Evaluating the Effectiveness of Reward Strategy at Tesco: Evidence from Selected Stores in UK.

AuthorAlam, Shafiqul


Reward strategy is one of the challenging parts in an organization's cost structure. It has direct impact on the financial statement of any organization and strategic influence on employees' attitudes, behaviors and organizational performances. So, it is a vital issue for any organization to persuade its own employees through appropriate reward strategy. Failure to implement this issue may cause immense loss both for the organizations and employees. In recent times, workers have already become more contrastive and they certainly do not prefer to stay in the same organization for a longer period of time. They are more aware of strategic compensation rather than traditional pay system. So, reward cannot be ignored. Even so, workforces are abandoned from equal pay, flexibility, job security, health and safety and different other benefit packages in many organizations in UK and other countries. In the USA, researchers identified that female faculty members earn on average 27% less than their male counter parts and also found the salary imbalances between private and public sectors (London, 2011). Another research finding by Hey group revealed, whilst employees were committed to work and optimistic about the future, more than half of them believed that there was no meaningful reward for extra effort, over 40% felt not appreciated, and one in every five said they were actively looking for other jobs. Even though some companies are practicing rewards which are not automated and exciting to keep their own staffs in peace and motivated them in repeating positive behavior (Perkin, Whit & Jones, 2011). As a result, almost fifty percent of the US companies already have undergone systematic review of their existing reward plans and adopted the concept of strategic reward. Later on, it was followed by many of the British companies (Manas & Graham, 2003).

Though reward is one of the neglected areas of HRM research it is not anymore confined only with the traditional recruitment, retention, motivation, recognition and cost control, rather has been appearing well beyond the system and connecting more closely to the organization's key success factors such as, competitive advantage, organizational effectiveness, increasing performance and achieving goal (Guest et al., 2012). So,it is crucial for the organization to invest and design future reward strategy and adjust current program based upon the feedback they receive from employees. Discussion on these issues may be to scrutinize current system and redesign for the future reward system at some point. In this regard, Armstrong (2009) states that the main objectives of employee reward system, are to attain the organization's strategic goal through ensuring that the existing workforce are committed, competent, and well-motivated. However, challenges may come in return in terms of setting strategic reward based upon dynamic nature of changing business and employee demand. Despite some challenges reward strategy must be meaningful and effective in order to impact employees' perceptions to the organization and have positive impact on its retention and motivation efforts. This research, therefore, intended to scrutinize existing reward strategy and evaluate the effectiveness of current rewards at Tesco as a case organization.

Case Organization

The global retail market has been experiencing a dramatic transformation over last few decades and it plays a crucial role in global economy. In 2014, global retail sale was U.S. $22.492 trillion (1) and it is expected that worldwide retail market will have a steady growth over next few years, and retail sales are projected to reach 27.73 (2) trillion U.S. dollars by 2020. In terms of country, the retail sector's economic output has followed an average growth (2.5%) in the UK economy last ten years from 1997 to 2018. The economic contribution was GBP 92.8 billion [pounds sterling] which represents the 5% of total UK's GDP (Gross Domestic Product) and the total employment of this sector was 2.8 million in 2017 (Rhodes, 2018). As the largest grocery retailer in UK and 3rd largest in the world, Tesco has more than 6351 stores, 360,000 employees worldwide. Every 8 [pounds sterling] people spend on the high street in UK, 1 [pounds sterling] easily goes to Tesco. To certain extent, Tesco takes more than 50 pence of every pound spend on groceries (3). Approximately 40 percent retail market share in UK is owned by Tesco which generated a sale of over GBP 157.7 [pounds sterling] billion in 2017 and employs over 1.4 million people across the UK4. Despite its economic contribution, Tesco has a growing concern to meet the manpower demand and make its own people happy. Employee development, procurement and retention have never been so crucial than today. Tesco is persistently searching ways to retain its core employees. Therefore, right compensation strategy has become a vital factor for employee motivation, retention and performance development. Specially in the era of economic crisis, downsizing, restructuring and fast pace technological changes it is hard to keep up employees moral and motivation. In many cases, huge compensation, benefits and psychological contract also fail to define employee needs and working culture. In this research, therefore, the researchers intend to define and redefine the current reward strategy at Tesco and the extent it is meaningful to its own employees.

Concept of Reward, Total Reward & Reward Strategy

The term "reward" means remuneration for the service in an organization. It is designed to reinforce desired behavior of the employee and the employer. It comprises both financial and nonfinancial returns provided by the employer. Reward helps to connect employee and employer for understanding their feelings and gratitude to each other. Malhotra et al. (2007) state that "work rewards" indicate the returns employees receive from their employers. However, in recent days, the reward system is not confined any more only with bureaucratic pay, incentives and benefits. Rather, it has been designed, redesigned; assessed, reassessed; produced and developed an apparent simplified term of 'Total Reward'. In fact, the term 'Total reward' has been embraced to explain strategic reward that includes additional elements such as, flexibility, working environment, workforce training and development, recognition, work-life balance, and other advanced benefit packages. It is an apparatus used by the employer to attract, retain and motivate employees in the organization. Total reward works as the tool, used by the employer to attract, motivate and retain staff (Tsede & Kutin, 2013).So, the term "total reward" includes everything employee receives to be valued by their employment relationship. Total reward is horizontally integrated with HR strategy and vertically integrated with other business strategies and it also goes beyond typical remuneration by embracing organizational culture, raising employees' voices, inviting collective bargaining, and in return certifying better employee performance. In order to justify individual and organizational needs total reward is integrated with corporate and HR strategies. Appropriate reward strategy works as a guideline for the organization for the present-days operations, brings maximum return, builds up employment brand and proceeds of sustainable competitive growth in an organization.

Currently, many organizations in UK have better understanding of total reward and they are acknowledging it ever more than before. The important role of reward programs is to achieve organizational goals. Employers started realizing that individual company needs to develop its own reward strategy rather than duplicating from other companies. Own reward strategy ultimately will support the company's human capital strategy and will allow them to align with business strategy. This implication of reward strategy has significantly increased in various private sectors including Tesco. Tesco has developed its reward philosophy, principles and guidelines and integrated with comprehensive business strategies like consistent growth, customer loyalty, gaining competitive advantages and bring innovative concept. Tesco incorporates the concept of reward strategy with business and corporate strategy through internal resourcing, creating healthy working environment, taking employee opinions, training and development and many other HRM practices. So, the people at Tesco feel rewarded for the work they do. As given reward must reflect the priorities and needs the of the employees for different markets, Tesco pays good basic pay, fair overtime and many other facilities to satisfy employees in each country. For instance, albeit there is no legal minimum wage in Malaysia, Tesco recompenses thirty percent (5) more than the Poverty Line Index for household. In USA, Tesco delivers a variety of competitive benefits complying with local labor...

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