Explanatory Model on the Factors That Affect the Adoption of Total Reward Practice

Subject: Organizational Management
Pages: 7
Words: 2767
Reading time:
11 min
Study level: Undergraduate

Introduction

There are factors that have to be considered in adoption of a total reward strategy to compensate employees of an organization. They include the factors that are conducive and the factors that prevent the application of total reward management. Organizations need to know which factors exist and are dominant or if there is an interdependence of both the conducive and preventive factors so that they can asses if a total reward practice can be applicable and efficiently adopted in their organization.

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An explanatory model of the factors to consider when adopting a total reward strategy in an organization is a useful description and explanation of how these factors relate to one another, how these factors operate, the significance of these factors in an organization’s total reward process and to see which factor is most important to the success or failure of total reward management in an organization. An explanatory model needs to fit well enough to a sufficient portion of the observation and theoretical knowledge about the factors that prevent and the factors that are conducive to the application of total reward practice, so that it forms a useful tool in making a decision or choice on how they relate to an organization’s total reward practice.

Effective Communication

Communicating the reward information which includes; organization’s salary policy, methods of job grading regarding rewards, method of Salary progression and potential for higher pay and the organizations benefit schemes is the most important for an organization that has identified total reward management as a management strategy for improving the organization’s overall performance (Lyons & Ben-Ora 2002, p.35). The time of communication is also very important. The information should be communicated to every employee at the time of employment so that they become aware of the advantages that come with their excellent performance in the organization. Any reviews and changes that are made during any meeting by the board of directors regarding their salary schemes and their benefits should be communicated to them as soon as the changes are approved. The best channel of communication for this information is through face to face where the managers hold a meeting with all the employees or a one-on-one meeting with particular employees who are affected. Face to face communication with employees makes them feel that the management has their interest at heart and acknowledges their value in the organization.

They are made to understand the pay structure for every level that they can achieve in case they perform satisfactorily to merit appraisals. They are also made to understand other benefits that come with outstanding performance as well as the organization’s pension scheme. Thus employees are motivated to work harder and to maximize their talents and skills in their job performances. They are able to appreciate the efforts that the organization is putting in place to achieve its objectives and mission and they are able to focus their efforts to help the organization realise its objectives and mission (Azasu 2008, p.5). Employees are also able to understand the organization’s transparency in terms of their salaries and benefits and this would limit their complaints over biasness over salary and benefits distributions (Vroom 1994, p. 43). Effective leadership would enhance the communication of the total reward management strategy.

Employee Empowerment

The most effective employee empowerment strategy entails improving their capacity to perform better in their areas of job operations by improving their skills and developing their talents and thus giving them a chance for carrier growth. This would make them more efficient and effective in meeting the expectations of the total reward management strategy (Armstrong 2006, p.560). It also includes involving them in decision making within their departments and in the organization. Incorporating the views of employees in the management and in decision-making makes them feel appreciated and valued by the organization and are therefore motivated to dedicate all their efforts and skills to enable the organization achieve its goals and objectives. Employee empowerment also involves giving them a chance to discuss the goals of the company and reward schemes that they would best prefer and as such they are more motivated to work towards achieving goals which they have helped set. The rewards are also made to be more employee-oriented. Employee empowerment also contributes to their job satisfaction and is highly associated with good leadership in the organization (Armstrong 2006, p. 808). Good leadership and management in an organization help enhance excellent management of the workforce (Armstrong & Murlis 2004, p.4).

Effective Leadership

The managers, departmental leaders and supervisors have a greater role in ensuring the successful implementation of the reward scheme decided upon by the organization (Armstrong 2006, p.660). Monitoring the progress of the reward strategy is the most important in providing effective leadership in total reward management. The management and the leadership should carry out continuous monitoring of employees performance and progress so as to provide them with the necessary support and to clarify operational benchmarks for ensuring quality in their job performance which are evaluated in the reward scheme. During the monitoring process the management is able to realise employees’ skills which need to be developed to achieve efficiency and maximum production and therefore review their training and development scheme for the employees. Thus effective leadership also gives employees the opportunity for carrier development and hence empowering them. Managing the success of the reward system is also very important. The leadership should put in place benchmarks for evaluating employees’ performance both at individual level and at group level. This should be communicated to all the employees affected by the reward scheme so as to ensure fairness in its application. Effective leadership would therefore help in aligning employees’ skills and job performance to achieve the organization’s objectives (Armstrong 2006, p.656). The management has to provide leadership that empowers employees to decide on the kinds of rewards that they would prefer from the organization for their excellent performance (Tropman 2001, p.55).

