The 2002/2003 Strategic Rewards survey provides a blueprint for companies seeking to balance their short-term goals against long-term concerns. From incentive pay to global compensation philosophies to customization of rewards, the study identifies what works — and what doesn’t — when it comes to maximizing the return on investments in rewards. As the economy struggles to regain equilibrium, successful companies will use this information to invest in strategies that mitigate short-term cost concerns while ensuring long-term competitiveness.

Survey Highlights

• Companies have become more aggressive about cost cutting. While they have tried to avoid reducing their human resource investments, continued economic uncertainty has forced firms in the last year to move from cost containment to cost reduction.
  
  
• Staffing changes should be targeted. While companies are selectively cutting the size of their workforces, critical-skill employees remain in demand and are being aggressively recruited by a quarter of surveyed employers.
  
  
• Investing in the right HR strategies is critical. Annual incentives are viewed as the most effective compensation tool for achieving desired outcomes, such as improving financial performance, aligning behavior with goals and culture, meeting key strategic goals, attracting and retaining top performers and controlling costs. As expected, base salary is viewed primarily as an effective attraction, retention and cost management tool.
  
  
• Differentiation of variable pay is strongly linked to excellent financial performance. The companies that deliver higher variable pay to their top performers are 68 percent more likely to report outstanding financial performance.
  
  
• Going global makes a difference. Multinational companies that perform well tend to have compensation philosophies and plans that are more global, especially for senior managers. In contrast, lowperforming multinationals are more likely to have compensation philosophies and plans that are local-country based.
  
  
• Customization is important but often overlooked. High-performing companies are customizing rewards more often than low-performing companies, but both groups are missing opportunities for customization.
  
  
• The perceived effectiveness of rewards changes over time. Organizations can take advantage of shifts in opinions among their high-performing employees to better align their programs with their business objectives and with the accounting and tax implications of program designs.