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Performance management

The role of performance management in a reward 

system  is  to  contribute  to  improving  performance 

by  providing  a  means  of  recognition,  influencing 

job  design  when  reviewing  role  responsibilities, 

setting  up  personal  development  plans  and,  when 

appropriate, informing contingent pay decisions.

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Chapter 

26

  Reward Management – Strategy and Systems

367

Reward strategy

Reward strategy defines what an organization 

wants to do about reward in the next few years 

and how it intends to do it. It may be a broad-

brush affair, simply indicating the general 

direction in which it is thought reward 

management should go. Additionally or 

alternatively, reward strategy may set out a list  

of specific intentions dealing with particular 

aspects of reward management.

Formulating reward strategy

The thrust of reward strategy is to provide the 

impetus for reward design and operation in order 

to achieve three major objectives: performance, 

competitiveness and fairness.

Implementing reward strategy

The aim of implementation is to make the reward 

strategy an operating reality by building the 

capacity of the organization to put into practice 

the proposals worked out in the development 

stage.

Key learning points: Reward management – strategy and systems

Reward philosophy

Reward strategy should be underpinned by a reward 

philosophy that represents the views of the organization 

on how people should be valued. This can be articulated 

as a set of principles that guide the development of 

reward strategy and the design and operation of the 

reward system.

Reward system

A reward system consists of the interrelated processes 

and practices of financial and non-financial rewards that 

combine into a total rewards approach to ensure that 

reward management is carried out to the benefit of the 

organization and the people who work there.

Financial rewards consist of job-based pay, which 

provides pay related to the value of the job, and person-

based pay, which provides rewards that recognize the 

individual’s contribution. They also include employee 

benefits and pensions and financial recognition schemes. 

Non-financial rewards focus on the needs people have to 

varying degrees for recognition, achievement, personal 

growth and acceptable working conditions.

Total rewards are the combination of the financial and 

non-financial rewards made available to employees.