Reward Management Case: Green Fingers Garden Centres

Executive Summary

This paper provides a proposal for a reward management system for a new company called Green Fingers Garden Centres. Because the company is new and is not yet known by the majority of prospective employees, the management team should design a reward system that will be more attractive compared to the competitors’ offerings. Therefore, a Total Reward System may be a suitable option to implement.

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Integrating a Total Reward System into the company is a costly venture. However, because of the risk of losing talent to more renowned counterparts and a possible challenge of failing to acquire required employees, the company should invest in this system that is going to profitable in the long run. The system is comprised of five elements, but only three of them are considered in the proposal – compensation, benefits, and development.

The basic pay should be higher than the market average because the company is new and unpopular. People do not yet have confidence in the company because it has not yet proven that it can operate stably. In addition to the base compensation, the company should offer variable payments for individuals that perform well and achieve set objectives. To retain executive talent, short-term and long-term incentive payments will be provided. For the benefit component of the Total Reward System, the company will offer a defined benefit pension scheme to attract more employees. Among benefits, the company may also offer parental leave payments and employee discounts. The development component is comprised of payments for training and courses.

Introduction

Attracting and retaining top talent aligns with the organizational strategies of all companies. To meet the company objectives, enterprises should not only have enough financial resources but also should have suitable human capital at their disposal (Afsar, Badir, and Khan, 2015). However, to ensure that companies need to make sure that employees are motivated to stay in the company and are driven to perform well (Iles, Preece, and Chuai, 2010).

Financial compensation is the primary factor that motivates employees because any work is essentially an exchange of employer’s money for employee’s skills and effort (Sung, Choi, and Kang, 2017). Because of tight competition in the human capital market, it is critical to design a compensation scheme that will attract top talent and ensure these employees stay with the company for many years (Fang and Gerhart, 2012). Therefore, enterprises started integrating reward strategies into their overall corporate strategy (Kim and McLean, 2012). This paper discusses a reward strategy for a fictional company called Green Fingers Garden Centres. It consists of recommendations and reasons for implementing this strategy.

Analysis

Environmental and Organizational Context

Green Fingers Garden Centres is a new company that is yet to open its first facility. Therefore, the company should consider many environmental factors that will influence the reward strategy of the company (Nazir, Shah, and Zaman, 2014). Because the company will need to attract its first employees, it will have to offer more benefits than the competition (Lin, Liang, Chiu, and Chen, 2019). Otherwise, established brands will lure away the candidates only because of their strong identity (Kim, Aryee, Loi, and Kim, 2013). There are more than a hundred garden centers in the UK, and at least a dozen of them are chain companies. Therefore, the competition is stiff and is not likely to reduce.

Besides competition, government regulations also influence reward strategies (). For instance, the government of the UK imposes a minimum wage that differs between different age groups (Employee earnings in the UK: 2019, 2019). For example, current rates are at 8.51 pounds per hour for employees older than 25 and are set to increase in 2020 (National minimum wage and national living wage rates, 2019, para. 3). Because of this amount of minimum pay, employees will unlikely to get interested in the company if the payment is not higher than the minimum wage because this amount is guaranteed elsewhere (Rana, 2018).

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The company will consist of several departments with related administrators and team leaders. The majority of the staff will consist of sales personnel, and about a quarter of employees will work on a part-time basis. Therefore, the HR department has to develop a strategy that will be performance-based to make sure that sales personnel motivate each other (Xavier, 2014). The strategy should also clearly differentiate between full-time employees and part-time workers.

Overall Reward Strategy

There is a strong link between organizational success and its reward strategy (Gerhart and Fang, 2014). The literature also indicates that companies are more likely to achieve their business objectives if they approach reward management holistically (Brown, 2014). Among different approaches, a Total Rewards System is the most suitable for the company because it will not only attract top talent but will also contribute to the development of junior employees so that they grow and stay motivated to work for the company (Brown, 2014). Statistics show that the most prosperous organizations are the ones that invest in their employees (Banker, Darrough, Huang, and Plehn-Dujowich, 2012). Such workers are more likely to have more dedication to work for the company and perform well (Yan and Sloan, 2016).

The Total Rewards System is comprised of five components – compensation, benefits, recognition, work-life balance, and development (Brown, 2014). Compensation includes variable pay schemes besides the base pay (Brown, 2014).

Studies have shown that incentive pay may have a positive effect both on the commitment and competence of employees (Gerhart and Fang, 2014). However, the management should understand that incentive pay is only adequate when organization-wide incentives are equal among employees and do not discriminate between roles (Hong, Li, and Minor, 2016). In this case, all employees will equally be more committed to their work (Gerhart and Fang, 2014). Alternatively, individual-based incentives without intensification of the work process should be considered (Gerhart and Fang, 2014). Paying only for extra hours was proven to be ineffective and sometimes deteriorating employee satisfaction (Gerhart and Fang, 2014).

