRM533 (Today’s TOTAL REWARD STRATEGY Organization Overview WorldatWork is a non-profit organization providing education, conferences and research focused on global human resources issues; these issues include compensation, benefits, work-life and integrated total rewards to attract, motivate and retain a talented workforce consultatively in a recruitment manner. It has nearly 30,000 members and the organization operates in more than 100 countries of the world as well as having affiliate organizations to support its operations. At this organization, total reward is primarily about retaining employees and financial performance involving business objectives that include retaining high performers, enhancing the organization’s financial performance and attracting key talent. Total Rewards Strategy For an effective total reward system, WorldatWork has chosen to have a senior executive in every region or country who will be responsible for this scheme as well as make decisions about it. Such an individual should be directly reporting to the top human resources professional or rather the CEO. The strategy for such a rewarding scheme should be able to draw on the internal analysis and reports as well as external practices from other organizations for making an informed decision. The total reward mix for the organization needs to primarily use cost affordability measures as well as business strategy documents to make such decisions and involve the senior management in their development in order to have a standardized scheme. Researches have shown that the total reward strategy of this organization has stayed constant in the face of economic turmoil although there has been a revenue reduction recorded. Even with investments in total rewards programs staying mostly neutral, organizations changed the levers they were pulling and mixed up the allocations of their total rewards spend as forty per cent reported enhancing or adding wellness programs. This can be an incentive for the performance of the employees during the unpredictable economic structures involving turmoil. The top factors that have been influencing changes to the total reward programs were the affordability, business performance and the ability to attract and retain key talent. Previous empirical research on compensation has distinguished between either financial versus non-financial (Armstrong & Stephens, 2005), rewards or intrinsic versus extrinsic rewards (Deci, 1972), or hygiene versus motivator factors, thereby rendering the comparison of empirical findings problematic. This difficulty is exacerbated by the lack of consensus among researchers on what components should be included in these different categories whenever such a non-profit organization is under consideration, (Werner and Ward, 2004) It is important to stress here that Foa & Foa (1975) considered particularism to be similar to Blau’s (1967) notion of extrinsic and intrinsic rewards and that Sachau (2007) argues that hygiene and motivator factors should be understood as extrinsic and intrinsic rewards too. There is need to understand that the particularistic returns encompass intrinsic rewards, motivator factors and non-financial rewards whereas non-particularistic ones also referred to as universal, encompass extrinsic rewards, hygiene factors and financial rewards as a whole package; in terms of concreteness, rewards which are neither visible symbolically and physically, nor easily computable and comparable between them or with those of other employees are included in the category intangible. Those which are easily computable and comparable by employees are encompassed by the category tangible Fixed pay, flexible pay, benefits and insurance, as well as expatriates allowances, can thus be classified as Tangible Universal Rewards, whereas opportunities for higher professional status and good working conditions which are important to expatriates are classified as intangible particularistic rewards. Also, included in this latter category are all the non-financial rewards related to the work itself, such as having a meaningful role, a wide scope of responsibilities and a strategic role in the organization. These exchangeable rewards are those that expatriates seem to strive for and they are all linked to developmental growth, which attracts international mobile employees and represents what global leaders seem unwilling to sacrifice. It is therefore expected that studying the link between the perceptions expatriates have of their total compensation package and their affective commitment will provide employing organizations with information and a means to influence both ends of this link. More specifically, this means is the understanding of the state of their employees’ personal commitment from the perspective of the contract held. System Advantages Loyalty can be described as an employee’s perceived socio-emotional link and attachment toward their employing organization which can be attributed to the satisfaction levels felt in the work environment. Affectively committed employees are regarded as being willing to build and maintain long-lasting relationships with their employer due to their perceived vision going hand in hand with the organisational goals. Multinational organizations face the strategic challenge of affectively committing their valued international employees who are the source of their labour valued in the international market. Examples of them are the