Organisation Culture

Integrating reward plan with the organisations culture, values as well as aligning the reward plan to the business strategy is equally important when adopting a total reward strategy with respect to the organisations culture. This would help in aligning employee’s job performance and operations with those of the organisation. They become more committed to the organisation tasks since they understand what is expected of them by the management. Aligning the business strategy with total reward management ensures that employees understand the organisation’s mission, values and objectives. This enables the organisation to empower its employees through training and development to perfect their skills to meet the requirements of the total reward management put in place by the organisation and the goals of the organisation. Aligning the total reward management with the organisation culture helps in achieving the organisation’s mission and goals (Armstrong 2006 p.306).

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Available Technology Support

The level of technology in the organization can effectively help in modeling and adopting computer-assisted model reward scheme. Adoption of this technology is highly dependent on the management’s capacity to effectively apply this technology. Computer-assisted model reward scheme are supposed to be monitored by the management and therefore their ability to adopt the technology would make the implementation of the total reward management more efficient and more effective. However, this may not be possible if the organization does not have the capacity to embrace the technology. The management needs to communicate to employees the variables that the model uses in its statistical analysis (Cruz, Gomez-Mejia, Mayo & Pastor 2008, p.18). Thus they are made aware of the benchmarks put in place by the organization to determine their performance.

Employee Commitment

Effective achievement of the organisation task and good team work are equally important factors attributed to high level of commitment by employees; which is a factor that is conducive to the adoption of total reward management. Employee commitment in the organisation’s tasks can be monitored and evaluated by applying effective leadership which can also be supported by the available technology to monitor and present an analysis of each employee and group performance (Morris 2010, p.8). This implies that an employee’s personal job skills, individual contribution in the group and leadership skills have to be evaluated to determine employee’s commitment to the organisation tasks. These are used to determine the reward schemes and appraisals as well as to develop and improve the employee’s skills and talents. The variables evaluated by the organisation to determine employee commitment in the organisation tasks and in team work are communicated to employees before the implementation of the total reward management (Morris 2010, p.9).

Poor Reward Management

The use of uncompetitive pay and unequal reward policy for employees is an important factor that can prevent the application of total reward which are characteristics of poor reward management. Unequal use of reward policy to the workforce which is not based on any reason such as performance is very detrimental to the success of the reward system. When this occurs, the reward structure becomes illogical and unclear to employees and the reasons of the variation of the reward policies is caused by the use of uncompetitive pay as well as unequal reward policy. The employees would therefore feel less motivated to give their all towards the achievement of the organisation’s goals since they feel the management applies biasness and not merit in its pay structure and reward scheme. Use of unequal pay structure is an indication of lack of empowerment of employees and poor leadership in the organisation. Concentration on financial rewards is also a factor that can undermine the adoption of total reward based on poor management. This factor is caused by the failure by managers to address the issue of developing a total reward approach which combines financial and non-financial rewards, therefore depending on only financial rewards the only source of reward structure. This obviously is contradictory to the concept and principle of total reward management which includes the use of both financial and non-financial rewards.

Unfavourable Economic Environment

Depending on non-financial reward and a limited use of financial rewards are equally important factors which are caused by unfavourable economic climate when adopting total reward. Dependence on non-financial as a result of the organisations not being able to use financial reward benefits extensively during harsh economic situations and the use of non-financial reward is not likely to have its desired effects during economic hardship as employees prefer financial resources to cope with the situation. Financial constraints in an organisation result from the leadership’s inability to analytically evaluate and project the financial activities of the company. Unfavourable economic environment is also likely to limit the organisation’s ability to implement technology which can be used to monitor and evaluate employees’ performance so as gauge their qualification for rewards. It is also likely to limit the organisation’s capability to provide for employees empowerment in terms of training and development due to limited resources.

Explanatory model on the factors that affect the adoption of total reward management and their relationship

The most significant factor that is conducive to the application of total reward practice in an organization is effective communication (Armstrong 2006, 647). Total reward management strategies would only be effective if it is communicated effectively to the workforce. Such is done during the recruitment stage, after payment and benefits reviews by the board of directors or before the implementation process of the total reward management. The employees are therefore able to understand how the total reward strategy operates and therefore align their performance with the requirements of the total reward strategy. Effective communication is highly dependent on the leadership in the organization. Transparent and democratic leadership would give employees the opportunity to discuss their reward preference with the management. The management would also be able to communicate the benchmarks put in place and variables that would be analyzed to distribute the rewards to employees. They are also able to get the required feedback from employees about the total reward practice in use. However, poor communication is likely to limit the implementation of total reward management since the employees may not be able to understand the significance of some of the variables of the reward scheme (Tropman 2001, p.61).