Recommendations

Appropriate Base Pay Structure

The primary objectives of the Total Rewards System are to ensure that top talent remains and that junior workers develop into skilled employees (Brown, 2014). For these reasons, it is most suitable to use the broad-banded structure for the base pay. The first reason to use this structure is tight competition in the market. The company should be able to respond quickly to changes in pay policies of other companies to prevent experienced employees from joining the competitor (Gerhart and Fang, 2014). The second reason is that this structure places a significant focus on career development – this structure is suitable for motivating employees.

The company is a new player on the market, and therefore it is impossible to attract new employees only using the brand name. The company should offer a basic pay that is above the market average. This approach will result in more expenditure, but it is necessary to get distinguished in the job market. Failure to offer a higher basic wage will have negative results (Gerhart and Fang, 2014). For instance, experienced personnel may consider a job at the competitor company because candidates often seek work at companies that are stable and are likely to operate successfully in the coming years.

Variable Pay Schemes

Incentive payment schemes will not be the same for all employees, but instead should be differentiated depending on their roles (Gerhart and Fang, 2014). Sales personnel should be motivated by providing them with extra income based on their performance. In other words, the more they sell, the more they earn. Team leaders, however, should get team-based rewards based on the performance of their teams. There is evidence that collective rewards do not result in a performance increase; therefore, collective rewards should be offered to regular employees (Bolino and Turnley, 2008).

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Senior management and administrators should be motivated by long-term, and short-term incentive pays (Banker et al., 2012). This scheme is very popular in many public corporations and is proven to be an effective approach for retaining top talent (Banker et al., 2012). The company should establish a list of key performance indicators and set target values for one-year and 3-year periods. If these organizational objectives are met, managers receive these additional payments (Cai, Jo, and Pan, 2011). Executive compensation is a popular topic in public, and many believe that senior managers receive too much money (Rost and Weibel, 2013).

However, from the investor perspective, excellent performance should be incentivized to motivate key workers further to perform even better (Xavier, 2014). Investors’ primary objective is to maximize the return on their investment, and it is only possible when competent executives are in place (Xavier, 2014).

Employee Benefits and Pension Schemes

A defined benefit scheme is a suitable pension scheme for the company because it benefits both the employer and the employee. From the employee’s perspective, this scheme is attractive because there is a guaranteed amount of pension (Anand, 2017). From the employer’s perspective, who is seeking to attract and retain talent, this scheme encourages employees to stay (Anand, 2017). However, because the company will be obliged to pay a guaranteed sum, there is a certain amount of risk, but this risk is necessary to achieve organizational objectives (Anand, 2017).

The fourth component of the Total Rewards System is development. Therefore, the primary benefit offered by the company’s reward system should training and education fees or opportunities. For instance, the company may offer its employees a certain amount of money that they can spend on approved courses that will benefit not only the employee but also the company. These courses may include sales training, management courses, customer relations training, or other specialized courses. Studies have shown that such benefits make employees feel that they are cared for and contribute to an increase in dedication and commitment at work. Therefore, the company should emphasize the importance of development and provide all necessary means for the professional growth of its employees.

Non-financial Rewards

The company may consider several non-financial benefits it can offer to its employees. Any benefit is additional spending for the employer. However, certain benefits are required to ensure that the company’s image is kept positive. For instance, parent leave payments for administrative personnel should be considered. Other advantages may attract new employees with no high costs to the company. For example, providing employee discounts on the center’s products is one of the options.

Conclusion

Reward strategy is a critical aspect of the company’s overall strategy. Despite its significance, many enterprises tend to overlook this crucial element and eventually fail to retain key workers. As a result, performance declines, and the company fails to meet its business objectives. There are many approaches to designing a reward system that integrates well into the organizational strategy. However, each reward system should be developed according to the company’s unique needs. In this paper, a fictional company Green Fingers Garden Centres was used as an example enterprise, and a suitable compensation system was proposed.

As the basis, the Total Reward System was used, and each element of the strategy was described briefly. The company should offer a basic payer that is higher than the market average to attract new talent. This approach is necessary because the company is not yet well-known in the job market. Individual-based incentive payments and other benefits in terms of career development opportunities should be provided to retain top performers. Key persons from the management team should be incentivized by short-term and long-term bonus payments. This strategy will ensure the company will have enough competent human capital to meet its business goals.

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Reference List

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