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Reward management entails the formulation, maintenance, communication and evaluation of reward processes that assist an organization in enhancing its performance as well as achieve its objectives.
Successful organizations manage their reward practices in such a way that enables them to come up with accurate predictions with regards to what innovations are best suited for the organization as well as ensuring that whatever activities that they engaged in currently will assist them in delivering the expected results. Such organizations strive to avoid what Kerr (15) referred to as ‘folly of rewarding A while hoping for B’.
These organizations opt for the evidence based management approach. Evidence- based reward management refers to the kind of management approach that is justified by improvement in the organization’s performance.
In other words, it implies that the effectiveness of the reward management approach can be measured against a certain set of indicators to ascertain whether they have impacted the performance of the organization in any way.
Such organizations have come to the realization that reward management is about knowing an individual’s motivating factors- what makes him tick- and determining the level and type of rewards that they should be offered. In some organizations, there exists a very robust and explicit link between the two factors-rewards and performance- while in some they are separated on purpose for reasons best known to the said organizations.
Working in this area involves having a clear understanding of the organization’s structure and its objectives as well as the factors that led to the reviewing of performance and reward. One should attempt to understand the current performance and reward systems of the organization work, how they are perceived by the employees and the impact that they have on the overall performance of the organization.
The authority that is charged with overseeing the welfare of employees in the organization should be able to determine the conduct and capabilities that deserve to be rewarded as well as the reward approach that will be used. They should also be able to determine who among their employees deserves to be rewarded the most based on their performance.
The management can then proceed to devise an ideal reward system for the organization- one that will define the roles and responsibilities of every employee of the organization. The most suitable approach should be used and implementation should be done at the appropriate time (Corby et al, 27).
If an organization’s reward management approach is very effective, it will considerably impact the performance of the organization on all fronts as well as enhance its ability to attract and retain quality staff.
Most organizations have discovered that far from supporting their goals and objectives, their reward systems were in fact doing exactly the opposite; they were the fuel to counter- productive tendencies that were hampering the organization’s performance.
Issues facing reward management strategies and processes
The core issues that all organizations have to contend with regarding reward management are very crucial to the organization’s overall performance and should be critically analyzed. Reward management strategies should be in sync with the organization’s business activities as well as ensuring that the needs and aspirations of employees are met with regard to stability, security and career development.
Reward management is supposed to ensure that all the organization’s employees feel that they are fairly remunerated in correspondence to their performance and at the same time ensuring that the organization remains externally competitive.
Reward management strategies should ensure that emphasis is put on rewarding according to the level of output that a staff member is capable of. The quality standard for the final output should not be compromised. If anything, the reward management strategies should impact the activities within the organization in such a way that the quality of standards in the organization improve.
The reward management strategies should be structured in such away that individual staff members are rewarded according to their capabilities and at the same time promoting the spirit of harmony within the organization.
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No staff should at any given moment feel as if they are not part of a team. If an organization wishes to improve its overall performance, its staff need to work as a unit. This should be facilitated by the organization’s reward management approach.
The authorities charged with overseeing welfare of staff members should be constantly looking for ways to introduce sophisticated reward management processes in a way that will be welcome by the relevant managers who will be required to get the skills necessary for optimizing the implementation of the reward strategies.
The management of any organization is supposed to find ways of rewarding top achievers while maintaining a positive level of motivation among the core staff that the organization ultimately relies on for carrying out its day to day activities.
Consistency in maintaining the reward management processes is essential to any organization while at the same time being flexible enough to conform to the ever changing circumstances in the day to day activities of the organization.
The devolution of power to line managers in order for them to manage their own reward processes while at the same time maintaining the overall control that is necessary to institute corporate policies of the organization is an essential aspect of reward management that has to be achieved despite the fact that it is a delicate feat to accomplish.
The other issue that organizations have to contend with, with respect to reward management is how to motivate those staff members who have reached the zenith of their pay range while maintaining the respectability of the grading system as well as ensuring that the approach is cost effective. There is also the issue of adopting cost effective pay-per-performance approach that will enable the company to get value for money.
Case studies in reward management strategies and processes
We are going to analyze summaries of some case studies. In different settings, these case studies help illustrate how various organizations grapple with issues regarding formulation, implementation, evaluation of reward policies and structures hence each organization adopts its own approach in line with the organization’s context and the circumstances that it is in.
The various approaches underline the basic tenet that there is no one prescribed method that is suitable for the circumstances and the needs of the organization (Perkins & White, 63).
KPMG has a clear reward strategy that underlines its dramatic growth over the years. Its reward strategy puts a lot of emphasis on two objectives of strongly rewarding stellar performance as well as meeting the needs of a huge and diverse workforce made up of mostly young people through a sophisticated holistic reward approach.
The firm has a set of thirteen performance indicators which are monitored based on their reward strategy principles using a traffic light system of assessment for each indicator. For each of the thirteen indicators, targets are set and results are consequently compared with past performance.
The other case study involves McDonalds. It illustrates how this company with a robust culture of measurement has established a profitable empire. The success of McDonalds can be backed by evidence illustrating how rewards can enhance the commitment of employees and as a result business performance also increases. Their reward strategy is implemented albeit focusing on operations and cost.
They consider their reward strategy to be viable if it is cost effective and if it is not cost effective the necessary reviews are done to develop a better one. Their reward strategies are often reviewed numerous times and are altered if they are not producing the desired results. In order to maintain and reinforce the reward effectiveness, the processes of change management and consultation are deployed.
Components of reward management processes and strategies
Based on the case studies above, we can conclude with certainty that there are various common components that run through the different reward management processes. The way these components are applied varies depending on the need or situation of the organization.
