Implementing a successful total reward strategy

TOTAL REWARD

Implementing a successful total reward strategy

"A move to total rewards is not a short-lived endeavour. It is a long-term commitment to a holistic approach to managing and engaging the workforce. The investment required, in some cases, can be significant. But the potential returns can be even greater." That's the main conclusion to emerge from a study published in a recent issue of WorldatWork Journal.

Written by two consultants with an impressive mastery of the subject, the study describes the action to take to ensure that your total reward strategy is clear, compelling and differentiating. Tina Kao and Richard Kantor from Hewitt Associates in the US provide some fascinating insights into what topics a strategy should cover, as well as the key ingredients of effective communication.

The study takes a prescriptive approach, complete with action lists and talk of "rules for the road", and is packed with examples illustrating how a total reward approach can be a powerful tool to help drive the business forward -- when done right.

Primary aims of total reward strategy

All too often, total reward strategies simply state the obvious and are so generic they are rendered meaningless. As Kao and Kantor put it: "One company's strategy could be easily applied to hundreds of others because it does not say anything specific or differentiating."

So, how can this be avoided? The overriding message of the WorldatWork study is that organisations need to always be clear about the purpose of a total reward strategy. For Kao and Kantor a total reward strategy has two primary aims:

• "To articulate a distinctive value proposition for current and prospective employees that attracts and retains workers who have the capabilities and values the employer needs."
• "To provide a framework from which the employer designs, administers and communicates rewards programmes with the maximum motivational impact to drive desired behaviours."

Issues that a total reward strategy should address

One of the other key elements that Kao and Kantor write about is the importance of identifying what your reward strategy should address. The authors reckons a well-conceived strategy is eight to 20 pages in length and should include:

• strategic perspective -- an articulation of the company's values and business strategies
• statement of overall objectives -- how the reward system will support the needs of the business and its customers
• prominence -- the overall importance of rewards relative to other tools
• performance measures -- the performance criteria to be rewarded
• competitive market reference points -- types of companies, industries or other reference points that will be used as basis for determining the competitiveness of the reward package
• competitive position -- desired competitive position relative to competitive reference points in the labour market
• degree of internal equity and consistency -- a good total reward strategy clearly defines which is more important when the two are in conflict
• communication and involvement -- how much information should be disclosed
• governance -- how frequently underlying programmes will be revived and refreshed
• data and information management -- guidelines for data management, information sources, collection and reporting methodologies, and processes for using data.

A final word

Want to know more?

Title: "Total rewards: part two", by Tina Kao and Richard Kantor, WorldatWork Journal, fourth quarter 2004.

Availability: To subscribe to the quarterly WorldatWork Journal contact WorldatWork, 14040 N. Northsight Blvd, Scottsdale, Arizona, USA AZ 85260, tel: 001 480 951 9191 or email: worldatworkjournal@worldatwork.org

WorldatWork, formerly the American Compensation Association, is one of the HR professions oldest and most distinguished bodies. Founded in 1955, it is "dedicated to knowledge leadership in compensation, benefits and total rewards". WorldatWork is a not-for-profit association with a membership of more than 25,000 human resource professionals, consultants, educators and others, primarily in the United States and Canada.

For further details about WorldatWork visit www.worldatwork.org

Posted 3 May 2005