The Implications of Cox's Conclusions for Modern Principles of Reward Management - Literature review Example

REWARD MANAGEMENT Student’s Name Professor Course Date Introduction For the longest time, organizations have been struggling to design and put in place credible and successful reward strategies. Cox, Brown and Reilly (2010) argue that organizations are still being disappointed by their reward strategies because of the reward strategy design as well as the flawed assumptions and expectations on reward strategy models. They note that organizations fail to pay sufficient attention to workers preferences for different types of rewards. In this paper, I agree with Cox et al. (2010) argument regarding the disappointing nature of the reward strategies, as they exclude employee preference and are flawed in implementation. Reward strategies need to be people based, performance focused and intricately linked to business strategy. Cox et al. argument poses important points that modern organizations should take into consideration to overcome weaknesses in their reward strategies. These points include excluding employee preference in reward strategies, flaws in the strategies implementation, excluded total rewards and much focus on performance pay, too tightly drawn expectations on reward management and their links to business strategy and outcomes. First, Cox et al. (2010) called organizations that adhere to the pay driven, top-down approach reward strategy to rethink them. Organizations should thus focus less on grand plans in their boardrooms using financial incentives in their workplace and as an alternative think about their best possible placement in a set of management practices. Cox et al. showed that there are dangers in organization fascination with rewards that are financial in nature as the default chosen reward method and with reward strategy conceptions, which focus on planning instead of processes, concepts instead of communication, and intent instead of impact. They further called on organizations not to confuse the important function to hire and retain employees and the broader total rewards methods, which lead to higher performance and engagement from employees in their roles. There is need for all organizations to conduct a detailed analysis of the types on financial as well as nonfinancial rewards, which have most impact on the workers in order to investigate the relative importance of the diverse aspects. There is need to investigate the manner responses to diverse types of rewards vary in line with the employees demographic aspects, for instance by occupations and sectors, age, staff grade, gender and ethnicity. Cox et al. (2010) call for development of better methods and tools for assessing the employees’ preferences and attitudes towards different types of rewards. The methods and tools needs to be widely tested and applied because as there is diversity in a greater workforce; this would get rid of the current one-size-fits-all assumption which has failed to satisfy all the employees. This is particularly significant for organizations, which have compound influences of national and organizational culture as this can contribute to shaping of the workers expectations and needs. For organizations, this means that they need to refocus their reward and pay activity from complex pay scheme designs and strategic business aligned plans to rewards that are increasingly employee and operationally focused (Armstrong & Brown 2009). Nonetheless, Cox et al. (2010) argue that effective rewards delivery through line management will remain an enduring challenge and implementation of reward strategies is about a wide array of activities over an extended duration. It will not just entail making sure that managers adhere to key established pay-system, but it will also depend on the management abilities to give praise as well as recognition, to support career developments and to make working time preferences, which are accessible- Human Resource managers should offer guidance and support in all these areas. Cox et al. defined this as the true meaning of a total reward system instead of putting in place a flexible benefits plan. Becker and Gerhart (1996) argue that one of the aspects of a high performance HR system, particularly under varying circumstances has to be flexibility. The two further argued that where strategic HR systems are in line with business problems as well as the operating inventiveness, and that perspective is embedded in the organization and the system, all stakeholders usually anticipate system change because they see business issues evolving (Becker & Gerhart 1996). There is also need for employment tribunals, unions, and compensation consultants to focus more nonfinancial reward forms rather than just leaving managers to have the sole duty of understanding the connotations of a total reward system. The contribution of these parties can maximize the management ability to deliver a total reward package, which elicits high performance and engagement. Aligning reward practices with business priorities in a way, which is increasingly flexible through employee and line managers can, enable organization to circumvent the downsides of mechanistic as well as rigid contingency models (Armstrong & Brown 2009). This can facilitate tactical aspirations for advanced organizational performance through rewards to be achieved in reality in numerous places of work. These key issues