Chapter 1. AN OVERVIEW OF REWARDMANAGEMENT:Why reward?

Extremely crucial issue for both employer as well as employee Related to fulfillment of human needs Chief objectives are, Reward for past service Stimulus in future It helps to Attract Retain Motivate

Reward management defined:Reward management is an integrated process that deals with the strategies, policies and practices required to ensure that the value and contribution people make to achieving organizational, departmental and team goals is recognized and rewarded. Characteristics of reward management: People Stakeholder approach Integrated (integrated with organization goal. And activity) Strategic (what must be done and to believe in the need to plan ahead and make the planned happen.) Evidence-based

The Reward Management Framework: Its a complex model but it is simplified by dividing the concepts into, Aim of reward management Achieving the aims Contextual factors Concepts

Aims of reward management: Support the achievement of business goals; Reward people according to the value they create; Align reward practices with employee needs; Reward the right things to convey the right message about what is important in terms of behaviours and outcomes. Reward people according to what the organization values and wants to pay for; Help to attract and retain the high-quality people the organization needs; Motivate people and obtain their engagement and commitment; Develop a high performance culture.

Achieving the aims: Reward philosophy Distributive justice Procedural justice Fairness Equity Consistency Transparency Strategic alignment Contextual and cultural fit Performance and reward Segmentation

Contextual factors: Internal Org. culture Org.s business Work env. People Business strategy Political and social climate External Globalization Rate of pay in the market Economy Social factors Trade unions

Concepts: Reward management is based on the following concepts: The resource-based view Human capital management Human process advantage Motivation theory Instrumentality theory Content (needs) theory Process theory Expectancy, Goal, Equity Cognitive Evaluation Theory (CET) Principal agent theory (Agency theory) The psychological contract

Chapter 2 REWARD SYSTEMS:Definition:A reward system consists of the interrelated processes and practices that combine to ensure that total reward management is carried out effectively to the benefit of the organization and the people who work there. How reward systems operate??

Components of a reward system:-

Reward system at GlaxoSmithKline (GSK): The grades determine entitlement. The pay for each ranges approximately 25% either side of the range mid point. The main method of paying performance each year is through the bonus scheme, but individuals are also able to progress through their grade range on the basis of performance, their behaviors, relativities with peers and their market value. There is a two way performance and development planning process whereby individuals agree their objectives with their manager and identify development needs for the forthcoming year. The financial recognition scheme rewards efforts above normal job requirements. There are four different levels of reward.

Chapter 3 TOTAL REWARD:Introduction: Total reward includes all types of reward: Non-financial as well as financial, Indirect as well as direct, Intrinsic as well as extrinsic.

Underpinning concepts: Intrinsic motivation The philosophy of total rewards is strongly influenced by the concept of intrinsic motivation that arises from the work itself. Integration Reward and other HR strategies are integrated horizontally to achieve greater impact and internal consistency - Bundling

Elements of total rewards: The concept of total rewards combines the impact of the two major categories of reward: Transactional rewards Tangible (financial) rewards arising from transactions between the employer and employees concerning pay and benefits. These are all extrinsic. Relational rewards Intangible (non-financial) rewards concerned with the work environment (quality of working life, the work itself, worklife balance), recognition, performance management and learning and development.

Benefits of total reward: Greater impact Enhancing the employment relationship Flexibility to meet individual needs Attraction and retention

TOTAL REWARD MODELS: 1.Michael Armstrong:-

2.Towers Perrin:-

3. WorldatWork:-

Total rewards are all the tools available to the employer that may be used to attract, motivate and retain employees. Total rewards include everything the employee perceives to be of value resulting from the employment relationship. 4. Zingheim and Schuster model:- (Chart from book) 5. Watson Wyatt:- (Chart from book) 6.Sibson

Introducing total reward system:-

TOTAL REWARD FRAMEWORK Norwich Union Insurance

Chapter 4. STRATEGIC REWARD:Strategic Reward Defined An approach to the development and implementation over the longer term of reward strategies and the guiding principles that underpin them. Criteria For Reward Strategy: Sets out reward goals to provide direction over the longer-term. Supports the achievement of business and HR strategies. Provides a framework within which reward systems can be planned and implemented. Takes account of stakeholder needs. Operates flexibly in response to changed circumstances.

Rational for strategic reward: Idea of What you are doing? How to get there? Have you arrived? Complex linkage with other HRM policies and practices. Positive relationship between reward and performance. Reward is the largest item of expense

Problem with strategic reward: Gap between intended and actual practice Alternative approach in support of strategic reward is required.

