Comprehensive Report on Reward Management: Approaches and Strategies

This report provides a comprehensive overview of reward management, emphasizing its role in enhancing organizational, team, and individual performance through financial and non-financial rewards. It highlights the alignment of reward systems with business strategy, integration with HRM practices, and the adoption of a total reward perspective. The report details the aims of reward management, including rewarding value creation and aligning rewards with desired behaviors. It explores reward philosophies, guiding principles, and the process of developing and implementing reward strategies. The report also covers job evaluation, outlining different approaches such as analytical and non-analytical schemes, market pricing, and computer-aided methods. It discusses the importance of equal pay considerations and the design of grade and pay structures, emphasizing guiding principles for fairness and flexibility. The report concludes by examining the implementation of reward strategies, including developing line management capabilities and ensuring effective HR processes.

Reward Management
Rewarding people involves reward managementprocessesconcernedwith the
design, implementation and maintenance of reward systems that are geared to the
improvement of organizational, team and individual performance. It includes both
financial and non financial rewards. Reward management is treated as very much
part of an HRM approach to managingpeople. The essentialfeaturesof this
approach are that it:
• supports the achievement of the business strategy;
• is integrated with other HRM strategies, especially those concerning human
resource development;
• is based on a well-articulated philosophy – a set of beliefs and assumptions that
are consistent with the HRM philosophies of the business and underpin the ways in
which it proposes to reward its employees;
• adopts a ‘total reward’ perspective that recognizes that there are many other and
possibly more powerful ways of rewarding people besides financial rewards;
• appreciatesthat if HRM is about investing in human capital, fromwhich a
reasonable return is required, then it is properto reward people differentially
according to their contribution (that is the return on investment they generate);
• focuses on the development of the skills and competencies of employees in order
to increase the resource-based capability of the firm (pay for competency or skill);
• is itself an integrated process that can operate flexibly;
• supports other key HRM initiatives in the fields of resourcing,employee
development and employee relations.
The aims of reward management
The three most important aims of reward management are to:
1. Reward people according to what the organization values and wants to pay for.
2. Reward people for the value they create.
3. Reward the right things to convey the right message about what is important in
terms of behaviours and outcomes.
The philosophy of reward management
A belief in the need to achieve fairness, equity, consistency and transparency in
operating the reward system.
Total reward
Each aspect of reward, namely base pay, contingent pay, employee benefits and non-
financial rewards, which include intrinsic rewards from the work itself, are linked
together and treated as an integrated and coherent whole.
Broad-brush reward strategies
To achieve an appropriate balance between financial and non-financial rewards,
develop commitment and engagement and provide more opportunities for the
contribution of people to be valued and recognized.

Guiding principles for reward
Reward philosophies are often articulated as guiding principles
Three key guiding principles are:
1. Develop reward policies and practices which support the achievement of business
goals.
2. Provide rewards which attract, retain and motivate staff and help to develop a
high performance culture.
3. Maintain competitive rates of pay.
Reward strategy is a declaration of intent which defines what the organization wants
to do in the longer term to develop and implement reward policies, practices and
processes which will further the achievement of its business goals and meet the
needs of its stakeholders. It provides asense of purpose and direction and a
framework for developing reward policies, practices and process. It is based on an
understanding of the needs of the organization and its employees and how they can
best be satisfied. It is also concerned with developing the values of the organization
on how people should be rewarded and formulating guiding principles which will
ensure that these values are enacted. Reward strategy is underpinned by a reward
philosophy which expresses what the organization believes should be the basis upon
which people are valued and rewarded.
Developing reward strategies
The formulation of reward strategy can be described as a process for developing and
defining a sense of direction. The main phases are: diagnosis, detailed design, final
testing and preparation, and implementation.
Components of an effective reward strategy
According to Brown (2001) an effective strategy is one in which there are clearly
defined goals and a well-defined link to business objectives; well-designed pay and
reward programmes, tailored to the needs of the organization and its people, and
consistent and integrated with one another; and effective and supportive HR and
reward processes in place.
Implementing reward strategy
The aim of implementation is to make the reward strategy an operating reality by
building the capacity of the organization to put into practice the proposals worked
out in the development stage.