Effective leadership of the workforce is also very important in the successful application of total reward strategy in an organisation. It ensures that all the employees are made to understand all the benchmarks put in place to evaluate their performance against the goals of the organisation (Kantor 2010, p.4). Effective leadership ensures motivation of the workforce by providing economic and non-economic rewards. Effective leadership and management of the human resource help in monitoring and carrying out analytical and non-analytical evaluation of the employees’ performance. It also helps boost employees’ morale through demonstration of willingness to co-operate with them in their job performances and therefore win their trust and confidence. Effective leadership ensures that the employees are given the guidelines of operations in accordance with the total reward management and the goals of the organisation (Morris 2010, p.9). It ensures that employees are listened to and their views are taken in designing and implementing the total reward management strategy. It ensures that the skills and talents of the workforce are developed and aligned with the goals and the business strategy of the organization. Effective leadership in total reward management is enhanced by effective communication and proper alignment of the total reward strategy with the organisation’s culture (Jiang, Xiao, Qi & Xiao 2009, p.180).

Aligning the total reward management strategy with the organisation culture is very important. It helps give direction to the organisation’s operations as all efforts are focused towards achieving the benchmarks of the total reward management which are line with the goals, values and the mission of the organisation (Manas & Graham 2002, p.39).

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According to Armstrong (2006, p.280), employee commitment and empowerment would be motivated by work-life balance policies in the organisation, the job design, the performance management of the organisation, training and development as well as carrier planning that is put in place within the organisation. It is strengthened through communication of the organisation’s values, mission and objectives as well as the management’s commitment to empowering the employees. Rewarding employees who demonstrate commitment to the organisation’s tasks would effectively motivate the workforce. However, the variables used to evaluate employee commitment should be communicated to all the employees to avoid claims of biasness in the application of the reward strategy (Tropman 2001, p.61).

The availability of technological support in an organization is an important factor but this factor is not as important as other factors. It provides unbiased and accurate monitoring and statistical evaluation of employees’ performances. However, it cannot replace human judgement. It simply provides an easy and efficient means of applying the evaluation criteria and values which have been incorporated by reward managers into the system on the basis of their own analysis and reasoning.

Financial constraint is a significant factor that prevents the application of total reward management in an organization. The financial strength of an organization will affect they type of reward elements that an organization can include in its total reward program. It is not usual for organizations that are financially stressed to use a lot of financial incentives and perks to form a total reward strategy because this can be too expensive especially if such organizations operate on a tight budget. The adoption of a total reward strategy may also be prevented by the cost to employ the required human intelligence to operate a successful total reward management program.

Another significant factor that prevents the application of total reward management is the economic environment. Although a poor economic environment does not occur frequently, it can have more effect to total reward management than cost constraint when it occurs because there is more financial strain and nonfinancial rewards are usually not effective as employees need money to cater for human and social needs.

Poor employee behavior such as low commitment, poor teamwork is the least significant factor that prevents the application of total reward practice in an organization. While this factor can prevent the application of total reward management, it can easily be dealt with by the organization. The organization can use disciplinary measures to rectify this factor. Therefore, poor employee behavior is the least factor that can prevent the application of total reward management.

Conclusion

The total reward management model reveals that effective communication strategy is the most important factor in the implementation of reward strategy in an organization. Therefore, integrating effective communication strategies in all the operations in an organization would help achieve total reward management and hence quality management and production in an organization.

Reference List

Armstrong, M., 2006, A hand book for human resource management practice, 10th ed. London: Kogan Page Limited. pp. 275-810

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Armstrong M. & Murlis, H. (2004), Reward management, 5th ed. London: Kogan Page. P.4

Azasu, S., 2008, Is there a link between total rewards and the performance of Swedish real estate firms? Working Paper No. 57. Stockholm: Royal Institute of Technology. pp 5-8.

Cruz, C., Gomez-Mejia, L., Mayo, M, & Pastor, L. C., 2008, Contextual factors and contingent reward leadership: Employer adoption of telecommunicating. Madrid: IE Business School. p.18

Jiang, Z., Xiao, Q., Qi, H., & Xiao, L., 2009,Total reward strategy: A human resources management strategy going with the trend of the times. International Journal of Business Management, 4(11). Beijing: Democracy and Construction publishing. p.180.

Kantor, R., 2010, Transforming total rewards. Chicago: Aon Hewitt. p.4

Lyons, F. H. & Ben-Ora, D., 2002, Total rewards strategy: The best foundation of pay for performance. Compensation & Benefits Review, Vol. 34, No. 2. London: Elsevier: pp. 34-40.

Manas, T. M., & Graham, M. D., 2002, Creating a total rewards strategy: a toolkit for designing business-based plans. New York: AMACOM Div American Mgmt Association. p. 39.

Morris, I., 2010, A total rewards overview. New York: Mercer Human Resource Consulting. pp. 8-9.

Tropman, J. E., 2001,The compensation solution: How to develop an employee-driven rewards system. University of Michigan Business School and management series. Boston: John Wiley and Sons. pp. 55-61.

Vroom, V. H. (1994). Work and motivation. San Francisco: Jossey-Bass. p.43.