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The right remuneration strategy



In years gone by employees were viewed simply as a cost to a business but now business leaders have recognised that the human resource is a key strategic resource which can provide an organisation with a competitive advantage.
If you have to excel in business you need to have the right number of employees possessing the requisite skills for the job. There is always competition to get the right people in any industry.

So if an organisation has to recruit and retain the rightly qualified employees then it has to develop the right remuneration strategy which will help attract, retain and motivate the right people for your organisation. Staff costs are one of the biggest expense lines in most organisations because human capital is key to any organisation.

Research has established that while some organisations can have competitive advantage as a result of the resources that they have, it has however been shown that some of these resources are tangible assets which are typically imitable and thus unlikely to be a source of sustainable competitive advantage.

It has however been found that human assets or human resources are often hard to imitate due to scarcity, specialization, and tacit knowledge, and thus offer a sustainable competitive advantage.
If an organisation has the right people with the required skills then that organisation can compete effectively. It’s therefore very important that every organisation has the right remuneration strategy.

A remuneration strategy can be defined as “an approach to reward staff based on a set of coherent principles in support of the organisation’s goals.” It is important to view remuneration strategy in the context of the organisation’s strategy and overall human resources strategy.
It has to be seen holistically because it impacts on the whole organisation. Remuneration or rewards have an influence on performance and the behaviour of employees.

Although it has been argued by other writers that monetary rewards may not motivate in the long term, but however rewards certainly show what behaviours an organisation values, for instance, rewarding performance above other attributes.
The whole objective of rewarding employees is to ensure that the employee’s contribution towards achieving organisational and team goals is being recognized.

Rewards should therefore help in motivating employees to perform at their best and also in helping retention of employees.
The objectives of a reward system should be to attract the right people with the requisite qualifications, retain those employees and then motivate these employees to attain high levels of performance.

So when developing a reward strategy it is important to ensure that you consider the different elements of reward and what they are intended to achieve.  Some reward programmes will result in pushing employees to achieve short term profitability while others will push employees to strive to attain long term profitability.

So you need to structure the reward programme very carefully in line with your corporate strategy. Your reward programme should fit with your mission, values and organisational strategy.

Rewards can be viewed as intrinsic or extrinsic. Intrinsic rewards are intangible rewards concerned with the work environment like quality of working life, recognition, performance management and learning and development whereas extrinsic rewards are financial and material.
Rewards can be monetary or non-monetary. Monetary rewards include basic salary, employee share options, profit sharing schemes, annual or semi-annual bonuses and other cash awards.

Rewards and incentives play a vital role in the workplace because it positively impacts on performance and productivity, increased morale and job satisfaction. Non-monetary rewards could be given as perks or as employee recognition by affording training opportunities to a well performing employee.  By recognising a good performing employee it encourages the employee to continue performing better. So a good reward system should go beyond the financial returns to include all of the above things about one’s work.

Reward systems need to be carefully crafted because they often send a clear message to employees about what’s important in the organisation, that is, what does the organization value.  So if an organisation values quality then it has to place emphasis on that issue or if there is a certain competence that the organisation needs then it has to reward that competence to ensure that it attracts and retains the required skill.
For reward systems to be effective there is need for employee empowerment where the workers are involved in setting the targets and the critical areas that need to be measured and how they will be rewarded for exceptional performance. Employees want to own what will impact them otherwise they will resent changes that are thrust upon them.

They’re likely to embrace change in which they took part in. If employees consider the reward system as theirs then the reward will have significant effects on the employees’ behaviour and performance.

Different studies by a number of researchers have shown that there are internal and external factors that affect reward systems. These factors have been identified as organisational culture, the work environment, people, and business strategy, political and social climate.
Rewards will be tailored to address the key issues that the organisation values. Each organisation is impacted differently by these factors so the emphasis will be different for each organisation.

The external factors that may affect reward systems include globalization, market rate of pay, the economy, societal factors, legislation and trade unions. Organisations will have to take these factors into account when coming up with a reward strategy.
Rewarding good performance is critical if you have to motivate your staff as said by Charles Schwab, founder of Charles Schwab Corporation.
“I consider my ability to arouse enthusiasm among men the greatest asset I possess. The way to develop the best that is in a man is by appreciation and encouragement.”

And Robert McNamara former president of Ford Motor Company said: “Brains, like hearts, go where they are appreciated.”
l Stewart Jakarasi is a business and financial strategist and a lecturer in business strategy (ACCA P3), advanced performance management (P5) and entrepreneurship.

He provides advisory and guidance on leadership, strategy and execution, preparation of business plans and on how to build and sustain high-performing organisations.

For assistance in implementing some of the concepts discussed in these articles please contact him on the following contacts: or WhatsApp +266 62110062 or call +263 58881062.

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