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Development and implementation of an effective reward strategy lags behind human capital strategy in many organisations

Strategic reward ensures that reward practices support the delivery of the behaviour and performance needed by the organisation to achieve its strategic goals. While many organisations have made progress in adopting a more strategic approach to their human resources, it has not yet filtered through to the area of reward management. Keith Roxburgh and Dave Sorour share some of the key steps to follow in the development of an effective reward strategy.

by Keith Roxburgh and Dave Sorour

The fact that the world of work, globally, has changed dramatically in the last ten to fifteen years is well understood and documented. In the face of ever increasing global competition, organisations have had to seek new ways of leveraging value out of their human resources, driving individuals and teams to constantly higher levels of productivity and performance, and the achievement of strategically critical goals and outcomes.

These demands have resulted in new leadership approaches, organisational structures and people alignment processes within organisations. Increasing recognition is given to the need for an integrated approach to human capital management and for the strategic alignment between HR interventions and business goals. It is our contention, however, that while many organisations have made progress in adopting a more strategic approach to their human resources, this has not filtered through to the area of reward management.

The definition of the word “strategic” has been left to individual interpretation. While it is generally assumed that we all share the same understanding of the word, there are, in fact, the same number of interpretations as the number of people discussing the subject. Unfortunately, we often find organisations claiming to have strategic HR and strategic reward plans in place, yet these are no more than a reward procedure that handles “add on” elements considered strategic, such as whether to pay for “hot” skills, or a collection of best practices. 

There should be a logical link between the company’s strategic plan, its rolled down imperatives, and the HR or reward strategy that we create.  The following diagram illustrates the relationship:

Strategic reward ensures that reward practices support the delivery of the behaviours and performance needed by the organisation to achieve its strategic goals. It is about leveraging the reward system to support and drive the current and future human resource capabilities needed by the business in terms of its business strategy, and to support ongoing organisational change deemed critical for business success.

Strategic reward management, as a discipline, requires a systematic approach to the deciphering of business strategy, and the internal and external factors that impact the reward environment, leading to the development of a policy framework and the systems and processes needed to support this, that achieve a holistic and integrated reward solution for the business. The spectrum of what can be supported through rewarding the human element of the equation is shown in the above diagram.

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