Reward Strategy and Management - Case Study Example

Reward Management Student’s Name: Instructor’s Name: Course Code: Date of Submission: Introduction In the contemporary business world, different organizations are showing great commitment towards implementing different strategies that can ensure effective reward management practices that are well aligned with HR policies and practices and that are aimed at helping the organization to attain its goals and objectives alongside attracting, retaining and motivating its productive employees. Efficient reward practices and management processes are important in attracting professionals to an organizations who result oriented and can thrive an organization into great performance. With majority of the Human Resource Management professionals, reward management is considered the most important tool in motivating the employees and also working towards enhancing productivity of the workforce if implemented properly (Zingheim & Schuster 2000). Rewarding management has gone numerous revolutions since the 1970s when Peter Drucker wrote how organizations risked running bankrupt if this fundamental aspect of the business. Research is showing that in the last one decade, numerous changes are being enacted with regard to the role and functions of HR. This is especially common among the roles of the first level, supervisory and front-line managers. This is so in trying to manage people at departmental level as one way of trying to appraise their performance. According to Cox, Brown and Reilly (2010) even though different organizations have continued to implement different reward strategies, they are ending up in much frustrations and this is attributed to the problems in reward strategy design, in addition to the flawed expectations and assumptions in models of reward strategy (Bryan 2007). The objective of this essay is to critically analyze and evaluate the expectations about reward strategies and present various perspectives on the concept of management by paying particular attention to literature and research findings on what has been major cause of frustration among the personnel people in trying to design and implement different reward management strategies. Way reward strategy perceived High performing organizations are considered to be at the top with regard to managing its reward strategies and are able to predict and accurately determine which strategy is likely to work best within its systems. This is because majority of these companies try as much as possible to avoid what can be termed as ‘the folly of rewarding where strategy A is used to aim at obtaining outcome B.’ These organizations tend to apply an approach that is evidence–based reward management approach and this is done by recognizing that reward management is not just a soft art but a scientific and evidence-based methodology to increasing overall management of the company by taking due consideration on what should be entailed in the reward management field. However, this is not case with many of the organizations in the contemporary business society (Cox et al 2010). Despite making all the effort to ensure that the applied reward strategy that is being applied is able to improve productivity and performance of organization, the process of design, managing and implement has remained a major hurdle for the majority of organizations. This is because majority of the organizations while designing the reward management and strategy, they tend to pay less attention to the employees who are the major beneficiaries of the program. More often than not, while designing a reward strategy, much of the attention is paid to monetary rewards where individual efforts are only paid in terms of salaries, bonuses, commissions and overtime. This tends to work against the organization as employee preferences may be more than just monetary rewards. Further, on the same line, in reward strategy design, more focus is put on those rewards that can enhance performance rather than taking into account a complete package of reward for employees (Zingheim & Schuster 2000). Difficulties in implementing reward strategies in organizations, is one of the major challenges that organizations are facing today. Difficulties in implanting different reward strategies in an organization can be as a result of a number of factors which include inadequate involvement of the employees, inability to carry out a detailed study to establish what actually can be an obstacle to the strategy and failure to take account of the external forces like the industry factors which are very important in determining the most suitable rewards for the employees and that can give the business a competitive advantage over the rest (Brown and Purcell 2007). On the other hand, despite having very little substantiated evidence as to what reward management strategy will have which impact to the business, it is still estimated that over 90 percent of personnel executives from different companies, still go ahead to place so much expectations on what the strategy will have on the business in terms of performance and overall success of the organization. This is because they assume that with reward management, employees no matter what, they will always be motivated and ready to put in more effort towards realizing a given organizational objective (Bryan 2007). Contrast view to reward strategy In the current business society, many executives are very positive on what reward management can do to their respective organizations in terms of performance. However, this is very contrasting with the view held by Cox, Brown and Reilly (2010). In the trio’s article known as ‘Reward Strategy’ Time for a More Realistic Reconceptualization and Reintepretation, a very different view on what form reward strategy should is presented. For instance according to the trio, the reward strategies that are very common in North America are becoming very influential in Europe and in particular the united kingdom where they are considered by many organizations as best practice. In the review by the trio, it is argued that what has been neglected most in the reward strategy is the process of design and execution which is said to be paying very little attention to what the employees could like to see in their reward packages. To be more specific, the three are of the view that failure of majority of the reward strategies is facto of both design process and how the strategy itself is built (Suff et al 2008). In trying to present a different view to reward strategy, the trio have deeply discussed two major aspects that are considered among the top issues of failure of reward strategies and this is after carrying out an extensive study of various reward strategies from different regions including the United States and the United Kingdom. The two major issues explored by Cox, Brown and Reilly (2010), include the difficult in making and implementing different reward strategies and failure to pay very close attention to what employees have as preferences in reward strategies and the capabilities of line managers in reward strategies. Difficulties in reward strategies While exploring the concept of reward strategy, the trio had established that personnel executives