assigned expatriates whom despite offering competitive compensation packages are a hot cake in the international labour market. Compensation for expatriation is often considered extremely costly and time consuming for the organizations involved in international operations and hence caution is exercised in setting up the reward packages. There is the perception that pressures companies to downsize their allocation on investment in international experience and knowledge, on the other hand, there is a danger that the financial pressure that the organizations feel to reduce compensation costs may lead to an alteration in the expatriates’ perceptions not only of their compensation package, but also of their whole employment relationship leading to a change in attitude toward their employer in terms commitment levels. The expatriate compensation package, also known as the total compensation package has traditionally been studied from organizational and financial perspectives advocated by organizational control theories by a number of scholars in the management industry. There are three main components of the package that can be used to describe how employing organizations provide their expatriates with packages, these are fixed pay and flexible pay, Benefits and Allowances (Bonache, 2006; Gomez-Mejia & Welbourne, 1988; Schell & Solomon, 19970). In adopting the perspective of the expatriate’s compensation package, this individual perspective is combined with a total reward approach. In other words, this notion implies that each aspect of reward are linked together and treated as a whole; these components of the rewards namely base pay, contingent pay, employee benefits and non-financial rewards have managed the inclusion of intrinsic rewards from the work itself and make up the package that attracts the expatriates (Armstrong & Stephens, 2005), hence embracing everything that employees value in the employment relationship (O’Neal, 1998). This is a much more consultative and incorporating approach that puts together the compensation package and leads to the consideration of the whole expatriate package as a bundle of valued rewards as referred to by some scholars, in exchange of contributions (Blau, 1967). There are those components of the remuneration package considered as rewards that are interrelated and hence a distinction is required to differentiate the traditional compensation package from the total reward one. There has been a distinction made between two dimensions by Foa & Foa (1975) to classify returns is useful in this regard when considering the compensation schemes. The first dimension labeled particularism indicates the extent to which the value of a given resource is influenced by the particular persons involved in exchanging it and by their relationship; the second dimension, concreteness, ranges from concrete to symbolic and suggests the form or type of expression characteristic of the various resources where the difficulty in using such distinctions is that very few academic studies have referred to it previously. Communicating the Plan Traditional compensation package has for a long time been associated with the negative State of Psychological Contract where Rousseau & Ho (2000) use six features to classify types of compensation and Psychological contracts. More specifically, they consider core versus peripheral attributes of compensation where the core refers to basic and relatively enduring features of the agreement with their employer. At WorldatWork, they are stipulated in an initial or on-going employment agreement whereas peripheral attributes are not explicitly stipulated in the agreement but the efforts recognized towards the same are rewarded. Thus, they are the basis on which employees base their expectations and understanding relating to their exchange agreement. Any changes in core attributes are usually associated with a great perception of loss and the associated list includes salary, insurances, incentive stock options, moving expenses, and education assistance as representing this core feature. Employers have established ways that every employee needs to fell he is rewarded for the work done as well as compensate the pain involved in cases where there was the need for relocation. The previous working life as compared to the offer of employment should be well covered in the allowances of the expatriates as well as bridge the gap between expenditure in the home and the host country as well as to cover the costs of moving overseas and to motivate the individual to make such a career move (Torrington, 1994) However, the tangible resources, particularly ones with clearer monetary value, such as pay and material goods are readily exchanged with limited interaction and virtually no relationship between the employee and the expatriate. Thus, Tangible Universal Rewards has to cover the price of their move abroad or expatriation, the threshold of their approaching compromise, and the minimum of what they will be ready to accept in the future employment in the same country. Hence, it can be presumed that employees who perceive that their employer has not fulfilled their agreement in terms of the delivery of the promised compensation package would perceive their exchange relationship negatively and this would, in turn, affect their affective commitment accordingly Ensuring the Plan is Competitive Intangible particularistic rewards Particularistic resources include bestowing