Total
reward has been essentially developed to help employers satisfy their most
important needs, to wit: attract, retain, motivate and engage individuals not
just by means of salary increases, bonuses, golden handcuffs or other types of financial
rewards, whose effectiveness in the mid- to long-term is debatable at best, but
in a way that enables organizations to yield long-lasting results.
It can be argued that the “birth” of total
reward is essentially mainly due to the ineffectiveness of exclusively-extrinsic-based
reward systems and approaches. Despite employers have experienced over the
years that cash may prove to be an effective means to attract talented individuals,
these have on the other hand found out that money on its own cannot effectually
help them to retain and motivate individuals, if anything in the mid to long run.
These conclusions are indeed supported by the findings of several studies and investigations
carried out over the past and recent years as well.
In
their quest to ensure their organizations the skills necessary to attain their
intended objectives, employers are also constantly prompted to cope with the ever-changing
labour market conditions, which make it sorely difficult for them to recruit,
retain and motivate talented individuals without periodically granting them pay
increases. As suggested by Torrington et al. (2008), under such circumstances
employers may either decide to rely on fewer better paid individuals in order
for these to carry out the required work more effectively and efficiently or
capping salaries at large or search for additional more effective solutions to reward
employees. It is indeed the latter option which has finally prevailed and which
has accounted for the majority of employers opting for the “total reward” approach.
Total
reward can be ultimately considered as an additional means to an, or rather, to
“the” end, namely the attainment of an organisation’s intended strategy. As it the
case for HR practices at large, notwithstanding, for the development of total
reward policies the one-size-fits-all approach is utterly unsuitable.
When
designing and developing total reward programmes as well as when making
decisions about the most suitable HRM practices to be adopted and implemented
within their organisations, business leaders and HR professionals can
essentially have recourse to a number of diverse drivers, which they can and actually
differently use according to the aim they want to attain in practice. During
this process employers should have recourse to all of the components available
to them, albeit not necessarily to all of the elements forming each component. The
most difficult feat HR and reward professionals have to perform, nonetheless,
is deciding and determining how and in which measure have recourse to each of
these components, safe in the knowledge that each of these taken in isolation
will not enable them to yield significant results, if any.
Separately
analysing each of the components typically forming a total reward system it clearly
emerges that a total reward approach is not actually adding that much to what employers
already know and to the levers these habitually use to attract and retain
individuals. HR professionals invariably strive to formulate and execute HRM
policies and practices aiming at attracting, retaining, motivating and engaging
individuals differently emphasising, according to the type of bundle these
consider as the most suitable for their organization, the role of learning and
development, job design, job challenge, flexibility, internal mobility and
reward. In terms of bundling, total reward is clearly similar to HRM models, which
are also defined by a set of activities aiming at facilitating the execution of
business strategies. That is why total reward can basically be considered as a
HRM model on its own.
Analysing,
for instance, the People Performance Model (Purcell et al, 2003) it clearly
emerges that it basically relies on a few pillars, that is, training and
development, working environment and reward in order to induce individual discretionary
behaviour and increase performance standards. The same pillars are essentially also
identified analysing other HRM models like the Harvard Model developed by Beer
et al (1984), the Warwick Model developed by Hendry and Pettigrew (1990) and
other models as well.
Armstrong
(2006) claims that the total reward approach is holistic, its success relies on
the use of all of the possible options by means of which individuals can be
rewarded and receive satisfaction from their work. Total reward, however,
provides just the list of the ingredients which HR professionals can use, but
not the recipe explaining how to use and combine the different ingredients
together.
The
People Performance model developed in the Bath University by Purcell (2003) and
his colleagues, just to cite an example, in contrast, clearly stresses:
-
The benefit provided by recruitment and selection by ensuring organisations the
abilities and skills these need,
-
The role of pay satisfaction to motivate and incentivise employees,
-
The existence of direct linkages between teamwork, job challenge and
involvement to provide employees opportunity to participate.
Despite
the role played by cash to motivate individuals is considered questionable, it
must not be neglected the circumstance that, in a model where a bundle approach
is used, properly employed in combination with the other initiatives identified
by employers, pay can also effectively help these to attain their intended objectives.
The model also recognizes the linkages existing amongst all of its components and
the impact each component has on the successful unfolding of the overall
process and the achievement of the pre-identified aim.
