The Talent Management Handbook by Lance A. Berger Dorothy R. Berger

Author:Lance A. Berger Dorothy R. Berger
Language: eng
Format: epub
Publisher: McGraw-Hill Education

Chapter 30

Using the Right Rewards

Program to Help Your Talent

Management Program Fuel

Transformation

Juan Pablo González, Partner

Axiom Consulting Partners

JUST OVER HALF OF THE COMPANIES ON THE FORTUNE 500 HAVE DISAPPEARED SINCE the year 2000. Of the top five publicly traded companies ranked by market capitalization, only Microsoft was on the list in both 2011 and 2016. Organizations that don’t transform with the times are at risk. Even after years of success, organizations cannot take continued success for granted. With every passing day, customers are presented with alternative solutions, new competitors emerge, and the labor market shifts with succeeding generations of workers. The “new economy” is just that—new.

Organizations respond to these shifts in a variety of ways—often changing core strategy and tossing aside tried and true processes, overhauling the supply chain and rolling out new products and services. Following best practices, leaders engage employees, customers, and other stakeholders in the transformation process, devoting significant resources toward communication that fosters understanding and support.

In our experience even organizations that seem to have “done everything right” see transformations derail. Rewards, a common derailer, can catch leaders by surprise. While not the first thing leaders think of when changing strategy, rewards must remain aligned with the organization’s focus and objectives. Therefore, when strategy changes, so too must rewards. If they don’t, employees will receive a mixed message: “You want me to do X, but you’re still rewarding me for doing Y.” While some employees may trust management to do the right thing, many will simply follow their paycheck and not change until the way they are rewarded changes. It’s not that rewards are necessarily the driving force behind successful transformations, but if well designed they can be an important tool supporting a tranformative talent management program.

Decisions about total rewards are never more important than when a company is embarking on a new strategic direction. That may sound obvious but at many organizations rewards policies are calcified, cumbersome, and often viewed as a necessary evil, rather than as an important critical element of a new business strategy. Why does the typical rewards program jeopardize a new strategy? What emerging innovations offer hope in using rewards to drive an organization’s transformation? And how should leadership act differently in times of change to create greater value from rewards investments and overcome resistance to a transformation?

The Current State of Rewards

Total rewards represent a significant investment for most organizations. According to the Society for Human Resources Management, salaries alone account for 18 to 52 percent of operating budgets. This is just salary and does not include variable pay. It also doesn’t include a number of other critical elements of rewards such as culture, work environment, career, and benefits. Together, these elements comprise the construct of total rewards (see Figure 30.1), framing what employers offer employees in exchange for their contributions and achievements. Like any significant investment, total rewards must align with the organization’s strategic objectives. This means that when strategy changes, perhaps in response to the competitive landscape, industry dynamics, or economic conditions, it’s likely that some degree of change will be appropriate in rewards.

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