Friday, 31 July 2009

Reward systems and behavioural HR

 

   Interesting piece of research out from the CIPD today looking organisational risks associated with pay and reward of employees.

“Despite the media and regulatory spotlight on the dangers posed by bonuses around encouraging poor behaviour and performance, the CIPD survey finds bigger concerns around overall pay budgets failing to deliver improved performance. Money is being wasted because poor communication of pay and reward means budgets are being spent without anyone understanding what they and their teams are being rewarded for.”

 

Communication, of course, being the thing we blame, when we don’t get what we hoped to achieve - ‘oh, of course, it needed to be better communicated’.

The real problem is much more likely to be that reward systems haven’t actually been effectively designed to generate the behavioural changes or objectives that are desired – many being based upon erroneous assumptions about motivations and behaviours.

 

 

The CIPD find the most common areas of concern are:

  • Poor communication of reward leading to poor organisational performance
  • Inability to adapt reward policies and practices to the changing business environment
  • Reward failing to engage employees
  • Reward failing to attract key talent
  • Ineffective reward strategy causing poor employee relations.

 

In addition, they report that:

“Worryingly, only a small minority (17%) of respondents believe that their organisation is prepared to meet the reward risks identified in the survey.”

 

and:

“Far from being a source of competitive advantage, many of our respondents are worried that their organisation’s approach to reward is so unresponsive it could act like an anchor and drag it below the current turbulent economic waters.”

 

Well, at least the potential fall-out from these problems will be less significant than what we’ve already experienced in our banks.  But it still means that we’re not getting the behaviour and performance that we’re after from our employees, and that we’re wasting very large amounts of money in the process.

I have to admit to being slightly dazed by these findings.  How organisations can be continuing to waste one of their largest expenditures in the present economic environment is beyond me.

And , come on HR!  If you’re organisation isn’t prepared to meet the risks in your reward strategy, do something about it!

 

 

Photo credit: david.nikonvscanon

 

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  • 4 comments:

    1. Great post, Jon. But I can't say I'm surprised. As long as compensation is the primary form of reward (and any reward structure based on cash is compensation - I don't care what the HR leaders want to call it), then leaders will not gain the behaviour or culture change they desire.

      If you want to manage your culture by changing or directing employee behaviours, then you have to clearly define what those behaviours are (ideally, based on your company values and focused on achieving strategic objectives), how each employee can display those behaviours in their every day tasks, and what this means for company success.

      The best way to accomplish this? Through strategic recognition -- when an employee displays a desired behaviour, formally recognise him/her, specifically calling out that behaviour. Such positive reinforcement is a powerful way to change behaviours and drive culture management in any organization.

      Even better, track those recognitions so you can begin to see what values are NOT being recognised and then intervene with targeted training.

      ReplyDelete
    2. Hi Derek,

      Thanks for your comment.

      Yes, the survey took me back to our webinar a couple of months ago (http://strategic-hcm.blogspot.com/2009/05/measuring-reward.html) when I remember saying that poor reward design would no longer be tolerated in the current environment.

      I posted on the survey because I'm still surprised how much it is.

      ReplyDelete
    3. Exactly, Jon. I recently read Steve Kerr's new book (Reward Systems: Does Yours Measure Up?)

      Highlights from a post I wrote about it:

      Steve’s “definition-measurement-reward” process is based on the principle that “effective reward systems induce organization members to pursue organizational goals for that most reliable of reasons: each person’s conviction that he or she will benefit by doing so.”

      The process is simple – define your goal, find a way to measure it, then reward successful performance against that metric. Measurement is essential because:

      “If something isn’t measured, you can’t give people feedback about it, so they can’t improve. You can’t reward the people who are doing it well, and you can’t improve or admonish people who do it poorly. Measurement also signals that something is important; if no one is tracking it, it will take a backseat to things that are being scrutinized. … Things that aren’t measured can’t be rewarded and they very likely won’t get done.”

      Full post, here: http://globoforce.blogspot.com/2009/07/measuring-reward-systems-driving-change.html

      ReplyDelete
    4. Thanks again Derek.

      (I'm less of a fan of Steve Kerr's book though: http://strategic-hcm.blogspot.com/2009/05/talking-hr-016-web-20-and-hr-with-book.html.)

      ReplyDelete

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