Ensuring that everyone in an organization understands their contribution to the big picture, rather than focusing on the individual hero or personal achievements is at the forefront for many companies around the globe, as they look to confront the complexities of the new marketplace where talent holds no boundaries, reward budgets still remain tight and the drive to improve competitiveness is high.
Companies are beginning to seek better ways to balance both the needs to reward employees responsibly while addressing increasing examination from government regulators according to the Hay Group in a recently released study on Changing Rewards.
While many organizations have utilized pay-for-performance and/or bonuses to reward employees, reward strategies are now being driven in the Boardroom as executives recognize that the war for relevant talent grows in a hyper-competitive global economy. Strategies for retention, motivation, and engagement and performance improvement are integral for future innovation and growth. As a result, companies are assessing differentiated reward programs to redirect offerings that provide clearer career paths, global mobility and development.
Raises and employee perks are only a part of the formula for retaining great employees and employee engagement alone will not guarantee an organization’s effectiveness. Therefore, it is critical that companies begin taking a broader view of performance and how its impact on social, environmental, brand and employee potential to more effectively balance both short and long-term performance, and financial and non-financial measures of performance.
While many organizations have invested in ensuring that performance management systems and processes will work to drive defined performance in the future, it’s important to understand that building efficient systems and processes, and centralizing or automating performance management tends to work best in company’s that have the right workplace culture and are supported by strong management skills.
Countries outside of the United States, like Norway and India, recognize that the role of line management is shifting and will continue to change for middle managers in the new era. Responsibility for defining performance rests with leadership; and responsibility for managing performance in accordance with the performance definitions rests with line managers. Line managers play a significant role in helping employees understand organizational expectations, increasing employee’s levels of confidence and helping to cultivate the employee experience. Coaching the low performers to improved performance or to seek external opportunities that may be better suited to the employee is equally an important responsibility for line leaders.
An increasing globalization of business is creating a significantly complex environment for managing rewards, with organizations balancing the demands of local regulation, market conditions, culture and tax structures. Ensuring transparency and clarity from leadership about why the organization is doing what it is doing, and how a reward strategy will help drive performance is imperative to assess actual risks while reinforcing innovation.
Based on growing trends, reward programs in the 21st Century workplace will move beyond just pay and a one-size fits all approach to a more holistic view that can more closely link performance and differentiating rewards; creating both organizational and shareholder value for the long-term.
What are some keys to effective rewards? Below, are a few recommendations:
- Shift from ‘entitlement’ to a ‘performance’ culture. Ensure the measures that impact variable pay are optimal for driving performance and respectful behaviors. Differentiate reward for high performers and team outcomes vs. activities.
- Establish a holistic rewards program. Keep in mind the total benefits employees receive from working for your company. Often the intangible benefits such a career development, training play a significant role in engagement and adding to the employment experience.
- Consider costs and flexibility.
- Make a thorough assessment of risk and balance global vs. local requirements.
- Innovative reward programs need to deliver clear return on investment and value.
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