Sunday, 24 April 2011

The importance of reward strategy rhetoric before its translation into action

Reward strategy can be described as the most appropriate and effective instrument capable of enabling employers to reward their employees according to their practical contribution to the achievement of the organisation overall business strategy.

Reward strategy should be in fact developed and formulated by employers keeping in mind and duly considering that its aim is basically that to induce individuals to behave and perform in a way which can practically and productively support the organisation in the attainment of competitive edge. It should thus help employers to secure the company shareholders the best return on their investment.

Whether when designing and developing reward strategies employers should only consider the business needs, it is very unlikely that the reward strategies these have formulated may produce in practice the intended, expected  objectives. To be effectual reward strategies also need to duly consider and aim at satisfying the employee wants and expectations. The circumstance that employers before starting to design reward strategies should investigate and acquire an overarching knowledge and understanding of their employees wants, can thus be considered as a significant additional fundamental prerequisite for the development of effective reward strategies. To this extent, it is indeed also crucially important that strategy-developers gain a clear and thorough knowledge, comprehension and understanding of the objectives which the overall business strategy intends to pursue. Since reward strategy is essentially designed and executed with the aim of helping employers to achieve their overall business strategy, thinking to plan and develop a reward strategy independently of the organisation overall strategy would be a massive blunder and a likely cause for an inevitable failure.

To develop an effectual and consistent reward strategy, nevertheless, having an appropriate command and consideration of the objectives pursued by the organization is not enough; having crystal clear ideas of the intent an organisation aims at pursuing by means of the development of a reward strategy is indeed of paramount importance, too.

The identification and definition of specific and clear objectives, before the development of reward strategies, could be indeed considered somewhat of the glaringly obvious. Notwithstanding, the findings of a CIPD investigation (2005) revealed that many organisations develop and implement reward strategies without having previously neither agreed clear objectives, nor defined the approaches and tools necessary to assess and evaluate the effectiveness of the results yielded by strategy once implemented. Yet, the CIPD research (2005) showed that more often than not a certain degree of confusion prevails also in terms of what, how and when the newly developed and implemented strategy should bring positive changes.

A gap analysis, thoroughly investigating weaknesses and strengths of the current reward practices, can to this extent definitely help. It can in fact enable employers to gain a clear knowledge and understanding of how things are going, compared to how things were intended or were supposed and believed to be going (CIPD, 2005). Whether any gaps should emerge from this investigation, employers should carry out a further analysis aiming at determining the cause of these and prepare hence the plan of action needed to bridge the identified gaps.

Since the one-size-fits-all approach in reward strategy is by no means likely to produce any positive effect, HR Professionals should ensure that the reward strategy they develop and the practices deriving from these both fit the organisation structure and the management processes and systems the organisation operates.

In some instances, a number of different approaches to reward could be actually required within the same organisation, namely when different employees’ profiles are available within the same business or when the firm operates by means of several branches located in different sites. Employers should be aware that in such circumstances universally, indiscriminately adopting the same reward practices may potentially give raise to undesirable problems. Practices will soon reveal to be inflexible, showing to be effective in some areas of the business but lacking of consistency and do not making any sense in other areas. A uniform set of reward practices could, by contrast, successfully be applied and reveal to be effective, and likely to enable employers to attain their intended objectives in organisations “with common activities and a single location” (CIPD, 2005).

Reward strategy is clearly influenced both by the business strategy and the endogenous environment. Amongst the internal factors influencing reward strategy, acquire particular significance the appreciation and worth attached to reward issues by the business top management (Armstrong, 2006).

Nonetheless, there are clearly many other factors coming to play and having a relevant impact on reward strategy, which need to be therefore duly considered by employers when formulating their strategies, namely the exogenous environment and HR Strategy.

Amongst the external factors likely to influence reward strategy the most the labour market trends and features, with particular reference to the market rates, that is to say the level of salaries which are currently paid by the other organisations for similar job positions, are definitely the most significant. Since both market rates and reward management practices are subject to a constant change and evolution, businesses should put in place what it takes in order to receive regular updates on the theories and studies concerning these, and promptly adapt and review their reward strategy accordingly in order to these invariably fit the current circumstances.


In the overall alignment process which should characterise all organisations’ initiatives aiming at planning, designing and developing every organizational strategy, process and system, it should never be neglected that inasmuch as reward strategy flows from the overall business strategy (Armstrong, 2006), reward strategy has to align with HR Strategy. This 360° alignment has to be considered by employers as a necessary prerequisite for effectively and consistently fostering integrity within the organisation and providing evidence to the entire workforce that all the organisation efforts are converging towards a clearly, well-identified, common and shared direction and end.

Each reward strategy has to be developed on the basis of a reward philosophy which according to the behaviour and beliefs an organisation values the most defines how to reward individuals within the business. Its main objective is clearly that to foster and endorse the desired behaviour and values amongst individuals and encourage employees to exhibit and embrace these.

