Total reward can create a deeper relationship between employer and employee, says Stephen Perkins
To embrace total reward is to adopt a fresh mindset for considering pay and benefits. Rather than reduction to a set of separate elements, total reward is premised on an open-systems approach to people management. The value proposition is greater than the sum of its parts, and that proposition includes specifying the contribution expected of employees.
Adopting a total reward approach is less about designing a pay and benefits package, and more about thinking through a dynamic exchange process in which both managers and employees are directly enjoined. In short, it is a social as well as economic interaction.
Managing total reward considers the employee-employer bargain in a more profound way than a labour-for-wages exchange. It enters the black box to respond to what diverse employees are seeking from employment, matched to their ability and willingness to release potential to help the employer achieve and sustain organisational effectiveness. As World at Work, a US membership organisation, puts it: employers that grasp the total reward idea understand that “productive employees create value for their organisations in return for tangible and intangible value that enriches their lives”.
Complementing tangible pay and benefits are the working environment, colleagues, supervisors and projects, offering scope to learn and grow. It may also involve corporate values and actions that employees identify as being consistent with their own world view.
Total reward does not necessarily involve offering higher explicit employment benefits overall. At Nationwide Building Society, staff can customise a total reward portfolio expressing preferences for some aspects while trading off other potential benefits. Bottom-line employment investment remains containable and transparent, while optimising the value to the employee’s ever-evolving circumstances.
Decision-making mechanisms about what to give and what to receive in return, matching individual and organisational circumstances and wants, provide the total reward conduit. For the employee, the very invitation to participate with their immediate supervisors and, by extension, corporate management in the continuous process of creating and sharing value is part of the total reward process. Managements show workers that they are valued – as complex, active beings, not passive resources.
In fulfilling their part of the bargain, employees may feel motivated to act as good corporate citizens who put the interests of the organisation and its sustainability beyond the immediate individual labour-wage transaction.
Total reward management does not stop at the substance of the deal, however. It also involves making an investment in enabling the process. Gillian Hibberd, president of the Public Sector People Managers’ Association, told participants at the Chartered Institute of Personnel and Development’s (CIPD) annual reward conference in 2010 that public services management needed to do more to celebrate the value of a public sector employment package – in particular, a final salary pension scheme. Kellogg’s was recognised in the 2009 CIPD people management awards for its ‘lunch and learn’ workshops to communicate the value of its KornFlex benefits programme.
These chime with communicating value, but the initiatives may not go far enough. Total reward puts the onus on management, starting with corporate decision-makers and including front-line supervisors, to act consistent with the holistic principles of total reward – how they approach the relationship with the workforce.
Managing total reward, managing people, and managing performance are synonymous. HR specialists need to get this message across and to support the development of managerial capabilities to build an environment of trust – as well as honesty in communicating to staff what is expected of them in ways that workers will view as fair and legitimate.
Stephen Perkins is professor of strategy and HRM and director, Business and Management Research Institute, University of Bedfordshire
Reward management: choices, consequences and contexts, Perkins and White, CIPD Publishing (2011, in press).
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