Reward definitely is one of the most fascinating HR topics
destined to top and firmly remain high on the business leaders’ agenda,
especially on that of financial institutions boards.
One of the main reasons, arguably the main reason, employers are increasingly directing their attention to reward is associated with its alleged motivating effect. Nonetheless, it can be hardly contended that the motivational aspect may be considered as a distinctive reward feature. This subject has indeed caused controversy over time and the findings of the numerous investigations conducted over the years do not sustain this theory either.
Individuals are different one another; yet, individual preference and wants are also highly likely to change with the passing of time. The exogenous environment and the constant technological advances clearly play a fundamental role in this sense as well as the national and global economic and financial circumstances. A growing significant role is also played by the demographic aspect by reason of the ageing population phenomenon.
Individual wants and expectations are indeed influenced by several factors and can thus be considered as ever-changing and in many respects as increasingly dynamic; notwithstanding, the value proposition offered by employers must invariably aim at meeting as far as possible these needs. To this extent it should be essentially adopted the same approach and mechanism used in marketing according to which businesses should introduce in the market the goods and services which consumers want to buy and not those which the firm can more easily offer. Similarly, employers should offer their employees not the reward packages they prefer to offer or are most comfortable to offer, but rather the reward packages their employees would like and are thus expected to receive.
Financial rewards are, by common consent, considered more effective to attract talents and more in general individuals from the external environment, rather than to motivate and engage individuals. Nonetheless, it is also fairly widespread the conviction that this magnetic effect is due to vanish into thin air fairly soon. This essentially means that whether an employer needs to recruit individuals from the external environment to fill some new or vacant roles, this can successfully have recourse to financial reward as an appropriate leverage to attract and lure quality people, safe in the knowledge that this will not be enough to retain these hereinafter. To avert the occurrence of such a situation, HR and reward specialists before recruiting a talented individual from the exogenous environment, in addition to the identification of the most appropriate reward package that should be offered to the most suitable candidate, should also develop a clear plan of action enabling the organization to retain this.
Employers necessarily have to be far-sighted. These are indeed aware that to attract skilled individuals they should offer these appealing financial reward packages, which they are habitually willing to offer, but it also needs to be clear from the outset the plan of action aiming at retaining these and receiving their best contribution over time to the pursuance of the business strategy.
The circumstance employers should develop for high-flyers an appropriate reward package enabling them to both attract and retain these, does not entail that reward specialists should prepare for each of these individuals a precise progressive salary increase plan. The effect of money would not in any case be long-lasting and, unless there would not be the employer willingness to cover individuals with cash, which sooner or later would prove to be in any case insufficient, the retention objective has to be clearly pursued having recourse to other means. Inasmuch as there is a wider consent amongst reward practitioners and academics upon the effectiveness of financial reward to attract individuals from the exogenous environment, there also is a rather widespread agreement on considering non-financial rewards effective and, in any case, much more effective than financial rewards to motivate and engage people. Engaged and motivated people are clearly more likely to genuinely and spontaneously go the extra mile, exhibit discretionary behaviour and contribute to organizational success.
This is clearly not an exclusive reward matter. Whether, for instance, the person does not fit the organization’s culture or has misunderstood the content of his/her role, there will not be reward package worth to retain the individual. Under such circumstances, it would be better to recognize the recruitment error, bear the waste of money associated with it and with the induction process and start back seeking for the genuinely perfect match for the company and the position.
Employers and reward professionals in order to retain quality individuals should not therefore insist on the financial components of reward, but should rather identify and develop appropriate and sound non-financial, intrinsic forms of reward and recognition. Are indeed these components of the overall reward package which influence in practice individual behaviour and prompt employees to work with dedication. Non-financial rewards also contribute to induce individuals to develop a feeling of involvement and participation on the organizational success and to increase in turn their sense of citizenship.
Financial rewards are also destined to invariably represent a reason for individual concern as long as these have not reached somewhat of a financial comfort zone. As long as individuals will be struggling to pay their monthly bills (utilities, mortgage instalments, children school fees, public transport season tickets, etc.) it is hardly imaginable that these may ever pay lip service to the importance of their financial reward package. This circumstance can at times also give rise to undesirable family tensions, which can in turn unconsciously affect employee performance and behaviour at work.
All in all, it clearly emerges that total reward approaches are the most, or rather, the only suitable approaches employers and reward managers can have recourse to in order to retain and keep employees motivated. Albeit the role of money may become of secondary importance in order to motivate people during the employment relationship, money will invariably continue to talk. The importance of financial reward, by extension, needs to never be neglected or overlooked by employers. Individuals will invariably associate with money a relevant degree of importance and, even though they might not constantly think about financial rewards when performing their day-to-day activities, they could anyway perceive a pay increase as something they deserve or need. To this extent two elements play a particularly remarkable role: the fairness of pay decisions and the individual general financial circumstances.
Despite employers may be happy with their financial reward package and their daily activities, these could feel to be treated unfairly by their employer whether this should grant unjustified and unsustainable pay increases to some individuals. The knock-on effect produced by such circumstance can be extremely detrimental for the business and risks seriously and irreversibly jeopardising the relationship of trust established between the employer and its employees.
Internal fairness clearly represents a critical factor, but the external labour market and the pressure coming from it have to be duly taken into consideration, too.
It is important to clearly communicate and explain employees the worth of their overall reward package composition taking also into consideration, for instance, benefits and deferred benefits. Some employers may offer more generous pay, whereas offering very poor benefits and pension contributions. It is crucially important that these aspects are constantly and clearly communicated to staff and to external candidates when offering a job.
Despite money may not act as a powerful motivator, its hygiene effect definitely still counts and has to be properly and constantly taken into consideration by employers and reward managers.
Considering financial and non-financial rewards separately, it could be concluded that financial rewards would be the winners of the attraction contest, whereas non-financial rewards would be the winners of the retention tournament. However, both of them clearly play a significant role in both competitions. The synergetic, multiplicative effect produced by financial and non-financial rewards used in combination can effectually enable employers to attain in practice their intended objectives, namely to attract and retain quality individuals. Total rewards approaches are key in this sense. This does not clearly mean that attracting and retaining quality individuals is a straightforward task. People wants and preferences are subject to change over time. Yet, many other employers strive to recruit high-flyers and quality individuals.
Using fairness, consistency and integrity definitely is of paramount importance, but genuinely considering and taking heed of the employees’ wants and expectations assumes a greater significance, too. First and foremost, employers need to know their employees and their needs; this clearly represents the starting point, but whether neglected any employer action and initiative risk proving to be a massive waste of energies and resources. It would be like filling stores shelves with products that the manufacturers considers outstanding, but which customers do not like so that these remains and are destined to remain unsold in the shelves.
Longo, R., (2014), Rhetoric and Practice of Strategic Reward Management; Milan: HR Professionals.