Strategic Remuneration – What is It?
We use the term freely, but how often do we stop to think what it actually means?
Few organisations apply anywhere near as much scrutiny to remuneration programmes as they do to even relatively minor capital expenditure proposals. This despite the fact that in many organisations expenditure on remuneration programmes represents greater than 50 percent of total annual costs!
By redefining remuneration programmes as a strategic investment, and recognising their potential to contribute to the achievement of organisational objectives, employers can successfully turn remuneration programmes to their competitive advantage.
Strategic Remuneration is about linking remuneration to organisation performance. A crucial ingredient in the strategic remuneration mix is recognition of the uniqueness of organisations. This takes account of the fact that what may be appropriate in one organisation, may not necessarily work for another. Yet how often do we hear of organisations trying to apply systems and processes because such and such an organisation has used it successfully? Often this seems to take no account of the fact that the organisations may be operating in different industries, are at different stages of the organisational life cycle, and have totally different organisational cultures? Sad, but it’s true.
Cut down to basics, the term strategic remuneration encompasses the areas of:
- job evaluation/job sizing
- design and implementation of remuneration structures
- development of integrated performance management systems
- design of bonus, incentive, and employee ownership plans
- the area of non monetary rewards
- the development of software or administrative systems to support remuneration strategy.
Looking to the future, organisations that have the ability to invest in strategic remuneration programmes that contain more than just a sprinkle of innovation, will separate the want-to-work-for-organisations from the want-to-avoid-organisations!
So, where does your organisation fit? How do you fare on the Strategic Remuneration front?
A quick way to answer this is to look at the five critical areas in strategic remuneration that need to be addressed if you are aiming to be one of those sort after and want-to-work-for organisations:
- Organisational Support
- Employee Involvement
This is all about looking “outside the box”. It is about looking beyond, and challenging, traditional approaches and systems and coming up with a new way of doing things that is right for your organisation, your situation. It is about “daring to be different”.
If the remuneration strategies adopted by the organisation do not support the organisation’s vision, direction, goals and culture it may be time to close the business down. The organisation’s vision, direction and goals drive the business – they are its engine - and the remuneration strategy is the engine’s fanbelt. If the remuneration strategy is not linked to the key business drivers (the engine) it will quickly become dysfunctional, resulting in engine failure.
A crucial, yet sadly often overlooked, aspect of a remuneration strategy! Businesses are about people, they are about employees. If employees are involved in both the establishment and monitoring of the remuneration strategy, they can’t help but have an appreciation, understanding and commitment to it. If your workforce is committed to making the strategy happen – it will.
A remuneration strategy should not be cast in concrete. Yet how often do we hear organisations say, quote “if only I could change the way we size jobs…….if only I could change the way we look at external market data….” Your strategy needs to be responsive to changes in the organisation’s direction. Organisation’s don’t stand still, they evolve. Your remuneration strategy also needs to be a constant process of evolution. It needs to be flexible enough to adapt and change, just as the business itself needs to adapt and respond to market forces.
Last but not least, if you don’t monitor where you are going, and your progress along the way, how do you know when you have arrived? Once again, an often forgotten aspect of a strategic remuneration programme, yet one that can determine whether you are on the right track or alternately, wasting your time. Monitoring is about keeping in touch with the organisation and applying processes to monitor the effectiveness of your remuneration strategy.
Forward thinking organisations will be looking for solutions that ensure that these five critical areas are covered in their remuneration strategy. This in itself will pose a challenge for remuneration service providers to move away from traditional approaches and to become more in tune with their clients’ unique needs.
Bronwyn Summers is Principal Consultant, Cubiks.