A Rewards ‘Paradise built in Hell’?

Dr Duncan Brown, Visiting Professor at the University of Greenwich and Principal Associate IES
25 September 2020

While it may look irretrievably gloomy from your home-office window right now, as research from Jennifer Tsitsopoulos at the Board of Innovation explains in her article ‘Low Touch Economy’, we all do have choices, regardless of  the ongoing unclear outlook:

‘It’s not to say that this new world will be better or worse. Just different. With many isolation-induced behaviours becoming ingrained habits that usher in a whole new set of societal norms. During this period of influx, organisations will thrive in this change and reach accelerated success, while others will struggle to find their footing in all of the chaos.”

At the time of writing, with revised restrictions pending and significant rises in unemployment as the Job Retention scheme unwinds, it’s hard to be optimistic. But as the core of the above is in fact a positive message - that we as individuals and society are pretty adaptable when we need to be and so it’s about planning for and taking advantage where we can of this shift, rather than passively being steamrollered into oblivion by it. 

The HE sector certainly seems to risk a widespread low motivation and engagement situation from these ‘isolation-induced behaviours’ and be “unlikely to be able to claw back a large portion of these losses through cost savings unless they make significant numbers of staff redundant”, according to a recent Institute of Fiscal Studies (IFS) report. A review of the early experience of research scientists in Australia where 21,000 (one in seven) jobs are forecast to be lost in their universities, found a quarter of them reported worsening mental health and anxiety, with job insecurity the biggest contributor - 10% had had working hours cut and 5% had been forced to take pay cuts. 

Yet 60% said that their work was recognised as being more valuable and worthwhile as a result of the pandemic and homeworking experiences were in many cases positive. Mirroring the UK, the case in Australia has been made much more obvious for a stronger investment in the science and technology workforce as part of economic reconstruction efforts. In the UK HR needs to be making a similar case now for investment in our people. CIPD’s chief executive Peter Cheese has been in the vanguard of those arguing for us to take the opportunities now presented by the shock of the pandemic, exhorting us Obama-like to ‘not let a good crisis go to waste. Rather, let’s use it to build the world of work we want to see’.

Recently I was privileged to co-ordinate the self-styled ‘Rewards after the Pandemic’ group of senior reward professionals, policy makers and researchers who met virtually over the initial lockdown period. We all agreed that there is great value in employers stepping back and undertaking a strategic, systematic review of their reward and employment practices for the future. We developed a framework to support employers, HR, reward and benefits professionals to do this.

Our aim has been to encourage and facilitate HR and reward professionals, their leaders and boards to have these vitally important and challenging discussions. These will help them to think into an uncertain future, identify and link important reward issues, raise key questions and draw out the implications, to consider future alternatives, choices and improvements. 

The current situation is more complex and difficult than many of us will have faced in our careers, with huge uncertainties, as well as many immediate challenges to respond to - huge financial pressures - encouraging us to avoid these longer-term, deeper reward agendas. None of us will be the same after this horrendous experience; and nor will our organisations, our people and our policies. 

Yet review and renewal, rather than simply lapsing back into the status quo, is essential, for two reasons. First, the problems with the UK’s prevailing market-driven, flexible reward and employment model for the past decade have been widely exposed by the pandemic. According to the IFS’ Paul Johnson, ‘the world post-Covid-19 is likely to see many existing inequalities magnified...it should lead us to reassess the value of an effective welfare system and collective security’. The UK has become a low skill, low pay, low productivity economy with an untenably ragged social security net.

But second, there are also positive features to emerge from this, presenting opportunities for reform, notably: the strong sense of common identity, purpose and experience evident in fighting Covid-19; and the widespread recognition of the vital work but appalling rewards of our health, care and other keyworkers – ‘applause is not enough’.

Employers have achieved in weeks what would have taken years in the past to undertake – moving the majority of their staff to homeworking or introducing new benefits to support their mental health. Employers and governments have invested heavily in employees’ welfare and security, factors which underpin their engagement and productivity. 

REBA’s latest employer survey on HR responses to the pandemic shows two-thirds of employers increasing their spending on employee benefits programmes, with enhanced employee assistance and wellbeing programmes most evident, and with a third enhancing healthcare services, such as virtual GP support helplines. 88% of respondents report an increase in mental health discussions at senior management level and 71% are planning to increase how much they spend on supporting employees’ mental health and financial wellbeing over the next 12 months. Lessons need to be learned and applied.

Burning strategic questions

Any strategic reward framework designed to review, assess and reform reward practices in an employer, essentially boils down to addressing three questions (Armstrong, Brown and Reilly, 2009):
  1. What are our reward principles, goals, values and success criteria – what do we want our reward practices to achieve, what does ‘good’ look like?
  2. How well are our current reward policies and practices delivering these principles in practice, what are their strengths and weaknesses?
  3. What changes to reward strategy and practices have the potential to improve the delivery of the principles and which are the ones that we want to adopt and implement?
I would argue that we now need to add a fourth critical question:
  4. What has changed and what have we learned from this crisis from a reward perspective?

