What is the meaning of the word “reward” in your company? For some individuals, the reward is the reason for work, while for others the work itself is the reward. There are multiple meanings for the word “reward”, but older definitions seem to no longer meet employee needs. The total rewards strategy is one solution.
Reward management supports and develops an organization’s culture.
Rewards influence the perception of how people are valued within the organization. The general idea behind rewards is to motivate people, encourage high performance, and increase productivity. However, what might escape one’s attention is that reward management also helps manage expectations in the psychological contract between the employer and employee. It helps reduce disappointments on the part of the employer as well as employees. The best-performing companies link rewards to their organization’s business strategy.
Employers worldwide are realizing that employees don’t solely value monetary rewards, the traditional form of awards. Thus, it comes as no surprise that many employers are evolving their compensation practices to a total rewards approach and aligning their total rewards programs with their talent value proposition.
So, what is this “Total rewards”?
According to Gartner, “Total rewards is the combination of benefits, compensation, and rewards that employees receive from their organizations.”
Total rewards is the integration of all aspects of the work experience that employees value. It is a blend of both financial and non-financial elements. The total rewards strategy involves elements that appeal to the entire workforce, regardless of differences in generation, seniority, or level of position.
Total rewards has four main components: compensation, work environment, learning & development, and recognition.
The first factor is compensation. There will always be variability in how much people are contributing within a company. Some people contribute more and have more responsibilities, while some people have less. When we pay to motivate, there is an assumption that people by nature are not motivated. If people are already motivated and you pay them more to boost their motivation, hoping to increase their performance, it will not work.
Money cannot increase competence. However, it can get competent people on board. When it comes to acquisition and loyalty, money plays a significant role. For example, when selecting a job, people tend to look at how much money they’ll earn. Another case could be base pay. Base pay might not motivate people, but if the base pay is considered unfair or too low, it could lead to demotivation. This is the role of compensation in attracting and retaining employees. It is about acquisition and loyalty.
The pay that employees receive for their time and effort is the foundation upon which the other aspects of the Total Rewards strategy stand.
The work environment has a great impact on employee engagement. The work environment encompasses factors like the organization’s values, working conditions, work-life balance, and communication. A good work environment shapes the company culture, encouraging positive attitudes towards work and promoting excitement about the work people do.
Organizations can describe their employees’ career trajectories to them and give a series of long-term projections. This type of transparency helps alleviate workplace politics and fosters a healthy working relationship.
Having ample opportunities for learning and development is also an important consideration in the total rewards strategy. Employees appreciate opportunities for growth. This can look like helping employees grow as an individual within the organization by encouraging their interests or supporting their subject matter expertise. When employees feel supported by their organization, it boosts levels of morale and employee engagement which leads to more loyal employees.
Finally, recognition is one of the most effective methods to reward people. It is a form of feedback that lets people know that they did well. Therefore, it provides positive reinforcement. Recognizing people for their achievements makes them feel good and further boosts motivation and engagement.
A total rewards program helps employers communicate all the benefits and perks that are available for employees.
It can be an incredibly positive experience for employees when they see how much their employer invests in them. They contribute to a more loyal, productive, and engaged workforce.
The greater degree of flexibility and variety that the total rewards approach offers makes it even more appealing to employers. They can customize their total rewards packages to fit whatever is most attractive or most valuable to a specific workforce.
It all sounds so perfect, but it’s not all rainbows and sunshine. The challenge with a total rewards approach is that some employers may use it more as a cost-cutting strategy rather than a strategy to improve workforce wellbeing. They may shift the reward mix from monetary pay to lower-cost benefits and non-financial rewards to cut costs. This is why, among some employees, cynicism exists regarding the total rewards approach. They view it as a camouflage for cost-cutting. Therefore, it’s essential to educate staff about the value of the rewards package. Ensure that it is clear what the rewards strategy aims to achieve and how workers can benefit.
While it is better to be aware of the “best practices” in the industry or market, it is important to remember that there is no secret formula to elicit maximum productivity. What works well elsewhere will not necessarily work as well within your company. It’s wiser to build a rewards strategy looking for the “best fit” instead of the “best practices.”