For Strategic Rewards, There Must First Be a Strategy...

"Strategic rewards" has long been a cherished buzz phrase in our profession.  In these times, rewards had better darn well be strategic, right?  Can't much afford them otherwise.

Too often, though, the buzz phrase is an empty one.  There isn't enough strategic thinking behind the rewards.  The truth of this can often be found in an organization's compensation philosophy, assuming they even have one.

After many years helping organizations develop (or confirm or test) their compensation philosophies, I have come to believe that the most important part of the exercise is articulating a specific set of compensation objectives.  By specific, I mean something beyond the standard "attract, motivate and reward employees" language we typically see.  These are, as one of my clients would say, lovely words, and certainly outcomes which most - if not all - organizations should aspire to.  They do not, however, signal what your reward program must do in order to drive your particular business strategy.  As such, they do not provide the necessary underpinning for strategic rewards.

If you don't know the two or three critical things that your pay programs must do in order to help your organization push its strategy forward, then you'd better figure it out soon.

It could be "push our employees to constantly develop and improve their capabilities, both on the job and off."

It could be "ensure that employees who embrace and deliberately live our defined values stay, and those who don't leave."

It could be "create an environment where decisions are made by first asking 'what is best for the whole Company?' rather than looking out solely for ourselves, our teams or our functional areas."

These are meant not to illustrate what is right - or what is right for you - but offered simply as conversation starters.  The point is that they provide clear, actionable reward design guidance. 

Without which I am hard pressed to see how rewards can be strategic.

Image: Creative Commons Photo "Mount Airy Arrow" by Zyada

 

Comments

[Darcy]

When I read some compensation philosophies it reminds me of the scene in Alice in Wonderland when Alice asks the Cheshire Cat which path she should take. He asks her where she's trying to go and she answers that she doesn't know. He then tells her that if she doesn't know where she's trying to go, it doesn't matter which path she takes.

We have to know what we want our rewards plans to accomplish before we put them in place. Excellent post.

[Ann Bares]

Darcy:

What a great analogy! Many of us have been privy to those "Alice in Wonderland" moments, haven't we? Thanks for the comment!

[Wally Bock]

Congratulations! This post was selected as one of the five best independent business blog posts of the week in my Three Star Leadership Midweek Review of the Business Blogs.

http://blog.threestarleadership.com/2009/04/08/4809-midweek-look-at-the-independent-business-blogs.aspx

Wally Bock

[Ann Bares]

Wally:

Thanks - always an honor to be featured in the Midweek Review. Readers, check out Wally's line-up this week - it's a great one!

[Judy Clark]

Ann - I appreciate your article and the examples you give of far better objectives or statements of strategy. I teach Compensation at the undergrad and grad level and talk often about not doing the "attract and retain" thing since it does nothing to distinguish you from any other organization. Much like the phrase "excellent benefits offered." If everyone says that and offers the same things, aren't they really "average" benefits? I will use your ideas to spark discussion with the students about the unique ways that compensation strategy can be articulated. Thanks so much!

[Ann Bares]

Judy:

Glad that you found the post helpful enough to share with your students!