hr357 employee reward nick creaby-attwood what is reward?
TRANSCRIPT
HR357HR357Employee Reward Employee Reward
Nick Creaby-AttwoodNick Creaby-Attwood
What is reward?What is reward?
Week 1 – What is reward?Week 1 – What is reward?Week 2 – Introducing FastCat and Week 2 – Introducing FastCat and
reward strategyreward strategy
Lecture-based, tutor led sessionsLecture-based, tutor led sessions Lab-based, student led sessionsLab-based, student led sessions
Week 3 – AlignmentWeek 3 – Alignment
Week 4 – Job-based vs. person-Week 4 – Job-based vs. person-based alignmentbased alignment
Week 7 – CompetitivenessWeek 7 – Competitiveness
Week 10 – Employee contributionsWeek 10 – Employee contributions
Week 12 - AdministrationWeek 12 - Administration
Week 5 – Enhancement Week: Week 5 – Enhancement Week: Internal alignment – job-basedInternal alignment – job-based
Week 6 – Internal alignment – Week 6 – Internal alignment – person-basedperson-based
Week 8 – External Week 8 – External competitiveness for FastCatcompetitiveness for FastCat
Week 9 – Integrate internal and Week 9 – Integrate internal and external structuresexternal structures
Week 11 – Recognising Week 11 – Recognising performanceperformance
AssessmentAssessmentGroup assignment – design a reward systemGroup assignment – design a reward system
Proposals must be based upon the current state of knowledge about rewardProposals must be based upon the current state of knowledge about rewardEvidence of the practical implications of proposals will be requiredEvidence of the practical implications of proposals will be required
Dire
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softw
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Independent studyIndependent study
Learning sets will provide an opportunity to develop skills Learning sets will provide an opportunity to develop skills and share knowledge. Learning sets will be able to ‘m
eet’ and share knowledge. Learning sets will be able to ‘m
eet’ virtually via Blackboard. virtually via Blackboard.
Forms Forms of of rewardreward
Total returnsTotal returns
Relational returnsRelational returnsTotal compensation Total compensation
(transactional returns)(transactional returns)
BenefitsBenefitsCash Cash
compensationcompensation
Recognition Recognition and statusand status
Employment Employment securitysecurity
Challenging Challenging workwork
Learning Learning opportunitiesopportunities
Forms Forms of of rewardreward
Total returnsTotal returns
Relational returnsRelational returnsTotal compensation Total compensation
(transactional returns)(transactional returns)
BenefitsBenefitsCash Cash
compensationcompensation
Base payBase pay
Merit/cost Merit/cost of livingof living
Short-term Short-term incentivesincentives
Long-term Long-term incentivesincentives
Recognition Recognition and statusand status
Employment Employment securitysecurity
Challenging Challenging workwork
Learning Learning opportunitiesopportunities
Forms Forms of of rewardreward
Total returnsTotal returns
Relational returnsRelational returnsTotal compensation Total compensation
(transactional returns)(transactional returns)
BenefitsBenefitsCash Cash
compensationcompensation
Base payBase pay
Merit/cost Merit/cost of livingof living
Short-term Short-term incentivesincentives
Long-term Long-term incentivesincentives
Income Income protectionprotection
Work/life Work/life balancebalance
AllowancesAllowances
Recognition Recognition and statusand status
Employment Employment securitysecurity
Challenging Challenging workwork
Learning Learning opportunitiesopportunities
Adapted from Milkovich and Newman: 2002, 8Adapted from Milkovich and Newman: 2002, 8
CHOICECHOICE‘‘CAFETERIA STYLE’CAFETERIA STYLE’CHOICECHOICE
‘‘CAFETERIA STYLE’CAFETERIA STYLE’??????
