Total Reward Strategy: What Are You Rewarding and Why?

‍Why a more deliberate approach to Total Reward matters for business performance.

For most businesses, people are one of their biggest investments. Yet the way organisations reward their people often develops over time, through ad-hoc decisions rather than a clear strategy.

A salary increase to retain someone important, a bonus introduced to recognise performance or a new benefit to attract talent. Each decision might make sense at the time, but together they can create a reward offering that hasn't necessarily been designed with the bigger picture in mind.

At Humankind, we believe there's an opportunity to be more deliberate about how businesses reward their people, making sure that investment supports business performance, reflects what employees really value and is financially sustainable.

Looking beyond remuneration

When businesses think about rewarding their people, the conversation often starts with remuneration. What are we paying? Is it competitive? Can we afford the next round of salary increases?

But we think there's value in looking at reward more broadly.  

Total Reward is the full, tangible financial investment an organisation provides to its people, including salary, KiwiSaver contributions, leave, benefits, professional development and incentives such as bonuses or employee share ownership.

It's an important element of an organisation's broader Employee Value Proposition (EVP), which also includes the leadership, culture, purpose and opportunities that make it an attractive and meaningful place to work.

For example, an organisation might spend considerably on benefits that employees rarely use, while facing pressure to increase salaries. Or it might have incentives that reward short-term results when sustainable growth is the priority.

Spending more on reward doesn't always translate into greater value for employees. Understanding what people value is a good place to start.

What are you actually rewarding?

How people are rewarded can significantly influence what they prioritise and how they work. That's why finding the sweet spot of mutual value matters.

Take a business focused on growing revenue. Its sales team might be rewarded for winning new customers, but if profitability and customer retention are equally important, the incentive structure needs to reflect that.

The same applies to a business trying to encourage greater collaboration while predominantly rewarding individual performance.

For growing businesses, longer-term incentives such as Employee Share Ownership Plans (ESOPs) can also be worth considering. They can give employees the opportunity to share in the future value they help create, while supporting retention and longer-term commitment. As with any incentive, their effectiveness depends on what the business is trying to achieve and how well the scheme is understood.

This is where having a clear reward philosophy and principles becomes valuable. Agreeing what the business wants to recognise and reward gives leaders a clearer basis for making decisions and reinforcing the behaviours that drive performance.

Finding the balance as businesses grow

There's no single Total Reward approach that will suit every organisation. What's appropriate depends on the business, its financial position, the talent it needs and what employees value.

Some businesses might choose to pay above market for critical skills, while others may offer competitive salaries alongside development opportunities or longer-term incentives.

As organisations grow, reward decisions that were once relatively straightforward can become harder to manage. Individual arrangements made by founders or senior leaders can lead to inconsistencies between roles, while increasing salary costs create greater pressure to make sure investment is sustainable.

Having clear principles and processes helps leaders navigate these decisions fairly and consistently, while giving them confidence to explain how reward decisions are made.

It's also important to understand whether the current approach is working.

Design with employees and seek their feedback on what matters most to them. Review benefits uptake, retention data and market benchmarking as it all provides useful insight into what people value, where there may be gaps and whether reward is delivering the intended outcomes.

For CEOs, this means looking at reward as an ongoing business investment, rather than something that is reviewed only when salaries come up for discussion.

How we approach Total Reward at Humankind

At Humankind, we've developed a Total Reward framework to help organisations take a more deliberate approach to reward. It considers seven areas: affordability, reward strategy, pay structure, benefits, incentives, communication and governance.  

It provides a practical way for us to work with leadership teams to understand their current approach, identify opportunities for improvement and prioritise where to focus.

For one business, that might mean reviewing salary bands or benchmarking remuneration. For another, it could mean reconsidering incentive structures, reviewing existing benefits or giving managers greater confidence in how they make and communicate pay decisions.

The focus is on understanding the organisation's particular context and developing an approach that works for both the business and its people.

A question worth asking

For CEOs, there are four useful things to consider when reviewing their approach to Total Reward:

• Value: Are we investing in the aspects of reward that our people value most?

• Performance: Are we rewarding the behaviours and outcomes that matter to our business?

• Sustainability: Can we afford our current approach, and are decisions being made fairly and consistently?

• Future fit: Are we designing our EVP and Total Reward with our employees of today, while keeping an eye on the employees of the future?

You can download our EVP Design Framework as part of Foundations for Going Global, a talent playbook for scaling from Aotearoa, developed with Icehouse Ventures, here.  

If you were designing your approach to reward today, would you make the same decisions? If that question has you thinking, get in touch with Humankind. We can help you understand where your reward investment is delivering value and where to focus next, so your approach works for both your business and your people.

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