Main Components Of Reward Strategy

Published Date: 02 Nov 2017

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Introduction

Human resource management is an integral part of the organisation management. It is the key to the employee management. There are several human resource management practices that the most of the companies use to manage its workforce successfully. Today Human resource management is not playing as an operational and supporting function but it is playing as a strategic function which is related to the business strategy of the organisation. This assignment discusses the concepts/approaches with related to the human resource management, the reward strategy, integration between organisation’ s corporate strategy and its HR strategy, learning organisation, employee relation’s views, reward management, performance management systems, competency based approaches in human resource management, employee engagement, employee involvement, man power planning, human resource planning and action. It also discusses the in depth details relevant to the questions and given the real life examples as demanded by the questions.

Section A

Best fit and Best Approach

According to Armstrong (2006: p. 135) it is believed that the any organisation would perform highly by implementing the set of best human resource management practices. The figure 01 shows what the best HR practices are according to some sources and persons. According to the each person, they have mentioned to have successful human resource management in your organisation, it is necessary to practice the best HR practices in your organisation. Although best approaches suggested by people mentioned in the figure 01, many of the academic commentators argue that the possibility of being successful by using these practices.

The best fit approach suggested that every organisation is different to each other, therefore if an organisation needs to achieve the HR goals of the organisation, it has to develop HR practices which are suitable for its working environment such as the values, beliefs, culture and expectations of the organisation and people. According to the book of Collings and Wood (2009: p. 45), based on the research tested based on the best fit and best practice approaches, it is found that the best practice is stronger than best fit. It also argues that the deficiency in researching in best fit approaches supported such a result. Most of the organisations today are trying to use the unique practices as applicable to their oragnisation since the dependency nature of human resource management. Therefore difference in the industry, sector, culture affects its practices.

Figure 01: Best HR practices according to best practice approach

Source: Armstrong, 2006

Main components of reward strategy

There are well defined goals and these goals are clearly integrated with business objectives.

According to the book of Armstrong (2010: p. 85) There should be a well defined reward/pay programmes which has determined in a way to satisfy the needs of the organisation, also they are consistent and integrated with other HR functions.

The reward strategy has the financial rewards, non financial rewards, pay structures and grades

The rewards strategic value the jobs through market pricing and job evaluation

‘Pluralist’ and ‘Unitarist’ view of employment relations

In Unitarist perspective, the organisation is considered as a team where the employees and management are focusing on a common purpose and creating mutual cooperation. This approach expects the loyalty from employees towards the organisation. It is believed that there is no necessity of trade unions, since harmonious environment is maintained. As mentioned by Dzimbiri (2008: p. 03), in pluralism, the organisation recognise as they comprise of contradictory sub groups who have power which comes from legitimate loyalty and these subgroups are driven by leaders and set of objectives. Because of opposing interests, there are likely occurring conflicts between subgroups. The management and trade unions can be identified as main sub groups. Trade unions are perceived as the legitimate representatives of organisation’s employees. Conflicts are being resolved through collective bargaining for an organisational improvement and for positive change.

Features of Lawler’s model

There are 03 components that should have in reward system. According to the book of Adrian (2000: p. 194) following are the components as per Lawler (1990).

Organisation’s core value

Structural issues and

Process features

Organisation’s core reward values are the principles that based on the reward strategy determined. Structural features consist of the related administrative policies and strategic features such as profit related pay or performance related pay. The third feature refers to whether the employees are fully aware about how the pay strategy is operating and to what degree the employees are participating in to designing and implementation of the strategy. It is believed that the reward strategy should be consistent over the period. Also the employees are informed properly how functioning the pay strategy, which could motivate employees and deliver the desired outcome.

Main features of learning organisation

Flat organisational structure - According to Robins et. Al (2009: p. 495) the there should not have lengthy hierarchical structures, although the size of the company is large, the climate of the company should be smaller. So that the employees able to share their knowledge with each other.

Team work – As a team it is easy to learn new things. When you work in a team you will be able to learn by experiment and mistakes of other members and it helps to create impact of what you learnt.