These are big questions, not easy to address. The group’s framework of guiding principles and further questions is designed to help in structuring the discussion and drawing out actionable answers.
The reward principles most commonly stated in employer reward strategies (ibid, 2009) include:
  • being business-aligned and reinforcing the goals and values of the organisation;
  • maintaining competitiveness, so as to enable the recruitment and retention of staff;
  • meeting the diverse needs of employees, so as to motivate and engage them;
  • being fair and consistent in how all employees are treated, with an appropriate distribution of rewards and maximum levels of reward transparency;
  • reinforcing the collective identity, performance and contribution of the whole organisation and the teams and individuals it comprises of;
  • providing an appropriate degree of workforce security, health and wellbeing so as to reward with compassion.

Recent months have highlighted the importance of these last three areas in particular, which have been perhaps under-emphasised by HR professionals in the sector in their enthusiasm for market driven and institution strategy-aligned HR and reward policies.

The key questions for HE reward and HR leaders in the sector to consider in reviewing current reward policies and practices, include:
  1. How fair are our current reward policies; how do we better deliver fairness in the future?
  2. How well do we reward and recognise the contribution of staff at all levels and in all roles in our organisation? How can we improve on that?
  3. How well do our current reward policies support the security, health and wellbeing of our workforce? How can we better address these fundamental human needs in future?

When she studied the outcomes of major economic and social crises through history in ‘A Paradise Built in Hell’, feminist author Rebecca Solnit was surprised how often it acted as a catalyst for positive change and improvement. She observed of the Covid-19 crisis that:

‘In the midst of fear and isolation, we are learning that profound, positive change is possible. Ordinary life before the pandemic was already a catastrophe of desperation and exclusion for too many human beings, an environmental catastrophe, an obscenity of inequality. It is too soon to know what will emerge from this emergency, but not too soon to start looking for chances to help decide it. It is, I believe, what many of us are preparing to do’.

Solnit is rightly critical of what Citizens Advice has termed ‘this unequal crisis’, with those with the least taking their hardest hit from it, and a ‘motherhood penalty made worse by the effects of the pandemic’, according to The Atlantic magazine, a ‘disaster for feminism’. But as a HR profession, we can use the crisis to reflect on the importance of employment to addressing some of this inequality. 

The evidence is clear, reinforced by experience in this crisis: investing more, more effectively, in employee rewards has many benefits. Employers can attract high performing staff from diverse backgrounds, increase productivity as people add more value, because they see fairness in their rewards, the opportunity to progress, and appreciate the flexibility, security, recognition and support they receive.

Our group believes that a stronger emphasis on fair, collective and compassionate reward policies and practices in future would be a justified and highly beneficial outcome from the horror of Covid-19.

Seizing the Opportunities for Rewards after the Pandemic

The strategic reward agenda and questions we have set out for post-pandemic rewards are not easy and straightforward to answer. Some may argue that economic and financial concerns and the need simply to provide jobs on any basis is what is essential now, to recover from the virus and the unprecedented scale of its impact on the economy and public finances.

We would not question the need to ensure the affordability of any reward improvements and changes in an organisation; and clearly, the essential improvement of key worker pay and conditions in the public sector will require major additional state investments.

But that is the point – they are investments. The research record on human capital investments is unequivocally that they pay off: for the individual, the employer and society. Purely focusing on short-term cost concerns will simply induce another decade of austerity, falling living standards and millions of low paid, low productivity workers and contractors ‘one pay cheque away from poverty’.

The evidence is clear and reinforced by experiences during this crisis, investing more and more effectively in the rewards has many benefits for all stakeholders. Employers can attract and retain high performing staff from diverse backgrounds and stop wasting money on a recruit/retrain merry-go-round; increase productivity when people are able to grow their skills, add higher value and release their discretionary effort; demonstrate fairness and transparency in their rewards and the opportunity to progress their skills and careers, and build engagement (as their people appreciate the flexibility, security, recognition and support). Yet the scale of this crisis, the ‘huge shock’, is raising fundamental questions about relative pay and security in society and shifting attitudes to keyworkers. We all do want to see the opportunity taken for a ‘new new normal’ to emerge; and we need to address and advise on these bigger questions as a reward expert community.

Our questions are designed to support discussion about this wider stakeholder and longer-term people and reward agenda. Hopefully they are a start for you on your journey to encapsulating learning from the pandemic, drawing out pay and reward ‘good’ from its aftermath; and charting your own reward strategy going forward, enabling organisations and the UK to #buildbackbetter.

Our group believes that a stronger emphasis on fair, collective and compassionate reward management, policies and practices would be a justified and highly beneficial outcome from the horror of Covid-19 in supporting a shift towards ‘a more equitable, collective, compassionate approach to reward and people management’ that we believe is required post-pandemic.