Characteristics: Forward looking Systematic Goal oriented In line with business strategy Based on philosophy

Guiding principles: Reward guiding principles will be concerned with matters such as: Operating the reward system justly, fairly, equitably and transparently in the interests of all stakeholders; Developing reward policies and practices that support the achievement of business goals; Rewarding people according to their contribution; Recognizing the value of everyone who is making an effective contribution, not just the exceptional performers; Creating an attractive employee value proposition; Providing rewards that attract and retain people and enlist their engagement; Helping to develop a high-performance culture; Maintaining competitive rates of pay; Maintaining equitable rates of pay; Allowing a reasonable degree of flexibility in the operation of reward processes and in the choice of benefits by employees; Devolving more responsibility for reward decisions to line managers.

Reward strategy: Aim of reward strategy To provide the organization with a sense of purpose and direction in delivering reward programs that support the achievement of business goals and meet the needs of stakeholders. Defines pathways that link the needs of the business and its people with the reward policies and practices of the organization and thereby communicate and explain these practices Content of reward strategy Overall strategy

Specific reward strategy Focus on one issue or two or more linked issuesDeveloping a high-performance work system Job evaluation scheme Equal pay for work of equal value is achieved Contingent pay scheme Flexible benefits The structure of reward strategy A declaration of intent A rationale A definition of guiding principles A plan

Developing reward strategy: Limitations of the formal approach to developing reward strategy A model of management which is more rational than is achievable in practice In many situations cannot take place in a sequence of predetermined steps Its about evolution not revolution changes in organizational requirements at a pace the organization can manage and people can deal with formulated and re-formulated as it is used emerge over time in response to evolving situations Focus on the context Manage the balance Initiatives that are most needed and are most likely to make a difference Keep it simple Think implementation how it is going to be implemented problems might arise and how they will be dealt with consider the reactions of people Achieve vertical and horizontal integration.

Implementing reward strategy Issues and problems of reward strategy implementation Development stage is unrealistic and unduly complex, Implementation is hurried without adequate pilot testing or analysis of the likely consequences Poor project management Inadequate attention to managing change Underestimating the importance of providing guidance and training to line managers to ensure they are capable of playing their part in implementing and operating the strategy

Chapter 5. INTERNATIONAL REWARD:International reward management:International reward management is the process of rewarding people in international or multinational organizations. The international scene:The international scene is composed of international and multinational firms working in the context of globalization. International No investment outside home country Import-export Sells in more than one country Standard product

Multinational Investment in other countries Manufacturing Operates in more than one country Customized products

International reward strategy:International reward strategy is concerned with the development of an integrated approach to building reward policies and practices across international boundaries. Convergence or divergence: An issue facing all international firms is the extent to which their HR policies, including reward, should either converge worldwide to be basically the same in each location, or diverge to be differentiated in response to local requirements. The factors affecting choice are: Extent to which Local norms are developed; Local environment The strength of the flow of resources finance, information and people between the parent and the subsidiary; The orientation of the parent to control; The nature of the industry The specific organizational competences including HRM Convergence or Divergence in Reward Total convergence central reward policy, common benefits Partial convergence centralization in senior and international staff Partial divergence job evaluation is recommended but flexibility, comply with principles, incentive, pay level promotion will vary Total divergence complete freedom

Expatriate remuneration policies: Expatriate remuneration policies may be based on the following propositions: Expatriates should not be worse off as a result of working abroad Home-country living standards should be maintained The remuneration package should be competitive. Proper consideration to the conditions under which the employee will be working abroad. Higher responsibility should be reflected in the salary paid Account should be taken of the need to maintain equity Account also has to be taken of the problems that may arise when expatriates are paid more than nationals in the country in which they are working who are in similar jobs The package should be cost effective

Expatriate pay: The main approaches to calculating expatriate pay are: Home-based pay The provision of remuneration (pay, benefits and allowances) to expatriates that is the same as in their home country. Host-based pay The provision to expatriates of salaries and benefits such as company cars and holidays that are in line with those given to nationals of the host country in similar jobs.

Allowances: Companies add a number of allowances such as a cost-of-living, hardship, separation and clothing allowance to the expatriates salary to calculate the total expatriate remuneration package.

These are designed to compensate for disruption and to make the assignment attractive to the

Chapter 6. Performance Management and reward What is Performance? The accomplishment, execution, carrying out, working out of anything ordered or undertaken. It is about doing the work as well as result achieved. Performance management:It is the process of taking systematic action to improve organizational, team and individual performance Influences on performance: Influences on individual performance Performance = f (Ability x Motivation) Performance = Individual Attributes Work Effort Organizational Support The opportunity to participate Performance = f (Ability + Motivation + Opportunity to Participate) The work system Structure Support Materials Equipment Customers work culture Internal and external environments Leadership Leadership has a direct impact on organizational climate, and that climate in turn accounted for nearly 1/3 of the financial results of organizations. Taking action Adopting the right approach to improving organizational, team and individual performance and getting the work system and leadership right

High-performance cultures: A high-performance culture is one in which people are aware of the need to perform well and behave accordingly in order to meet or exceed expectations .