virtually world over are over ambitious of what pay-focused and organizational-based reward strategies. This is after an analysis of the case of Northern America concepts which have dominated a lot of literature and considered by majority as normative or rather best practice in reward strategy. These practices are very common among the multinational companies and have been extensively applied by different companies in the last 20 years. Perhaps this is because they are specific and easy to apply since they only pay attention to pay and business performance. This can be demonstrated from the analysis of various literatures both from the United States and the rest of the world, including Broughton (2009), Lawler (1990), Ulrich (1997) and Vernom (2006), who also argue that the increased use of the American approach to rewarding employees is one of the easiest to incorporate in the HR policies and practices and easy to apply in multinational organizations. This is after the research has shown that over 85% of various multinational company executives seem to prefer this model to reward management. This is because it easy to develop and manage its standards with regard to reward strategy. However, what is emerging as a surprise to many is the revelation that this strategy has never shown impressive outcomes as expected and instead it has continued to cause counter reaction than ever before. According to Brown and Purcell (2007), this strategy is not as productive as may be considered by its implementers because they seem to apply it in different business environments all of which may demand for different strategies. What this implies is that developing and implementing a reward strategy is a big challenge for many organizations. Given the central role of reward in organizations, one could expect that the strategy would be incorporated in the employment contract so as to show what is expected of each. However, according to the findings by U.K based organization, Chartered Institute of Personnel (CIPD), about 35% of organizations operating in the country, have a documented strategy while 91% of the companies in the countries agree that reward strategy is very difficult to design and implement. This is greatly attributed the problems presented by different environments and lack of involvement of line managers in the process (Brown 2008). This is all as a result of lack of employees’ priorities in the process. The disappointment with paying system is also associated by the fact that a lot research findings does exist with regard to failure in technical elements without showing any direct connection between pay-strategy with change in employee behavior which is very important in ensuring high level performance by an organization (Bloom et al 2003). The pay-system as used by majority of the organizations in the United States and in the United Kingdom is considered by Cox, Brown and Rheilly as one of the reward strategies that have not taken into consideration the views of employees. Employees’ views are very important in informing the reward systems. Research has established that different approaches applied across the world. While some organizations prefer a tradition where rewards are negotiated as required by the law, in some other cases it is not easy to accommodate reward preferences by individual employees. This is because there are no collective mechanisms to decision making process. In such countries where there are no strong collective bargaining systems, according to Lowry (2006), it is proving to be very difficult to have employees involved in the reward strategy design and implementation since they do not have legal support. Achieving high level of performance is the primary objective of any organization irrespective of the sector it operates in. According to Lawler (2005), the relationship between the employees and the organizations they work for, has continued to change. For instance, job security can no longer be guaranteed. What this implies is that a new relationship should be developed that can reward performance and skills which are important in organizational effectiveness. According to Lawler, the old is gone and the new era has come which demands that a relationship be developed which should clearly reflect the reality of the competitive environment. According to Lawler, the loyalty contract which was very common during the 20th century where agreements were maintained between the employees and their employers as they are able to be productive and remain loyal to the business, is gone (Bloom et al 2003). However, since it is no longer easy for one to account for or even tell of somebody’s loyalty, they must therefore consider competing for talent which is considered fundamental in organizational performance. This can be demonstrated by his virtuous spiral model and which he used to explain how organizations should attract and hire most talented workforce and also retaining most critical talent that may be available in the organization (Ellem et al 2005). According to Lawler, the virtuous spirals begin to take shape when an organization starts applying an intelligent strategy is purpose driven with conscious actions to attract and retain as well as motivate and develop high performance oriented individual. It is from this perspective that Lawler is arguing that reward strategy should always have a link with person based pay and performance. This is to say that in the contemporary competitive environment pay should be individual based as well as performance based. This is important in ensuring that essential skills and highly performing individuals are motivated and rewarded (Brown and Purcell 2007). As provided for in Lawler’s concept, to ensure that organizations are able to implement virtuous spiral, organizations are expected to emphasize the ever increasing demands for high performance, high level reward strategies for individuals and developing competent employees. As organizations seek to achieve these outcomes according to Lawler, a positive performance state is developed which depends on itself and that helps the organization to provide a competitive advantage (Lawler 2005). In general, Lawler, reward strategy could be used to maintain high levels of performance by rewarding individual performance effort to an organization which is considered important in reducing operational costs and trying to maximize the available resources. A good example of a company that has managed to implement this strategy and benefited from it is Microsoft Corporation. Since the 1980s, the company has continued to develop a virtuous spiral relationship with its workforce (Lowry 2006). Through this approach, the company has managed to create a conducive environment where the company has continued to do very well. This is because reward in the company was talent based and meant to attract great minds and result-oriented persons into this workforce. This is to say that, in the contemporary environment, reward strategy should be factual and should be applied at individual level where performance can easily be determined (Brown 2008). Reward strategy and link with HRM In Cox, Brown and Reilly (2010), in Reward Strategy: Time for a More Realistic Reconceptualization and