 They are powerful means of teaching the employees

what is actually valued in organization , as well as not.

 If the organization encourages teamwork but continues

to award significant bonuses for individual
achievement alone, teamwork is less likely to be taken
seriously.

 Hezberg’s (1966) theory suggests that money is just as

likely to demotivate (ex pay rise 10% or 15%). Money
in itself ceases to be motivating.

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The “running sore” effect of such organizational decisions can cause
people to see themselves as victims, and loyalty to the organization
suffers as a result.
Changing reward arrangements therefore is likely to be more as much
a source of concern for the organization as it is for employees.

CHAPTER 7
 CIPD talent management research found that reward system can have a significant
impact on talent management initiatives, in retaining people.

 Study made by Innecto Reward Consulting (2006) found that:

•Cultural, economic and technological changes in the past 10 years have made financial
reward a greater motivator than challenging work or personal pride.
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•Nearly three-quarters of the 690
“carrier oriented” UK executives
under 40 years old who were polled
said they now expected a pay rise
every year.

•Two-thirds claimed that financial

reward is now the number one career
motivator.

•Yet just 15% of the HR professionals

surveyed admitted believed financial
reward to be a key motivator.

These findings suggest that unless

there is a joined-up approach to
reward and talent management, an
investment in talent management
activities may just not be worthwhile.

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 When organizations had a stable hierarchical structures, the majority of staff
would be on a fixed pay arrangement and pay was often linked with
seniority.
 For many HR specialists, such schemes had advantages since they often
appeared to have power of negotiation about pay and promotion.
 Many organizations have introduced pay schemes which are intended to
reflect more performance in the job more than the job grade itself .
 Roffey Park’s research found that people who are dissatisfied with they
career development are likely to consider their organization’s reward scheme
and leadership are inappropriate when people are happy with their jobs,
the reward scheme is seen as less of an issue.

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 Reward systems need to be able to
provide people with a real sense of
profession, or at least demotivate
employees.

 The difficulty lies in indentifying what

needs to change and what the
organization whishes to reward.

 “The successful investment in new

reward practices involves a great deal
of effort, commitment and expertise.
And it is the most difficult task facing
HR managers” - JEFFREY PFEFFER
(1998).

 There is no such thing as a perfect pay

system.

CHAPTER 7
Many organizations focused
their business strategies on
customer needs and securing
customer loyalty by developing
more flexible, innovative
products and services.

More flexible packages, which includes

Organizational restructuring of
various kinds as flatter
structured, with focus on
teamwork, non-traditional work
arrangements.
Reward system may need to
be flexible
CHAPTER 7
variable pay – linked to job performance,
competence, skills development and leadership
behaviors.
Full time employment is increasingly being
replaced by various forms of flexible work
arrangements .
One in five workers in the
UK is employed within the
public sector
Pay is a key plank of
public sector structural
reform strategies, with a
continuing drive on
performance and
productivity.
2% of annual increases
represents the slowest
growth rate of public sector
for a decade!

CHAPTER 7
West Midlands Police had adopted a reward and contribution framework for
police staff which includes:
 more flexible job design;
 better performance;
 review processes.
In some government departments :

variable pay has met with a mixed response.

Another key feature of public sector is: equal pay(a pay gap in 2007 of 17%)

Research by Scholtes(1995) lists five reasons why performance-based rewards

doesn’t work:
I. There are no data to show long-term benefits;
II. They set up internal competition
III. Reward systems undermine teamwork and cooperation
IV. They often reward those who are lucky and pass by those who are unlucky;\
V. They create cynics and losers.
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Developing merit-based pay systems may be one of the
most challenging areas for human resource specialists.

Every pay system should be transparent and what is

being rewarded should be clear.

Any reward systems needs to reflect the key drivers for

future organizational success in the short and medium
term.

Many organizations want people to be keen and willing

to take on broader responsibilities, learn new skills and
develop wider competencies.

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More flexible reward strategies reflects the need to
attract and retain key employees.

Expatriate conditions guarantee a level of secured income

are becoming less frequent.

 A number of organizations are beginning to consider

paying the difference between the total compensation in two
locations by way of a cash supplement.
CHAPTER 7
CBP (competence-based pay) – is also knows as knowledge or skills-based pay.

•The downside of CBP is that they tend to be very complex:

The emphasis on individual competence can lead to failure.

TEAM PAY
•Organizations are encouraging team working.

•Team-based pay scheme provide financial rewards to individual employees

working within a established team.

•Payments are linked to team performance or achievement of the objectives.