Aspects of the reward Aspects of the reward ‘deal’‘deal’
HIGH PAY – LOW COMMITMENTHIGH PAY – LOW COMMITMENT
Hired Guns Hired Guns (Stockbrokers)(Stockbrokers)
HIGH PAY – HIGH COMMITMENTHIGH PAY – HIGH COMMITMENT
Cult-like Cult-like (Microsoft)(Microsoft)
LOW PAY – LOW COMMITMENTLOW PAY – LOW COMMITMENT
Workers as Commodity Workers as Commodity (Employers of low-skill (Employers of low-skill
immigrant labour)immigrant labour)
LOW PAY – HIGH COMMITMENTLOW PAY – HIGH COMMITMENT
Family Family (Starbucks)(Starbucks)
TRAN
SACT
IONA
LTR
ANSA
CTIO
NAL
LOW
TO
HIG
HLO
W T
O H
IGH
LOW TO HIGHLOW TO HIGHRELATIONALRELATIONAL
(Adapted from Milkovich and (Adapted from Milkovich and Newman, 2002: 49)Newman, 2002: 49)
SUPPORTING THE SUPPORTING THE WORKFLOWWORKFLOW• PerformancePerformance• QualityQuality• Flexibility and Flexibility and changechange• CostsCosts
FAIRNESS TO FAIRNESS TO EMPLOYEESEMPLOYEES
COMPLIANCECOMPLIANCE
The pay modelThe pay model
INTERNAL INTERNAL ALIGNMENTALIGNMENT
Work Work analysisanalysis
DescriptionsDescriptions Evaluation/ Evaluation/ CertificationCertification
INTERNAL INTERNAL STRUCTURESTRUCTURE
EXTERNAL EXTERNAL COMPETITIVENESSCOMPETITIVENESS
Market Market definitionsdefinitions
SurveysSurveys Policy linesPolicy linesPAY PAY
STRUCTURESTRUCTURE
EMPLOYEE EMPLOYEE CONTRIBUTIONSCONTRIBUTIONS
Seniority Seniority basedbased
Performance Performance basedbased
Merit Merit guidelinesguidelines
INCENTIVE INCENTIVE PROGRAMMESPROGRAMMES
ADMINISTRATIONADMINISTRATION PlanningPlanning BudgetingBudgeting CommunicationCommunication EVALUATIONEVALUATION
STRATEGIC STRATEGIC POLICIESPOLICIES TECHNIQUESTECHNIQUES STRATEGIC STRATEGIC
OBJECTIVESOBJECTIVES
(Adapted from Milkovich and Newman, 2002: 13)(Adapted from Milkovich and Newman, 2002: 13)
How do we make reward How do we make reward strategicstrategic??
BEST-FIT BEST-FIT (CONTINGENCY) (CONTINGENCY) APPROACHESAPPROACHES
BEST-PRACTICE BEST-PRACTICE APPROACHESAPPROACHES
THE NEW THE NEW PAYPAY
HIGH HIGH COMMITMENTCOMMITMENT
What business What business should we be in?should we be in?
How do we win?How do we win?
How should HR help us win?How should HR help us win?
How should reward How should reward help us win?help us win?
Milkovich and Newman: 2002, 30Milkovich and Newman: 2002, 30
Corporate objectivesCorporate objectives
Business unit strategiesBusiness unit strategies
EnvironmentEnvironment
Reward systemsReward systems
Employee attitudes and Employee attitudes and behavioursbehaviours
Competitive advantageCompetitive advantage
HR strategiesHR strategies
Strategic reward decisionsStrategic reward decisions
Best-fit approach to Best-fit approach to rewardreward
Ideal type strategiesIdeal type strategies
INNOVATOR: INNOVATOR: increase product increase product complexity and complexity and
shorten product life shorten product life cyclecycle
COST CUTTER: COST CUTTER: focus on efficiencyfocus on efficiency
CUSTOMER CUSTOMER FOCUSSED: FOCUSSED:
increase customer increase customer expectationsexpectations
•Product leadershipProduct leadership•Shift to mass Shift to mass customisation and customisation and innovationinnovation•Cycle timeCycle time
Committed to Committed to agile, risk agile, risk taking, taking, innovative innovative peoplepeople
•Reward innovation in Reward innovation in products and processesproducts and processes•Market based payMarket based pay•Flexible – generic job Flexible – generic job descriptionsdescriptions
•Operational Operational excellenceexcellence•Pursue cost-Pursue cost-effective solutionseffective solutions
Do more with Do more with lessless
•Focus on competitors’ Focus on competitors’ labour costslabour costs•Increase variable payIncrease variable pay•Emphasise productivityEmphasise productivity•Focus on system control Focus on system control and work specificationsand work specifications
•Customer intimacy Customer intimacy •Deliver solutions to Deliver solutions to customerscustomers•Speed to marketSpeed to market
•Delight Delight customer, customer, exceed exceed expectationsexpectations
•Customer satisfaction Customer satisfaction incentivesincentives•Value of job and skills Value of job and skills based on customer based on customer contactcontact
STRATEGYSTRATEGY BUSINESS BUSINESS RESPONSERESPONSE
HR HR ALIGNMENTALIGNMENT
COMPENSATION COMPENSATION SYSTEMSSYSTEMS
Milkovich and Newman: 2002, 31Milkovich and Newman: 2002, 31
Four steps Four steps to formulate to formulate a best-fit a best-fit strategystrategy
Assess total compensation Assess total compensation implicationsimplicationsCompetitive dynamicsCompetitive dynamicsCore culture and valuesCore culture and valuesSocial and political contextSocial and political contextEmployee/Union needsEmployee/Union needsOther HR systemsOther HR systems
Four steps Four steps to formulate to formulate a best-fit a best-fit strategystrategy
