Total Rewards (henceforth referred to as TR) is developing more as a contemporary way of thinking than as that of another Human Resource policy decision. It is transforming the outlook towards paying and motivating the employees, building a strong relationship between desired business objectives and the culture that needs to be built to deliver them. Let us see how this new age mindset is different from what has been so far and what modalities does a Total Rewards strategy employ in today’s organizations across the world.

Traditionally, pay for work has aimed at ensuring development of the intent to succeed for the employee, to give direction to his activities and to build a perspective on how he or she goes about doing his work to achieve what the organization has as its goals. But the famous Taylor and Gilbreth of the Time and Motion studies would not have imagined the amazing celerity with which new factors would get added to create a more productive workplace.

Total Rewards encompasses broadly the following 2 aspects:

1. Financial Rewards (Base Pay, Incentives, Cash, Shares, Benefits etc)
2. Non financial rewards (Identity buildup, Org pride, Work environment, Growth, Career opportunities etc)

All in all, TR is a way of building a culture, a way of working, a way of being entwined with the organizational goals both business and organic, and looking at maximizing the way employees perceive profit both for themselves and their firms.

As can be seen, a brilliant benchmarking study might be able to determine the various sorts of matrices for payouts, but it might vitiate the notion of a fulsome inspirational exercise. The answer lies in facilitating the employee to develop a connect towards his job, an attachment, a feeling about a task well done, and rewarding him in a way which is not only cash or benefits specific. It is also not always meant to give immediate returns, but to develop and build a larger image.

Before we venture into discussing the different types of TR that can be created, allow me to put forth business scenarios from real time experience, which reiterate what happens if the business objective and the reward strategy is not married correctly and it’s impact on the organizational thought process.

Consider 2 Projects A and B both of which have been running within the domain of IT led Software solutions and Consulting

Project A has traditionally been a Pyramid based org structure with practice based management teams. They realized that for moving into New Gen consulting as a business goal, their business policies would have to be realigned. So they effected a change and drew from multi practice consulting into creating matrix oriented teams with a faster decision making and technology prowess. As a result, costs went down, solutions became effective and cycle times reduced. But while the business goals received a faster facilitation, the new teams felt as if they had hit a wall. The Reward strategy continued to be one based on the regular hours worked with an annual bonus scheme with a multiplying factor linked to the organizational performance, both of which were outside the actual control of the teams performing. As a result, there was a rising frustration as the organization failed to connect the way people were asked to work to achieve the business goals and the way they were being remunerated for it.

Project B got a new mandate. The management decided to inject a fresh lease of life and did so by floating a new Reward strategy. They de linked an Evolutionary reward scheme which aimed at a long term benefit and went in for an incentive based scheme based linked to immediate creation of solutions and software designs. Each team was to benefit from the Coding and designing that it would be able to do within the least amount of man-hours invested. As a result, employees were encouraged to work harder and they began to see immediate conversions of their production into rewards. Though this new policy supposedly began to benefit the employees, the firm realized that since production in the least amount of time was the only criterion for success, the quality and the applicability of the new designs and solutions begin to wither. The customers began to lose the end value that was being delivered to them hitherto and their discomfort forced them to start looking for alternative vendors. The employees also refused to take initiative in changing a plan that was monetarily beneficial to them. Another case of a misplaced interlink.

Technical Base for creation of Total Reward Schemes

Hence the relationship is circular. Based on what you want out of running a shop, you can determine how you would want to be appreciable of those helping you run it. The following can be backbone for determining the nature of various TR. According to the US organization WorldatWork the following five are the components of work experience:

1. Recognition
2. Work life balance
3. Company culture
4. Employee Development
5. Environment

Under a reward policy, prominence has to be given to all these as well as the otherwise tangible benefits. The various approaches to determining the sort of model base lining could be:

1. Interlinking: innovative rewards which are integrated with the other HR policies
2. Employee First: recognizing that employees are the key source of sustainable competitive advantage and basing the TR on what they value
3. Value creation: To be stressed on if the idea is of aligning present reward strategies with end results for more shareholder value
4. Industry oriented: If the idea is to ensure and justify the competitiveness of TR’s vis-à-vis the external equity to stakeholders
5. Evolutionary: Focusing more on a long term than and incremental change. It could be used to relook at existing plans to factor in future expected incremental costs, tax and governance item points

It would have sufficed in the earlier years to have thought of business being driven by pure play pay and benefits. But the new economy firms have to rethink their reward strategies in the face of higher attrition and larger demographic access to employees. They will have to ensure that the employees think of a return from work as more enveloping and enriching. It will facilitate the culture and commitment that the firm hopes to build.