Developing, executing, managing, and reviewing a total reward programme is everything
but a straightforward process. The procedure requires meticulous attention and care
throughout and neglecting even one of the aspects which should instead be carefully
considered for the successful implementation of the programme could reveal to be
remarkably detrimental and ultimately resulting in a complete, irreversible failure.
Henemen (2007) reports three cases of total reward programmes whose introduction
failure was directly caused by the fatal mistakes made during the design and
development phases. The total reward programme of a chemical firm miserably failed,
accurate and long preparation notwithstanding, because during the first year of its
introduction the firm financial results were negative. The programme had been
communicated putting great emphasis on the profit-sharing cheque it should have
enabled employees to receive. In practice, however, because of the unexpected
difficulties caused by the exogenous adverse circumstances, in the end the staff did not
receive any cheque. The resentment caused by this occurrence within the workforce led
to the programme withdrawal, circumstance which could have been avoided if it should
also have been communicated to employees that the programme would not have been
operated during downturn or slowdown periods.
Similarly, a government agency in the U.S. introduced a programme linking salary
increases to a pay-per-performance scheme whose assessment should have been carried
out by means of a formal appraisal system. Unfortunately, or rather maladroitly, the
performance appraisal system had not yet been implemented before the launch of the
total reward programme and managers were obliged to assess their staff performance as
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they could, unable to rely on an objective measurement tool. The imprudent use of this
unstructured, makeshift assessment approach was perceived by employees as unfair and,
once again, the scheme had to be abandoned.
In another case, a total reward programme had been introduced in a plant of a heavily
unionized business having several factories in different geographical areas. The success
consequent to the introduction of the total reward scheme in the pilot factory
encouraged the business management to replicate the model in the other factories. The
lack of consultation of the union representatives in each of the other plants, however,
led to a series of unexpected difficulties emerged because of the unions harsh opposition
to the scheme introduction (Henemen, 2007).
The glaringly obvious deduction emerging from these examples is that in order to avoid
failures, drawbacks and massive waste of money and resources, it is of paramount
importance paying extra care and attention during the design and development phases.
The most likely risk being that problems emerging during the execution phase could
possibly no longer be effectively addressed and properly managed.
The project management team
In order to confer the programme the importance and credibility it deserves, the first
step should hence be represented by designating a project management team in charge
of developing and manage the project’s phases. Careful consideration should also be
paid to the appointment of the Project Manager who necessarily needs to be a senior,
respected manager, ideally a HR Manager with extensive experience in total reward
(Henemen, 2007). It is likely that in small to medium organizations there could not be
senior managers acknowledged and credited with such a technical competence. In these
cases, employers could decide to appoint the most representative and credible manager
as sponsor of the project and a manager or specialist having the technical expertise as a
project manager. A valuable option could be to appoint the senior manager as the
project manager and the technical expert as his deputy.
However, as maintained by Heneman (2007), equal careful consideration needs to be
paid to the appointment of the rest of the project team. Business leaders should ensure
that the necessary expertise and skills are considered and involved in the project
development. Ideally: payroll, employment law, finance, tax and reward specialists as
well should be all part of the team. In addition to these kinds of specific technical
expertise, employers should also ensure that individuals skilled in practices and
programmes development would be involved.
Small organizations could also consider to entrust one or two internal managers with
developing the project and have recourse to external consultancies or specialists for the
technical advice they might need on specific fields they do not have any available
expertise within their firms. Whatever the project team composition, the golden rule of
clearly determining, since the very beginning, each project member responsibility, role
and authority needs definitely to be applied and respected.
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Indeed, the appointment of a Project Manager and of a project management team more
than the first stage of the process can be deemed as a sort of pre-stage or, to put it
another way, as a mandatory prerequisite necessary to ensure that the right
competencies and the adequate level of credibility are put in place before the real
process starts.
