It is becoming increasingly difficult to ignore the fact that a contemporary business environment undergoes global changes that place business in adverse conditions. Such changes cause a wide range of issues so that many organizations claim that the difficulties they face are a part of a larger process, in the end of which a new entrepreneurial doctrine will be formulated. It is certainly true, but all the changes imply numerous unintended consequences. Among the entire complex of implications, an issue of strategic reward system emerges. Many companies are contemplating to make drastic amendments to their corporate governance and strategic orientation putting the employees under an excessive stress due to changes and adverse economic situation. Since a major change is a shortcoming in a performance of many companies, strategic reward system plays a pivotal role as it is able to influence employee enablement and other multiple factors of business performance.
The following paper focuses on a discussion of the strategic reward issue with regard to a wide range of perspectives, which occur to be crucial for a new system of such type. The paper conducts a comprehensive analysis and interpretation of findings concerning the subject. In such way, the study outlines the basic causes of workforce enablement, critically discusses the main challenges, and predicts possible problems that are likely to arise. Finally, the study draws an appropriate conclusion on the basis of the presented findings. The conclusion leads to a set of specific recommendations for a given case study of The Novartis Ltd. The company performs in the industry of life sciences so that the issue of strategic reward, employee enablement, and the entire change in the business environment are especially important to The Novartis Ltd. as its turnover and revenues have demonstrated a strong decline in recent years.
It is becoming increasingly apparent that a rapid tendency for a global change in macroeconomics, as well as business makes a significant impact on many perspectives of corporate governance, strategic planning, and even organizational behavior. Under circumstances of crisis of change, cost management has become an essential factor as appropriate allocation of expenditures is an evidently difficult task in a vague business environment. As a consequence, leaders put additional pressure on their subordinates as costs influence incomes that are reflected in balance sheets of organizations. First of all, it is a financial pressure concerning penalties, freezes, potential layoffs, and other means of economizing on the workforce. Accordingly, pay design becomes dramatically ineffective as long as it is influenced by a reducing costs program or a shortage of cash within a particular organization. Such issues describe an evident absence of focus on human resource as the main executive force.
At the same time, a model of performance in terms of ‘doing more with less effort’ is a key determinant of workforce efficiency nowadays. The focus on a performance enhancement should be followed with a certain system of rewards as the workers will not change under any of vital circumstances. Such paradigm, however, is not sufficiently deployed to operational environment, and leadership has also to be considered in regard to the given issue. In other words, strategic reward system itself, as well as lack of appropriate leadership does not create favorable conditions for performance in terms of efficient activities. Employees are tending to contribute to their organizations without sacrificing their comfort at the workplace even though a contemporary trend requires organizations to change their approaches towards strategic planning and corporate governance. Lack of employee enablement is based on absence of psychological contracting between leaders and their subordinates due to the factors described above.
Among a wide range of challenges, a risk factor has to be indicated. Contemporary conditions of a global change presuppose unexpected risks for any organization. Therefore, presence of risks is closely associated with return on investment as investors tend to invest in companies that are more resistant to external risks. Such tendency is respectively reflected on enablement of employees. Chief Executive Committees face a challenge concerning provision of the workforce with a more freedom of activity. Extended enablement of the human resource implies a probability of deviations that result in risks. Hence, the employees are not satisfied with conditions of their performance due to the limitations to their actions and responsibilities. Additionally, a psychological comfort of workers is not considered. Needless to say, every individual performs best at the activity that he/she is willing to do. That is why risk avoidance and employee self-fulfillment are opposite perspectives that create a challenge for many companies.
Another challenge is presented by talent management, since the entire demographic paradigm has changed throughout two past decades. Contemporary generations are seeking for contributing to something larger than their personal experience instead of obtaining certain career stability. Thus, the strongest young leaders are tending to use their skills outside of a complex approach. In other words, young generation of employees is more result-oriented, while the bottom-line of performance remains unaddressed. Considering such tendency, organizations find it very challenging to develop the strongest skills in their best workers, especially under conditions of a limited environment of performance. Selection of the best workers is always a matter of internal conflicts, considering the fact that it is difficult to combine strategic rewarding and promotion system with a new vision of a professional self-fulfillment. Organizations have to deploy much of their resources to create a larger context of performance for the best workers. However, absence of such context is much harder circumstance as an evident absence of motivation will prevail among the best employees.
