Strategic rewards - a case based study

Talent has won ’The war for talent’. The war is caused by the continuously increasing demand-supply gap for skilled workforce. Consequently, organizations face difficulty in attracting and retaining talent. Talent market is highly dynamic, since new disciplines of knowledge and skills are continuously emerging due to explosive growth of knowledge. It is resulting in rapidly changing technology and preferences and priorities of workforce in the midst of shortages. This necessitates appropriate reward system but in practice very few organizations offer attractive value proposition to their workforce. Most organizations still adhere to the conventional reward system.

The traditional Rewards Management assumes money, and cash components to be the strongest motivator and the best performance incentives for employees. Higher wages/rewards have a close association with efficiency/productivity and employee turnover rates. Neo-classicists postulate equality between wages and the marginal product of labor. Higher-wages help in facing short supply of talent.

Neo-classicists argue that the ’Total Factor Productivity (TFP)/Multi-factor Productivity (MFP)’ depends on investment in human capital; education and skills are the drivers of productivity of labor. It implies that the companies, especially service providers, which use manpower as the pivot, should particularly invest in human capital.

This study also considers rewards as the main driver of high performance; so the companies should focus on satisfying the needs of all the employees by balancing extrinsic and intrinsic values; which is based on strategic reward system. Further, the Rewards Strategy, Business Strategy and external environment should be aligned to ensure sustainable results. Outcomes tend to diverge from desired goals if business and rewards strategy are not well aligned. ’Strategic Rewards System’ does not emerge in one go it evolves if the above conditions are satisfied.

Therefore, the study traces the historical evolution of ’Strategic Rewards System’ by review of literature. This furnishes the rationale for the case study based on a Small Medium Enterprise; it provides evidence for the choice of the “Strategic Rewards System” by the organization under study. The case study assesses the relation of reward strategy with the organizational performance. The study concludes that a well-designed and a well-executed Strategic Rewards System reverses employee turnover and improves performance without a lofty budget.