'Next Practice' in Reward Means a Focus on Employees as Assets

What will the 'next' reward practices look like? A study by Hay Group and WorldatWork shows that in the coming few years, decisions in reward will be driven by the need to keep employees motivated and engaged despite tight resources and the fear of layoffs. The research reveals a renewed focus on managing human capital as an asset.

Conducted in the challenging first three months of 2009, this Hay Group/WorldatWork study found reward executives focused on the 'here and now': first getting labor costs aligned with the new economic realities, then preparing for future growth. The study revealed five key trends in reward 'next practice'.

From benchmarking to alignment

Firms have become less focused on what the market is doing and more concerned about aligning reward with strategy and performance. Amway International is trying to "find the right balance between employee motivation, cost control, and market competitiveness in our reward programs."

Taking the employee's perspective

Employee needs and wants are becoming more important as organizations seek to maintain motivation in a tough climate. According to McDonald's Corporation: "We design our reward programs, invest in new programs, and beef up current programs based upon the feedback we receive from our employees."

Strengthening the ties between pay and performance

Organizations in this study are looking much harder at the design of short and long-term variable pay programs. Comments from Heineken reinforce this: "We ensure that the objectives in our STI program are broad, simple, quantifiable and measurable and that they accurately reflect the key performance fundamentals of our business."

'Total reward'

Employers are looking to intangible rewards in their quest to keep the workforce engaged when budgets are tight. Collective Brands in the US plans to "provide much more focus on non-monetary forms of rewards and recognition. In tougher economic times, there will be a focus to provide recognition through non-monetary vehicles."

The key role of the line manager

As firms tighten their belts, they are realizing how line managers can help reinforce the pay-to-performance link and communicate the value of the reward program. Microsoft is looking for: "better support for managers to be able to better explain the reward programs and how they link to individual and company performance."