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|BM 0210 |
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|Reward Management |
|By Rebecca Ambler |

BMO 0210 – CIPD Reward Management

This assignment will critically evaluate reward philosophy, strategy and policy in Genix Healthcare Ltd. The Key economic, psychological and motivational theories that influence reward policies and practices will be identified as should the factors that influence employee satisfaction with our rewards and the reward system such as equity, fairness, consistency and transparency.

Overview of Company

Genix Healthcare is the UK’s fifth largest dental corporate company, founded in 2005 Genix was set up to address the shortage of NHS dentists in the UK by providing easy access to affordable dental care. In 2006, Genix Healthcare bought its first dental clinic in Garforth, Leeds. To support the local community Genix became the main sponsors of Garforth Town Football Club. By the end of 2006, Genix acquired six more clinics. One of these was in Conisbrough, Doncaster, where Genix worked closely with Doncaster PCT to give more than 3000 additional patients access to an NHS dentist. So far in 2012 Genix has acquired two new practices: one in Beeston, Leeds and another in the centre of Edinburgh - Genix’s first dental practice in Scotland.

Since Genix Healthcare’s opening in 2005, the Company now has 24 Dental Practices spread across the country. They go as far north as Edinburgh and as far south as Havant. Genix employ more than 250 employees across the UK, and around 90 dentists.

Genix has also improved their education programme by partnering with a new education provider to enhance their apprentices’ experience and training. The Genix Healthcare Apprenticeship Programme, run in partnership with accredited training providers, provides comprehensive training support for candidates on several apprenticeship programmes.

The apprentice programme offers training in Customer Service, Business Administration and IT (NVQ Level 2 and 3) together with an advanced apprenticeship in Dental Nursing (NVQ Level 3). After an induction candidates on the Dental Nurse Apprenticeship Programme will work in a practice, fully supervised by experienced Genix Healthcare staff. This will involve spending up to 24 months ‘chair side’ in a dental surgery.

Following successful completion of the apprenticeship, candidates will be a fully qualified Dental Nurses eligible to register with the General Dental Council as a Dental Care Professional. Further training through the ‘Genix Academy’ offers potential for candidates to take further education and progress to practice management and beyond.

Genix Healthcare’s Strategy, Objectives and Purpose.

Strategy
Genix is committed to further expansion over the coming years. Genix wants to help meet the ever-increasing need for affordable NHS, private and specialist services, while maintaining the highest possible standards of care and customer service for all their patients.

Objectives
Genix provide NHS dental treatment wherever they can secure a contract. When Genix acquire or set up a new practice, they always work closely with the NHS to try to increase the number of NHS places available or bring NHS dental services clinics that did not previously have them.

Genix is deeply committed to training and developing its dentists and employees to help them achieve their career objectives. Genix were the first dental corporate to introduce an apprentice programme, with the intention of creating highly trained and motivated staff and dental care professionals.

Purpose
Genix purpose is set out in their Mission Statement which is:

“We strive to fill the gap in dentistry by providing the highest quality treatment that is affordable and accessible at all, while ensuring excellent patient care”

Outlook

Whilst the market continues to be challenging for dentistry in the UK, with the pressures on NHS funding and consumer spending, the dental care delivery system itself has become increasingly complex not only is there a far greater range of treatments and increased legislation affecting care provision but also it has increased patient expectations. These developments increase the risks of adverse events occurring; i.e. failings within the system. With the loss of the national General Dental Services contract and the introduction of locally based commissioning of services through Primary Care Trusts, dental care services now need to lead their business to a far greater level than previously. Genix believe that they are well positioned to take advantage of further opportunities in the dental sector. In particular it will focus on:

• Delivering high quality care and the highest clinical standards • Optimising the delivering of existing NHS contracts • Increasing our portfolio through new practice acquisitions or opportunities to tender for new contracts • Implementing improved systems and processes to increase efficiency; and • Investing in our practices

Introduction to Reward

“Employee reward is about how people are rewarded in accordance with their value to an organisation. It is concerned with both financial and non-financial rewards and embraces the philosophies, strategies, policies, plans and processes used by organisation to develop and maintain reward systems”. (Armstrong, M. 2002)

Reward management deals with the strategies, polices and processes required to ensure that the contribution of people to an organisation is recognised by financial and non-financial means. The overall objective of reward management is to reward employees fairly, equitably and consistently in accordance with their values to the organisation in order to meet the organisation business goals and objectives.

