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What is Reward Management? - Definition & Examples

Instructor: Susan Fenner

Susan has an MBA in Management from the University of North Alabama. She teaches online and campus-based Business courses.

This lesson examines strategic reward management, and how an organization can utilize a reward management plan to attract top talent and reduce employee turnover.

What is Strategic Reward Management?

Larry was looking forward to his first day on the job as a human resource manager. That hard-earned college degree helped him land the job, and he was eager to put the knowledge to practical use. Imagine his surprise when he no sooner sat down at his desk at 9:00 am sharp, then the door burst open and the CEO rushed into the room.

'Larry . . . it is Larry, right? Larry, we've got a problem. We're losing too many good employees. It's costing too much money and time to keep hiring and training people, only to have them leave. I want you to figure out why we can't keep people, and I want you to figure out how to fix it. I'll expect a full report and your recommendations by the end of the week.'

Then, without waiting for a reply, the CEO rushed back out of the room, slamming the door behind him. Larry just stared at the door for a minute. For just one second, he thought about quitting himself. Then he said, 'No! I won't quit. I can do this! I just need to examine the total rewards the company offers and devise a plan to make some strategic changes.'

What our friend Larry is about to do is formulate a strategic reward management plan. A reward management plan is a comprehensive plan to compensate and reward employees fairly and consistently in order to attract and retain top talent. It includes direct monetary compensation and other types of employee benefits.

One of the primary considerations that Larry will be examining to achieve the goal of reducing turnover is the perception of equity, or fairness. He will be looking at external equity, which is how the company's rewards stack up against other similar employers. He'll also be looking at internal equity, whether or not employees believe that they are being fairly compensated in comparison to others in the company. This perception of fairness is a major factor in employee retention. Now let's look at some examples of reward management that Larry could implement.

Reward Management Examples

When Larry looks at how to decrease turnover through reward management, he will be looking at compensation, incentives, benefits and intrinsic rewards. Let's find out how he will do this.

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