Only a third of organisations in Britain have a reward strategy and barely more than half of these bother to measure its effectiveness, leaving most in the dark when it comes to assessing how – or even if - rewards support business goals.
A survey of 466 organisations by Britain's Chartered Institute of Personnel and Development (CIPD) has found that the majority of organisations fail to measure the real contribution pay and benefit packages can add to business, leaving many HR and reward professionals unable to fully justify increase spend or changes to benefit packages.
Yet despite this, the CIPD's Annual Reward Survey 2007 found that four out of 10 organisations plan to increase their benefit spend and over a third of public and voluntary sector employers will be making changes to pay structures this year.
The survey found that only a third (35 per cent) of organisations currently have a reward strategy in place, with a further 40 per cent planning to create one in 2007.
But while the overwhelming majority of organisations said that the main priorities of these strategies are to support business goals, reward high performers and recruit and retain high performers, less than a quarter (23 per cent) of those that do have a reward strategy link its measurement to business data.
"Organisations could make the wrong decision and waste time and money on pay and benefits if they fail to measure the effectiveness of their reward strategy properly," warned Charles Cotton, CIPD Pay and Benefits Adviser.
"HR and reward professionals should investigate measures, such as customer satisfaction and line manager feedback, to show the real value such packages can have on all areas of the business."
Linking this measurement to business data is still more important at a time when global competition is pushing employers to look for ways to cut costs and tax payers, investors and other stakeholders are demanding value for money, Cotton added.
"While the pressure is on to cut costs there is also the demand for better quality goods and services. This increases the pressure on pay and benefit specialists to manage the forces pushing costs down and the upward cost pressures so that stakeholders are satisfied and so that the organisation succeeds in attracting, retaining and motivating talent."