7 STEPS TO DEVELOPING A STRATEGIC REWARD PROGRAM

Anne Howard
Anne Howard Human Resource Consulting Inc.

Contact Information: 403-816-3361 anne@annehoward.com

STRATEGY
A careful plan or method for achieving a desired end (Merriam Webster Dictionary) A long-range policy designed to achieve a specific purpose (Canadian Oxford Dictionary)

To be strategic is to serve the ends of strategy

STRATEGIC REWARDS

the art and science of formulating, implementing

and evaluating the reward programs that enable the achievement of organization objectives.

THE 7 STEPS

1.
2. 3.

4.
5. 6.

7.

Know the Business Plan Understand Factors that Affect Strategy Establish Reward Principles Establish Required Behavior Establish Reward Mix Establish Evaluation Process Establish Communication Plan

Know the Business Plan

Company Vision, Mission and Long-Term Goals Key Success Measures Productivity Profitability (Financial Viability) Stakeholder Satisfaction Corporate Citizenship

Productivity
Formulas: Example:

Gross Organizational

GOP = $10,000,000

Productivity
Gross Revenue Total Hours Worked

208,000

Total Hours Worked: # of Employees X Working Hours (100 x 40 hrs /week= 208,000/a)

GOP = $48.08/hr

Productivity
Formula Example

Gross Organizational

GOP = $10,000,000

Productivity
100 People working for

157,500 GOP = $63.49/hr

1575 hours per year

Factors That Affect The Reward Strategy

Internal

External

Internal Factors That Affect The Reward Strategy

Life Cycle

Size
Structure Management Style

Culture
Products & Services Employee Knowledge/Skills

Constraints

External Factors That Affect Reward Strategy

Volatility/Stability of the Environment Product/Service Life Cycle & Demand Customer Needs Technological Change Workforce Complexity/Simplicity of the Environment Variety of the Product/Service Offerings

L
O V

I T Y

C O M P L E X I

Establish Reward Principles

Articulate Core Beliefs Define the Purposes of the Reward Program Establish Market Position Establish Reward Process

Establish Required Behaviors

Task (Motivation) Membership (Commitment) Citizenship (Engagement)

Establish the Reward Mix

Base Pay Variable Pay Indirect Pay Other Rewards Training, Development & Education Other Rewards

Establish the Evaluation Process

Identify The Evaluation Factors Establish the Evaluation Process & Timing

Establish The Communication Process

What, When, Where, Why How By Whom

THE 7 STEPS

1.
2. 3.

4.
5. 6.

7.

Know the Business Plan Understand Factors that Affect Strategy Establish Reward Principles Establish Required Behavior Establish Reward Mix Establish Evaluation Process Establish Communication Plan

Reward Strategy Success

Work collaboratively with other people Understand the business

Sober Second Look

Strategic Planning
Formulation Implementation Evaluation

QUESTIONS

References
Canadian Oxford Dictionary Merriam Webster Dictionary

Compensation
Strategic Pay Strategic Compensation in Canada Strategic Compensation Strategic Management The ROI of Human Capital

Milkovitch Newman Edward E. Lawler III Richard J. Long Joseph J. Martocchio Fred R. David Jac Fitz-enz

To learn more about Anne Howard Anne Howard Human Resource Consulting Inc. 403-816-3361 anne@annehoward.com To learn more about Payscale

1-888-699-0702 AccountManagement@payscale.com
Visit our blog: http://blogs.payscale.com/compensation/ Join our group on LinkedIN: Compensation Today: HR Best Practices