identified by Cox et al. relate to market imperatives and fairness and facilitate balance between individual and collective rewards as well as the reward strategies, which are related to performance. The Implications of Cox et al. Conclusions for Modern Principles of Reward Management Cox et al (2010) argue that pay and reward arrangements should be employee based, performance focused and intricately linked to business strategy for them to be effective in motivating and engaging employees. This has certain implications on the modern principles of reward management as the modern reward strategy has different assumptions and expectations than the one proposed by Cox et al. (2010). There is a potential gap between theory and practice. for instance, currently employees are remunerated according to the personal characteristics which they bring to the job or those that they develop over time. Kessler (2007) notes that pay is related to the inputs of the employees whether in the form of experience, qualifications, capabilities, and skills. Pay is related to performance and this means that there is more emphasis on outputs rather than inputs. According to Kessler (2007), the outputs might derive from the activities of the individual or the collective, offering the foundation for various types of pay systems: in case of the individual, sales commission, piecework, and merit based schemes where as in case of the collective share ownership, profit sharing, as well as team-based pay. Rewards are offered based on the nature of performance and hence different behaviours and attitudes are encouraged or reinforced. Profit sharing and share ownership schemes foster commitment and loyalty whereas merit based schemes seek to ensure the completion of clearly defined, individual work-related objectives. The reward strategies are thus tied to performance and person- employees’ attitudes and behaviours are linked to the pursuit of business objectives. These individuals lay a high relative value on pay and this makes them undesirable for many roles, they are risk takers and have the leaning of low organizational commitment (Cox et al. 2010). The reward strategies thus underpin grand plans for cultural transformation and business improvement and hence collapse into underperformance. As Kessler (2007) argues, reward practices and policies are characterized less by clarity of purpose and this results to a reward strategy that is conceptually flawed and organizations also fail to make a suitably link between the reward strategy and business strategy. Embedded in the idea of reward strategy is that of over-arching logic. That every aspect of a reward strategy (the underlying reward viewpoint, the pay structure, its progression rules, as well as the market positioning) integrates in a mutually supportive manner. In theory, a reward strategy is also expected to support the business strategy from which it is drawn from. The other aspects that a reward strategy might include are integration with other HR practices and policies- training and development, performance management, and career progression. A reward strategy should also impact on the organizational culture as well as the individuals behaviours and also facilitate high potential for persons to gain a clear line of sight whereby rewards lubricates the link between improved corporate performance and individual efforts (Boselie, Dietz & Boon 2005). Reward strategies also mean that an over-arching approach should support the prevailing business strategy, which an organization adopts and it should be supported by HR practices and policies. Generally, in modern organizations, the reward strategies usually sound like a relatively tall order. After all, to gain from the reward strategy, theory dictates that the strategy should come from the business strategy and support it. Theory also dictates that the reward strategy should drive sustainable improvements in business performance and it should result in and underpin behavioural and cultural change. In addition, it should integrate with the rest of HR practice and policy and keep the pay bill under control. Most organizations are unable to establish a reward strategy with all these characteristics and this explains why in practice, most organizations under-perform in the design as well as the delivery of a truly strategic approach to reward (Boselie et al. 2005). The modern reward management theories are thus vulnerable to pitfalls in their practical implementation. The capacity for reward management to be consistently adaptive, flexible, and sophisticated is limited. The issues identified by Cox et al. (2010) are simply an important part of what is needed by modern reward management. In reality, most organizations reward strategies usually underperform because of mistakes in the delivery and design of the strategy. For instance, Cox et al. (2010) argue that employees are rarely considered in devising reward strategies and even in cases where they are offered voice in relation two rewards, it is usually very narrow and exclusively consists of mostly financial and material rewards. They further argued that in the modern business world, it is hard to make a compelling case that increased employee discussion regarding rewards would make the more useful, as managers only have restricted amounts of voice to employees, which leads to restriction of parameters within which reward preferences analyses can be made. This