In regards to challenges and causes of poor enablement of the workforce, certain problems are expected to arise. In such way, ineffectiveness of a traditional employee engagement is obvious. Global crisis makes workers focus on job security rather than prospects in career and salary. Financial side has become less important as non-financial factors of performance are caused by a change in a global entrepreneurial orientation. Such conditions suggest that employees are willing to take their responsibilities seriously, but a rare worker would make a sacrifice to the organization for taking an unpopular action. The workforce prefers not to make extra efforts even though a contemporary tendency of global business requires a company to make drastic changes. Hence, a substantial lack of motivation can be indicated, since the human resource does not see any particular purpose to change. It includes financial rewards, as well as a provision of a field for a professional fulfillment of employees.
Likewise, poor performance of employees is not reflected on a financial statement of organization any longer. Non-financial issues of performance have become more essential because a contemporary human resource management focuses on valuation of the workforce. Nevertheless, non-financial issues produce a significant impact on the financial perspective. In such way, a performance of employees may occur to be ineffective in spite of the fact that a company manages to meet the objectives of its upper line. However, a sudden decline is still possible, but it becomes less explicit in terms of a current tendency. It is becoming increasingly apparent that a top line growth is much less important because many companies are attempting to leverage a balance of its bottom-line aspects. Thus, consequences of a poor worker enablement and changing environment for business lead to a problem of strategic model validity. In other words, a current strategic model is inefficient for present circumstances of business environment.
It is appropriate to make a general comment on the fact that a contemporary model of a strategic reward system is based on such aspects as profit growth, talent management, risks, cost containment, employee engagement, and efficiency of performance. It is important to note that performance of employees depends heavily on a behavior of workers. As a result, reward system is expected to motivate workers to act in a particular way. Such strategy should be satisfactory psychologically and financially. The two factors create a basic motivation that can address all issues related to a drastic change in a global business environment.
Overall, it does not have to be a strategic-oriented rewards system at all. A common practice results in an explicit need for balance between financial and non-financial factors of performance and related rewards. Enablement of employees to participate in a primary decision-making is obviously a reasonable idea, but workers may want to do some jobs that will not result in positive outcomes for the organization. That is why strategic alignment should be applied. Such method leverages a balance between internal desires of the workforce and strategic objectives of the company. Thus, employees should be acknowledged about negative consequences, while performance in terms of a corporate strategy results in rewards for them. In such way, strategic rewarding system belongs to a large context of a contemporary business, which is why it should be reviewed in a complex as a functioning mechanism of the entire system.
Generally, the study has identified the main causes, challenges, and arising problems concerning a change of trend on strategic reward system. Generally speaking, the main finding is related to the fact that organizations have to perform in terms of adverse economic situation that causes a need for drastic changes in corporate governance and strategic orientations. Approaches and models that were established a couple of decades ago are not applicable any longer. Such evidence is also typical for issues with human resource management as positioning of workers also changed under demographic and social factors. A definition of job satisfaction presupposes a different concept. As a result, the employees need a non-financial rewarding first as high salaries, as well as bonuses do not obtain its real value in case a worker is not satisfied with his/her job and workplace.
That is why engagement with employees, as well as talent management has become a considerable difficulty. It is important to note that such phenomenon does not have anything in common with a change in employees’ self-esteem or their excessive demands towards organizations. As a matter of fact, adverse state of business environment and conditions of employment put an additional pressure on workers because many of them work hard owing to the fact that they do not want to lose their current jobs. Financial rewarding is surely important in such cases, but it does not motivate workers much. It can be explained by the fact that bonuses and increase in salary make employees work harder but they do not deliver them a real satisfaction from their jobs. In some specific cases, elevated salaries are not enjoyed by employees, since they spend most of their time working. Nevertheless, some disadvantages in pay system are present and they contribute much to the existing issue.
Regarding the above-provided information, pay system needs certain amendments. First of all, budgetary control should be changed as long as many companies keep their workers under pressure of being penalized. Reward system has to work in both ways. Moreover, it should not penalize or promote for minor activities but for substantial outcomes of an employee’s hard work. Penalties, as well as rewards are a reflection of certain efforts of a worker. Consequently, non-financial aspect has to be regularly satisfactory. That is why pay system does not have to presuppose economizing on the workforce as a way of reducing costs. Such approach is definitely not a strategic reward system, which is why it should be substituted for a more credible and flexible reward model.
Eventually, ability to implement an effective reward system depends heavily on an organization’s capacity. In other words, a company that does not obtain a sufficient financial liquidity should not focus its performance on a growth of its top line, since it is not able to afford bonuses and favorable environment for the workforce performance. Thus, preparation of a firm for a top line growth should start with maintaining its bottom line issues and formation of basic leadership for orienting and motivating the entire human resources. As a result, leadership can be considered as a central issue, and its involvement in a global process is also important. Besides financial and non-financial issues, a strong leadership can modify all depending factors, such as pay system, motivation, talent management, and acceptance of change. A contemporary state of a global business environment requires all such perspectives to be addressed in a complex until adverse economic situation is leveraged, and a new entrepreneurial orientation is formulated.
