Posted by Justine Woolf on 04 May 2023
Reward Strategy: How to avoid reward structures that can inadvertently encourage overwork and poor working cultures
At Innecto, we encourage our clients to really think about who they are as an organisation, and what they are wanting to achieve when we talk about defining culture. Once that has been established, we can begin to question whether the existing reward structures are supporting or impeding those aspirations.
A key challenge with reward structures is that they have often evolved over time without continuous or purposeful review. This can then result in clunky frameworks that hinder agility and bear little relation to the organisation’s current focus. Frequently, we see organisations wanting more flexibility or to be more market-facing, but find themselves unable to move away from incumbent frameworks that are deeply rooted in internal control requirements. This difficulty can also be compounded by a nervousness to change, particularly where job evaluation or pay frameworks are concerned because these are seldom quick fixes.
However, reward structures that are no longer fit for purpose leave organisations wide open to a host of issues, including complaints about fairness, an inability to recruit and retain talent and reduced productivity through demotivated and demoralised staff.
As mentioned previously, it's often sensible to take a step back and really question what you are trying to achieve – if the job evaluation process being used is not adding real value to the organisation, or is impeding agility, then the process should be simplified. An overly complex job evaluation process can lead to structures that focus predominantly on hierarchical progression, or are status driven, with too many grades and with promotion being the only way to grow pay. Robustness is an important factor in job evaluation, but not at the expense of the process.
Reward structures that are not fit for purpose can inadvertently end up driving the wrong behaviours which in turn have a negative impact on working culture. For example, a poorly designed bonus or commission scheme can cause competition between departments, teams, and individuals, driving a lack of collaborative working, leading individuals to pull in different directions that, while achieving their own targets, it is to the detriment of the business. Again, the purpose of the scheme needs to be questioned, and the unintended consequences resolved.
Recognition plays a huge role in creating a strong company culture, but as with reward structures, if it is not executed correctly, it can do more harm than good. Recognition that is seen as unfair, inconsistent in its application, or perhaps isn’t happening at all, can negatively impact working culture. To truly motivate our employees, we need to understand what drives them, and how this can be leveraged to positively impact the desired outcome. For example, if the aim is to drive collaboration, including employee input in making decisions and providing opportunities for peer-to-peer recognition can help facilitate this.
Communication also plays a big part in facilitating a strong working culture. Being open and transparent can help clear up any issues where perception doesn’t match reality. Simple acts such as sharing top-line stats can create clarity around what is and isn’t happening. Finally, good communication can hold leaders to account - leaders need to role model the behaviours they expect those lower in the organisation to demonstrate.
If you feel that the reward structures you have in place are inadvertently causing a poor working culture, it is time to question what these structures are saying to your employees now. Consider what you want them to say, and amend accordingly – structures that are not fit for purpose can be hugely detrimental, and the short-term pain of resolving this will be worthwhile in the long run.
