For companies that have a mission of selling, a major objective is to motivate the salespeople.  While that are many factors that go into motivating these people, one of the primary factors is the co

STEP 2: DESIGN A design process starts with the corporate mission, vision, and business strategy. The HR philosophy flows from this and serves as a guiding light in the design of all HR programs. Total rewards philosophy and strategy are incorporated within the HR philosophy and strategy. From this, strategies and practices/programs are developed within the five facets of total rewards. Establishing a total rewards strategy helps ensure that rewards become a strategic driving force in the accomplishment of organizational goals. It also helps to align the rewards system with the organization’s culture and change efforts. Define the Corporate Mission and Vision The corporate mission is an organization’s reason for existence or purpose for being. Some conglomerates have more than one mission to reflect different missions for different industry sectors. Knowing “what business you are really in” is key to an organization’s survival and growth. For example, railroads stopped growing because they defined themselves in the train business instead of in the transportation business. To create success, an organization needs to define itself in terms of the market and the customer, rather than the products or services it offers. The corporate vision delineates the organization’s aspirations and goals. While the mission concentrates on what the organization needs to do in the immediate future for growth and success, the vision provides a blueprint for the organization’s long-term viability. It’s how you see the organization 3, 5, even 10 years from now. The corporate vision keeps you on course as you make decisions and plans that affect the company’s future. Define the Business Strategy Business strategy is a company’s plan for competitively positioning its products or services with the intent to accomplish or support corporate mission and vision goals. Business strategy drives HR philosophy and total rewards design. Business strategy elements include: Pricing. Quality. Product innovation. Service excellence. Market responsiveness. Required rate of return. Cost structure. Target market. Marketing and sales. Production. Finance. Product design. Differentiation from competitors. Distribution. Define the HR Philosophy and Strategy The HR philosophy consists of management’s values and beliefs about its approach to the employee relationship. Both HR philosophy and business strategy are key components to the development of an HR strategy. HR strategy consists of the organization’s overall plan for recruitment, retention, and talent management of employees. The total rewards strategy follows from the HR strategy. It consists of the plans that will be used to support the organization’s HR strategy. Define the Total Rewards Philosophy Statement The total rewards philosophy statement expresses management’s values and beliefs about total rewards. The process of developing a statement unifies management’s thoughts about total rewards programs. The total rewards philosophy statement serves many purposes: Communicate commitment and expectations to employees. Facilitate HR plan design. Serve as a reference point to measure the success of total rewards programs. Reinforce company culture and goals. A starting point to develop a total rewards philosophy statement is to ask broad questions about current rewards programs, the organization, its culture, and its employees. Answering these questions thoroughly and systematically can generate the essential elements of the philosophy statement. What is the company culture and environment? What needs to be done to attract, motivate, retain, and engage employees? What are your objectives? (In employment? Retention?) What is the role of HR? (Attracting employees? Retaining employees? Increasing employee satisfaction? Achieving the organization’s performance goals?) What are the company’s performance goals? What cost constraints on the total rewards program can be defined in terms of profit or revenue and expense? Once these questions are answered, it’s time to begin putting together the total rewards philosophy statement. Components of that generally include: Program objectives. Desired competitive position in the labor market (often stated as a percentile of the market). Values regarding factors that should be considered in maintaining internal equity (identification of compensable job factors, the relationship of pay and performance and the relationship between pay and tenure). Values regarding total rewards communication (open versus secretive). Values regarding benefits cost sharing. Desired mix of total rewards elements. The total rewards philosophy statement should be communicated widely and regularly. Employees should understand the statement. They should have the opportunity to discuss the philosophy, ask questions about it, and give management feedback. Define Your Total Rewards Strategy The total rewards strategy determines detail beyond that provided in the total rewards philosophy. It narrows the HR strategy to the specific plan with regard to the total rewards mix that supports the HR philosophy and strategy. The total rewards strategy identifies: The optimal mix of total rewards elements for each employee group. The mix may be high in some elements and low in others. For example, more organizations are moving toward placing a higher emphasis on work-life. In addition, the life cycle of the business can affect the mix. In a high-tech startup, there may be a cash shortage, so wages and benefits may be low, but stock options and work-life may be high. The manner in which each element will be earned and allocated (performance versus entitlement, individual versus group incentives, fixed versus flexible benefits). Appropriate labor market segments for each employee group in which the market is identified according to industry, size, geographic location, or performance. Desired competitive position in the marketplace for each employee group. Many companies want to offer a rewards program targeted at the 50th percentile in the market. However, the average in one market may be considered high or low in another. Therefore, it is important to define the marketplace in which the organization operates. Without a sense of vision and overall strategic direction, people don’t feel as invested in what they’re doing. Therefore, as the total rewards strategy is defined, it is important to remember how it will be viewed and embraced by key players, both within and outside of your organization. (Chapter 3 elaborated on the critical formulation of a total rewards strategy.) Key stakeholders include: Senior management/board of directors. This group needs to approve and be willing to support the philosophy and strategy. They also are important for buy-in and ownership. HR leadership. This group articulates the HR philosophy and strategy, while its staff facilitates the process. Employees. Internal, external, or exit surveys may provide guidance in identifying the relative importance of total rewards elements to various employee groups. Outside consultants. If outside consultants are used, they should work closely with HR to facilitate the process.