Developing line management capability
HR and reward specialists need to develop line management capability by initiating
processeswhich can readily be implementedby line managers,promoting
understanding by communicating what is happening, why it is happening and how
it will affect everyone, providing guidance and help where required and providing
formal training as necessary.
Questions
Job evaluation
Job evaluation is a systematic process for defining the relative worth or size of jobs
within an organization in order to establish internal relativities.
The aims of job evaluation
• Establish the relative value or size of jobs.
• Produce the information required to design grade and pay structures.
• Provide as objective as possible a basis for grading jobs.
• Enable sound market comparisons with jobs or roles of equivalent complexity and
size.
• Be transparent – the basis upon which grades are defined and jobs graded should
be clear.
• Ensure that the organization meets equal pay for work of equal value obligations.
Approaches to job evaluation
Informal approaches price jobs either on the basis of assumptions about internal and
external relativities or simply by reference to the ‘going’ or market rates. Formal
approaches use standardized methods to evaluate jobs, which can be analytical or
non-analytical.Such schemesdeal with internal relativitiesand the associated
process of establishing and defining job grades or levels in an organization.
Analytical job evaluation schemes
Analytical job evaluation is based on a process of breaking down whole jobs into a
number of defined elements or factors such as responsibility, decisions and the
knowledge and skill required. These are assumed to be present in all the jobs to be
evaluated. In point-factor and fully analytical matching schemes, jobs are then
compared factor by factor either with a graduated scale of points attached to a set of
factors or with grade or role profiles analysed under the same factor headings.
Non-analytical job evaluation schemes
Non-analytical job evaluation schemes enable whole jobs to be compared in order to
place them in a grade or a rank order. They are not analysed by reference to their
elements or factors.
Market pricing

Market pricing is the process of obtaining information on market rates (market rate
analysis) to inform decisions on pay structures and individual rates of pay. This is
called ‘extreme market pricing’ when market rates are the sole means of deciding on
internal rates of pay and relativities, and conventional job evaluation is not used.
Computer-aided job evaluation
Computer-aidedjob evaluationuses computersoftware to convert information
about jobs into a job evaluation score or grade. It is generally underpinned by a
conventional point-factor scheme.
Choice of approach
The overwhelming preference for analytical schemes shown by the e-reward 2007
survey suggests that the choice is fairly obvious.
The 10 most frequently used factors in tailor-made analytical schemes in r
order, e-reward survey (2007)
1. Knowledge and skills.
2. Responsibility.
3. Problem solving.
4. Decision making.
5. People management.
6. Relationships/contacts.
7. Working conditions.
8. Mental effort.
9. Impact.
10. Creativity.
The advantages of using a recognized analytical approach that satisfies equal value
requirements appear to be overwhelming. Point-factor schemes were used by 70 per
cent of those respondents and others used analytical matching, often in conjunction
with the points scheme.
Equal pay considerations
Job evaluation has particular significance when it refers to the achievement of equal
pay for work of equal value between women and men. Women should be paid the
same rate as men when they are carrying out ‘like work’, ‘work rated as equivalent’,
or ‘work of equal value’.

Grade and pay structures provide a logically designed framework within which an
organization’s pay policies can be implemented. They enable the organization to
determine where jobs should be placed in a hierarchy, define pay levels and the
scope for pay progression, and provide the basis upon which relativities can be
managed, equal pay achieved and the processes of monitoring and controlling the
implementation of pay practices can take place. Grade and pay structures also
enable organizations to communicate the career and pay opportunities available to
employees.
Guiding principles for grade and pay structures
Grade and pay structures should:
• be appropriate to the culture, characteristics and needs of the organization and its
employees;
• facilitate the management of relativities and the achievement of equity, fairness,
consistency and transparency in managing gradings and pay;
• be capable of adapting to pressures arising from market rate changes
and skill shortages;
• facilitate operational flexibility and continuous development;
• provide scope as required for rewarding performance, contribution
and increases in skill and competence;
• clarify reward, lateral development and career opportunities;
• be constructed logically and clearly so that the basis upon which they
operate can readily be communicated to employees;
 enable the organization to exercise control over the implementation of pay
policies and budget