For starters the objective and criteria of the reward is clearly defined. This is done through conducting executive interviews as well as senior management seminars. The organization’s and human resource’s strategies are rigorously analyzed in an effort to define reward pathway, setting of goals and gap analysis. As a result, the rationale for review process is established.
Senior management is able to reach an agreement on the goals for the reward arrangements. The criteria for assessing the effectiveness of the reward strategy and goal prioritization are also agreed upon.
The second component is reviewing the organization’s current reward policies and practices. This involves the formation of a project group charged with carrying out an internal research to ascertain the attitude of the organization’s employees towards the current reward policies and structures of the organization.
The project group will also conduct an external market research which is intended to analyze the prevailing market rate relative to the organization’s reward policies. This is intended to benchmark the organization’s reward policies with those of other organizations that are superior. Thereafter, a review of the relevant research is done to decide on the next move by the organization.
As a result, one is able to comprehensively understand the current reward position of the organization relative to that of the market. Key reward issues that would have emerged as a result of the research as well as issues and problems concerning the organization’s reward policy are highlighted and consequently addressed.
The third component of reward management is the measuring of reward effectiveness. It involves making up ones mind with regard to what is going to be measured. The decision of what data is going to measured, how to gather that data and the methods that are going to be used to gather it has to be made at this point. One also has to define the measures by referring to reward goals as well as success criteria.
The intended outcomes are obtaining pertinent information that is going to be used to evaluate the effectiveness of the reward. This will lead to devising a set of measures that will be used to evaluate the reward policies currently in place.
The fourth component of reward management is the evaluation of reward outcomes. It involves referring to the reward objectives as well as the success criteria in the evaluation of reward outcomes.
These measures are used to evaluate to what extent have goals for the reward strategy as well as the criteria used to evaluate them been met. The aim of this component is to get the relevant information that is required to develop and implement either new or revised strategy. It is also intended to define the various processes to be used in the ongoing evaluation (Shields, 18).
The other component that is shared by most organizations in their quest to improve their reward strategies is the development of future reward directions as well as practices. This involves referring to the survey results, measuring and evaluating in order to highlight key reward issues that need to be addressed. The stakeholders reach an agreement with regard to reward architecture for the future of the organization.
An analysis is then carried out on the possible alternatives and changes that have to be made with respect to the organization’s reward policies. The objectives of the new reward practices are then designed followed by the formulation of the new reward practices.
This exercise should be all inclusive in the sense that all the employees of the organization are involved. The line managers are also required to undergo a brief training for them to gain the skill necessary to effect the proposed changes.
The above activities are aimed at getting a clear understanding as to what has to be achieved and why, which forms the basis of future evaluation and review. Designs and alterations that have been completely tested using the basis of very thorough analysis of evidence that is backing the change are obtained. What follows is the development of organizational capacity to implement and effect the changes successfully.
The final component is the implementation of either new or improved practices which entails communicating the proposed developments to the various relevant parties. Introduction of new reward practices then follows.
Regular effectiveness reviews are conducted on a regular basis to ascertain whether development of additional changes is necessary. The outcomes of the mentioned activities include altering the existing reward policies to improve their effectiveness.
Criteria for pay structure
The criteria of the pay structure should be in such a way that it is relevant to the characteristics and needs of the organization. Consideration should also be given to factors such as how big the organization is, cultures that it has adopted, how complex it is as the likelihood of it changing and to what capacity.
The criteria of the pay framework should not be rigid with regard to both internal and external pressure with respect to market rates and the scarcity of highly skilled human resource.
The senior management of any organization should always strive to align the organization’s pay structure so that it is better than the prevailing market rates or if not possible they reflect something close to current market rates. This will go a long way towards allaying fears of their employees and enable them to concentrate on their work better hence delivering according to expectations.
An organization’s pay structure should enhance role flexibility. This will serve to ensure that employees can be shifted to different jobs within the organization that have little variation in size without the employee demanding that the rates of his pay be altered to reflect the alteration in the size of job that he is currently undertaking.
Any organization’s pay structure is supposed to clearly define the scope of rewarding top achievers and those who have made tremendous contributions towards the organization while offering pertinent awards and due recognition to the most efficient and effective core staff members who form the bulk of an organization’s workforce.
A good pay structure should be one that assists in making sure that consistency is upheld when making decisions that are made concerning pay with consideration being given to the job size, skill, contribution and competence.
A good pay structure should be developed in such a way that it is coherent and as explicit as possible. This is usually done to ensure that the likelihood of vagueness occurring on the part of the employees when it has been communicated to them. An ideal pay stricture facilitates the exercising of control over its pay policies as well as the budget by the organization’s senior management (Gerhart & Rynes, 89).
Reward management keeps evolving with time as most organizations adopt reward management trends that are in line with the times. Nowadays, many organizations have become increasingly sensitive to the various sectors in which they operate in as well as adopting favorable market practices.
These ensure that their effectiveness is enhanced as a result in terms of positioning themselves in the market that is essential in aiding in the attraction and retaining of top notch personnel.
Corby, Milkovich, Newman & Palmer. Rethinking reward. (ed) Palgrave. 2008. Print.
Gerhart, Rynes. Compensation: Theory, Evidence & Strategic Implications. CA: Sage. 2003. Print.
Kerr. “On the folly of rewarding A, while hoping for B”. Academy of Management Executive. 1995. Print.
Perkins, White. “Reward Management” (2nd ed). CIPD. 2011.Print.
Shields. Managing Employee Performance and Reward. Cambridge University Press. 2007. Print.