This
reasoning has originally led to the conclusion that albeit total reward models could
be considered somewhat of HRM models in embryo, these could not be considered
as having gained the full status of HRM models. This because these lack of an apparent
structure in which all of their components are clearly linked one another in a
systematic and logical order and relation (Longo, 2011). This conclusion, on
the basis of the founding assumption that total reward aims and objectives are
similar to HRM models aims and objectives at large, also led to posit that appropriately
developed total reward frameworks could produce valuable effects and prove to
be even more rewarding tools for the organisations themselves.
These considerations are indeed truer in the
case of total reward systems developed in the form of four-quadrant diagrams.
In these cases their elements are just listed and grouped on the basis of their
classification: financial, non-financial, individual or communal components of
total reward, whereas no indication is provided of the mode these elements should
be used and eventually support one another. Yet, employers cannot obviously use
all of the elements available to them in a similar fashion with all of the
individuals concerned.
It
can be argued that one of the most, arguably the most, comprehensive and
detailed HRM models currently available is the People and Performance Model
developed by Purcell et al (2003). This model, also known as the AMO (Ability,
Motivation, Opportunity) model, not only includes all of the components and
elements necessary to induce employee discretionary behaviour and improve
performance level standards, but also outlines which components, that is to say
initiatives and actions, have to be used by employers in order to induce the desired
behaviour and help individuals to gain the required skills. Indeed, not all of
the HRM models developed thus far are actually as descriptive and overarching as
this is.
These further considerations, the circumstance
that total reward systems also tend to take into growing consideration the
contextual factor and the need for total reward systems to be aligned with an
organization culture and overall strategy, can actually lead to the final
conclusion that total reward can be indeed considered as an additional model of
HRM.
These
further considerations, the circumstance that total reward systems also tend to
take into growing consideration the contextual factor and the need for total
reward systems to be aligned with an organization culture and overall strategy,
can actually lead to the final conclusion that total reward can be indeed considered
as an additional model of HRM.
Regardless
of the way total rewards systems are graphically represented, these models definitely
encapsulate all of the typical HRM models features and components. Despite these
do not establish and outline a clear cause-effect relationship between the employers
initiatives and their intended objectives, it can be anyhow posited that total
reward models can be actually considered as HRM models on their own. What essentially
differentiates them from the others is the role played in total reward models
by financial rewards, which is clearly more relevant, or rather, more evident
than that played in the other HRM models.
There
is indeed a specific and well justified reason for total reward models not
showing a specific correlation amongst the several components forming them,
which is consistent and coherent with the underpinning assumptions of all of these
models. Individuals are different one another and have different wants, which
are also subject to change over time so that it would be virtually impossible
to draw a model equally valid for and applicable to everybody. All of the
components and elements are there, but they need to be used and mixed
accordingly. Total reward models can ultimately be considered as flexible, bespoke
and tailored HRM solutions capable to fit each employee wants and expectations
and adapt to these and to the ever-changing content of the individual
psychological contract.
In
order to gain full HRM model status total reward systems need to be craftily
designed and developed and, most importantly, need to include a relevant number
of elements for each of their components enabling employers to achieve their
intended objectives by means of the multiplicative, synergetic bundle effect. This
also depends on the complexity of an organization and on the composition and
variety of its employee population. Organizations characterized by a rather
homogeneous generational population or by the presence of people having the
same wants at large might find it relatively easier developing less complex and
less sophisticated but not by reason of that less effective total reward
systems. It clearly depends on the circumstances.
As
invariably happens with practices, strategies and policies at large implementation
is of paramount importance. Even state-of-the-art total rewards models on paper
can miserably fail whether not properly, consistently and effectively executed
in practice. Extra care must be hence paid by employers to this crucial activity.
The
overall process, from design to execution, could reveal to be particularly demanding
and resource-consuming, but it should not be overlooked the circumstance that
the stake is well-worth the efforts and resources it requires.
It is very likely that the ever- and
fast-changing exogenous context, which is sorely influenced by the global economic
and financial conditions, will increasingly push employers to come up with more
flexible and effectual total rewards model where, differently from the past,
the word reward is destined to be growingly associated with diverse meanings.
In order to keep the pace, organizations need to pay extra care to this aspect
and constantly investigate and study the exogenous and endogenous environments
in order to timely come up with new, suitable, innovative and forward-looking solutions.