Data collection
This process can actually be carried out in different ways, but what matters the most is
that, whatever the way identified to proceed, the method has to be considered as a
structured and predefined flow where some precise and pre-identified steps cannot really
be missed and necessarily need to be carried out. A clear route and direction, therefore,
needs to be drawn since the very beginning.
In order to design and develop a consistent total reward system and ensure its
successful introduction and implementation, it is crucially important and mandatory
prerequisite to gather as much data as possible about and from the workforce in that, as
we have seen, individuals are different and have different wants. It would, hence, be
practically impossible for an employer being able to design and develop successful and
consistent total reward systems without having previously gathered and analysed such
data.
Information can be collected having recourse to a wide variety of initiatives: face-to-face
or by means of questionnaires. Amongst the former large group methods and focus
groups clearly are the most used and effective as well. More in particular, large groups,
putting managers and staff together, could be used to let managers understand the real
concerns of staff about the mechanism of the process and gather employees’ ideas and
suggestions about the best way to execute the system once introduced.
In regard to focus groups, Heneman (2007) properly suggests conducting them
separately for managers and employees. Depending on the type of data which need to
be collected, focus groups can be preferable to large groups in that employees are likely
to express more freely their preferences and wants if managers are not attending the
meeting. Additionally, with specific reference to reward, it is likely that during the
meeting managers could refer to some kind of perks and benefits which are not, or are
only in part, accessible to employees, circumstance which could generate tensions during
the meetings.
Both large group and focus group approaches, beyond the fact of enabling the business
to gather relevant and useful information, are clearly also effective means to give voice
to employees and, hence, ensure their genuine involvement in the process. As
maintained by Heneman (2007), focus groups can also contribute “to generate survey
items and test pilot surveys.” Individuals invited to the focus groups have to be
significantly representative of the people to whom the scheme is directed.
Employee surveys conducted by means of questionnaires can indeed be considered
valuable tools to investigate individual preferences about reward too. Since they are
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usually anonymous, the risk is that findings provided by this type of investigations do
not enable employers to discern preferences expressed by employees from those
expressed by managers. On the other hand this type of surveys usually enables
businesses to reach a higher number of individuals, potentially the entire workforce. Yet,
surveys will surely reveal to be effective tools to gather more specific information about
the perceptions of staff towards rewards and the packages they receive. In order to be
effective, questionnaires have to be craftily devised and need to potentially enable
employers to gather information about individual perspective and outlook concerning all
the aspects of reward, namely both financial and non-financial.
A combination of face-to-face and by-questionnaire investigations would represent the
best approach. Face-to-face investigations will enable employers to gain a first insight of
manager and employee concerns and thoughts about the subject, whilst providing
valuable hints and tips for devising more useful and comprehensive questionnaires which
will enable in turn organizations to gain an in-depth knowledge across the whole
business.
Also the examination of the current rewards practices and of the filled forms eventually
already available, for instance those containing records of performance appraisal
meetings, can be useful to the project team in order to determine staff attitude towards
total reward.
Heneman (2007) also suggests gathering information by means of benchmark surveys
carried out amongst successful organizations of the same industry. This method should
in any case be used with extreme caution. The information gathered in this way could
enable employers to gain knowledge and understanding of new methodologies and
techniques; in the light of the best fit approach main tenet, however, employers have to
be conscious that replicating practices which have revealed to be effective in other
organizations, just because of this circumstance, can actually be sorely dangerous.
Although the Author suggests this activity in order to find out if these practices could
merit to be adopted in any other given organization, which entails consciousness and
awareness of the risks associated with this method from the side of whom is performing
the analysis, it is essentially rather unlikely that managers of different organizations
could be completely able to fully understand the reasons behind the decisions made by
other employers. It would require in fact having a broad and in-depth knowledge of
competitors’ strategies, culture, practices and business objectives.
Gap analysis
Albeit all of the above outlined steps are genuinely part of a total reward system
development procedure, they can actually be considered preparatory to the very first
official phase of the process, that is, the gap analysis. The main objective of the gap
analysis is to depict a faithful picture of the current state of play, in terms of the reward
system existent within an organization and contrast it with the desired state.
