The formulation of reward strategy can be described as a process for developing and defining a sense of direction. There are four key development phases:
- The diagnosis phase, when reward goals are agreed, current policies and practices assessed against them, options for improvement considered and any changes agreed.
- The detailed design phase, when improvements and changes are detailed and any changes tested (pilot testing is important).
- The final testing and preparation phase.
- The implementation phase, followed by ongoing review and modification.
A logical step-by-step model for doing this is illustrated in Figure 19.1. This incorporates ample provision for consultation, involvement and communication with stakeholders, who include senior managers as the ultimate decisionmakers as well as employees and line managers.
In practice, however, the formulation of reward strategy is seldom as logical and linear a process as this. Reward strategies evolve; they have to respond to changes in organizational requirements that are happening all the time. They need to track emerging trends in reward management and may modify their views accordingly, as long as they do not leap too hastily on the latest bandwagon.
It may be helpful to set out reward strategies on paper for the record and as a basis for planning and communication. But this should be regarded as no more than a piece of paper that can be torn up when the needs of the organization change – as they will – not a tablet of stone.