Effective Reward Management

The criteria for judging the effectiveness of a reward management system is the extent to which it:

• is fit for purpose — the contribution it makes to achieving organizational objectives and recognizing the needs and wants of stakeholders;
• is appropriate — fits the culture and context of the organization;
• is designed in accord with what is generally regarded as good practice in the particular context of the organization, subject to the requirement that it must be appropriate;
• functions in line with well-defined guiding principles, which include the need to achieve fairness, equity, consistency and transparency in operating the reward system;
• includes processes for valuing and grading jobs and rewarding people according to their performance or contribution that are properly conceived and function well;
• makes a significant impact on performance through performance management or contributions to high-performance working;
• has produced an attractive employee-value proposition;
• provides rewards that attract and retain people and enlist their engagement;
• maintains competitive and equitable rates of pay;
• incorporates successfully a total rewards approach;
• manages reward processes carefully and obtains value for money;
• provides for the evaluation of reward processes and taking corrective action as necessary;
• communicates to all concerned how the reward system operates and how it affects them;
• provides for the devolution of a reasonable degree of authority to line managers to make reward decisions, taking steps to ensure that they have the skills and support required and that their decisions are in line with reward policy guidelines.

Effective Reward in the Best Performing Firms

The best-performing firms view their reward programmes differently from the lower-performing organizations:

• Top firms are more likely to use rewards as tools to engage people in improving business performance.
• These firms make greater efforts than others to communicate their plans and to measure reward plan effectiveness.
• They are more likely than the rest to link rewards to their organization's business strategies.

Reward management: six tips

• Reward people according to the value they create.
• Reward people according to what the organization values and wants to pay for.
• Take account of employee as well as business needs.
• Best fit is preferable to best practice.
• Strive to be different, even unique, when developing reward policy and practice.
• Adopt an evidence-based management approach that involves managing reward systems on the basis of fact rather than opinion, on understanding rather than assumptions, on grounded theory rather than dogma.