At this stage, it can also be very useful carrying out a literature review, the more the
project team knows about total reward, reward management and reward practices, the
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better it is. In order to make informed decisions knowledge is definitely of paramount
importance; specialized websites, journals and books can, hence, reveal to be absolutely
beneficial, as well as the production of an assessment report. Before doing so, the
project team should review the data gathered and ascertain their comprehensiveness. In
case further investigation should be considered appropriate, for instance by means of
additional employee interviews, it should be carried out accordingly (Heneman, 2007).
The first phase can, at this point, be concluded with the identification of a “compensation
philosophy statement”, which should be put at the basis of the future reward strategy.
This statement should help employers to identify: the values and behaviour that should
be rewarded within the business, the types of reward which would work better in order
to achieve this objective, how the total reward system would actually be funded and all
of the other questions concerning communication, unions participations in designing total
reward practices, if any, and so forth (Heneman, 2007).
Define total rewards components
Now that the project team has gained a thorough knowledge of employee wants and has
prepared a compensation philosophy statement, it is time to identify the components of
the total reward system which have to be offered to the business staff. If the previous
phases of the project have carefully and thoroughly been carried out, this stage should
not reveal to be particularly problematic.
In order to include all of the relevant elements and avoid missing some of them, using
an empty traditional four-quadrant diagram and bit by bit filling it might probably help.
Of course, amongst the components of the total reward system equal attention to pay,
benefits, personal growth and the working context has to be paid.
The challenge at this stage is mainly represented by linking employee wants and
expectations in terms of employer proposition and employer aims and requirements
about individuals’ behaviour. Furthermore, whilst some relational components of reward
such as, for instance, learning and work-life balance are more easily identifiable and,
hence, manageable by employers, some others, namely those related to the work
context, such as corporate culture, are subject to change over time and have more
widespread implications, so that actions and activities aiming to eventually achieve
quick-win/quick-fix results can, in such cases, clearly turn to be more difficult to plan
and implement (Armstrong, 2010).
The same necessity of balancing individual and organization needs arises when it is time
to identify the relational components of reward. Whether elements such as career
development and training, for instance, represent clear forms of reward for employees,
who clearly perceive their worthiness, the benefit of these types of rewards might appear
less obvious to employers (Heneman, 2007). For organizations the circumstance an
employee might gain additional skills will be perceived as valuable only whether these
would enable employers to gain new abilities which competitors cannot imitate and
reproduce. It is, indeed, the existence of such circumstance which will actually enable a
business to gain competitive edge (Barney and Write, 1998). In order to meet
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businesses’ and individuals’ needs and expectations employers should, therefore,
essentially offer individuals opportunities for growth that these value but that, at the
same time, help organizations to attain their intended aims and objectives (Henaman,
2009).
Top and line management support
The role of top managers in supporting the introduction of a total reward system, as well
as of any other new initiative within an organization, is absolutely crucial. In order to
ensure that the new system is accepted by all of the organizations staff, top managers
have to clearly and visibly back and foster the initiative. On doing so, as averred by
Heneman (2007), they need to consider that “action speaks louder than words”, so that
their support has to be convincing and their actions coherent with their words. In such
circumstances, therefore, managers cannot really afford to talk the talk but do not
walking the walk.
For the successful introduction of a total reward system employers also need the support
and efforts of the overall organization management, top and line managers as well. Line
managers are typically those who spend most of their time with employees, those who
better and genuinely know individuals, those who on a regular basis speak with them
and build interpersonal relationships, so that employees know and trust them. As such,
line managers definitely represent important and precious employers’ allies and partners
in strategy and policy execution. Their full and genuine support and cooperation for the
successful implementation of a total reward system can definitely be considered as a
mandatory prerequisite (Longo, 2011b). This consequently entails that whether line
managers do not consider the new total reward system valuable and adequate they
could at best pay lip service to its implementation and at worst completely ignore its
importance. Employers have to do whatever they can to avoid that any of these
circumstances could ever occur. That is why organizations’ managers have to be
involved, since the very beginning, in the process, because this is the most effective and
practical way for them feeling that the new total reward system is actually fruit of their
work and activities too.
