Chartered Institute of Personnel and Development (CIPD) which is
Europe’s largest HR and development professional body defines
the concept of total reward thus : Total reward is the term that
has been adopted to describe a reward strategy that brings additional
components such as learning and development, together with aspects
of the working environment, into the benefits package. It goes beyond
standard remuneration by embracing the company culture, and is aimed
at giving all employees a voice in the operation, with the employer
in return receiving an engaged employee performance (1).
a not-for-profit organisation that provides education, conferences
and research on global human resources issues defines total rewards
as “all of the tools available to the employer that may be
used to attract, motivate and retain employees. Total rewards include
everything the employee perceives to be of value resulting from
the employment relationship.”
rewards has the potential to assist employers, in a very powerful
way, and help them align both their HR and business strategies.
If we consider all the tools available that we can use to attract
and retain, certain considerations come to mind.
no single element can be considered in isolation. Certain elements
may rank higher in terms of priority, such as pay, of course. However,
there are other elements, which contribute to a sense of fulfillment
for an employee and make the difference between whether an employee
stays or goes. In fact, how many of us have heard and read that
oftentimes, people leave because of their manager? This goes to
show how the entire employment experience needs to consider the
critical nature of some of the non-financial elements.
while there are many tools available and many options we can explore,
the most important thing to consider is whether we truly understand
our people. Our ability to understand what motivates them, what
they are really thinking about key issues, how they feel about certain
initiatives, how well they get along with peers, subordinates and
leaders and your assessment of all of this have a far-reaching impact
on how you approach total rewards.
Total rewards is, after all, an approach. It gives you a framework
to manage your compensation and benefits issues but it is reliant
on accurate assessment and analysis for it to work.
We recently spoke with Adam Sorensen, Global Remuneration Professional
(GRP), who leads the WorldatWork global rewards practice. Sorenses
serves as staff liaison to the WorldatWork Global Advisory Board,
which advises the association on issues related to the design, implementation
and management of total rewards programmes globally. The WorldatWork
in 2000, introduced a total rewards framework which was intended
to advance the concept and help practitioners approach rewards in
new ways. You can see the Model below.
TOTAL REWARDS MODEL. COURTESY : WORLDAT WORK
Sorensen spent some time with us, to outline key aspects of this
Model. Although it has been a decade since the Model was developed,
Sorensen says that the concept of the Model has not changed very
much. If anything, it was the application of the Model that tends
to change in response to the environment.
“If an organisation has adopted the Total Rewards Model,
then what you will find is that different elements come into
play and a number of things work together. To compare and contrast
the US and emerging markets in Asia, for example, you would
note that compensation in the US has been declining. You will
see that compensation has been less important and therefore,
organisations have been emphasising the other parts. However,
in Asia, growth has slowed but not necessarily declined and
therefore you see that compensation is really emphasised. In
short, it really is driven by what is happening around us,”
The Model itself focuses on three elements, namely, compensation,
benefits and the work experience. Sorensen explained at length
that one of the most important things to recognise about the
Model is the larger context.
a long time, people have talked about compensation and benefits.
But the way in which we conceptualise the Total Rewards Model is
to call out explicitly that it’s not a strategy in itself
- it really needs to exist as part of a larger framework. You need
to look at what the business is trying to achieve. You need to consider
what the organisational culture is and what values it is trying
to create. Thereafter, you need to look at what this represents
in relation to the HR strategy. All of these come together to help
an organisation to think of total rewards in a specific context.
You step back and see what you are trying to achieve and look for
the elements that will support your strategy and your HR plan,”
WorldatWork Model recognises that total rewards operate in the context
of the business strategy, the organisational strategy and the HR
strategy. How do these external influences impact on the Model as
such? Sorensen highlighted the fact that there has been much recognition
from HR practitioners that there is a lot of flexibility here.
taking a total rewards model approach, you can modify what you have.
I worked with a high tech company some time back and they were having
issues with retaining women in skilled technical positions. So,
one of the things they concentrated on was increasing diversity.
We developed a range of work-life strategies to attract these women.
If you leverage one of those pieces, it can go a long way towards
helping you,” Sorensen clarified.
Total Rewards Strategy leverages five elements to attract, motivate
and retain. These five elements are compensation, benefits, work-life,
performance and recognition and lastly, development and career opportunities.
WorldatWork regards these elements as the ‘toolkit’
from which an organisation chooses from.
are all five necessary? Could some of us say, choose to focus on
compensation and work-life while disregarding development to a larger
extent? We argued that some organisations do already implement rewards
in this way and perhaps compensate in one area for the non-inclusion
of another element. We asked Sorensen whether one element carries
more weight than another.
was candid. He pointed out that, while as an organisation they did
advocate the Total Rewards Model, they did spend more time on compensation
than on any other area. The reason he pointed out was that the majority
of their members are Compensation and Benefits practitioners.
that make compensation and benefits more important? Not necessarily.
The point Sorensen makes here is that organisations realise that,
at a baseline, one needs to have competitive compensation programmes.
The best work-life programme would not get you anywhere without
the compensation element being prioritised. As he puts it, “People
will stop working for you if you take away their pay.”
Our research into what practitioners were doing in the rewards sphere
led us to the UK. This year marks the ninth year the annual survey
of reward management was carried out in the UK. The survey was conducted
between August and October 2009. Based on replies from 729 organisations,
the survey found that just over a third of the respondents have
a reward strategy with a further three in ten planning to create
one this year. Interestingly, one in twelve respondents abandoned
their reward strategy and one in twenty ditched their total reward
survey also found that key reward issues for this year were :-
ensuring alignment with the business strategy;
ensuring reward is market competitive;
cost minimisation; and
ensuring that reward is internally fair.
Total Rewards encompasses a range of things within the employer-employee
relationship. We know that a paycheck, while important, is not in
itself the single most decisive factor. There are after all, many
reasons for why we do what we do. As Sorensen explained perfectly,
“In a sense then, total rewards is an attempt to recognise
these other reasons for why people go to work and how organisations
can leverage some of these other things to get people to perform
at their best”.