Reward management should not just be about the remuneration package it is equally concerned with non-financial rewards such as recognition, learning and talent development, career opportunities and increased job responsibility. Five distinctive aims of reward management are to:

1. Minimise expenditure on wages/salaries over the long term 2. Motivate and engage employees, obtaining their commitment 3. Attract and retain staff to the organisation 4. Reward employees according to the value they create and encourage particular types of employee behaviour 5. Align reward processers with the business goals and objectives

The aims of reward management are achieve by developing and implementing strategies, policies, processes and practices that are fit for purposes and maximise organisational performance.

Elements of employee reward are categorised as follows;

• Direct pay base – Fixed salary or wage that constitutes the rate for the job. Providing the platform for determining additional payments related to performance, pension entitlement and life insurance. • Indirect pay (Employee Benefits) – Pension, company sick pay, insurance cover, company cars and annual leave • Non-financial rewards - Focus on the achievement, recognition, responsibility, influence and personal growth of employees

Schuler and Jackson (1987) indentified a model to indentify the generalised employee behaviours required to support strategy and the consequential reward policies. Schuler and Jackson were able to argue that different competitive strategies imply the need for different kinds of employee behaviour.

Schuler and Jackson 1987 Model

This model seeks to indentify the generalised employee behaviours required to support each such strategies and the consequential HR & reward policies.

|Business Strategy |Required employee behaviour |HR & Reward policies |Which resembles Genix |
|Innovation |Creative employees, focussed on the|Job design that stresses |The reward practices mentioned |
| |long term. |cooperation and team work |in this strategy are present in|
| |Need employees to be co-operative |Performance Management looks to |Genix as they have a string |
| |with each other and with others |the long term and rewards group |ethos of team working. The |
| |Quality fairly important |bases achievements |Company is not market |
| |Equal emphasis on process and |Reward systems emphasise |competitive with salaries and |
| |results |internal equity as more |therefore, has reward systems |
| | |important than |in place. |
| | |external/market-related pay | |
| | |Broader career paths | |
| | |Emphasise the development of | |
| | |skills | |
|Quality enhancement |Predictability of employee |Competencies may be used to | |
| |behaviour , could emphasise |indentify ‘high performance’ | |
| |compliance |employee behaviours | |
| |High concern for quality of output |Performance management is short | |
| |or service |term in focus | |
| |Less emphasis on quantity of output|Emphasis on results | |
| |No risk, process important and |Extensive development and | |
| |commitment of employees to |training | |
| |organisations goals | | |
|Cost Reduction/minimisation |Repetitive and predictable |Jobs are clearly and narrowly | |
| |behaviour |defined, with little scope for | |
| |Short-term focus |ambiguity | |
| |Emphasis on the individual |Career paths encourage employees| |
| |High concern for quantity of |to specialise in a narrow range | |
| |output, less concern for quality |of tasks to encourage efficiency| |
| |Stability, emphasis n results, low |Minimal training and development| |
| |risk-taking |Pay rates are geared to | |
| | |(low-level) market rates | |

Source: Adapted from Schuler and Jackson (1987) Reward Management in context

Employment and labour market – current financial environment

A reward strategy will be contingent on the internal and external environment and organisations will be aware of how much they spend on pay and benefits and want to know that they are getting value for money. However, HR departments will need to show that their reward practices are valid, and that they support the business. A reward strategy can also get blown off course due to changes in the external environment, such as new legislation or downturns in the market. For a reward strategy to work, you have to be able to articulate and justify what is being rewarded and why.

Reward management policy and practice are subject to a number of influences. As summarised below, these consist of contextual factors arising from the internal and external environment and conceptual factors relating to theories and beliefs about strategic management, total reward, human capital management, the factors affecting pay levels, motivation, engagement, commitment and the psychological contract.

The Internal Environment
The internal environment consists of the organisation's culture and its business, technology and people.

The External Environment
The features of the external environment are competitive pressure, globalisation, and changes in demographics and employment.

Strategic Management
Strategic management as 'the set of decisions and actions resulting in the formulation and implementation of strategies designed to achieve the objectives of an organisation'.

Total Reward
Total reward policies provide for a holistic approach to be adopted to reward management, which ensures that all aspects of reward are treated as a coherent portfolio of policies and practices.

Human Capital Management
Human capital management (HCM) is concerned with obtaining, analysing and reporting on data, which informs the direction of value-adding people management strategic, investment and operational decisions at corporate level and at the level of front-line management.

CIPD Reward Management annual survey 2012 found that two-thirds of organisations in their survey used some form of performance-related reward, incentive or recognition scheme. Individual performance is the most common criteria for determining pay progression, with over three-quarters of all respondents saying this is used in their organisations. Over half use market rates as criteria for progression while the least common criteria is length of service. Ability to pay, inflation and the movement in market rates were the top three most important factors in determining the size of pay reviews in 2011.

