R&R Are More Holistic Than C&B

Introduction

Rewards and recognition (R&R) practices have a rich history of more than 2,600 years. That R&R can bring positive change in workers’ behavior has often been observed in history. Today we practice R&R in organizations along with our compensation and benefits (C&B) program. Both the R&R and C&B practices run concurrently to get the best from the employees. Organizations craft their R&R innovatively with a blend of monetary and nonmonetary packages. Increased motivation, employee engagement and retention of talent are some of the benefits employers expect to achieve through their R&R programs. So far we have no conflict. But the practice of separating R&R and C&B is the main debate of this article. Should we separate these practices or integrate them? Should we rename C&B as R&R?

With this objective in mind, I posted this question on the LinkedIn discussion forum, International Compensation and Benefits Group. The idea in doing so was to trace the differences in practices globally and understand the conceptual clarity in the management of R&R. The responses from different world-renowned organizations and professionals were overwhelming. But there was no consensus. Rather, the debate remains unresolved; at times I received conflicting responses from the same professionals and organizations. This prompted me to restate my thoughts in this journal as a possible forum to broaden the debate.

What Is the Debate?

When operationally we manage compensation and rewards as one and the same, then why not rename C&B to R&R? In this era of performance-related pay (PRP), along with C&B practices to provide fiscal security, the traditional weight or importance of the fixed salary component is slowly losing importance. Even in highly a regulated labor market like India, we have embraced PRP and have started giving more and more weight to variable components that go beyond the statutory minimum fixed wages. This in reality slowly subsumes C&B practices as elements of R&R.

Studying the compa-ratios of three major multinationals operating in India, I observed to my surprise high internal inequities in C&B, while century-old Indian organizations (seven in number) place high value on internal C&B equity. I could not complete an external benchmarking in the absence of reliable C&B data. Hence, market pay comparisons are unknown. But looking at the attrition rate of young managerial and executive talents of these multinational corporations, which is almost 38%, my guess is external pay disparities for these organizations are high. In contrast, century-old Indian companies that emphasize high internal pay-equity, even though they pay less than many of their multinational corporation competitors, are able to retain their talents.

This provoked me further to look into the problem from generic C&B views. First, C&B is not free from the evils of the master–slave relationship. A real question of culture! Many organizations legitimately follow the no-work, no-pay model. There is nothing wrong in it. But managing C&B like other cost functions prompts the impression that C&B elements continue to be a passive force in business processes. Employees get paid for participation. This is the economic rationality. No behavioral dynamics exist in it.

Contrarily, when C&B is managed as R&R, people feel more engaged, motivated and prefer to continue. Getting your pay as a reward excites you more than getting it for the time or services you render. Can there be then this argument that R&R is more holistic than C&B and that C&B is a subset of R&R?

What Professionals and Organizations Say?

Arguments and counterarguments have extended this debate to nowhere. However, the convergence of opinion leads to the conclusion that, yes, R&R is more holistic than C&B. However, nobody seems prepared to rename C&B to R&R. I also personally think that at this stage it is not required. At least managing C&B as a broader R&R function is as much as can be expected.

Let us look at the summary of arguments in Table 1.

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Table 1.

Summary of Arguments.

Reply from	Reply	Comments
Hay Group	Reward = everything somebody gets from going to work—both monetary and nonmonetary, tangible and intangible	Not prepared to separate R&R from C&B but later agreed concept of reward is very broad and C&B is one component of it
	Compensation and reward can be exactly the same
Worldat Work	Total rewards include everything the employee perceives to be of value from the employment relationship	Did not answer the question, rather highlighted on their total rewards model
IBM	Compensation suggests a payment to offset some detriment or inconvenience while reward implies a positive response	Implicitly agreed
People Scope	Rewards are the total of compensation, benefits, incentives plus any nonmaterial things such as nonmaterial recognition	No agreement or disagreement
Individual professionals	Rewards include compensation	Neutral
	Rewards are more inclusive term than traditional C&B components
	Culture and size of an organization sometimes dictates how the term rewards is defined
	Compensation (regardless of the mix or form) is payment for work, while reward is an award for performance
	Reward is an “add on” to compensation

The strategic fit between a rewards strategy and human resource strategy, as a subject of research, has had a high level of cross-country attention. The resource-based view of HR leads us to believe organizations will naturally choose those rewards that are expected to enhance their competitive advantages in competing for talent and for motivating employees. The contingency view argues HR strategy must fit with business strategies; hence, the mix of rewards is highly situation specific. It may be anything that can motivate people and so also retain them in organizations.

Making an organizational rewards program culture-congruent to achieve the goals of organizations was also important in a series of research studies, as in this process organizations should adopt to promote the desired behavior from employees. Organizational culture is seen both from the cognitive and the behavioral terms. While cognitive interpretation of organizational culture focuses on the importance of shared values, the behavioral dimension of organizational culture is seen as the contingencies of reinforcements, so that employees embed the behaviors in the culture of their organization. Likewise, rewards are also seen both from the cognitive and behavioral perspectives. The cognitive aspect of rewards requires communication and employees’ participation. Behavioral aspects of rewards require selection so as to reinforce the desired behavior from the employees. This can be ensured by selection of rewards that are identifiable with the organization. Many organizations design their rewards boutique, putting many options, which often employees fail to relate. I am sure the type of rewards boutique that can be understood by the employees of Goodman Masson cannot be seen as the right fit by the employees of CISCO, or for that matter by a family managed centurion and successful company in India, like Dabur.

Conclusion

Shifting our focus from C&B to R&R shifts the human capital orientation from cost management to investment. Seen as investments R&R influences both the cognitive and behavioral dynamics of employees. They appreciate rewards and perform better. Thus, R&R has a positive dimension, C&B does not. R&R is more inclusive, C&B is not. R&R enhances employees’ engagement, C&B divides them. R&R is more holistic, C&B is fragmented. R&R excites employees for the embedded element of unanticipated actions to recognize their value; C&B is largely scheduled, and more or less fixed. Thus, renaming C&B to R&R concedes R&R is broader, more dynamic and more holistic than C&B. Professionals may disagree. But what is the harm? In fact by embracing the value of R&R, and renaming C&B to R&R, organizations are likely to manage their HR functions more strategically and will be able to optimize their management of resources and make better use of a broader array of nonmonetary benefits.