Reinterpretation, a number of issues related to reward strategy and organizational performance have been discussed. The issues have highlighted by the trio include the difficulties associated with reward strategy and dissatisfaction of outcomes, neglect of employees’ views in formulating different reward strategies, application of different theories in reward strategies and in general, the problems and difficulties that are related to identifying and incorporating employees preferences in reward strategies. According to the trio, the major problem with different organizations is the failure to incorporate their reward strategies in their Human Resource Management Strategies (HRMS). This is because the two functions tend to operate in isolation from each other (Brown 2008). This is because, in developing the reward strategy for an organization, it’s the responsibility of the HRM to capture and apply various aspects of employees’ preferences to their reward strategies. This is because according the trio, employees preferences are very essential in developing most effective reward strategies (Waring et al 2005). This is because many of the available reward strategies that have been developed and applied by different organizations, have failed because they have not been customized by the entire systems within the workforce practices and policies. Perhaps, this is because reward strategy is handled from different division with the HR which limits the opportunity to recognize all employee preferences in the reward strategy systems. With this in practice, reward strategy continues to pay attention only to pay reward while forgetting that such rewards as appreciation, recognition and creating a conducive workplace. Even though Paauwe (2006) argues that HRM should not always play a central role in developing reward strategy systems, it is very vital in facilitating the process. This is because the HRM stands a better chance to identify various issues and aspects like reward, recognition, appreciation and working conditions all of which are important in designing and implementing different reward strategies. Conclusion by Cox, Brown and Rheilly According to the trio, it is high time that organizations should move out of the tradition whereby they are making gland plans about reward strategies in the boardrooms and bringing them to the rest of the team including the frontline managers and supervisors who are expected to play a central role in implementation, measurement and managing employee expectations. In many occasions what is discussed within the boardrooms according to trio is the use of financial related incentives with the expectation that they will be able to stir workplace. However, this is not helpful enough in ensuring optimal positioning in the management practices suite (Lowry 2006). The study has shown that the problem with implementation of the reward strategies is the use of financial incentives as the best choice for reward system and the tendency to apply those strategies that pay more focus on planning as opposed to processes, concept as opposed to communication and intent as opposed to the impact to the workforce and the orgnisation in general (Waring et al 2005). Further, the trio recognizes the need to carry out a detailed analysis of different reward strategies and in particular the financial related strategies so as to be able to determine what the impact of each strategy is, to the performance of an organization. The purpose of doing this is, to try and measure what impact each of the strategies has to the performance of an organization (Brown 2008). Finally, according to the trio, inability to incorporate employee preferences in the reward strategy systems and use of financial incentives like pay to try and improve organization’s productivity and performance, has been outlined as the major cause of failure of the reward strategies in an organization. This is because employees may be looking at more than pay as a reward strategy. According to Brown and Purcell (2007), in their review on compensation and benefits, it is mentioned that even though rewarding is a very concept it still remains a thorny issue in many of the organizations and this is because the strategies that are employed are yet to yield any significant results. The major issues according to the duo are founded on lack of involvement line managers and also lack of appropriate skills and capabilities among them. On the other hand, the issues of measurement of the impact of different reward strategies according to Corby (1969), is a major issue because of the existing tension between the line managers and reward specialists. Corby argues that lack of involvement of the line managers in reward strategies design and implementation is the major obstacle in determining its impact to organizational performance (Purcell et al 2003). This is because line mangers are the ones to give feedback on the overall performance of their units to the reward specialists. Finally, with regard to issues of expectations, reward strategies have continued to fail because many of the managers have continued to believe in generalized truths about rewards something that has led them to put into practice certain reward strategies like financial rewards which according to Brown (2012) cannot trigger positive reactions in some occasions. Overcoming the weaknesses Different weaknesses have been identified in the analysis and which are a major hindrance to reward management. The major weaknesses can be categorized into three major groups namely implementation, measurement and expectations. In implementation for example, the frontline managers and the supervisors are expected to play a central role. However, these groups either like the will for lack of involvement or lack of skills and capabilities. To help eliminate this problem, the management must always involve these two groups in designing and implementing as well as facilitating further training to enhance their proficiency. On the other hand, despite the application of various strategies, there is a defined criterion for measuring the significance of the strategies to organizational performance. This is because rewards are applied in general to all employees. This complicates the process of determining the impact to each and every person in the workforce. To help improve on the measurement process, applying different rewards to different employees based on their performance and talent is advised. Finally, expectations by the management with regard to applied strategies are unrealistic. This is because management only tends to put more emphasis on pay rewards without comprehensively covering the reward package. To manage this problem, it is advisable that a customized approach to reward management be appraised and this is to mean reward should be more than just financial pay. References Bloom, M, Milkovich, G & Mitra, A 2003, International compensation: Learning from how managers respond to variations in local host contexts. International Journal of Human Resource Management, 14, p. 1350–1367. Brown, D and Purcell, J 2007, Reward Management: On the line, Compensation and benefits review, 39(28), p. 90-123. 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