They also found that the top 6 reward approaches to employee benefits are:

|Reward Approaches |Percentage of |
| |respondents using |
|Flexible/home working |69.1 |
|Annual leave in excess of statutory |65.2 |
|Training and career development |65.2 |
|Childcare vouchers |62.7 |
|Free tea, coffee and cold drinks |62.3 |
|Christmas party or lunch |59.6 |
|On-site parking |56 |

From the above approaches Genix offer the following reward approaches:

• Annual leave in excess of statutory entitlement – Genix offer management up to 25 days annual leave • Training and career development – Genix offer dentists and dental nurses who work for Genix CPD events and courses such as implant and hygiene. • Childcare Vouchers – Genix offer a salary sacrifice childcare voucher scheme which is available through a Company called Busy Bee’s • Christmas party or lunch – Genix used to pay for head office lunch however, this benefit got removed last year however, Genix do pay for adhoc nights and the Christmas party for Head Office and each dental practice. • Free tea, coffee and cold drinks – Genix provide head office and each practice with free tea and coffee and they also provide head office staff with bottled water. • On-site parking – Genix provide free onsite parking at Head Office

What would make an effective reward philosophy, strategy and policy

Reward Philosophy
Reward management is based on a set of values, beliefs and principles that are consistent and in line with the organisation objectives. Reward philosophy looks to the long-term relating to how people should be valued for what they do and achieve.

Effective reward philosophies reflect and underpin a positive organisational culture; an organisation that recognises the value of people and rewards them accordingly. It provides management with guiding principles on how reward strategies and policies should be formulated.

Reward Strategy
Reward strategy provides a sense of purpose and direction, it links the needs of the organisation and its employees with reward policies and processers and defines how these should be developed to meet business needs.

An effective reward strategy has clearly defined goals and links to the organisation objectives and well designed pay and reward programmes which are tailored to the needs of the organisation, its employees which are integrated together.
The aims and objectives of any reward strategy from the outset must achieve the following: • Integration. Not only must the reward strategy fully support and complement the organisational strategy, it must also be integrated with other HR activities, such as Performance Management and Learning and Development in order to be successful. Policies which are created in silos usually can create conflict. For example, performance management objectives and competency measures which focus on team working and collaboration should be complemented by a reward strategy which recognises and reinforces team performance. • Improvements driven. The success of the reward strategy will be dependent on how well it drives individual and team performance, and ultimately organisational success. Measures including attrition/turnover rates, exit interview data and staff opinion surveys can build a picture of the effectiveness of the reward strategy. • Financial control. The salary bill is invariably the biggest overhead to any orgainsation. Reward policy must be sustainable even during more challenging economic times, in order to be successful. The ability to flex discretionary elements of pay, such as bonuses, is a key consideration.

Reward Policy
A Recognition and Reward Policy and Process should provide recognition and reward of individuals and groups of staff who make an exceptional (sustained or one-off) contribution to the delivery of the organisation or meets an exceptional shorter-term operational challenge. It should provide a coherent and practical approach to both recurrent and one-off payments to staff in order that individual contribution within a role may be recognised and rewarded in an equitable way.

Current philosophy, strategy and policy at Genix

At present Genix do not have an existing policy for a reward system to their employees. The current issues are:

• There is no documentation for reward management policy. • There are currently no KPIs (key performance indicators) for monitoring and rewarding for employee's performance activities. • Employee recognition is applied inconsistently. • Difficult to assess the employee performance and it's questionable. • Employee satisfaction stands at very low rate.

Financial and non-financial reward

In general, there is a widespread use of short-term bonus and incentive awards, either to encourage future performance (incentives) or to recognise past performance (bonus). However, there are variations by sector, with bonus and incentive schemes being much more common in the private sector. Of those with a scheme, the most common type is that linked to an individual’s performance, followed by collective approaches, the most popular being those driven by business results (such as profit or revenue targets) and combination schemes (combining both individual performance measures with collective measures, such as unit- or team-based). Most organisations have more than one scheme, with the average number per organisation being three. The advantages of variable pay is that, in theory, it only pays when there is something to pay out and it is generally not pensionable which means no additional on-costs. Many organisations use gift vouchers or arrange trips or experiences, while others find a simple ‘thank you’ from an individual’s line manager or the chief executive can have positive effects.

The factors affecting levels of pay influence pay decisions regarding the rate for the job, market rates and pay reviews.

