At a glance
Key Learning Points
The benefits of employing reward management strategies
The aims of the strategy are to enable a business to;
- encourage value-added performance from it’s employees to support the business in achieving its goals, and,
- compete in the global labour market by retaining high-quality staff.
Reward management strategies don’t have to cost money
While money may be a motivator, studies have concluded that opportunities for personal development are far more appealing to people when they consider whether they are content working for their employer.
Reward management in young, lean businesses
Small businesses are in a much better position to employ strategies which provide extrinsic motivation for their staff. In practice, this is providing staff the opportunities to take on additional responsibilities and grow a body of experience much faster than they would be able to if they worked for a larger organisation.
If you, as a smaller business owner, capitalise on that fact and focus on it in your recruitment strategy, it can help you to attract and retain skilled, motivated staff that can provide better-rounded value for your business.
In my recent interview with Cha Lounge owner Mandeep, she suggested an article on the topic of motivation and encouraging the best performance from her staff. An excellent but meaty subject!
To help me prepare, and make sure that the content would be as useful as possible for Mandeep and others like her, I decided to make the most of my employment at the University of Leeds and head to the library! Moseying around the deep regions of the business studies section, I happened to get talking to a lecturer that recommended an excellent book called ‘Reward Management: A Handbook of Remuneration Strategy and Practice’.
Despite the edition of the volume I picked up being published in 1993, he assured me that the fundamentals of reward management had remained the same, and that the book was still on the syllabus for many-a-student studying management or business across the world.
So let’s start at the top, what is reward management and how is it a useful concept for growing a business?
At it’s core, reward management is a tool for business owners to illicit impactful change on the way their business or organisation manages its human resources. It’s objectives are numerous, but the ones I’ve found most relevant are;
Encouraging value-added performance from employees
By doing so turn, positively impact the business’ ability to achieve its goals;
Support culture management
As expressed by the value it provides in the areas of performance, innovation, risk-taking, quality, flexibility and team working;
By providing them with the authority, skill and means to use rewards that help their team achieve their goals;
By using the reward system to raise performance and quality through empowering staff so that they have the scope and skills required to succeed and be rewarded;
Competing in the labour market
By attracting and retaining high quality people.
So the core principle behind Reward Management is that it deals with the strategies required to make sure that the contribution of people to the business/organisation is recognized by some means. Successful reward management is about designing, implementing and maintaining a reward system which serves to encourage behaviours that help the business to achieve its strategic goals.
Writing that, I imagine the first concern any owner of a lean growing business likely has is; ‘how this can be useful to me if I don’t have room for budget allocated to staff rewards?‘
Fear not, valued reader, this article is written with you in mind.
This is because reward management isn’t just concerned with pay and employee benefits. It places equal emphasis on non-financial rewards, ones which provide what the authors describe as intrinsic or extrinsic motivation.
Intrinsic motivation is motivation from the work itself
It’s achieved by satisfying an individual’s needs for achievement, responsibility, variety, challenge, influence in decision-making and sense of belonging to a supportive team.
Extrinsic non-financial motivation is what’s provided to them directly by the organisation through means other than monetary incentives
It’s motivation that’s achieved through recognition, skill development/learning and career opportunities.
As a growing business, while you might not be able to provide financial incentives in the same way as larger businesses, you’re in a far, far better position to employ reward management strategies which meet your staff’s need for intrinsic and extrinsic motivation to drive performance.
Small businesses, by their nature, can’t operate in the same ways as their larger counterparts. Where a larger business identifies that the management of a new task needs to be performed on a regular basis, they will create a role and hire someone to manage that responsibility (providing that the cost of filling that role is justified by the output).
In a smaller business however, unless that same responsibility is business critical, no new staff will be brought on to manage it until the business has grown to the point of financial security where it take on additional staff.
As such, there’s a huge scope for existing staff to start taking on responsibilities outside of their core duties and develop a body of professional experience which they would be unable to do elsewhere.
That’s incredibly valuable for workers, especially in the current employment market where experience is generally valued above any other attribute in potential candidates amongst employers. Own that. Make sure you’re completely aware of the fact that you offer this type of value, and take every available opportunity to make sure that your staff are aware of it too.
Have someone who’s interested in all things creative? Well why not have them take a look at working on your Instagram page, creating blog posts for your website or providing photography for events?