Whether a reward philosophy is, for instance, aiming at enhancing productivity and endorsing high performance and substantial contribution to a firm efficiency at large, this will be very likely based on the tenet that individuals are rewarded according to their actual contribution to their employer success and to the return on investment they are able to generate.

Armstrong (2006) suggests that a reward philosophy should be strategic in that is should strive to address “longer-term issues relating to how people should be valued for what they do and what they achieve.” Since the link between business strategy, reward strategy and reward philosophy is very tight, nonetheless, this has not to be intended in the sense that reward philosophy and strategy are static in the long-run. Being sensibly influenced and affected by the external environment business strategy is very likely to be subject to a frequent, and in some cases even continual, process of change, which is very likely to produce in turn remarkable effects on reward strategy and philosophy. Employers should be aware of and consider this aspect in addition to the other factors influencing reward strategy and philosophy.

In order to favour and facilitate the practical translation of reward strategy and philosophy into policies and practices, it is particularly important that organisations also identifies a set of guiding principles, which define the approach and guidelines to reward that an organisation has decided to adopt (Armstrong, 2006).

Guiding principles can be considered as somewhat of a ring existing between a reward philosophy and the policies and practices emanating from it. These are intended to facilitate the shift from theory to practice, but being based on the organisational values and beliefs, guiding principles also have to foster these values and beliefs and ensure that these are reflected in the way individuals are rewarded within the organisation.

Essentially expressing a company reward philosophy, guiding principles enable employers to consistently translate into actions, that is, into policies and practices what has more rhetorically been stated into reward strategy and philosophy.

This might appear to be the most tedious part of reward management, but whether organisations should miss properly and carefully carrying out these stages, these should be prepared to face the consequences of an inevitable miserable failure, ultimately preventing them to achieve the intended objectives. Employers can by no means hence afford to pay lip service to these activities.

Although this process might be perceived as being essentially theoretical, it actually has strong practical implications; as usual, it is a matter of formulation versus execution.

Strategies and philosophies could also have been developed and formulated in an incredibly good way and guiding principles could also have been devised consistently fostering the organisation shared values and beliefs, but what matters in the end is not only how these principles have been formulated and put in writing (which could obviously help to ensure that everybody is singing from the same hymn sheet), but also how these will be translated into policies and ultimately into actions.

Individuals will look at strategies and policies with circumspection as long as they will not see a practical consistent implementation of those principles: “Is the reality that is important, not the rhetoric” (Armstrong, 2006). Employers need hence to definitely talk the talk and walk the walk, but this may not reveal to be sufficient; it does not matter what employers think they have been able to deliver, but rather how what they have delivered is perceived by their employees.

As for strategy in general it is hence of paramount importance that all the individuals within an organisation, line managers more than others, have clear ideas and a thorough understanding of the company reward strategy intended direction and of the objectives its implementation is aiming at achieving. Whether employers should not meet this prerequisite, it is very unlikely that these may ever successfully implement their intended strategies and policies.

The ultimate aim of reward management, strategy and philosophy and of the values, beliefs and guiding principles these are intended to foster is to put in place and operate a consistent, fair and transparent reward system which needs to be seen and perceived as such by the whole workforce. Whether something in practice should not properly work or whether individuals should perceive a difference between what is written and what is said and done in practice, whether employers would therefore talk the talk, but should not walk the walk, the consequences would be even worse than those which would arise in the case of not having introduced any reward management practice at all.

In the end, reward management as all the activities and initiatives planned and implemented by employers, very often in the form of a bundle, is intended to directly or indirectly motivate, engage and retain employees. This has indeed revealed to be in practice the most challenging feet employers need to become acquainted to deal with presently and in the distant future as well. Individuals, from their side, are much more likely to be positively influenced by transparency, openness, consistency, integrity and the intrinsic benefits they derive from their work, rather than only by extrinsic rewards, which should be intended just to support and consolidate the overall individual perception of their job and of their employer.
Organizations should take good care of reward management practices and do their utmost to avert that in a bid to pursue specific objectives they would instead put practically in place something preventing them to attain their intended objectives or even jeopardise the outcome of the efforts they are making by means of other initiatives in order to motivate and engage staff. This is why the rhetoric of reward management, and of the strategy behind it, is of paramount importance. Before translating strategy into action organisations need to do everything they can to avoid inconsistencies and lack of integrity; this definitely is something flowing first and foremost from specific, well-articulated and well-thought-out choices aiming at prompting individuals to behave and perform as the business is expected these to. After having done all of that, the rhetoric of strategy, philosophy and practice needs to be translated into consistent and effective actions, which is clearly far from being a straightforward task.

Longo, R., (2011), The importance of reward strategy rhetoric before its translation into action, HR Professionals, [online].

For an extended version of this article and much, much more click here