How to Aligning Reward Strategy with HR Strategy?


It is never too much to point out the importance of HR strategy for the successful organization. Effective HR management is maximum utilization of capacity of work force within organization by appropriate allocating of employees and effective motivation for the all different types of employees. In order to do so, analysis of each employee’s nature, competence, stress endurance level and trait should prepare. What Are My Goals? It is important to know each employee’s character and motivation factor base on data base obtaining the daily working behavior of employees as well as their accomplishment from the macro perspective.

This kind of accurate, thorough and fair data base can be applying to the company’s redundancy management. Company can help employees to look for other jobs, which fit them better, by which company can have better productivity with same input resource. Which company can have the sustainable competitive advantage over the competitors.

The HR strategy is directly connected with the reward strategy as we have  through so far, employees’ motivation is heavily rely on the total reward strategy of organization, which should design not only by HR department but senior managers who are directly involve in the whole organizational strategy, by which the total HR strategy can implement, support and review consistently. Components of a Strategy Statement!

Regardless of eastern, western, ancient time or modern time, the importance of HR strategy is always appreciates. This is because, even if any given organization has the best infrastructure in many ways. They are manipulate by human and this cannot be replace any other system that are available so far. Therefore the right people for the right place base on the total reward strategy development map is more important than any other factors or than ever to maintain the long lasting successful organization.

Align your Reward and Business Strategy

So you’ve done a market study on compensation, and you are Peggy pretty much at where you want to be against the market. You’ve design a cutting edge Pay-for-Performance program and even have some exciting stock options for your top management. And of course, you know better than to ignore the millennial – you have a flexible salary structure, complete with gym memberships and other such benefits. All you need to do now is wait for the motivation to kick in and reap the benefits right? Then why is your business not growing every year as you had plan? Or perhaps your margins are shrinking with every passing year, while your employee costs keep rising due to the war for talent? The Types of Kotter’s Eight Steps Change Model.

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Why is your rewards strategy not delivering results? 

One critical aspect that companies tend to overlook is alignment of rewards with business strategy. Reward programs work, if they are strongly link to business objectives and the employees know what is expects of them in their jobs. Employees must see the connection between their own work and the overall goals of the company. But, how do you ensure that your rewards and business strategy are align?

Identifying measurable business goals: The first step towards bringing this alignment is by breaking down the company’s vision into clear measurable goals. Identify your goals for the next three years and think about how you will achieve those goals – identify the levers you must pull, to create value for your company.  Let’s say that lever is new products, then you must have metrics related to new product development on your company’s scorecard and also distributed across the scorecards of your CXOs – it could mean adding a new production line over the next three quarters, augmenting the R&D unit or hiring new technical specialists. This implies that you must add metrics to the scorecards of your Head of Production, Head of R&D and CHRO. 

Driving alignment through all levels in the organization: The next step would be to align the larger employee population to these company goals. Stop and consider what are you are currently rewarding for vs. what you should be rewarding for? If it is planning sustain growth that you are after, instead of small incremental year-on-year growth. Make sure your employees understand how you plan to make that shift. Employees need to understand what they should be doing differently. It’s most likely that you won’t grow faster by just working harder and putting in more hours. You will have to innovate, and create more value from the same resources at your disposal. Hence, the KPIs should reflect this change in your thinking and approach. 

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Equity in target setting: Given the business strategy and goals, what is the acceptable level of performance now that your goals have defined? This definition must be the same for everyone in the organization. All too often, different departments rate their people differently, depending on their own perceptions of acceptable performance. Another reason for this is the perceive difference in the achieve-ability of targets. Incorporating a structured, data-based system for setting targets starting from the top will go a long way to establish equity in target setting. Equity in targets is an important factor for maintaining. The optimum degree of stretch across, an organization and keeping everyone focused on the goals. 

Don’t underestimate the intangibles: Goals and metrics is only one aspect of executing a business strategy. Another equally important aspect is ‘employee will’ to execute the strategy. Reward has a key role to play in demonstrating an organization’s values, commitment to employees. The value it places on performance. The intangible, emotional part of rewards is far heavier than the tangible, monetary part. This is why it’s important to view rewards as Total Rewards rather than just a monetary pay-out at the end of the year. Total Rewards includes tangible rewards like basic salary, allowances, benefits, bonuses, stock options, retrials etc. Also intangible rewards like career development, work-life balance, safety and security, quality of work and an enabling environment.

Make sure that your intangible rewards speak the same language of performance and success as your tangible rewards. For example, if monetary rewards in your company are link to metrics that can achieve through innovation and collaboration. You cannot cultivate an environment that promotes bureaucracy and competition. You may need to make changes to your structure, systems. Processes in order to create an enabling environment. Perhaps reduce the number of layers in the organization to increase speed of decision making. Or create cross functional teams to encourage creativity and collaboration? 

Robustness of supporting environment and processes: Sometimes the factors that get in the way of alignment are the very processes that support and help deliver the reward strategy.

Some factors to watch out for are:

  1. The Performance Management System – Is it fair, transparent and objective?
  2. Organization Structure – Is it gear to deliver business strategy and performance?
  3. Role definitions – Do people know what is expects of them in their job?
  4. Behaviors – Are we encouraging the right behaviors needed to achieve our business goals?
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Top management Involvement: Creating alignment is hard work and demands a lot of time and attention from the top management. Some of the ways in which the top management can support.

The alignment process are:

  1. Communication: Reinforce the company’s business goals through on-going, public communication. This would ensure that all employees are aware of the future direction of the company. Be vocal about the reward strategy and how it links with business goals. Emphasize on the company’s commitment to high performance.
  2. Role modelling: Every leader in the organization must be a role model for behaviours desired for business success. They should demonstrate company values through their actions on a day to day basis.
  3. Drive the process: Aligning reward strategy with business strategy should not be seen as a purely ‘HR’ activity. It is critical for business success and should position in the same manner. The top management should drive the process with support from HR.
  4. Gatekeepers to the process: Top management must ensure that the process is followed as intended. They must appropriately and visibly address any deviations or exceptions to the process.

It goes without saying that the top management’s inputs are crucial for articulating the business strategy. Ensuring its buy-in and also serving as gatekeepers to the process. Moreover, the effort has to be a consistent one, till the time it becomes a part of the organization’s culture. What are Effects of Goal Orientation on Student Achievement?

Lastly, I would not recommend trying to fix everything all at once. Take the time to study the data, listen to your employees and then address the aspects that matter the most. Know where to start to get maximum impact.

Aligning Reward Strategy with HR Strategy - ilearnlot


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