The Effectiveness Of Hay Groups Reward System Business Essay

This paper aims to examine and evaluate the reward system that Hay Group, a global management consulting company, develops to meet its clients needs. Specifically, the compensation and benefits system of the organization is analyzed and discussed in depth, by investigating the internal processes toward this function and by assessing how the reward system affects the overall performance of Hay Group. The performance of the reward system Hay Group has developed for its clients is evaluated by examining the results that clients experience (i.e. size, profitability, reputation, market share, competitiveness, equity value, and leadership position)

Company Description

Company Information

Hay Group is a human resources consulting firm operating globally, which aims at dealing with people-related business issues, while transforming the clients’ strategy into reality. Specifically, it is a global company operating since 1943, composed of over 2600 specialists working in 85 offices in 47 countries, focusing on helping private, public or non-profit organizations realize and understand their potential.

Areas of Expertise

The Company helps its clients by designing and analyzing jobs, dealing with their reward system (i.e. compensation and benefits) as well as developing performance and talent management systems.


Hay Group has managed to become the leading company in the industry it is operating. The depth and breadth of knowhow not only has made customers trust the recommendations it provides, but also has become the reason for further achievements. Hay Group gains ground thanks to the database of organizational management information it has built, which has been awarded as the world’s most comprehensive and rich database in the related field.

The creation of Hay Job Evaluation methodology, which is used worldwide by over 8000 companies, is one of Hay Group’s most significant accomplishments, which offers international recognition. Hay Group, through this method, stresses the link between business success, employee motivation, reward, and employee contribution in the business strategy of the company. Specifically, it wants that firms “reestablish discipline within compensation programs and better align pay with value creation”; to ensure that Hay Group tries to develop reward programs that reflect each organization’s business strategy and serve the needs of both firms and employees (HayGroup, 2001).

Hay Group Compensation and Benefit Function

Hay Group has employs a range of methods to develop its reward system, on which the clients’ compensation system is also based on. The various components that Hay Group uses in developing compensation and benefit systems are divided into five groups:

Reward Strategies

Job Evaluation

Total Reward Framework

Reward Information Services


Reward Strategies

Each company needs a reward program that should be in alignment with the overall business strategy and organizational culture. Only through this alignment a firm can ensure that both employees and the organization itself each fulfill their needs. Hay Group when dealing with its clients, it tries to provide a reward strategy that creates real business value.

One of the first steps is to set up a salary system, which is an essential tool that companies must consider if they want to retain their employees. What actually Hay Group does, is to balance the technical, business and behavioral factors involved in remuneration. It does that by working closely in an ongoing basis with employees of the client company, something that helps Hay Group understand the firm’s business strategy, model, overall culture, resource capabilities, and current reward system. The demographics of employees are then investigated and according to these, priorities for salary management programs are set. After doing so, potential base salary equity issues are analyzed, the competitiveness of the firm’s salary program is measured and finally, Hay Group the salary program is communicated to the firm’s members to guarantee the program’s clear understanding.

Hay Group is promoting the idea of the developing a reward architecture, which is a method to define why people are paid. By answering the question “what you reward your people for”, the company focuses on employees (i.e. demographics and needs of different groups), controls costs and ensures that the right message is delivered to employees. By conducting employee surveys aimed at the determination of what is valued most and by looking at results, Hay Group helps in determining whether reward system outcomes are aligned with the firm’s reward strategy.

Investigating whether the compensation system stands in a satisfactory level in respect to competitors is also part of Hay Group’s tactics. Benchmarking its client’s as well as it self’s reward system is an effective technique to identify if remuneration is competitive enough to recruit and retain personnel. To achieve that Hay Group provides access to PayNet, a database that enables companies to benchmark pay and benefits, interpret data, make comparisons, identify implications and uncover potential issues in respect to their reward system.

It is significant to mention that Hay Group when developing reward systems, it distinguishes reward objectives in respect to short-term or long-term incentives. Short-term incentives usually include efforts toward culture cohesion, commitment, engagement and specific team targets, while long-term incentives involve the alignment of rewards with shareholder interests, retain of people and competitiveness of the compensation system.

Total Review Framework

Compensation systems must be aligned with the overall strategy of the company and represent the business reality in order to be effective. Hay Group, to have a clearer understanding of its clients’ reward systems, engages in a holistic model, presented above, which has as a starting point the strategy of the firm.


Through this model Hay Group can better understand the current remuneration program of its clients, and then develop the appropriate base salary that represents the firm’s requirements and reward strategy.

Job Evaluation

Job evaluation is a significant component in measuring and determining the value of jobs within an organization, a technique that helps in the establishment of the pay structure. Hay Group has developed a number of job evaluation methodologies; to enhance its efforts it created Hay Group Spectrum, a practice considered to be “the next generation HR solution”.

As mentioned by Aspasia Voulgari, one of the Managing Consultants of Hay Group based in Athens (Greece), Hay Group realized that companies started losing “the real value of understanding their work” with the application of job evaluation by following a fragmented approach; this, emphasized the necessity for creating a more holistic approach that combines reward decisions, talent management and structuring work. Jobs, employees, performance, structure and pay can be connected, and, in that way, work measurement, work alignment, work fit, and work value are united. st.bmp

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