• Motivation - Motivation theory is important as a guide to the use of contingent pay and the non-financial elements of total reward. • Engagement and Commitment - The concepts of job engagement and organizational commitment also provide guidance on total reward policies and contingent pay. • The Psychological Contract - It is necessary to understand what the psychological contract is and its significance when formulating and implementing reward policy as a key aspect of relationships with employees.

Financial Rewards
Financial rewards comprise any rewards that has a monetary value and add up to total remuneration – base pay, pay contingent on performance, contribution, competency or skill, pay related to service, financial recognition schemes and benefits such as pensions, sick pay and health insurance.

Financial rewards are mainly based on three motivation theories: Maslow’s (1954) hierarchy of human needs, Herzberg’s (1957, 1968) motivation-hygiene theory, and Deci and Ryan’s (1985) cognitive evaluation theory. All these theories reduce the role of money or extrinsic rewards as motivators. According to Herzberg (1968) money does not result in lasting satisfaction. People may feel good when they get an increase as, apart from the extra money, it is ways of making people feel they are valued however, different people have different needs i.e. some will be much more motivated by money than others. What cannot be assumed is that money motivates everyone in the same way and to the same extent.

Non-financial Rewards
Non-financial rewards are those that focus on the needs employees have to varying degrees for recognition, achievement, responsibility, autonomy, influence and personal growth. They incorporate the notion of relational rewards, which are the intangible rewards concerned with the work environment (quality of working life, work–life balance), recognition, performance management, and learning and talent development.

Non-financial rewards can be extrinsic, such as praise or recognition, or intrinsic, arising from the work itself associated with job challenge and interest and feelings that the work is worthwhile.

While pay and benefits are important, and getting them wrong can have dire consequences for the organisation, they are not the only rewards that employers should consider. Research shows that non-financial rewards can be just as important. These include: • opportunities for personal and career development • flexible working (such as working from home or flexi-time) • being involved in decisions that affect how and when employees do their work • a pleasant working environment • good performance management and appraisals • recognition, such as through an employee of a month award or team-based events.
Latham and Locke (1979) noted that: ‘Money is obviously the primary incentive’ but they went on to say that ‘money alone is not enough to motivate high performance.’ Money may be an important factor in attracting and retaining people (the sorting effect). It can produce satisfaction, but this may be short-lived. And if the principles of distributive and procedural justice are not followed, it can cause lasting dissatisfaction.

Reward schemes in Genix

Genix currently do not have any reward schemes in place.

Key economic, psychological and motivational theories that influence philosophy, strategy, and policy

Motivation theory examines the process of motivation. It explains:

• why people at work behave in the way they do in terms of their efforts and the directions they are taking • what organisations can do to encourage people to apply their efforts and abilities in way which will help achieve the organisations goals as well as satisfying their own needs

Arnold (1991) states that the three components of motivation are:

1. Direction – what a person is trying to do 2. Effort – how hard a person is trying 3. Persistence – how long a person keeps on trying

It can be said that money will motivate some people all of the time and, perhaps, all of the people some of the time. Money has to be reinforced by non-financial rewards, especially those that provide essential motivation. When motivation is achieved by such means it can have a more powerful and longer-lasting effect on people, and financial and non-financial rewards can be mutually reinforcing.

Recognition is one of the most powerful methods of rewarding people. Employees need to know not only how well they have achieved their objectives or carried out their work but also that their achievements are appreciated. Recognition needs are linked to the esteem needs in Maslow’s (1954) hierarchy of needs. They are defined by Maslow as the need to have a stable, firmly based, high evaluation of oneself (self-esteem) and to have the respect of others (prestige). These needs are classified into two subsidiary sets: first, ‘the desire for achievement, for adequacy, for confidence in the face of the world, and for independence and freedom’, and second, ‘the desire for reputation or status defined as respect or esteem from other people, and manifested by recognition, attention, importance or appreciation’.

Three topics that impact upon Genix

Pay Structures

The most common types of pay structure are:

• Graded • Broad banded • Pay spine • Job family • Pay curve • Spot rate • Individual job range

Genix currently does not have a pay structure in place for each department and the practices. When they have a new starter in a practice they will either put them on the same salary as the other nurses or dependent upon the individual’s salary expectations they will pay this within reason. The highest paid nurse receives £9 per hour. The apprentices within Genix are paid at the national apprentice rate of pay (£2.65) per hour and once they have been on the apprentice a year they then go onto national minimum wage as per the terms of the apprentice agreement.