Innovation and change – when the organisation turns to a learning organisation, the innovative ideas come out and by implementing them successfully the positive change can be seen, as well as the processes would be cost effective and less time consuming.

Blame free culture – As per John (2009: p. 93), this kind of culture encourage the employees to experiment new things and learn new things. Also the mistaken are treated as the opportunity to learn something rather than criticising the actions of an employee. There should be a strong commitment from top level management towards learning and encourage employees to learn new things and reward for innovations

Job satisfaction and commitment – when the employees get the opportunities to learn and improve within the organisation, they will be motivated and work hard for the company. The loyalty and commitment will be increased towards the company.

It is a fact that, if the employees are developing, they will drive the organisational development. Therefore strategic human resource development is essential for the growth and for a better change of the company. Human resource development upgrades the skills, ability and competencies of the employees. Grieves (2003: p. 08) Mentioned that the learning perspective of the organisation has influenced to the personal development and management development. This influence encourages the organisation to adapt new strategies and management practices to sustain in the competitive business environment.

Recruitment and Selection

If the recruitment and selection go wrong, then the performance of the staff will be not up to expectation level. Through recruitment and selection organisation chooses the most appropriate skilled and talented employee who can drive organisation for the betterment with the right attitude by performing excellent way. If a wrong employee is hired then future growth of the company, HR goals, corporate goals cannot be achieved. Therefore every organisation has a systematic, carefully planned recruitment and selection process. For an example if an organization advertises its vacancies, they will not get an appropriate pool, although the pool is appropriate, if the selection process is planned in a way to examine candidate properly based on the organisation’s requirements, at least most appropriate candidate cannot be selected. (Rothwell and Kazanas, 2003: p. 333-334)

Human resource planning relates to Human Resource strategy

Human resource planning is the essential part of the human resource strategy. As per Deb (2006) human resource planning is the start of the of the Human resource strategy. As determined the HR goals through the HR strategy. The current demand and supply of the demand should be forecasted. If the available human resources within the organisation are not sufficient, it is necessary to acquire suitable employees from the labour market. If HR planning is not well prepared, it affects adversely to the achievement of the HR strategy. For an example, if there is a shortage of a plan, then the work load of other employees will increase. As a result of it, employees will be unsatisfied and cannot be achieved the expected performance.

Human resource planning and Manpower planning

Human resource planning refers to the process which forecast the human resource needs of the company due to arise of the business strategy and it also plans the skills and competencies required with the need of total number of employees. As mentioned by Deb (2006: p. 75) the forecasting the demand and supply of requirement of labour is the manpower planning. Human resource planning expects the increase of the quality in acquiring new employees. Manpower planning expects to fulfil the employees with the same quality of skill. Human resource planning emphasises on human resource commitment, development and its creativity. Manpower planning emphasises controlling, matching demand and supply and forecasting. Human resource planning is more flexible and response quickly to the changes of the organisation.

Relationship between corporate strategy and HR strategy

According to Hill and Jones (2009: p. 285) corporate strategy decide in which industry/sector that the company operate in, what are the companies that compete with, the value creation activities company performs, how the company enter or leave the industry by achieving long run profit maximisation. These factors are determined by the corporate strategy. HR strategies are decided by considering the corporate strategies. For an example based on the industry and HR strategies are determined, the starting pay is decided through what sector operates in. It is required to keep good industrial relations, if the competitive organisation follows the same. Therefore corporate strategy guides, how the HR strategy shape in to give the maximum results to the organisation in achieving goals.

HR strategies of multinational corporations

Figure 02: Model of strategic HRM in Multinational enterprises

Source: Dowling et. Al, 2008

Multinational companies are operating in different industries and different environments, therefor the HR practices need to be practiced as not exactly similar to one country to another. But the main values and norms of the company should be same and comply with them. Since the values of a company comes from the corporate strategy of the company. Most of the companies change their business strategy when operating in an international market. For an example, Mc Donald does not promote beef burgers in India, since it negatively affect to the Hindu belief. Likewise organisation has to change its strategic human resource practices based on the business strategy. According to Dowling et. Al (2008) figure 01 has shown the integration of strategic human resource management

Harzing and Ruysseveldt (2004) mentioned that the internal organisational factors such as multinational companies’ structure, organisational networks, mechanism of coordination, mode of operation, experience in handling international business, its corporate level strategy, its business level strategy as well as the external environmental factors such as industry characteristics, country regional characteristics (such as the European Union policies in Europe countries), inter organisational network with other authorities and Multinational goals and values affect designing strategic HR functions. Also according to a research, it is found that companies like P&G, Unilever corporate HR department using a centralised approach and a company like Siemens is trying to change the policies adapting to the local setting.