special status such as recognition, services that benefit another’s well-being that may come in the form of development mentoring, and love expressed via concern and socio-emotional support - support and flexibility in response to a family crisis, personal relationships are typically the basis for particularistic resource exchanges. Thus, unlike for Tangible Universal Rewards, the value of Intangible Particularistic Rewards is influenced both by the particular persons or parties involved in exchanging them and by their relationship (Foa & Foa, 1975). The exchange of such rewards is based on and involves the socio-emotional dimension of the relationship between the expatriate and his/her employer; the findings by O’Reilly and Caldwell (1980) support the view that intrinsic rewards have a positive linear relationship with affective commitment Total reward package The total reward package represents the bundle of all types of rewards classified above according to the two dimensions described by Foa & Foa (1975), Tangible Universal Rewards and Intangible Particularistic Rewards. On the other hand, Rousseau (2001) and a wealth of other writers state that in the case of valuable employees such as the international work force, special terms and conditions of the employment relationship preferred by the employee can be negotiated between the two parties while at the same time helping the employer attract, motivate, and/or retain this highly valued contributor. Thus, this kind of deal benefits both parties and these authors call such exchange agreements, i-deals. In the case of expatriates, the negotiation of their total reward package usually occurs after their employment relationship has gone on for a period of time such as the socialization period of employees prior to their assignment for expatriates or pre-recruiting periods where they apply. This negotiation echoes with what is referred to more specifically as the ex post i-deals. These ex post i-deals involve commitment from both sides, as well as an exchange of information and trust comes in handy in the development of a commitment approach to non-profit organizations such as WorldatWork In addition, Robinson & Rousseau (1994) stress that the psychological contract, unlike formal employment contracts, is not made once but rather it is revised throughout the employee’s tenure in the organization. Events in the form of new job assignments, relocations, and organizational restructuring may overlay new terms upon old ones as this is particularly the case for international assignments and jobs; promises related to what expatriates value most, based on reciprocal trust, can forecast how proportionally negative their reaction would be if they perceived that their employer actually failed to deliver what they had promised (even if the employee’s perception might be inaccurate) and vice versa. The ex post i-deals tend to include more particularistic rewards than universal ones and in addition, there is some support for the view that intrinsic rewards are more powerful determinants of affective commitment than extrinsic ones. Consequently, it is expected that any positive discrepancy in the delivery of Intangible Particularistic Rewards will override any possible negative perceptions relating to the delivery of Tangible Universal Rewards References Armstrong, M. & Stephens, T. (2005). Handbook of Employee Reward Management and Practice. Kogan Page, London. Blau, P.M. (1967). Exchange and Power in Social Life, Wiley, New York, NY Bonache, J. (2006). The compensation of expatriates: a review and future research agenda. Handbook of Research in International Human Resource Management, Edward Elgar, Cheltenham. Deci, E.L. (1972). Intrinsic motivation, extrinsic reinforcement, and inequity. Journal of Personality and Social Psychology. 22(1), pp. 113-20. Foa, U.G. & Foa, E.B. (1975). Societal Structures of the Mind. Charles C. Thomas Publisher, Springfield, IL Gomez-Mejia, L.R. & Welbourne, T.M. (1988). Compensation strategy: an overview and future steps. Human Resource Planning. 11(3), pp. 173-89 O’Neal, S. (1998). The phenomenon of total rewards, ACA Journal. 7(3), pp. 6-18 O’Reilly, C.A. & Caldwell, D.F. (1980). Job choice: the impact of intrinsic and extrinsic factors on subsequent satisfaction and commitment. Journal of Applied Psychology. 65(5), pp. 559-65. Robinson, S.L. & Rousseau, D.M. (1994). Violating the psychological contract: not the exception but the norm. Journal of Organizational Behavior. 15(3), pp. 245-59 Rousseau, D.M. (2001). The idiosyncratic deal: flexibility versus fairness? Organizational Dynamics. 29(4), pp. 260-73. Rousseau, D.M., Ho, V.T. & Greenberg, J. (2006). I-deals: idiosyncratic terms in Employment Relationships. Academy of Management Review. 31(4), pp. 977-94. Sachau, D. (2007). Resurrecting the motivation-hygiene theory: Herzberg and the positive psychology movement. Human Resource Development Review. 6( 4), pp. 377-93 Schell, M.E. & Solomon, C.M. (1997),Capitalizing on the Global Worksforce: A Strategic Guide to Expatriate Management, McGraw-Hill, New York, NY. Torrington, D. (1994). International Human Resource Management: Think Globally, Act Locally, Prentice-Hall, London. Wright, P.M. & Nishii, L.H. (2007). Strategic HRM and organizational behavior: integrating multiple levels of analysis. CAHRS Working Paper Series, Center for Advanced human Resource Studies, Cornell University ILR School, Ithaca, NY. Read More