implies that modern reward management should capture, largely, the motivations/views of the employees. The importance of employee engagement is evident in the case of Standard Chartered Bank where employee engagement is an important element of the bank plan to build a strong culture supported by useful employees (Brown 2008). Research by the bank has shown that there is a strong link between business outcomes and engagement. The research found that customer subdivisions in one of its market with upper quartile engagement levels delivered 16% higher profit margin growth as well as 74% higher deposit increase than customer branches with lower quartile scores. According to Dr. Miller- “Standard Chartered Bank Group Head of HR” and “Group Chief Executive,” reward is one of the forces that help to generate the bank high performance through a high engagement culture. Dr. Miller argues that the bank commitment to the workers is to develop them, acknowledge their efforts, and remunerate them for their accomplishment. Through the company reward policies and practices, the workers are prompted to concentrate on personal and business objectives, provide, and uphold excellent performance and encourage acting in accordance with the company values (Brown 2008). The other challenge that modern organizations face when it comes to reward strategies is failure to involved line managers, which in turn lead to pay communication, and decision-making processes which are not delegated and where training is not given. According to Corby, Plamer and Lindop (2008), pay specialists are not truly empowered to take pay decisions and they are not equipped with skills to do so. According to CIPD research (cited in Corby et al 2008), organizations considered line managers to be the biggest barriers to turning the rhetoric of reward strategies into reality, as HR managers do not deem line managers as having appropriate skills and abilities. This consequently leads to failure in delegation of pay decision making and communication and where training is not given. The organizational frustrations by reward strategies resulting from such design of the reward strategy, as well as the assumptions and flawed expectations are addressed in theory by antotal reward strategy. A total reward strategy is a holistic approach, which should seek to align the employee strategy and the business strategy; the reward strategy should consist all the things that employees value in there employee relationship like benefits, compensation, development as well as the work environment. This type of management approach is flexible and depends on the circumstance at a particular time, it can help to save costs, maximize profits on the reward strategy adoption and build up employment brand, aspects which can generate both long term and short term organizational goal. It is a reward strategy of efficiency and can help to gain adequate information of the workers and to undertake unbiased analysis, in order for an organization to make wise decision and evaluate their internal and external influences. In accordance with Cox et al. (2010) considerations, for a total reward strategy should embrace the culture of an organization and it should be aimed at offering every employee a voice in the operation, in turn the organization would benefit from engaged employee performance. It should offer a wider view to treat all things that an organization can provide to its employees and all it can promise to their organization; this represents the fundamental change of management. The reward strategy should reflect a way in which an organization can attract, motivate, and retain talents in ways that employee performance link with corporate objective is evidence and in ways that employees are motivated and praised. HRM’s Interest and its Impact on Business Outcomes Reward strategies have the dramatic potential to become one of the key positive influences on employees’ performance and behaviour for human resource managers. Organizations, which place reward as the foundation of their HR strategy, need to involve the employees in design of reward strategy. To promote a clear link between the reward strategy and organizational success, organizations need to provide for flexibility in the strategies as well as administrative efficiency (Boxall & Purcell 2008). The design of the reward system should be flexible enough to prevent bureaucratic rigidity and allow for dealing with changes in individual differences and market rates. The plan should also be simple enough to operate, understand, and explain. The other important themes for establishing a clear link is having a holistic focus on staffing as well as retention through using a wide range of intrinsic and extrinsic rewards and using a best fit approach that is n line with the unique culture, structure, objectives and processes of an organization. The reward strategy should also be integrated with other HR practices and policies (Boxall & Purcell 2008). It should also be centred on the employees by focusing on finding out the things that the workers really place value on within the work environment. Becker and Barry (1996) identify various concepts for best practice for HR system structure and effects: system architecture, practice process, and policy alternative. The system architecture are guiding principles- the performance of the employee is valued. Policy alternatives are an integration of policies consistent with