Mechanisms of employee involvement and employee engagement

Employee engagement and involvement is the new concept which comes out to in recent history. The employee engagement is the employees’ genuine willingness and actions to contribute towards the organisation’s success. Employees without any influence are trying to add value to the organisation and its process. Engaged employees are satisfied with the work environment they work and with the job. Therefore most of the organisations intend to generate an engaged employee. According to the annual report of the Vodafone (2013), it indicated that the open, consistent and regular communication is the basic to the high levels of employee engagement. Therefore most of the companies have been practicing the open door policy where the employee has the freedom to talk to immediate superior whenever they want. It is proven that two way communication is also a key factor of employee engagement.

These two concepts promote the healthy relationship between employer and employee. In modern HR practitioners accept the fact that the active participation of employees towards decision making process is important. According to the website information of British Airways (2013), they have started a programme called speak up to enhance the involvement of employees, where employees can give their opinions, ideas, views on different topics. Also British airways shared the opinion survey results with employees and requested to submit an action plan for critical areas. In this way employees are supporting to change the organisation for betterment. It recognises their valued contribution and willing to work for a positive change.

Section B

Reward management is problematic for SHRM

The reward is a crucial factor in Human Resource Management. All of the employees work for organsation expecting a pay for their work. Therefore when managing rewards, organisation always need to examine time to time whether the reward are determined to give is fair, equal and consistent when compared to the contributed values of an employee. According to Armstrong and Murlis (2007: p. 03) The purpose of forming reward structure, policies is to support the organisation to achieve its goals and objectives. Also it is difficult since it is integrated with all other functions as well as with business strategy.

Although a company sets a reward structure, it will not encourage the performance of employees. It should be attractive and has the ability to motivate employees. As Maslow’s hierarchical need the pay is a basic need, if it would not be satisfied by the employer, employees will not be retained in the organisation. Also the inequality, inconsistent of pay, would harm the employee relationships. According to Armstrong (2002: p. 20) in managing reward, the organisational culture plays an important role. The values of the organisation encourage the desired behaviour of the employees. Therefore in many organisations rewards and recognition are given to employees who stand for the value of the organistion exceptionally, such as an example of value words in Tesco.

Connecting many functions to reward management, makes complex process. Also having the ability to create or destroy the quality HR factors such as loyalty, employee engagement, employee involvement, managing rewards seems very challenging to an organisation. The reward management practices should adhere to the minimum level labour laws of a country. As mentioned by Armstrong and Cummins (2011) reward management process changes and it is more reactive than proactive. For an example, in the construction industry, if your competitor increases the basic pay of an engineer, to retain and attract engineers to your company, you should increase the basic pay. Pay is a sensitive factor, it influences the behaviour of employees, and therefore every company should be alert what is going on in their internal and external environments.

Integrate reward management into the HRM strategy

An organisation requires linking the reward management and Human resources strategy to get the best benefits. HR strategy is developed from the business strategy. The HR goals are determined by considering the goal of the business. For an example if the business purpose to enhance its production by 30% through expansion and requires 200 more employees and overtime hours, then HR strategies are formulated to fulfil the HR goals. In developing HR strategy pay management plays a vital role. Every employee works to get a reward such as bonus, increment or incentive.

The reward management can be integrated to HR strategy through recruitment and selection and performance evaluation. Especially when recruiting an employee the pay is determined by considering the job evaluation and grade structures. There is a connection with HR strategy and reward management. Further the performance of every employee is measured and rate the performance as excellent, very good, average, poor and very poor. Based on the results of the performance evaluation the total rewards are given. As per Armstrong (2002: p. 32) total reward it what employees really value by accomplishing. It can be monetary or non monetary as learning and improvement opportunity or work experience.