Someone else fancies marketing? They could look into social media marketing, networking with local bloggers or performing market research to help widen your audience.
Management or logistics more their thing? Cool, why not start introducing them to managing inventory, dealing with suppliers or leading team meetings?
These are opportunities that you can provide, in service to your business which benefit your staff in a way that they simply couldn’t find in any other type of employer. What you might not be able to reward in terms of monetary compensation to encourage certain behaviour types you can reward 100-fold by way of opportunities for learning, development, innovation and team-working.
This is also something to advertise as part of your recruitment process, ensure that potential candidates know about the potential scope of the role, and the kinds of career development opportunities you’re offering.
Doing so helps to ensure that you attract people that aren’t just looking for a steady income, but motivated individuals who are looking to actively contribute to your business for mutual benefit.
A company which does this exceptionally well is Monzo, take a look at this screenshot from a vacancy advert for a Data Protection Officer on their website;
In particular, the first two questions do a fantastic job of demonstrating the type of candidate they’re looking for and the scope for freedom in the role without having to even explicitly state it.
They demonstrate that the company encourages an open dialogue with candidates as to how best policies can be implemented within their operation, with honest feedback being valued and openly considered.
Still unsure whether or not this all sounds like wishy-washy nonsense?
Let’s take a look at Maslow’s theory on the hierarchy of human needs as published in his still extremely popular paper “A Theory of Human Motivation”. In it, after extensive study, Maslow concludes that self-fulfilment or self-actualisation is the highest need of all and the ultimate human motivator.
You know where money places? Fourth, under the heading ‘Security‘ (i.e. financial security). This isn’t to say that money isn’t an important factor for most people, ask anyone if they want to earn more and they’re going to say yes. But what Maslow is saying most motivates and drives people, is something which provides a sense of self-fulfillment.
Self-fulfilment, he defines as ‘the need to develop potentialities and skills, to become what one believes one is capable of becoming’.
Ambitious and determined people will seek and find these opportunities for themselves, though it’s imperative that the organisation clarifies the scope for growth and development it can provide (if it does not, they will go away and grow elsewhere).
Increasingly, however, individuals at all levels of organisations, whether or not they are eaten up by ambition, recognise the importance of continually upgrading their skills and of progressively developing their careers. This is the philosophy of continuous development – appealing to that need in your staff is an excellent method for ensuring they provide the maximum value for your business and towards its success.
In making use of this advantage, you can provide intrinsic motivation in the form of responsibility, variety, challenge and influence as well as extrinsic motivation through development, learning and career opportunities.
Ultimately this serves to provide four key benefits for you;
You are encouraging your staff to actively look for opportunities to take on additional tasks which will help support your business, and in doing so, align the behaviour of your staff with achieving your business goals;
Encouraging employees to seek out and take on additional responsibilities allows you to expand the scope of your current operation without being forced to manage the cost of an additional salary;
You create a positive, supportive team-environment which encourages innovation, quality and performance;
You attract, retain and develop high quality people.
So I hope I’ve somewhat provided some information on the basics of reward management theory; the question then becomes, how are reward management strategies of use for start-ups or growing businesses?
My view is that they offer a fantastic means of motivating and getting the maximum value from your staff and that, in the context of a leaner business environment, they can be employed without the requirement for additional financial burden.
Ultimately, this is because the conclusions of many studies in social sciences determine that factors such as self-fulfilment, recognition, skill development and empowerment play a much larger role in motivation and an individual’s sense of employment equity than monetary compensation does.
To fully employ these strategies will undoubtedly be a time-consuming endeavour, as the business will need to spend time mapping out potential new responsibilities and making colleagues aware of them. However the benefits that employing such strategies can have on your staff and business are significant and potentially far-reaching.
At the very least, it’s worth a shot right?
Sorry if I butchered Reward Management Theory for you, but if you’d like to read more, I absolutely recommend checking out the book. The lecturer who told me about it gave the great advice of going for a pre-owned, earlier edition copy of the book. He explained that little of substance is changed in newer versions but they cost a lot more. To buy the same edition as me, you can literally pay 1p on Amazon and just cover the cost of postage.
Point in case, I paid £1.67 for my 1993 edition whereas the 2015 edition will set you back a lofty £40.
What do you think about Reward Management? Any merit to the idea in context of a growing business? I’d love to chat with you about it!