Employee Benefits

Employee benefits should support the business goals of an organisation by encouraging the behavior and values that it needs in employees in order to be successful. The design and content of employee benefit provisions should aim to support the business goals of the organisation by helping to attract, recruit, engage and motivate its employees. Organisations need to examine what their existing and future employees need and want and how best they can meet these needs.

The employee benefits which Genix offer are:

Salary Exchange Pension Scheme

The Genix Healthcare Pension Plan is based on a “salary exchange” type agreement which means that Genix offers to pay a contribution into the employees’ pension scheme on their behalf providing the employee also contributes at least this amount as well.

Genix also provide a Death in Service benefits of three times salary. No personal contribution is required and on joining the pension scheme, employees will be automatically enrolled into the Death in Service scheme, entirely at Genix’s cost.

The Genix Healthcare salary exchange scheme agreement which they have means that they exchange 3% of their annual salary, which is credited to their pension plan, and Genix matches the 3% contribution which is also credited to their pension plan.

Child Care Vouchers

Genix Healthcare chose to introduce Childcare Vouchers from Busy Bees Benefits. The benefits to the parents where:

• Quick and easy to register • Safe, personal online account • Simple to pay your carer • You don’t need to change your childcare provider • iPhone application – so that you could check the childcare voucher balance or pay the carer • Our provider credits parents’ account with 5% of their Voucher value when used at a participating Busy Bees Group nursery

The provision of offering employee benefits such as Childcare Vouchers will help towards enhancing working parent’s loyalty to Genix. Improve the morale of the workforce as childcare is more affordable; make is easier and more financially beneficial for parents to be able to work and adds to Genix’s benefits profile, making Genix an employer of choice.

Pay Determination

The theories of labour economics affecting reward are:

• The nature of the external and internal labour market • Economic determinate of pay including supply and demand, efficiency wage theory and human capital theory • Agency theory • The effort bargain

From a pay determination and reward point of view Genix must be aware of the external market in which it operates. Genix also has internal pressures which need to balance the external factors such as equity, rewarding individual contributions and competence, long service and loyalty.

The key factors that influence pay determination at Genix are the capital in which it has available to reward its employees and how the Company has performed during the financial year. It is also important that Genix has met all of its KPI’s through the delivery of its UDA contracts with the PCT’s.

Conclusion

It is more important to identify what motivates employees of an organisation before attempting to put in place any scheme to improve performance via pay. Performance management isn't just about motivation but is about organisational culture. It needs to ensure the following:

• Clear identification of the aims of any reward scheme. • Consultation with employees about performance management and reward systems. • Performance management must come before reward0 and must be embedded in the organisation's operations and culture. • The role of line managers is crucial, if they are to make judgements that will impact on their team's pay they need to be very clear what they are doing and why.

Recommendations

Recommendations have been identified that would be relatively easy to implement across all sites.

Reward Policy
Total rewards systems map out paths for the entire career of an employee based on a basic template created by a business for its specific program. Such a plan provides immediate incentive for employee retention by giving an employee a series of long-term projections and goals. Total rewards programs provide direct incentive for employee performance. These programs present ostensible career trajectories, though employees understand that certain aspects of these trajectories, including bonuses, only occur if employees meet certain performance standards. These programs also include aspects such as professional development, training and performance management that allow employees to develop new and special skills through education and training, thereby increasing an employee's knowledge of and ability to perform his job. Total reward systems include methods of employee performance monitoring for employers that allow employees input and create dialogue, all of which help foster a relationship of mutual input, which potentially leads to increased levels of professional respect and understanding.

Introduce an incentive scheme
This proposal would necessitate providing employees with some sort of incentive to encourage them to improve upon their current performance.

An example could be that a practice and practice manager receives a bonus for meeting its UDA target for the year.

Another example could be that every quarter the practice which sells the most sundries receives a voucher.

Improve employees well-being and ‘work-life balance’
As a nation we are working longer hours and there is an increasing focus on the benefits of encouraging a good ‘work-life balance’ (CIPD, 2007) and ACAS (2008) suggest that health and well-motivated employees will have a positive impact on the productivity and effectiveness of a business.

The benefits of each of/all of the proposals/recommendations are outlined below as they will all have a similar effect:

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References

Armstrong, Michael. A Handbook of Employee Reward Management and Practice.2007

Armstrong, Michael. Armstring’s Handbook of Reward Management Practice: Improving Performance Through Reward. 2012

CIPD Reward Management Survey 2012: http://www.cipd.co.uk/binaries/5844%20RewMan%20SR%20(WEB).pdf Wright, Angela. Reward Management in Context. 2004