Reward strategy basically aims to provide guidance, direction and a clear path in order to employers developing reward policies and practices enabling them to achieve their intended business’ overall strategy. While formulating reward practices, hence, employers should constantly give serious and careful consideration to the main aims the business intends to pursue. This clearly entails that a reward strategy cannot be developed regardless of the business’ strategy from which it instead should practically flow, and that, on the contrary, reward strategy needs to be tightly connected, i.e. aligned, to this.
As suggested by Torrington et al (2008), in fact, a reward strategy is, above all, intended to align an organisation’s payment arrangements and wider reward system with its business objectives. This means developing systems enhancing chances that individuals will actively seek to contribute to the achievement of their employer objectives. So that, if improved quality of service is amongst the major business aims, this should be reflected in a payment system which rewards front-line staff who provides the best standards of service to customers. If the main aim of the organisation is to increase productivity, an approach rewarding efficiency would, instead, be more appropriate.
Broadly speaking it can be said that alignment represents an important part of a reward strategy developmental process. Indeed, for crucially important vertical alignment – as it is defined the alignment of a strategy to the overall business strategy – is, it only represents part of the overall alignment process. Another critical aspect of alignment, on which employers should therefore also focus, is, in fact, represented by the attainment of the horizontal alignment, which refers to the alignment of reward strategies with the HRM practices and policies developed and implemented within an organization.
Indeed, a slight difference can be identified between the purpose that vertical and horizontal alignments are meant to achieve. Whereas, in fact, the latter is mostly intended to provide consistency between the reward and HRM practices introduced within a business, the former is mostly concerned with scope, i.e. supporting the attainment of the overall business strategy. So that the predominant feature of horizontal alignment can be identified with integrity, whereas the most remarkable feature of vertical alignment can be associated with business objectives attainment. In any case, the successful attainment of both the horizontal and vertical forms of alignment generates a virtuous circle based on the supportive action played by the successful introduction and implementation of a type of strategy over the other.
Clearly, a 360-degree alignment process is everything but straightforward to achieve in practice, not only because when devising reward strategies reward managers have to take into account a large number of variables, but also and foremost because business strategy and hence HRM strategies and policies, being remarkably influenced both by the internal and the external context, are subject to frequent changes which can make the alignment process rather tricky to achieve and once achieved, difficult to sustain.
Indeed, such difficulties are sensibly likely to increase when, for instance, business strategies aims and objectives are not clearly stated and/or understood within the organization.
But this is not all. In order to genuinely attain a 360-degree alignment, in fact, reward strategy development also needs to take into due consideration organizational values and shared beliefs. The careful consideration of the impact of these factors over reward strategy can actually enable employers to develop sound reward strategies enabling them to simultaneously attain two different objectives: on the one hand foster consistency and integrity within a firm and on the other hand provide support to corporate culture. Also in this case, reward strategy can actually allow employers to generate a virtual circle where corporate culture and reward strategy reinforce one another. Reward strategy will, in fact, contribute to induce, foster and favour amongst staff the kind of behaviour desired by an employer, whereas values and beliefs underpinning organizational culture will support the consistency of the reward practices developed and introduced within the business.
If within an organization fairness and equity are, for instance, amongst the main values underpinning corporate culture, these have to be reflected in its reward strategy and system as well.
It finally emerges that reward systems can be crucially important to foster and encourage the behaviour, ideals and principles an organization values the most and is expected from its staff.
As seen above, one of the most, arguably the most, important form of reward management alignment is represented by the vertical alignment, which essentially aims to consider, during the strategy developmental process, business needs. Notwithstanding, an effective reward strategy also needs to duly take into consideration employees’ wants and the way they can be satisfied, ultimately balancing the needs of the one with those of the others. To some extent this too can be considered as a form of alignment of its own, and since this kind of alignment is meant to consider the entire staff wants and expectations it can be considered as a transverse form of alignment.
It can finally be concluded that in order to reward strategy being effectively and practically supportive of organizational objectives and consistent with business strategy and other HRM practices a 360-degree alignment process has to be considered as a mandatory prerequisite. A process, hence, aiming to achieve both a horizontal and vertical alignment but also ensuring the alignment of reward strategy with corporate culture and individuals’ wants and expectations. Attaining just a partial alignment will surely reveal to produce a limited, if any, effects. Actually, this approach very much recalls to mind the bundling-approach typical of HRM models, that is an approach according to which only the concomitant combination of different actions and initiatives can effectively enable employers to achieve the intended outcomes.
But the apparent complexity of this approach, basically intended to devise consistent and effective reward strategies, has not to be confused with complexity and let alone with over complexity. One of the main features characterizing reward strategy should, in fact, definitely be represented by simplicity instead. Overcomplicated strategies can only contribute to deter individuals to try understanding the mechanic of a reward system and the way it is operated, making employers efforts pointless and causing them to waste massive amounts of resources
Amongst the backlashes typically associated with complex reward systems can also definitely be included the likely difficulties which will be experienced by managers in executing the system (Armstrong, 2010). Yet, excess of complexity and difficulties are all too often associated with programmes failures and consequently, with the withdrawal of the reward system introduced as a result of the final stage of the reward strategy implementation process.
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