Development opportunities top factor in reward fairness: Study

Reward communications most effective way of improving perceptions
||Last Updated: 07/25/2011

When it comes to reward fairness, it’s neither total pay nor salary increases that have the biggest impact on employees’ perception, but development opportunities, according to a new study released by WorldatWork and Hay Group.

The report, Reward Fairness: Slippery Slope or Manageable Terrain? reveals the top five concerns in reward fairness are:

•career development opportunities
•merit increases
•base pay amounts
•non-financial recognition
•employee development and training

“Reward professionals view career development opportunities as the top reward fairness concern because growth opportunities are in high demand by employees, while at the same time, career development processes are not particularly developed in many organizations,” said Tom McMullen, Hay Group’s North American reward practice leader. “Career development concerns are also the number one retention issue for employees, according to our employee opinion database.”

Surprisingly, variable pay, such as bonuses and incentives, was not among the top five concerns in reward fairness, found the study.

“Variable pay is likely not ranked as a top concern because a decent portion of these plans are based on corporate or business unit performance measures as opposed to individual performance measures,” said Dow Scott, co-author of the report and professor of human resources and employment relations, at the Graduate School of Business at Loyola University Chicago. “There are also fairly systematic reporting processes in place in organizations that provide periodic communications as to how these programs are performing, resulting in less ambiguity.”

The report also identified the top three criteria that impact reward fairness. These are:

•individual performance
•work responsibilities
•overall organization performance

“HR organizations would be well served to establish effective processes around job design and organization design, work measurement systems, person-role fit assessments and performance assessment processes,” said McMullen. “Improving these HR infrastructure processes should substantially enhance the perception of fairness in organizations.”

Effective reward communications was identified as the most effective way in improving the perceptions of reward fairness in organizations, followed by external benchmarking, reward strategy and design, and non-financial recognition programs.

“Communication is king in improving perceptions of reward fairness. The best organizations focus not only on the core messages to be communicated, but also the most effective messengers and channels,” said Kerry Chou, WorldatWork’s compensation practice leader. “In addition, these organizations devote significant energy to determining how to sustain core messages and equip managers to effectively communicate them.”

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