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Developing a Reward Strategy

Reward Strategy

This is the key step in the design of a reward system. You have to decide what the reward strategy is and how much it should fit with other HR systems. It gives a framework for the reward system and provides alignment to the business strategy.

The logic goes like this:

In order to meet its strategy, the business must show certain characteristics. It needs to behave in certain ways. For example, it needs to treat its people in an open and honest fashion or create co-operative relationships with its customers and suppliers.
Companies are made up of people. How people behave will determine how the company behaves.
An integrated approach to people management starts with individual behaviour expectations and looks at how these will be:
- Measured (performance management)
- Developed (personal development)
- Rewarded (reward and career management)

A reward strategy will typically describe at a high level the company’s policy on:

Underlying structure – this provides a common grade framework that supports a drive for consistency (single, career or job family).
Common threads – these provide a framework to address shared compensation and benefits issues.
Base pay structure - recognises the market value of roles and any role-specific needs.
Variable pay - sets out reward that must be re-earned by achieving agreed goals.
Recognition - encourages greater commitment to behaviours that support the business strategy.
Non-financial reward – focuses on personal development and environmental (hygiene) factors that support the cash and benefit rewards.
Integration - shapes a consistent and comprehensive approach to managing employees and their performance.

For more details on creating a reward strategy click here.