Performance Management Systems

First it needs to identify what kind of performance is required by the organisational goals. Since the HR strategy is derived from business strategy. The performance goals also determined through the business goals. Therefore the desired performance should be identified the top level management. Performance goals are the key to guiding employees to achieve ultimate business goals. According to Lawler (2010) the performance appraisal system should encourage employees to gain skills and talents, so that they deliver their excellence performance. It is necessary that the performance appraisal system motivate the employees. Although the organisation has the best talented employees, they will not perform if they are not motivated. It needs to provide information for other HR functions.

According to Werner and DeSimone (2009: p. 337) the involvement of the top management is essential. Performance goals need to be determined from the bottom and the head of the company should assess the performance of his direct reporters. The senior management level should actively participate in the performance management system by being an example for their subordinates. The HR department should not only implement the performance appraisal system. It is owned by the entire organisation. To have an effective performance appraisal system, it is required that each department implements it actively. The job description should link to the performance evaluation is also important. Job description is the official document which communicates employees about their role. The performance goals derived through the duties and responsibilities performed by an employee.

The business strategy should guide to make the relevant performance goals which align with the overall strategy of the organisation. The achievement of goals set should be measurable. The goals set should be attainable and the reward should be worth enough. Then the employees really attempt to enhance the performance to achieve goals. The performance management system should set the talent development goals, therefore employees motivate to develop their team and individual skills and competencies. The skills and competent employees are a value to an organisation. Rate the employee based on the achievement of performance goals. According to Werner and DeSimone (2009: p. 337), it is necessary to train the evaluators to execute an effective appraisal. The managers should have the ability to convey the negative feedback in a constructive way and evaluate performance without biases.

According to Lawler (2010) it is important to link rewards to the performance evaluation , as well as discussed about the development activities. Development of an employee supports them to achieve the future goals. Rewards are the motivators for employees for the accomplishment of the goals. Also the appraising of the evaluator by giving feedback how they appraise the performance well and by rewarding will motivate managers to do it more effectively in the future. It is good to discuss the performance of the employee face to face, first let them go through the performance evaluation sheet and let the employee to raise the questions. It lets them to correct any issues have in the mind regarding the ratings.

The nature of the link to SHRM thinking

The Strategic Human Resource Management comes to the applications due to the competitiveness in the organisation. Strategic management is a broad concept which is practicing successful most of organisations operating current businesses. According to Sullivan (2008: p. 08), being strategic is impacted to a business problem. Human resource Management, it is required to think strategically, act strategically to achieve goals and enhance the business performance. Most of the companies act strategically to manage its workforce and to get the expected performance of the employees. For an example IBM, HR professionals have shaped the way of communication using the technology which make a significant impact, since the IBM HR professional all over the world are able to convey their ideas through meetings. Therefore it enhances the ability to implement the decided innovative HR practices in IBM all over the world.

Role of the competency based approaches

Competency based approaches are new ways of managing Human resource functions and processes. Competency based management in HR is the process that enables organisation to compare the capacity of human resources available currently in the organistion based on their possessing competencies, with the requirement of competencies achieving the strategic business goals of the organisation in the future. There are several competencies based approaches that organisations are following as competency based recruitment, competency based learning, competency based career development, competency based training, competency based performance management and etc. According to Shermon (2004) The competency based approaches became significant since the jobs are more focused knowledge and service focused. The competencies determine the value that employees can give to the organisation

The skills, knowledge, capabilities and learning of employees become a competitive asset and it enhances the competing ability of an organisation. Therefore most of the organisation uses the competency based HR application by identifying its future skill requirement. Organisation focus to start the competent candidate and selecting them using competency based selection processes. According to Cooper (2000: p. 11) that the competency based Human resource management applications reduce the skill gap, support to increase the performance, increasing the employee competency level as per a research. The competency based approaches shape and guides the behaviours of the employees from the recruitment to retire. According to Kessler (2009: p. 280) the competency based performance reviews are more effecting and to coach employees to emphasis the competencies required by the organisation. These performance management systems are used by IBM, Coca Cola, American express, Johnson and Johnson and etc.