To speak about the issue of the case study, first of all a new reward system has to be recommended. Since The Novartis Ltd. follows a common trend of switching to a business-to-business form of performance, some amendments in its strategy are also obvious. As a consequence, approach to reward system has to be substituted by a more flexible model. A common practice suggests that reward system should rely heavily on behavioral pattern of the workforce. Thus, The Novartis Ltd. needs to utilize a period of change as a way of orienting its workforce towards a particular set of strategic objectives. However, the employees are mainly not willing to accept any changes. Nevertheless, business-to-business dimension presupposes a larger context so that talent management becomes more feasible, since the best workers will be able to complete the hardest tasks. The company has to acknowledge its employees about the fact that new environment of performance will become much better than it is now. Hence, the workforce should participate in decision-making concerning rearrangement of the company towards new objectives.
Such approach is sufficient for establishment of a minimal internal motivation, while financial rewards and promotions are an effective way to maintain external motivation of the workforce. The main philosophy of strategic reward in The Novartis Ltd. should be based on a concept that the organization proceeds with its development so that the change is an unavoidable part of moving to the upper level. The employees are the main driving force of the company, which is why value of their work has to be reconsidered to make rewards and promotions a natural process. Moreover, in case costs on rewards are not affordable for the organization, it means that it is not ready for achievement of more complex top line objectives. Provided that The Novartis Ltd. occurs in such situation, an existing group of leaders should be proactively involved as long as talent management would be ineffective.
Taking such point into account, employee engagement has to be accordingly enhanced. As long as non-financial aspect is persisting now, establishment of a psychological contracting between workers and leaders is pivotal. In spite of the fact that performance of The Novartis Ltd. is deployed to a new business environment, a model of relationships between people remains the same. As a result, the creation of trust and collaboration is the best method to prepare a meaningful basis for a further motivation of workers. From such perspective, strategic reward means a reasonable enablement of the workers as they have to be aware of the fact that their efforts will result in benefits for each of them, as well as for the entire company. Such approach to the workforce engagement may seem to be quite simple, but employees are known to deviate from a standard in case they are given freedom of actions. Consequently, strong leadership will leverage their needs to contribute to the global context of the company’s performance.
Strategic reward system is expected to become cost-effective, but a major role is played by the internal motivation of the workers and appropriate talent management. Therefore, employee engagement on the basis of a psychological contracting is the most reasonable solution for The Novartis Ltd. in terms of adverse economic situation. In other words, the company’s management does not have to think much about the costs on rewarding, especially for some strategic purposes. Reward system is always a part of a corporate strategy as it regulates behavior of the organization’s workforce. Employees’ enablement is possible without substantial expenditures on bonuses, which is why non-financial measurement of performance is becoming a strong aspect. At the same time, the human resources can be satisfied with more favorable conditions of working instead of bonuses that will probably make them work despite their unwillingness to make extra efforts.
Since financial perspective does not obtain the most significant part in a formation of an effective strategic reward system for The Novartis Ltd., cost reductions are not needed any longer. Such expenditures are recommended to be redirected to enhancement of working conditions, training, and any other issues related to non-financial performance. Reducing staff costs presupposes a single short-term advantage, while investing in modern technologies, approaches, and tools for a more efficient performance underpin a principle of ‘doing more with less effort’. Furthermore, the workforce will accept the change as it leads to a better working conditions. With regard to the strategy of the firm, the human resource behavior can be modified with activities recommended above and favorable working conditions. The main purpose of The Novartis Ltd. should be focused on making employees to improve their performance in the firm, while the outcomes of such work can be aligned with a corporate strategy.
Finally, The Novartis Ltd. does not have to consider strategic reward as a new element of its strategy. On contrary, the rewards should be present in the company regardless of its strategic orientation. The current trend results in a need for establishment of non-financial satisfaction of the workers. Such issue is vital, especially for talent management as the best workers are always seeking for challenging environments. That is why, The Novartis Ltd. is recommended to continue maintaining a balance between financial and non-financial issues of its bottom line. Costs can be spent not only on bonuses or any other rewards, but also on advances in the operational environment of employees, team-building, etc. To explain it in simple words, The Novartis Ltd. is recommended to make its workers satisfied at the workplace as it is the best reward and motivation on the basis of psychological contracting.
