Your line manager has asked for a written report on the future of reward management.

All submissions should be in the region of 1,000 - 1,500 words and references should be added in the Harvard Referencing Format. There is a Harvard Referencing tutorial in the Resources Area which outlines the formatting required.

Sample Answer

The Future of Reward Management: Aligning Reward Strategy with the Business Environment

Introduction

In a rapidly evolving business environment, reward management has emerged as a strategic tool for driving organisational performance and employee engagement. Traditionally seen as a function focused on salary and benefits, reward management now plays a critical role in shaping behaviour, influencing culture, and supporting strategic objectives. This report explores the argument that an organisation’s reward strategy must align with the external and internal environment in which it operates. It critically examines supporting theories, real-life business examples, and current trends in reward management to evaluate this proposition.

Theoretical Foundations of Reward Management Alignment

The concept of aligning reward strategy with the business environment draws from the contingency theory of management, which posits that there is no one-size-fits-all approach to organisational strategy or structure. Instead, optimal outcomes are achieved when strategies, including reward strategies, are tailored to fit specific environmental conditions (Burns & Stalker, 1961). In the context of reward management, this means that factors such as industry dynamics, economic conditions, technological change, and workforce demographics must be considered when designing reward systems.

Resource-based view (RBV) also offers valuable insight, suggesting that human resources are a key source of competitive advantage (Barney, 1991). Reward strategies must, therefore, be designed not only to attract and retain talent but to maximise the potential of human capital within the context of an organisation’s goals and challenges.

Key Environmental Influences on Reward Strategy

Economic Conditions

Reward strategies are highly sensitive to macroeconomic factors such as inflation, unemployment, and wage growth. For instance, during the COVID-19 pandemic, many companies revised their reward policies due to economic downturns and operational constraints. In contrast, in periods of economic growth, organisations may introduce incentive schemes to retain talent in a competitive labour market.

Example: In 2023, UK retailer John Lewis introduced cost-of-living support payments to employees, recognising the impact of inflation on workers. This move illustrates the responsiveness of reward strategies to the external economic environment (John Lewis Partnership, 2023).

Technological Change and the Gig Economy

The rise of digital technology and the gig economy has introduced new forms of work that demand flexible and personalised reward systems. Traditional reward models centred on fixed salaries and long-term employment are becoming less relevant in industries dominated by freelance or remote work.

Example: Uber’s reward strategy includes dynamic incentives, such as surge pricing bonuses, which align with its operational model and the preferences of its gig workers. This case underscores how technological and labour market changes necessitate adaptive reward strategies (Kalleberg & Dunn, 2016).

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