Sustainable Reward Systems

DEVELOPING A SUSTAINABLE REWARD SYSTEM

 

Every top CEO today has a 2-5 year contract. Gone are the days of permanent and pensionable jobs for most staff. Today, the performance contract (PC) rules the job market with a tight fist. Many employees find jobs stressful and are never sure whether their jobs will be renewed or not. In the old days job security was much higher and people were much more relaxed at work.

 

All companies need a system to attract, reward and keep staff at a profit. If they don't they will not only loose much business but will shut down sooner than later. A good system will match short term job security to a firm's medium term profit plan. It is a hard match because low job security puts profits at risk. On the other hand high job security does not ensure profit. You need both of these to survive the long term. The system will need to be well anchored in of five key areas; work conditions, staffing, how you deploy staff, diversity and profit related pay.

 

First, a business needs to put in place a conducive work environment. Policy should take care of staff welfare on paper and in practice. This will attract suitable staff to the business. A company may pay good money but still have high reward budget because of the cost of loosing unhappy staff.

 

The second stage is to develop  a recruitment system that will produce the desired kind of staff not just once in a while but all the time. Indeed, the system should always have them on standby. The nature of business today is that you cannot afford to take a month or two to recruit new staff. Options must be a phone call away. One company I work with realized that they must have recruitment as a routine activity - not just when there are vacancies. This ensures that they have a steady stream of options for any job.

 

Third, job terms need to be flexible. Work today does not come in rigid frames.

A clerk may act as a salesman for one month during a company promotion. This helps a firm focus on profit without moving its reward budget. The budget stretches for longer while doing more business for the firm.

 

Too many firms use standard pay packages. It is time for pay diversity to create pay that meets individual needs. Such pay structure need not cost more, but it should help staff meet personal goals. One staff member may need a house another a car another to do business with the company. Schemes that pay for staff goals motivate staff performance and loyalty. Treating each staff as a person and not a "staff number" will need a creative HR outlook. But it will contain reward costs and retain good staff over the medium term.

 

Lastly, a great deal of effort needs to be put into communicating to staff the nature of their work in relation to the profit of the company. Jobs and pay can only be sustained if earnings are able to cover reward costs. Each staff needs to know how their performance affects profits and how that in turn secures them a job. Too many firms and staff still believe that people are paid for production. Not any more. That was the case in the old days. Today people are paid for profit.

 

Allan Bukusi, January 14, 2009