Market update reward

Written by
Changeboard Team

14 Jun 2013

14 Jun 2013 • by Changeboard Team

Good news for reward teams?

Reward functions remain stretched to capacity – and beyond. Our reward & analytics team reported an exceptionally busy year last year and continued momentum through the start of 2013 in regard to job numbers and the need for top quality talent. This is good news for reward professionals looking for new opportunities, but it reflects significant challenges for the function. Julian Ingleby, director of performance and reward consulting at McLagan, explains. 

The reward agenda

Aon Hewitt’s 2012 Reward Fundamentals survey highlights some of the top business drivers of the reward agenda:

  • Rewarding and motivating high performers
  • Ensuring variable pay is aligned to longer-term performance
  • Recruitment and retention of key staff
  • Getting the most from total reward
  • Staff engagement / morale

Economic headwinds, cost-cutting and on-going uncertainty add to both the urgency and the complexity of achieving these goals. However, a key determinant of the effectiveness of reward programmes is something within the function’s control: communication.

Lack of engagement

Only a little over half of the reward professionals that Aon Hewitt surveyed believe reward programmes are effectively communicated (around a third actively disagree) or effectively engage and motivate staff, despite over 80% believing reward programmes reflect the priorities and needs of the business. Indeed the CIPD’s 2012 annual Reward Risks survey report describes effective reward communication as ‘a stand-out [reward] risk for organisations of all shapes and sizes’.

This is not a happy state of affairs and seems like it should be an urgent call to action. No matter how well reward programmes are aligned to business strategy and integrated with business processes, if they are not engaging staff then what is the point? Reward programmes are surely failing unless employees understand the desired performance and behaviours and can see how reward is driven by those factors.

Assessing priorities

For the reward function in many firms, the challenge is finding time and space to pro-actively address these fundamental issues amongst the array of other priorities the function finds thrust upon it. Since 2009, the reward change agenda has been shaped more by external factors – such as changing workforce demographics, activist shareholders, public outrage around banking and executive reward, the Eurozone crisis, Financial Services regulation – than a focus on what is right for the organisation (or indeed for customers and clients).

Getting strategic

Despite the conflicting demands on reward leaders’ time and bandwidth, they must find the capacity within the function to maintain focus on key strategic reward priorities. Aligning reward programmes to evolving business needs, making choices around when to differentiate for competitive advantage and when to follow the market, and ensuring processes, communications and governance support effective reward implementation has never been more important.

Julian Ingleby, director, McLagen

Julian InglebyJulian is the director of performance and reward consulting at McLagen.