Competency based recruitment and selection

Web site information on Microsoft (2013) stated that it uses the competency based recruitment aiming to examine whether the applied candidates possess the particular skills that is importantly require for the job applied for. This recruitment process comprises of telephone interviews, online aptitude tests, assessment centres and interviews which expect to know more about the experience and how you manage certain situations. The behaviour of an employee in a given situation will be assessed. Theis approach will minimise the halo effect, stereotyping, inconsistencies, primary and recency effect, effect of first impression. Also it confirms the consistency of hiring decisions and more focused on acquisition of the right talent. This recruitment approach promotes the objectivity over subjectivity.

The behavioural interviewing plays a significant in selections. Behaviours such as customer management, adaptability, ability to work under pressure, team working abilities and etc are assessed. Interviewers have to rate each candidate and justify their ratings with a note. Therefore it has lack of room for subjectivity. Also there are possibilities to rehearse the similar situation question by a candidate to perform well in the interview. As per the article of Stripe (2013) regarding the strength based approach in recruiting which practicing in Nestle. They test strengths over competencies, because they believe that a person enjoy doing what he is good at doing. It makes them satisfied.

Main features of performance management system

There are several features of performance management system as follows:

The emphasis on evaluation of the performance with the development of the employees through one process

The ability to generate data for strategy formulation is a characteristic of performance management system reference to Deb (2006: p. 206)

The performance management system is integrated with other Human resources functions.

According to Armstrong and Baron (2005: p. 47) that most of the commentators argue that the performance appraisal fail to achieve the intended objective. In the book of them, they mentioned what are the failures of performance evaluation noted by the writers as follows;

The successful implementation of performance management can not be accomplished if the line managers don't support. They should see the importance of it.

This process is complex since an appraiser attempts to review one person’s performance, also it requires clearly the social and psychological skills which is not sufficiently developed by the managers who are doing it.

This also happens due to the poor design and implementation of the performance evaluation.

The lack of unitary framework of the process and the conflicting interests of different parties.

Management do not support the development of the process.

Armstrong and Baron (2005) also stated that the performance evaluation process is focusing more on financial rewards. It is also inconsistent and subjective processes. The subjectivity ruins the effectiveness of the process.

This process lets down the managers and employees since its harsh and coercive control

Developing a strategy to accommodate the ‘employee voice’

Most of the organisation in todays business world is willing to get to know the opinion of the employees. Therefore every year they spend money for the anonymous surveys know what employees actually they think about the organisation and its growth. It also requires knowing whether the employees are satisfied working in the company. Gennard and Judge (2005) stated that it requires having an open culture where the employee has the freedom to tell work related or non related things to the immediate superior. Trust and respect are the two factors that encourage the effective implementation of the open door policy. The managers are willing to give their time and actively listen to the ideas in a constructive manner.

The Vodafone (2013) and many of the organisations have implemented the intranet which facilitates employees within the organisation to communicate with each other easily. Some of the company publishes a quarterly newsletter which helps the organisation to convey about its growth and newly started up projects. Establishing quality circles are also a good option in increasing employee voice in the work place where employees have the opportunity to express their views to quality related problems. The best possible, effective solution will be implemented in the working process. Quality circles promote the sharing of the working knowledge to overcome the existing problems as a team.

Conclusion

This assignment discusses the perspectives and functions of Human resource management which are relevant to business organisation. Managing Human resource is a challenging, therefore organisation has to find out the most appropriate Human resource functions to apply into the organisation. Human Resource Strategy has derived from the corporate level and by business strategy. It directs, how the HR management should be be planned to achieve the goals and objectives of the organisation. The integration of the HR function it is recommended to integrate all the HR functions since there benefited to the organisation. Also business organisation needs to improve its employee relation by generating committed, loyal and motivated employees. The effective communication in the workplace facilitates the active engagement and involvement of the employees. It also recommended to implement performance related reward management system which is the key to retain high performers in the organisation. High performers are able to lead the organisation to the next level.