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Reward Management Practices

Posted By IRMSA Insight, 18 February 2014
Updated: 17 February 2014
What is the value of money? Peet Kruger, president of The South African Reward Association, began his presentation at the 2013 IRMSA Conference by posing this question.  Kruger explained that in terms of the Reward Practices, there are two answers to this question:
1.      the money that goes into your bank account, and

2.      the perceived value of money 

He asserts that "It is not what we pay people, but it is how we pay them and the communication that goes with that process.” He then gave a scenario of an employee being told by the line manager that there would be no bonuses due to tough economic and trade environment. The employee accepts this but later finds out that the CEO, who is leaving the company, has received a golden handshake – the question in the employees mind will be: "Is this fair?”. 

Another scenario is that of a salary adjustment in one department, but not in others. He emphasises the point that "Pay is an emotive issue” and the challenge for businesses is two-fold: ‘how we manage reward’ and ‘how we manage communication around it’.Kruger spent sometime time explaining the concept of reward and highlighted that it is more than finance. "It is also about people development, proper management and leadership of staff; it is also value proposition you offer as company to your employees,” he says. He further states that reward is certainly a strategic risk – which will influence behaviour, especially in relation to the long term vision and culture of the organisation.Kruger asked delegates to reflect on their companies’ reward philosophy – "In your organisation, are staff expenses seen as a cost or an investment?” He explained that if it is seen as a cost, it is likely that management will focus on minimising costs. On the other hand, if seen as an investment, the focus will be on how to optimise staff expenses in a synergised manner. 

He believes that a proper reward process/philosophy has three main benefits:

o   Attraction – attracting the right staff, at the right price and employed at the right time.
o   Retention – saving on retention costs (as up to 100% cost of the annual package can be spent on recruiting a new candidate).
o   Engagement – proper reward can help to keep staff engaged, interested, and committed to making an impact in the company. 

Kruger cautioned companies about the design of reward process – "they must be modelled and designed properly so that they do not become demotivating.” A critical element of the reward structure is to recognise the needs of each staff member, and their life stage. An example of this is providing options for more affordable medical aid cover for a younger person, in order for their take-home salary to be slightly higher, and doing the opposite for the more senior members with families.  

Do you consider reward practices to be a strategic risk within your organisation? Share your thoughts in the comments below. 

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