Characteristics, People know whats expected of them they are clear about their goals and accountabilities. They have the skills and competencies to achieve their goals. High performance is recognized and rewarded accordingly. People feel that their job is worth doing, and that theres a strong fit between the job and their capabilities. Managers act as supportive leaders and coaches, providing regular feedback, performance reviews and development. A pool of talent ensures a continuous supply of high performers in key roles. Theres a climate of trust and teamwork, aimed at delivering a distinctive service to the customer. Another important characteristic is the encouragement of discretionary behaviour.

Discretionary behaviour: Discretionary behaviour takes place when employees exercise an element of choice about the amount of effort, care, innovation and productive conduct they display and how they do their job. It is more likely to occur When individuals are committed to their organization When they feel motivated to do so When they gain high levels of job satisfaction.

Approaches: There are three approaches to developing high performance culture 1. The implementation of high-performance working through a high-performance work system 2. The use of rewards 3. The use of systematic methods of managing performance including the use of a performance management system. High-performance work system An internally consistent and coherent HRM system that is focused on solving operational problems and implementing the firms competitive strategy. The means for creating a performance culture HPWS facilitate employee involvement, skill enhancement and motivation

1.

Components of HPWS: Job infrastructure Training programs to enhance employee skills Information sharing and worker involvement mechanisms Compensation and promotion opportunities that provide motivation

2. Use of reward Impact of reward on individual performance Impact of reward on organizational performance

3. Managing performance Organizational performance Team performance

Elusive bridge between the aims of the individual employee and the objectives of the organization. Setting work objectives Setting process objectives Team performance reviews (General feedback review, Work reviews, Group problem solving, Update objectives)

Performance management cycle

Chapter 7. ENGAGEMENT AND REWARD:The meaning of employee engagement: Employee engagement takes place when people are committed to their work and their employer and are motivated to achieve high levels of performance. Commitment Motivation Organizational citizenship

Why engagement is important? Employee engagement is important to employers because a considerable amount of research indicates that behaviours such as maximizing discretionary effort, taking initiative, wanting to develop or aligning actions with organizational needs deliver a range of organizational benefits like, Higher productivity Reduced staff turnover

The factors that influence engagement Engagement will be affected by Work and job design, The quality of life provided by the working environment The quality of leadership.

The role of reward in enhancing engagement A total rewards approach is required to increase engagement. Financial rewards are insufficient and the major levers are provided by non-financial reward, especially those provided by Intrinsic motivation, The work environment Line managers.

Chapter 8. FINANCIAL REWARDS Arguments for financial rewards: The most powerful argument is that those who contribute more should be paid more. It is right and proper to recognize achievement with a financial and therefore tangible reward. This is in accordance with the principle of distributive justice, which, while it states that rewards should be provided equitably, does not require them to be equal except when the value of contribution is equal.

Arguments against financial rewards The main arguments against financial rewards are that: The extent to which contingent pay schemes motivate is unclear. Money by itself will not result in sustained motivation; intrinsic motivation provided by the work itself goes deeper and lasts longer. People react in widely different ways to any form of motivation. Financial rewards may possibly motivate those who receive them but they can demotivate those that dont. Contingent pay schemes can create more dissatisfaction than satisfaction if they are perceived to be unfair, inadequate or badly managed. Schemes depend on the existence of accurate and reliable methods of measuring performance, contribution, competence or skill, which might not exist. Contingent pay decisions depend on the judgement of managers, which in the absence of reliable criteria can be partial, prejudiced, inconsistent or ill informed. The concept of contingent pay is based on the assumption that performance is completely under the control of individuals, when in fact it is affected by the system in which they work.

Chapter 9. NON-FINANCIAL REWARDS:= Definition Non-financial rewards are those involving the payment of salaries, wages or cash that focus on the needs people have to varying degrees for recognition, achievement, responsibility, autonomy, influence and personal growth. They can be extrinsic such as praise or recognition, or intrinsic arising from the work itself associated with job challenge and interest and feelings that the work is worthwhile

The significance of non-financial rewards Money has to be reinforced by non-financial rewards, especially those that provide intrinsic motivation. When motivation is achieved by such means it can have a more powerful and longer-lasting effect on people, and financial and non-financial rewards can be mutually reinforcing.

Types of non-financial rewards Non-financial rewards can be classified as follows: individual extrinsic rewards non-financial recognition, praise, feedback; individual intrinsic rewards fulfilling work, opportunity to grow; collective extrinsic rewards worklife balance policies, employee well-being services, voluntary benefits, learning and development and talent management programmes; collective intrinsic rewards work environment enhancement, work system design, quality of work life