The phenomenon of total rewards

Human resources personnel used to be able to solve their problems via single-silo solutions of pay, benefits, training or labor. After all, these problems were unidimensional. But increasingly, human resources - like medicine and social services - demand interdisciplinary solutions to complicated problems. Bundling human resources disciplines to address these complexities results in what is called "total rewards." What Research Tells Us

Simply stated, total rewards embraces everything that employees value in the employment relationship. It integrates a number of classic human resources disciplines and adds some not-so-classic ones. To identify the components of total rewards, Towers Perrin conducted a major market research study in 1997 involving 200 executives in North America and another 300 in the United Kingdom, France and Germany. These individuals were asked what they and their work forces found rewarding. One hundred percent of them included pay in that definition, 96 percent included benefits, 83 percent included learning and development, and 75 percent included work environment (Towers Perrin 1997).

Included in the Pay quadrant of the total rewards definition were base pay, variable pay, stock plans and recognition programs, as well as the supporting processes of these programs, such as pay delivery.

The Benefits quadrant included health care plans, retirement plans, savings plans, pay for time not worked, and the administrative processes to support benefit coverage.

The Learning and Development quadrant encompassed classroom training, performance management, succession planning, career development and coaching and mentoring programs.

The final quadrant - Work Environment - included leadership, work/life balance, performance support, and organization climate, as well as the reputation of the organization, the challenge of the work, relationships with co-workers, and numerous other aspects of affiliation in the work environment.

Supporting all four quadrants was organizational communications. (See Figure 1.) By studying rewards from a "total" perspective, we learn some interesting things about the individual elements themselves. Pay often is the catalyst for undertaking a review of total rewards. It is generally believed to provide the strongest motivation for reinforcing the business strategy. However, pay alone cannot create and sustain sufficient competitive advantage or reach and motivate all employees. There is, nonetheless, a continuing movement toward variable pay, especially broad-based stock plans that align with value creation, as well as incentive plans using...