system architecture and well aligned internally and externally; this is evident in a mixture of incentive pay, performance appraisals, and promotions. Policy alternative are contingent in appropriate form specific alignments. Practice process entails the best-in-class implementation as well as technique given appropriate decisions at the architectural level, for instance team based incentive compensation and up to date degree performance assessment. Such processes are contingent on various policy alternatives. Reward management is an important component of human resource management and it facilitates strategic outcomes and options for the organization. There are a number of intervening variables between reward management and improved organization performance and these issues encompass the way individuals, organisations, and scholars measure the effectiveness of various approached and practices. According to Becker and Huselid (2006), an immensely integrated, joint reinforcing system of human resource practices, all of which do very little to boost plan executions, has very limited strategic value. Implications of Cox et al. Conclusions for Modern Reward Management Principles Cox et al (2010) argue that organizations are still being frustrated by their reward strategies and the disappointment lies in the design of the reward strategy, as well as the assumptions and flawed expectations in reward strategy model. They further argued that the satisfaction of a reward strategy is determined by a manager personal capacity in giving recognition and praise, sustaining career development as well as facilitating working time inclinations, realms where human resources personnel should offer guidance and support. Clearly, these conclusions have a considerable impact on modern principles of reward management. The expectations concerning modern reward management is important in promoting the effectiveness of reward management. Contemporary reward management needs to capture, largely on the motivations/views of the employees (Warner & Ward 2004). This is important in increasing the employee engagement in pursuing the organizational objectives. Modern companies neglect employees’ preferences for different types of rewards while constructing reward strategy models. Consideration of employee preference and orientation would necessitate development of a total reward strategy in development of reward strategies, which support business strategies. Discussion of total rewards would have to shift from flexible benefits arrangement, which narrow employee options as to composition of their rewards to an approach that promotes more employee engagement and considers their perception and work environment aspects, which influence those views. Cox et al. (2010) also argue that workers might seek value as well as act in response to rewards, which are not directly financial, but those that entail diverse upshots; for instance, training opportunities or career development, personal recognition, meeting time preferences and acquiring a sense of meaning from work. Contemporary reward management thus has to accommodate both the needs of the employees and those of the organization. In their research Corby, White and Stanworth (2005) found that there is limited formal assessment of amends in the pay as well as grading systems. Managers also expressed significant scepticism regarding the assessment process. Michael, Duncan, and Peter (2011) also found out that although an evidence-based approach was sought-after, there lacked an established blueprint of undertaking evaluations of reward strategies. Milsome (2006) notes that when organizations are applying novel reward practices, they overlook facts and work on casual benchmarking and ideologies. This further point to the weaknesses in reward strategies in modern organizations concerning the assessment of the effectiveness of the reward strategies. The modern reward management theory is vulnerable to pitfalls in its practical implementations, as most of the principles identified are not put into practices in real business situations. Conclusion There is need to for organizations to overcome the weaknesses adopted by Cox, Brown and Reilly so that all employees and the organization can benefit from the reward strategy. There is need to increasingly involve the employees in designing and implementation of reward strategies in order to empower them. On the other hand, the organization will benefit from increased employee engagement, which will in turn result in increased returns. As Brown argues, the whole motive of being strategic regarding reward management is to determine the way rewards can best facilitate organizational success, make improvements and changes to bridge gaps and set criteria for assessing success. Reference List Armstrong, M & Brown, D 2009, Strategic reward – implementing more effective reward management, Kogan Page, London Becker, B & Gerhart, B 1996, The Impact of Human Resource Management on Organizational performance: Progress and Prospects, Academy of Management Journal, vol. 39, no. 4, pp. 779-801 Becker, B & Huselid, M 2006, Strategic human resources management: where do we go from here? Journal of Management, vol. 32, no. 6, pp. 898-925. Boselie, P, Dietz, G & Boon, C 2005, Commonalities and Contradictions in HRM and Performance Research’, Human Resource Management Journal, vol. 15, no. 3, p. 6794. 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