•CIPD has shown that team pay is more talked than practiced.

CHAPTER 7
The three basic elements of a team-based reward
package:
The individual element, i.e. the basic salary but varied in
relation to performance or skills/competence.

A team element related to the achievement of team

targets.

And organizational element related to business

performance measured as profit, or added value.

CHAPTER 7
Cable and Wireless from UK has developed a cafeteria-style benefits system.
Items in the scheme include:

Pensions;
Health-care;
Childcare vouchers;
Annual leave;
Life cover;
Dental insurance for employees and partner.

Some companies in US such as Lotus development and Apple Computers, are

now extending benefits to domestic partners as well as spouses.
Benefits have to be relevant .
Managing a flexible benefits scheme is not easy since it is a dynamic situation.
CHAPTER 7
Extrinsic rewards:

 Profit sharing;
 Flexible benefits;
 Bonuses payable in terms of extra leave rather than pay;
 Bonuses payable towards prestigious qualifications;
 Long-term incentives (LTIs);
 Deferred incentives;
 Extending private health schemes to all employees and their families
 Longer holidays;
 Sponsored holidays;
 “Free” family holidays in company-owned cottages;
 Enhanced early retirement;
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CHAPTER 7
Intrinsic motivators (“psychological” rewards):

 Chance to do something worthwhile;

 Chance to have a development stretch;
 To increase job satisfaction;

 People want to feel their skills and contribution have been recognized by
others.

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ZINGHEIM AND SCHUSTER

CHAPTER 7
Recognition with financial reward is run by an Australian
pharmaceutical company.

Recognizing the following types of contribution:

Exceptional team work

Excellence in normal keys tasks
High achievement in a special project

CHAPTER 7
Important attributes of a quality employee:

Attitude to quality;
Teamwork;
Commitment to their department;
Consistency with work performance;
Attitude to company and co-workers;
Attendance and punctuality;
Enthusiasm;
Accuracy;
Use of initiative and knowledge of customer requirements

CHAPTER 7
HR has a key role to play in producing a high-performance organization.
Working with line managers, HR can devise structures and work processes to
achieve organization’s goals.
With reward system, it seems that more impersonal and corporate the scheme,
the less employees find financial reward motivating.
If excellence performance is required, people need to see the link between
what they have achieved and what they are paid.
Reward strategies should not focus solely on pay and tangible benefits, we
need to see the importance of recognizing the unique contribution of each
individual.
The more choice, flexibility but transparency than can be built in the better.
Money is not the main motivator for many people !

CHAPTER 7
“To manage talent successfully, executives must recognize that their talent strategies
cannot focus solely on their top performers” Guthridge 2008

Talent management is seen as a critical element of helping organizations to

achieve competitive advantage, and skilled workers expect to carry on developing
their skills.
The Boston Consulting group study of HR directors and Executives found that
“managing talent” is the most critical challenge facing HR.
UK’s public sector (74% had no well-developed plan to implement the strategy)
where there appears to be no systematic and coordinated approach to developing the
next generation of leaders and judging talent is still more intuitive than systematic
process.
CHAPTER 8
People are expected to demonstrate a wide range of skills and continuous
learning and development.

It is vital for national success too.

According to Lord Leitch in his review of skills in the UK (2006), seventy

percent of the 2020 workers have already completed their compulsory education,
therefore it has to teach people already in work !

A CIPD focus group of HR directors confirmed that improving the quality of

leadership and management is central to employee engagement, performance and
retention.

CHAPTER 8
In any development strategy there are likely to be three areas of focus:

Organizational level Induction, Quality Improvement, Leadership, Customer

care and Culture Change Programmers are addressed

Departmental/Business Unit level where job-related training and development

are to take place

Individual level where people are usually motivated to close the gap between
their current and desired capabilities

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CHAPTER 8
CHAPTER 8
Kirkpatrick suggests the following guidelines to implementation when trying to
assess the impact of training on business results:

Use a control group, if possible;

Allow enough time for results to be achieved;

Measure both before and after training

Repeat the measurement at appropriate times

Consider cost of evaluation versus the potential benefits

Be satisfied with the evidence if absolute proof isn’t possible to attain.

CHAPTER 8
Competencies can provide a common language within organizations to describe
both desired skills and behaviors required to achieve desired organizational
outcomes.

“Competencies” are those capabilities which at an individual and team level

contribute to organizational capabilities, such as customer focus.

Criteria for prioritizing management development needs include:

Business needs

Building to Strengths
CHAPTER 8