hr357 employee reward nick creaby-attwood what is reward?

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HR357 HR357 Employee Reward Employee Reward Nick Creaby-Attwood Nick Creaby-Attwood What is reward? What is reward?

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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

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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)

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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)