Too often, though, the buzz phrase is an empty one. There isn't enough strategic thinking behind the rewards. The truth of this can often be found in an organization's compensation philosophy, assuming they even have one.
After many years helping organizations develop (or confirm or test) their compensation philosophies, I have come to believe that the most important part of the exercise is articulating a specific set of compensation objectives. By specific, I mean something beyond the standard "attract, motivate and reward employees" language we typically see. These are, as one of my clients would say, lovely words, and certainly outcomes which most - if not all - organizations should aspire to. They do not, however, signal what your reward program must do in order to drive your particular business strategy. As such, they do not provide the necessary underpinning for strategic rewards.
If you don't know the two or three critical things that your pay programs must do in order to help your organization push its strategy forward, then you'd better figure it out soon.
It could be "push our employees to constantly develop and improve their capabilities, both on the job and off."
It could be "ensure that employees who embrace and deliberately live our defined values stay, and those who don't leave."
It could be "create an environment where decisions are made by first asking 'what is best for the whole Company?' rather than looking out solely for ourselves, our teams or our functional areas."
These are meant not to illustrate what is right - or what is right for you - but offered simply as conversation starters. The point is that they provide clear, actionable reward design guidance.
Without which I am hard pressed to see how rewards can be strategic.
Image: Creative Commons Photo "Mount Airy Arrow" by Zyada