By Professor Emeritus Stephen J. Perkins, Global Policy Institute, London and London Metropolitan UniversityTo make sense of findings from the results in the CIPD 2019 Reward Management Survey report, a useful starting point is to ask how they evidence an answer to the following question: what is the purpose of paying people to work in organisations? There are shifts and continuities in the response put forward by academics over the years. But the classic text, written for the Engineering Employers’ Association and published 50 years ago this year, Lupton and Gowler’s (1969) Selecting a Wage Payment System, is instructive.
Adopting the standpoint of the manager, a payment system can be summarised as ‘a way of so influencing the behaviour of workers that the purposes of the organisation, as the manager interprets them, are efficiently served’. The qualification put forward to this claim is that ‘the human being is more intractable than the raw materials or the machine’, so the manager may offer incentives to induce the worker’s cooperation (“to work hard and effectively”), but within limits to perceived value of ‘incentives’ available.A leading analyst of the ‘new pay’ school of thinking (Gomez-Mejia, 1993) puts forward three core principles to shape the direction of pay management, each deemed to be competing and hence ones that managers might put different weightings on: business strategy, internal equity, and external equity.In the 1980s and 1990s the first of the three came to be prioritised over the other two. There is, however, a corrective: ‘fairness’ of treatment is likely to play an important part in generating the kinds of employee attitudes and behaviours needed to further business goals (Kessler. 2007). How managers interpret organisational purpose and what they decide to do, may be viewed as a critical intermediating factor as to whether successful or unintended outcomes follow. To fulfil corporate purpose, the processes and the people involved need careful attention when balancing strategic choices.These are the kinds of consideration that, along with what we have learned from previous reward management surveys, informed the basis on which the 2019 exercise introduced new questions and gathered opinion from a sample of UK employees as well as from a managerial perspective. Perhaps unsurprisingly, a more devolved policy context for managers to make pay decisions is evident in small and medium sized organisations. Greater corporate-level controls on what line managers are expected to do day to day features in larger ones. Communication of what the organisation intends employees should understand about the purpose of pay is generally emphasised in survey responses. And here it is worth pausing on the formal versus more intuitive assessment respondents give of how capable managers show themselves to be in carrying out their pay management tasks. In ways that amplify perceived shortcomings.And even more strikingly to contrast the view among employees with opinion from a managerial perspective. It’s not just that managers may not be viewed as very effective in communicating around pay. For a large swath of the workforce there seems to be a complete lack of it. A finding that ought to give policy and processes designers pause for thought, to seek improvements. Especially as, when the workforce does feel engaged with line management, people show greater contentment with the decisions being made around individual pay outcomes.At a time when disquiet about inequity between most employees and those in top management roles remains heightened, developing better comprehension of and processes for getting the balance right between corporate strategic intentions and fairness internally as well as externally in pay management demands attention. As the CIPD put it recently: ‘success is a collective endeavour - disparities risk undermining trust and, in turn, workforce engagement and productivity’. However, the 2019 reward management survey evidence suggests that active risk management among the sample of organisations who responded is not given the priority it merits. Even getting a clear and common understanding across the organisation about what ‘fairness’ means in the local context lacks prominence; and where there is a definition, organisations seem to discourage line managers from discussing it with their subordinates when talking through the outcomes of pay management decisions.Given concerns about ongoing problems derived from the gendered nature of managerial structures and practice, it is worth adding here the risk illustrated by the negative survey evidence of getting managers involved at the crucial employee-front-line-manager pay management nexus the higher the proportion of women in managerial roles. This despite a parallel finding that fairness gets a greater airing inside organisations that have more female managers. Here is a topic that HR professionals may wish to take to the board to challenge the status quo and encourage reflection and adaptation. Questions for corporate management and their HR teams are prompted too by the finding that it is in private services sector organisations that perceptions of fairness in pay management outcomes are most positive. Is it something about differences in the climate of what needs to be done in those settings - perhaps with a heightened sense of ‘keeping customers satisfied’ - that plays a part? Compared with settings that may be viewed as more bureaucratically or otherwise remote from the consumer interface. Reflection on these questions and possible lessons learned have consequences for the factors that organisations emphasise in briefing and training line managers in fulfilling their responsibilities at the employee pay interface.Summing up, informed by the findings of the 2019 survey, corporate management attention is directed towards:
• creating an infrastructure to balance strategy, reward and risk;• developing front-line manager capability, if not in pay system design, then at least empowering them to engage with individual employees in continuous, properly informed dialogue around what goes into pay decision making, striking a fairness-strategic alignment balance; and• having an honest debate about questions of gender and management in the pay arena, and whether there are positive lessons to be learned from practice among those working closely in customer service settings.
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Hi, thank you so much such a interesting article.
thank you Stephen, as insightful and thought provoking as always
A thought-provoking report. I was particularly interested in the developing (problematic) interconnections between communication, fairness and the publication of CEO pay ratios. The report notes that just 20% of employees feel that there CEO's salary is 'about right'. The disclosure of the ratio of CEO's pay to the median within a company will increase the availability of this metric. However, without the provision of a coherent and grounded narrative that goes beyond reference to market forces, I fear that little substantive progress in perceptions of the equity of executive pay will be secured. Employee perception of the 'fairness' of executive pay will, at least in part, depend on the construction of convincing arguments as to how the external factors determining executive pay can be reconciled with the internal policies and processes that characterise the employee experience of working within their organisation. The report highlights the immediacy of this task given regulatory developments, and the importance with respect to trust within organisations. This may well require the development of a new mode of narrative engagement, as the traditional rhetoric of company reports is designed to answer the concerns of investors rather than employees.
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