What is Total Reward?
Reward strategies, quite rightly, vary from organisation to organisation,
heavily influenced by business and people issues. The challenge for reward
professionals has always been to create a reward strategy that balances the
needs of the business with the wishes of the employees. As far as possible,
business imperatives and the implications for people practices must be set
against a requirement to meet personal needs.
Increasingly, these conflicting needs are driving reward professionals away
from managing ‘compensation and benefits’ separately, towards the
introduction of managing Total Reward programmes.
Total Reward recognises that different elements of the package are best suited
to reward different behaviours. So, to maximise the value from any reward strategy,
a holistic approach needs to be adopted that takes into account the various
elements of fixed-reward costs, performance-based reward and environment-based
reward (see Figure 1).
The Watson Wyatt approach to Total Reward is underpinned by four key principles:
- organisations need to focus their time, energy and resources on those elements of reward which maximise value to the business
- we recognise that there is an optimum balance between fixed and variable pay, and this balance will vary from company to company
- the provision of non-financial (or environmental) elements of reward is key for certain groups of employees
- poor delivery can undermine even the best design.
Total Reward brings all elements of reward together, viewing each element
within the context of the bigger picture. Total Reward is not something radically
different – it is a philosophy or way of thinking that considers and positions
reward in a different way.
Figure 1
click on image for larger version
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Successful management of pension plan termination