Getting reward basics right

In today’s fast-paced and ever-changing business environment, I sometimes receive feedback that the work we do in rewards is ‘inflexible’, ‘too traditional’ and ’non-innovative’. It is valuable, therefore, to self-reflect and evaluate the truth in these statements and how to respond to them.

Long before Herzberg’s ‘total rewards’ made it to organograms as a department, and as far back as when ‘people and culture’ was ‘human resources’ or even ‘personnel administration’, working with employee remuneration was typically seen as ‘complicated’ and ‘too technical’ by the colleagues in the people department. Partly because of working with numbers and (typically simple) mathematical models and partly because of the requirements for legal compliance; there is an element of truth in that perception. I personally think, however, that this is also an overstatement, and maybe a myth that reward professionals enjoy keeping alive.

There are two things I tend to say to my team when it comes to the work we do in reward. The first thing is that “there is some good news and some bad news; the good news is that we can never be wrong, the bad news is that we can never be right either”. The mere fact that we work with numbers does not make our work an absolute science, there is a whole lot of grey between the black and white of any decision. The second thing is that “we have the same motto as LAPD; we are here to protect and to serve”. This balance is difficult and often becomes controversial, this is when reward professionals can be perceived as ‘inflexible’ and ‘traditional’.

Once a senior executive complained that I was being unfair to his team, in the context of a job evaluation exercise. My response was that I was not aiming for fairness (as this is a rather subjective notion) but consistency, so if I made a mistake, he should be certain that I made the same mistake for all others. Consistency is hard, especially in large organisations – it requires alignment, and alignment, in turn, requires clarity.

Get the basics in order

As with many other areas, it is hard to innovate if you don’t have the basics in place. For me, when it comes to reward, there are two fundamental pre-requisites for any good practice, even more for a progressive approach:

1. You need to know your organisation and how your company creates value for its customers. Reward is an extension of the company’s business and people strategy, so you need to know which are the key positions, the talent segments and how the company interacts internally.
2. You need to know your external reference market. Global, regional or local, defi ned as one or as many, it is important to understand the talent flows between your company and the external market. This is crucial as it forms the basis of any gap analysis, which in turn becomes responsive actions.

As cliché as it may sound, the above two points require reward professionals to understand and be able to bridge the gap to the business. It also requires a robust data foundation, but that is another sore point that most do not want to address as the work is cumbersome and rather ungrateful. Sadly, I don’t know many who got stars for data quality, despite this being the foundation of any meaningful analysis and decision-making process.

Are we done then?

So where does that leave us? Should reward professionals take comfort in doing the basics right and stop there? I don’t think so, and I don’t think we have a choice either; there are plenty of external challenges that inevitably lead us in reconsidering the way we have always done things.

• A much larger degree and wish for transparency.
• A much larger degree and wish for personalisation.
• A much larger degree and wish for fl exible working arrangements.
• A much larger degree and wish for timely rewards

Add to all above the focus on sustainability, the temporary labour imbalances and rising cost of living, and your plate is full with exciting challenges that require some innovative thinking. Innovation, however, is rarely a major breakthrough – as in most cases it comes with incremental modifications and improvements.

So maybe next time a colleague sends you a link about a company that democratised the annual salary review process by introducing peer-to-peer salary evaluation (typically a tech start-up with around five employees in the Bay Area), despite being tempted to ask them “and how exactly do you envision this done in a company of 200,000 employees?”, thank them and ask them “what problem do you think this might solve in our organisation?”

Listen to key industry leaders at the Payroll & Reward Conference this June, where they will explore the latest trends and challenges in the sector. Get your tickets here.