Inasmuch as line managers involvement is of pivotal importance for the successful
introduction of a new total reward system, it is crucially important their broad and deep
knowledge of the system, of its mechanism and of the way it actually needs to be
operated. Line managers cannot really improvise and get along in such a delicate
circumstance without the appropriate knowledge and skills. Employers have to
consequently take extra care with line managers training in order to avoid jeopardising
the attainment of the intended results (Longo, 2011b). Training sessions have to be
provided before the introductory phase of the system, managers need to be ready to
answer questions and support the programme before it is formally introduced to the
workforce.
Formal introduction and execution of total reward systems
Once the system has been fully designed, the project team has decided the components
which fit the organization and full support from the organization management has been
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secured, there is still a paramount activity which needs to be carried out, namely the
launch of a communication campaign aiming to explain to the entire workforce the
reasons for the introduction of the new programme.
More in particular, the mechanism of the programme and how employees will benefit
from it need to clearly and thoroughly be communicated having recourse to all of the
possible communications means which are usually used within the business, such as
posters, brochures, intranet and if possible a specific website where individuals can also
post questions to which answers need to be provided as quickly as possible.
Findings of a research carried out over thirteen different organizations across the U.S.,
gathering responses from 13,000 individuals, revealed that on the one hand the more
staff know about reward systems the more satisfied and, hence, engaged they are; on
the other hand, the investigation also revealed that by and large employees know little
or nothing about the reward systems put in place by their employer (Heneman, R. L.,
Mulvey, P. M. and LeBlanc, P. V., 2002).
Another relevant matter which employers should duly consider before the introduction of
a total reward system, especially during grim economic periods, is determining how the
system will be funded. It is widely recognized that the personnel budget represents the
most relevant cost organizations actually have to face and the impact of a total reward
system introduction could be quite remarkable.
Whereas some considerable savings can be achieved for the introduction of flexible
benefits by means of a wise and savvy application of fiscal laws; in order to fund an
overall system, employers definitely need to go further afield.
Heneman (2007) suggests, amongst the most effective ways of funding a total reward
system: overtime, seniority and merit pay reduction and a progressive and slow
headcount reduction. Whatever the means identified, what really matters the most is not
let feel employees that the introduction of the new scheme is intended to cheat them,
that is, that you are giving on the one hand something that you have taken from the
other hand, basically offering them nothing more than previously offered.
Before officially launching the communication campaign, an important activity relating to
the unions involvement needs to be carried out. In order to have their full support,
employers should try to involve trade unions representatives as early as possible in the
total reward programme development. Furthermore, having unions’ officials contributed
to the new scheme, they should feel truly committed to it (Heneman, 2007).
Multinationals and big corporations having branches in several countries across the world
should also careful take into consideration cultural diversity. Introducing exactly the
same programme in different countries would entail the conviction that the one-size-fits-
all approach could work, whereas obviously it does not. To avoid jeopardising the
successful launch of the system, firms deciding to design and develop programmes in
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their headquarters should afterwards adapt the pilot scheme to the different countries
accordingly (Heneman, 2007).
Total reward schemes execution
The system is now ready to be introduced and executed within the organization.
According to the circumstances, rather than deciding to suddenly change the overall
reward system, employers could decide to progressively implement the new scheme. In
terms of change management, it could be said that instead of a transformational, big
bang approach to total reward an incremental approach could sometimes be considered
preferable. The final aim is to gain employee trust by means of quick-win, win-win
initiatives. Gradual change should concern both financial and non-financial initiatives, for
instance the introduction of flexible benefits if these were not previously offered and the
introduction or improvement of work-life balance policies (Armstrong, 2010). The
combined introduction, albeit progressive, of both financial and non-financial form of
rewards wi