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Total Reward Strategy: A holistic approach

The total rewards strategy is a unique and tailor-made approach that addresses the needs of individuals in a workplace, thereby motivating them and enhancing productivity. Organisations need to introduce a good TRS without sacrificing ethical principles to achieve optimal performance. It takes care of all the content and contextual factors of both work and life, creating optimum satisfaction. A TRS that is properly designed, aligned, and delivered meets all the needs in Maslow’s Triangle, starting from physiological to self-actualization needs—basic pay and benefits to career growth opportunities. It provides for fair and equitable compensation, with respect to the quantified inputs of the employees, which is an appropriate blend of financial and non-financial elements.

A global survey by World at Work, a total rewards association, presented a comprehensive model of this tool in 2006. It included five components-compensation, benefits, work-life, performance and recognition, and development and career opportunities. 

In a nutshell, TRS is a wide umbrella of benefits covering all the components of rewards, both extrinsic and intrinsic. It also covers the employer’s initiatives to make the workplace a challenging one, with an intention to attract, motivate, and retain employees. Ideally, TRS should be aligned with strategic goals and closely integrated with HR policies; it should be flexible too, providing the best mix to suit employee preferences.

Perception and performance

Employee performance in a given context and for a given employee is the result of employee’s ability, engagement, and commitment. Engagement and commitment are employee behaviors that are derived from employee satisfaction. Whenever employees perceive that work conditions including wages and benefits are fairly fixed and take care of their needs, they feel satisfied with the situation. Thus, managers who are responsible for managing employees have to act in two ways to succeed. At first, they need to ensure the right share of business outcomes to the employees as the contributors for the result; and secondly, to convince the employees that the share provided to them is the right one in that situation. This means influencing the perceptions of employees and simultaneously providing the benefits in the right manner. 

The quality of rewards is evaluated by the employees through their perception and in accordance with the quality content of rewards rather than its quantity content. Employees have their own yardstick to measure and compare their rewards with their own comparable standards. Employees who feel satisfied show positive behaviors such as loyalty, engagement, and commitment; while employees who are dissatisfied show decreased engagement, and reduced loyalty and commitment. And while the positive behaviors lead to high performance, the less positive attitude (sometimes negative) results in low performance. From the figure, it is clear that the perceptional acceptance acts as the determinant of employee performance.

Text Box: HR managers must be aware about the perceptions and perceptional differences among the individuals, as well as those related to their service conditions and the organization as a whole.Perception plays a significant role in human resource management. And for effective human resource management, it is critical that HR managers must be aware of the perceptions and perceptional differences among the individuals, as well as those related to their service conditions and the organization as a whole. And effective communication between the managers and individuals is the only way to understand the perceptions and perceptional differences of individuals. To avoid miss understanding, this communication should be open and transparent. Trustworthy dealings from the side of the management have a high influence on employee perceptions.

The Dilemma of an HR Manager

In every organization, both the employer and the employees are equally concerned with the reward strategy, as it is a factor that protects their interests and existence. Employees naturally expect a fair reward for their contribution and, as social partners of the business, they have every right to get a proportionate share of the business gains.

Text Box: It is very important for HR Managers to make sure that, the Total Reward Strategy is capable to satisfy the perceptions of both employer and employees for ensuring better organizational performance, strengthened by mutual trust.

However, employers who are responsible for providing a good rewarding system would have their own perceptions, which many a time contradict employee expectations. This makes it tough for HR managers (HRM) to formulate a total rewarding strategy that can equally satisfy both parties. A reward strategy that does not match the perceptions of employees may not contribute to the positive attitudes and behaviours that lead to better performance. An objectively formulated reward strategy may not be a success despite its fairness unless it is accepted by the employees.

Reward perception is a reality at any workplace-in every organisation, employees have their own perceptions regarding the benefits offered to them in recognition of their skills, experience, or performance. Perceptions vary with personal, environmental, and situational backgrounds and are an outcome of their experience and expectation. But they may not always reflect reality. They are subjective, override objective elements, and play a major role in shaping business performance. Perceived fairness with respect to rewards simply means that the employees value it as being fair. Most often, an objectively formulated reward system may not be valued even though it has maintained, a reasonable level of fairness in the distribution of outcomes. So, it is obvious that it is not the quality of reward but its perceptual acceptance that brings results.

Whatever the situation be, perceptual acceptance of rewards is the determinant factor that leads to either positive or negative behaviours. It is quite difficult to have a perfect blend of perceptions and practice, leaving no space in between. The gap between perception and practice has a crucial role in shaping the behavioural attitudes of individuals.