HUMAN RESOURCE
contribution not just through pay alone but also
through privileged access to opportunities such
as challenging assignments or special leadership
development programs.
Work Environment
5Definitive Success Factors
As the workplace context metamorphoses from
traditional structures and takes on a newer, unprecedented
shape, the nature of the employer-employee relationship
has also undergone a sea change. The world of lifetime
employment and unflinching loyalty to a single employer no
longer exist. In the face of turbulent change, a “static”
approach to rewards will no longer work. Recessionary
trends, aggressive competition and increasing cost
pressures mean that organizations have to take a hard look
at their current labor cost structures. A rewards system that
is wholly dependent on periodic increases in pay and
benefits will not be sustainable in this new context.
Thus, many modern organizations regard pay and benefits
as just one part of the larger context of a total rewards
strategy that encompasses all aspects of the employee
value proposition from growth opportunities to a
motivating work environment (recognition, flexible hours
etc.). This approach gives organizations a flexibility to finetune or vary their total rewards mix depending on the
specific internal and external conditions prevailing at the
time, whilst ensuring attraction, motivation and retention of
employees. At the same time, this approach ensures
strategic alignment between the rewards approach and the
organization’s business strategy and business results.
Ultimately, a total rewards strategy is about getting the
right proportion of rewards to the right people at the right
time in a way that is aligned with the organization’s
business needs.
Components of a Total Rewards Strategy
A Total Rewards Strategy looks at both tangible and
intangible benefits offered to an employee by the
organization. Many organizations use below three key
components to build a holistic total rewards strategy.
Basic Rewards
This is the “foundational” component of a total rewards
strategy and encompasses the “traditional” reward
components of base pay, short-term incentives and longterm incentives. No longer is this considered the key to
employee attraction, motivation and retention. Today, this
component is seen as just one of the elements of a total
rewards strategy.
Performance-linked Rewards
The erstwhile philosophy of “equal pay for equal work” has
today evolved into a “pay for performance” approach that
emphasizes on performance linked rewards. In a world
where there is huge competition for the high potential, high
performing “superkeepers” in your organization,
performance differentiation becomes critical. Thus, the
organization has the opportunity to recognize differences in
In order to successfully implement a total rewards strategy,
the HR practitioner needs to keep the following five factors
in mind:
1. The total rewards strategy needs to be rooted in a
sound understanding of the organization’s business
context and short term/long term business objectives.
The starting point for a total rewards strategy is a clear
understanding of the organization’s unique business
strategy, context and objectives. HR practitioners will do
well to build an
understanding
of external
factors such as
the labor
environment,
political,
regulatory or
economic
changes. This is
in addition to a
comprehensive
understanding
of the
organization’s
short term and
long term
business goals,
performance
metrics, critical
capabilities
required to be
developed for
competitive
advantage as
well as behaviors and attitudes to be shaped. The total
rewards strategy is a great opportunity to drive these
behavioral changes and strategic shifts within the
organization. Ultimat ely, what the organization chooses to
reward will drive employee behavior and performance.
2. The organization’s total rewards philosophy, guiding
principles and objectives must be clearly articulated.
Many total rewards initiatives fail because of a lack of focus
and hazy objectives. With the business context and its
specific objectives, an HR practitioner needs to develop
guiding principles to offer a framework for shaping a total
rewards strategy over time. Some aspects which the
philosophy and guiding principles should encompass
include competitive positioning, performance
differentiation vs. uniformity, cost considerations, flexibility
and choice offered etc. Care should be taken to ensure that
the total reward strategy covers the various categories
comprehensively and is holistic. At the same time, the
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various categories and components must fit together and
complement each other, rather than be force-fitted
disparate elements.
3. The communication of the total rewards strategy
principles needs to be done well
A total rewards initiative is a large-scale organizational
change which requires ongoing communication and
employee involvement to be successful. Often,
organizations have powerful components in their total
rewards strategy, which fail to achieve real results simply
because employees may not be aware of them. The more
employees know about the various components of the total
rewards strategy and how they are operationalized, the
more likely they are to be satisfied by it. Many
organizations choose to communicate to each individual
employee details on the rewards received by them, thus
making total rewards personalized. Rather than merely rely
on policy documents, many organizations are educating
their line managers to have conversations with employees
about the total rewards offered. The organization’s intranet
and internal social networks can also be leveraged for this
purpose.
4. There should be a strong leadership buy-in for the total
rewards program.
HR practitioners need to bear in mind that a total rewards
strategy is not an “HR” initiative. It is a powerful business
initiative that can make or break employee performance
and commitment to the organization. Thus, strong and
highly visible leadership
buy-in is an imperative
for a successful
implementation of a
total rewards program.
5. Set success measures
and periodically review
total rewards strategy
for continued alignment
to business objectives.
In line with the total
rewards initiative’s
identified philosophy,
guiding principles and
objectives; an
organization needs to
define clear, SMART
success measures which
will help it ensure that
the initiative stays on
track. Many times,
organizations treat total
rewards initiatives as a
one-time “rollout”. However, when the organization’s
business strategy changes every few years, the total
rewards strategy also needs to be reviewed periodically to
ensure continued alignment with the business strategy.
Thus, the focus of measurement and review should be not
just on “what are we currently rewarding” but also on
“what should we be rewarding”.The total rewards strategy
is a great opportunity for organizations to move towards a
holistic employment proposition rather than restrict
themselves to an unsustainable focus on monetary rewards
and benefits. Thus, they can gain the flexibility to shape the
employee experience in a wide variety of ways, based on
the organizational life cycle as well as the current realities.
Depending on business needs, a combination of reward
components, the level of investment in them and the
distribution amongst different segments of the employee
population can be varied. Through this approach,
organizations can powerfully influence and shape employee
behaviors and attitudes.
5 Critical Success Factors in Implementing a Total Rewards Strategy
This category is often ignored by many
organizations while overemphasizing on the
more “tangible” basic and performance reward
categories. However, there is clear impact that
ignoring this critical category can have real risks
for organizations. On the positive side, if a
consistent employee experience is consciously
shaped at every employee touch point after a
thorough evaluation of employee needs and
drivers, then this category has the potential to
create a dramatic positive impact.
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