Total Reward – How Can It Differentiate You From The Rest?

Total reward is not a new concept and, increasingly, organisations are beginning to use such a reward strategy to align business and HR strategies to employee expectations. But what exactly do we mean by total reward? We are talking about a reward strategy that brings together the wider components of reward including:

• Financial reward – cash (base & variable pay), benefits (holidays, insurances etc) & equity
• Career & development opportunities – often includes personal skills
• Work/life balance – takes account of organisational culture
• Environment – this includes the job itself i.e. design, autonomy and working environment
• Recognition – typically non-cash awards to recognise individual or team contribution.

By bringing these strands together and aligning them to your organisation’s culture and business objectives, total reward can increase your employees' engagement and performance. The resulting business impact is typically greater than that arising from individual reward initiatives.

What are the pros of total reward?

• Meet individual requirements – more effective than traditional approaches
• Recruit more first choice candidates – acts as key differentiator to competitors
• Lower attrition levels – total reward increases motivation and retention levels
• Enhanced reputation –  it is more difficult to replicate than individual pay practices
• Better business performance – benefits are sustainable and longer term.

What are the cons of total reward?

• Limited track record  – small numbers who typically have flexible benefits already
• Time consuming and sometimes complex – it is not a ‘quick-win’ solution
• Cost versus benefit – ensure ROI benefits outweigh implementation cost and timelines
• Managing expectations – business needs and personal choice balance must be managed.

Read the Tips section below to find out how to implement total reward within your business.

Just News

Inflation and interest rate rises fuel higher 2007 pay awards. Latest inflation figures issued for December 2006 showed two sharp inflation increases where CPI (Consumer Price Index), the government’s preferred measure of inflation, rose from 2.7% to 3.0% in November – the highest on record. This was mirrored in the latest RPI (Retail Price Index) of 4.4%, the highest level for 15 years. As RPI is commonly used to determine pay deals, this, combined with an unexpected Bank of England interest rate increase to 5.25%, is expected to impact on the current level of pay awards in 2007.

Fortune names the 2007 best companies to work for in the USA. The latest Fortune 100 list produced by the ‘Great Places to Work Institute’ has placed Google as the best company to work for in the USA. Google has experienced meteoric growth over recent years with 2006 sales exceeding $10 billion. Google is renowned for its distinctive culture and Googlers, as employees are known, have the lure of a vast array of benefits from free meals, financial incentives for hybrid cars to on-site activities. While many of the benefits may encourage people to work long hours, there is no shortage of takers. Google receives over a thousand job applications a day and the company’s financial success still continues.

Website of the Month

Each month, we bring you a quick round up of a website and for January we take a look at Harvard Business School Working Knowledge, often known as HBS WK.

From the Harvard Business School faculty, this website for ‘business leaders’ provides a range of free resources across business topics such as leadership, strategy, globalisation and more including  a ‘Compensation’ section. Take a look at the ‘What do you think’ articles by the HBS faculty which invite comments. Check out one of 2006’s most popular articles on the topic of Performance Reviews and forced ranking – it is worth a read.

The HBS Working Knowledge site is free and you can also subscribe to their weekly newsletter for a round-up of news, research and more.

7 Steps to Implementing Total Reward

Step 1 Carry out an initial assessment to determine if total reward is right for your organisation at this point in time, taking account of current reward practices and business strategy.

Step 2 If total reward passes the assessment in Step 1, define what total reward will mean for your organisation and its culture and values – remember it is not a short term solution.

Step 3 Prepare the business case to gain senior management buy-in and approval. Define the business benefits and the reward components that are relevant to the organisation.

Step 4 Define individual reward components e.g. career development and environment to establish a ‘straw model’ of your total reward strategy. Specific examples include implementing effective career development paths, addressing work environment issues and work-life balance improvements.

Step 5 Communicate to employees using the model from Step 4. Take account of employee feedback and your organisation’s culture and business strategy to plan the implementation phase, ensuring that front line managers are involved and trained.

Step 6 Carry out the implementation of agreed reward initiatives and communication plans that form the total reward strategy ‘roll-out’. Allow plenty of time for all the different plans to be implemented.

Step 7 Project manage the implementation ensuring that employees and front line managers have the right level of information and guidance. Regularly monitor progress to ensure that total reward strategy implementation is aligned to your organisational objectives at every stage.

This advice is provided as guidance only. If you need specific advice on implementing total reward within your organisation, please call us on + 44 (0) 1367 710 618.