Six Reward Principles

1.   Create a positive and natural reward experience.

Leaders must take care, early on, to communicate and educate people on the reasons for changing rewards and the advantages to the workforce and company. Involve people in the change process to gain their understanding, acceptance, and commitment.

2.   Align rewards with business goals to create a win-win partnership.

Both the company and people need to gain from the relationship. People who contribute to the organization achieving goals share in the success. To ensure a balanced win-win partnership, the company must provide clear direction, people must continue to add value, and the company must acknowledge their value with rewards.

3.   Extend people's line of sight.

Involve people in extending their line of sight to how they influence the results of their team, group, business unit, and company. Engage people in understanding how what they do affects the customer and how they can adapt to evolving customer needs. Ensure that everyone is a knowledgeable stakeholder in overall success.

4.   Integrate rewards.

Use each reward tool for what it does best. Take an overall perspective of not only total pay but also total rewards when determining rewards for people. Create a customized better workforce deal from total rewards.

5.   Reward individual ongoing value with base pay.

Use base pay to reward three dimensions of individual value: (1) the skills and competencies needed by the company and used by the individual to generate results, (2) the individual’s consistent performance over time—whether individual contributions or contributions to team results, and (3) the individual’s value relative to the labor market.

6.   Reward results with variable pay.

The bottom line is that the company needs results to meet shareholder expectations and provide a compelling future. By rewarding the workforce for achieving results, variable pay (cash and equity) creates stakeholdership and a win-win relationship between people and the company so that both share in success. Variable pay is best suited to reward results because it is agile, flexible, adaptable, responsive, and able to focus on key measures of success.