Assess total compensation Assess total compensation implicationsimplicationsCompetitive dynamicsCompetitive dynamicsCore culture and valuesCore culture and valuesSocial and political contextSocial and political contextEmployee/Union needsEmployee/Union needsOther HR systemsOther HR systems
Fit policy decisions to Fit policy decisions to strategystrategyObjectivesObjectives
• AlignmentAlignment• CompetitivenessCompetitiveness• ContributionsContributions• AdministrationAdministration
Four steps Four steps to formulate to formulate a best-fit a best-fit strategystrategy
Milkovich and Newman 2002, 34Milkovich and Newman 2002, 34
Assess total compensation Assess total compensation implicationsimplicationsCompetitive dynamicsCompetitive dynamicsCore culture and valuesCore culture and valuesSocial and political contextSocial and political contextEmployee/Union needsEmployee/Union needsOther HR systemsOther HR systems
Fit policy decisions to Fit policy decisions to strategystrategyObjectivesObjectives
• AlignmentAlignment• CompetitivenessCompetitiveness• ContributionsContributions• AdministrationAdministration
Reassess the fitReassess the fitRealign as conditions changeRealign as conditions changeRealign as strategy changesRealign as strategy changes
Implement strategyImplement strategyDesign system to translate strategy into actionDesign system to translate strategy into actionChoose techniques to fit strategyChoose techniques to fit strategy
How do we know what How do we know what our objectives are?our objectives are?
Importance of consultation and communicationImportance of consultation and communication
Senior managers don’t have all the answersSenior managers don’t have all the answers
The debate of different viewpoints provides a balanced understanding of corporate The debate of different viewpoints provides a balanced understanding of corporate objectives.objectives.
Management will learn about the variables that are associated with performance Management will learn about the variables that are associated with performance improvementimprovement
Management will learn about what motivates employeesManagement will learn about what motivates employees
People will understand and become committed to the strategyPeople will understand and become committed to the strategy
Best-fit or best Best-fit or best practice?practice?
Success is not derived from a clever strategy Success is not derived from a clever strategy determined at the top – but by having rewards that determined at the top – but by having rewards that attract and retain the best human resources attract and retain the best human resources availableavailable
It is the people that are the source of competitive It is the people that are the source of competitive advantage – and the basis of good strategiesadvantage – and the basis of good strategies
EnvironmentEnvironment Reward systemReward system StrategyStrategy SuccessSuccess
SuccessSuccessReward systemReward systemStrategyStrategyEnvironmentEnvironment
High commitment High commitment management and rewardmanagement and reward Emphasises the need for a ‘moral commitment’ to Emphasises the need for a ‘moral commitment’ to
organisationsorganisations This is about the perceived mutuality of interests This is about the perceived mutuality of interests
between employees and their employersbetween employees and their employers This can be achieved through adopting reward This can be achieved through adopting reward
practices which foster high trust relationships and practices which foster high trust relationships and intrinsic work satisfaction – sharing success but intrinsic work satisfaction – sharing success but protecting from failureprotecting from failure
The New PayThe New Pay
Pay levels driven by market forces rather than Pay levels driven by market forces rather than internal comparisoninternal comparison
Pay rises driven by performancePay rises driven by performance Reward set in the context of a psychological Reward set in the context of a psychological
contract characterised by ‘risk sharing’ contract characterised by ‘risk sharing’ between employer and employee:between employer and employee:– More pay dependent on performanceMore pay dependent on performance– More emphasis on ‘employability than ‘job security’More emphasis on ‘employability than ‘job security’
What do we mean by ‘Best What do we mean by ‘Best practice’ – and does it practice’ – and does it work?work?
Performance bonuses and share options are Performance bonuses and share options are important (Becker and Huselid: 1997)important (Becker and Huselid: 1997)
Bundles of high performance work systems Bundles of high performance work systems (gainsharing, competitive pay levels, training, (gainsharing, competitive pay levels, training, team working, and participation) are more team working, and participation) are more effective than isolated initiatives (MacDuffie: effective than isolated initiatives (MacDuffie: 1995; Arthur: 1994; Ichniowski et al: 1998)1995; Arthur: 1994; Ichniowski et al: 1998)