Across the world and across many different sectors, employers are still facing issues around recruitment and retention. The start of the COVID-19 pandemic may be five years in the past, but its effects continue to be felt. The ‘great resignation’ is still a very real phenomenon, as people reevaluate their work-life balance and exactly how much monetary reward they need in their life.
Research increasingly shows that younger generations put workplace culture and their personal relationship with their work and employer above plain monetary reward when it comes to choosing (and staying with) an employer. This makes establishing an effective wider reward strategy an increasingly powerful tool for employers.
What is a reward strategy?
A reward strategy is an organisation’s approach to recognising and rewarding employees. It aims to encourage employee loyalty and engagement by offering more than just a paycheck or a financial bonus. A reward strategy is a holistic way of providing short- and long-term incentives that provide real value to employees. By doing this, the organisation benefits in improved engagement, performance, retention and recruitment.
How to develop a reward strategy
A good reward strategy should be aligned with and support both your business strategy and your people. Consider the broad characteristics that go into making a successful reward strategy:
Alignment
A key characteristic of any good reward strategy is that it must be aligned with the goals and values of the organisation. Stripped of the jargon, this just means that you should decide what achievements and behaviours you want from your people. Do you want to find new clients? Retain and expand relationships with existing ones? Expand the business into new areas? Develop and innovate internally? Change the internal culture? Whatever your yardstick is for success, your reward strategy should clearly support it. This sounds obvious, and it is, but many attempts to implement a reward strategy have failed because of a lack of clear alignment with broader goals.
Transparency
A reward strategy that is aligned with your broader goals should also be transparent. Establishing a fair and transparent approach ensures it is clear to your employees what they need to do. The approach to reward should – must – be consistent. Nothing undermines trust in, and the perceived value of, a reward strategy if the approach taken is (or appears to be) inconsistent.
Engagement
Every human resources department likes to think that it is fully in touch with the desires of its people. But all too often this turns out not to be the case. For a reward strategy to be effective, it has to resonate and be relevant. Nothing will kill the potential of a reward strategy more thoroughly than the sense that it is being imposed from above - formulate the strategy by engaging your employees and garnering their input into the reward approach.
Adaptability
Although it can require extra administration effort, an effective reward strategy allows for some flexibility which adapts to individual needs and preferences. This is most often achieved via the benefits - offering a ‘menu’ of benefit rewards that can be selected up to a certain level allows for choice and personalisation, so employees can choose the rewards that are the most meaningful and rewarding to them.
Specific offerings
We’ve looked at some of the general qualities and principles a successful reward strategy is built on. Here are some examples of specific elements that can form the building blocks of a reward strategy.
Pay
Those drawing up reward strategies are often cautioned to look beyond pay. And it’s true that simple monetary rewards and bonuses are not always the best way to reward, recognise and retain high-performing workers. But base pay is what is known as a ‘hygiene factor’ – without a base pay that is competitive with the wider labour market and matches an individual’s competencies and performance, you will struggle to even start to achieve good performance.
But base pay should be seen as the minimum, reflecting the expected basic ‘input’ by employees of their time, effort, skills and competencies. Anything above the base pay should reward ‘output’ – specific results, improvements and changes. This is where a broader reward strategy comes in - variable pay can be part of this in the form of bonuses, profit-sharing schemes or similar rewards.
Employee development
Once employees feel that their monetary reward is at an adequate level, the most common thing they look towards next is their professional development. A clear and transparent pay structure, alongside opportunities for employee growth through training, development and career progression can be a powerful motivator. Don’t tie the development on offer too rigidly to specific roles or departments. Also consider broader desirable skills for your sector or even life skills that can make more rounded, knowledgeable and flexible employees. Enlarging job roles and job enrichment can also enhance employee satisfaction.
Appraisal
Don’t underestimate the power of recognition. Whether it’s as a team or an individual, or in public or private, simply acknowledging good performance can be its own reward. Or at least it can certainly be a simple, effective and low-cost part of a wider reward strategy. More formal appraisals as part of an employee’s career progression can also play a major part in motivating people and boosting their engagement and self-esteem.
