What role does Reward play in a Talent Management Strategy?

To be a top-performing organisation, an employer must attract and retain high-potential staff with a talent management strategy that is clearly aligned to the business’ objectives. But what role does reward play in this? Is it enough to simply offer staff the highest pay grade, or to reward only results and not behaviours, in the hope that the business succeeds?

Reward plays a vital role in ensuring that an employer’s values and aspirations are communicated and conveyed through its employees.

Advocate Employer Values

For an employer to position reward effectively in a talent management strategy, it must first consider the values that are important to the organisation and then mould a reward structure around this. For example, it should look at the way in which results are achieved, not just that targets have been met. Ian Gooden, chief executive of talent management consultancy Chiumento, says:

For this to be true, behaviour becomes very important. It’s not just about delivering objectives or KPIs [key performance indicators], sales numbers or other metrics: are people actually achieving those results in a way that is compatible with the organisation’s values? Many reward structures are created in a way that does the opposite and rewards the metrics. For example, a typical bonus scheme will see everybody get a bonus if the organisation hits profit targets. “Very often, that means that everybody gets the same bonus irrespective of how they’ve behaved,” says Gooden. “That sends a message, whether intended or otherwise, that behaviours are discretionary.

Reward can be used as a conduit to signal to employees what the organisation is trying to achieve and what it needs from staff in terms of performance, skills, values and attitudes. Charles Cotton, performance and reward adviser at the Chartered Institute of Personnel and Development (CIPD), says:

Also, how it will reward and recognise employees who demonstrate those performances, behaviours and skills that are required by the organisation to be successful

Recruit, Reward, Retain

Once a potential employee has initially been attracted to an organisation, how reward is positioned as part of the employment deal can be a huge factor in recruiting that individual.

Mark Quinn, partner and business leader for talent and reward at consultancy Mercer, says:

[Pay and reward] is more important in the recruitment process than in the ongoing process partly because when people move organisations, they don’t know what it’s like to work there. The nature that pay plays in the decision is a risk-mitigation point. In a sense, for the individual, it mitigates the risk of going somewhere they don’t know.

A reward strategy can be influenced by the approach that an employer takes to talent management; some will develop talent in all employees, while others will focus on high-potential staff and top performers. But, whichever direction an employer’s talent management strategy takes, its reward approach must be clear. Michael Rose, director of management consultancy Rewards Consulting, explains that employers need some alignment and consistency between their talent management strategy and the messages they are giving through their reward system.

It’s a question of [employers] making sure that they are looking at both what people are doing in terms of output and what they are achieving, but the real issue is around their behaviours and the extent to which they’re displaying behaviours that are important to enable them to develop within the organisation

Retaining employees with the X-factor

Once an employer has successfully attracted and recruited that talent with the X-factor for its business, the next stage in the talent management cycle is to ensure staff are happy to remain at the organisation, while continuing to contribute to the business’ results. Employees are motivated by different factors, and structuring a reward strategy that reflects this is a challenge. “The danger is assuming the same benefits have the same impact on everybody,” says Gooden. “Reward is a very personal thing. Motivational types change over time for all sorts of reasons, and what we highly value at one point in time, we might not value two years down the track.”

Research by recruitment firm Robert Half UK, published in August 2015, found that the top reasons an employee will leave an organisation are for a better work-life balance (30%), further career advancement (29%), higher remuneration, including salary, bonus and benefits (27%), better location (11%) and a better corporate culture (6%).

With this in mind, employers can promote an employment deal that incorporates pay, benefits and development opportunities in order to retain key players. Quinn agrees:

What tends to be more important [than pay] in organisations are those issues around the manager they work for, the culture of the organisation, and the intrinsic nature of the work that they do.

Opportunities to develop and progress their career is a vital retention factor for employees, and is also recognised by employers, according to the Global talent management and rewards study, and the Global workforce study, published by Towers Watson in 2014. Offering employees a managed career path will help to retain key talent within the organisation, but it is not as simple to structure a reward strategy around this. A talent management strategy needs to be flexible in the way it identifies people, presents opportunities, gives feedback and understands the drivers that are important to them, and it can be difficult to align reward to this.

An organisation should develop some reward statements: what its belief system is on reward, says Rose. “For example, if it believes strongly in identifying talented people and therefore having some relationship between people’s progression, development, contribution and performance, then it probably should have some link to pay.

A talent management approach, therefore, needs to be strategic and clearly aligned to the values and behaviours that the organisation considers important. Reward can be used to support this approach by indicating to employees the skills and attitudes it needs.

Petaurum Solutions Comment

A great article that further cements the link between reward, attracting and retaining talent and performance. As the article points out, taking a wider view of reward allows an organisation to harness employee motivation and reap the benefits of doing so. If you want to further promote or introduce a performance culture in your business, then contact us as we would love to talk to you about how we can bring this to life for you.

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