The Efficiency of ITN’s Reward System and Benefits Strategy to Motivate Employees

Introduction

In 2016 ITN (Independent Television News) conducted a staff survey to establish what staff attitudes to working practices were. The results of the survey showed that a large proportion of the staff were dissatisfied with the current pay and reward strategy which consisted of an annual collective pay rise for all staff, as well as various flexible benefits.

The feedback from the staff survey resulted in management proposing a new reward and benefits strategy to the unions. This new strategy proposed a more personalised pay, based on individual, departmental and company performance, as well as the market value for the job. On the face of it, the new reward and benefits strategy seemed reasonable and reflected what staff desired. However, after the unions analysed the staff survey a large difference was highlighted in the departments that were in favour of the new company strategy and those opposed to it.

Due to the large departmental differences in accepting the new reward and benefits strategy, the unions would only agree to the new proposal if it was introduced on a two year trial basis and only if it was implemented across those departments that voted in favour of the new proposal. The departments that were overwhelmingly against the new proposals would continue with the status quo; i.e. the collectively negotiated pay rise.

This resulted in the two biggest departments ITV and Channel 4 News remaining in the old collective bargaining system and the rest of the company adopting the new individual pay strategy. Coincidently both ITV and C4N had the highest number of union members which may have influenced the employee’s decisions when completing the staff survey and therefore their attitude towards the new pay and reward strategy.

Academic Models and Theories

ITN is essentially a cost centre for its four corporate shareholders who also happen to be its largest customers. The organisation’s goal is to make award winning news programme for its customers i.e. ITV, C4 and C5. Unlike most organisations ITN’s main aim is not to make a profit for its shareholders.

For a company such as ITN it is difficult to have a relevant and affordable reward strategy when its substantial core news contracts are provided at a fixed price for several years, with just RPI increases factored into the equation. This limits its ability to increase the revenue from these contracts.

Hodson stated in his (2014) article ‘Reward and Recognition’ that there is a need for sustaining organisational performance through the engagement and motivation of the workforce when the affordability of pay increases is not always possible. Under such circumstances, organisations such as ITN must become creative and flexible with their approach to reward strategy.

Any reward and benefits strategy should not only motivate and help retain staff but also promote personal and organisational goals.

According to Marchington and Wilkinson (2008) there are five key decisions that every organisation should make when designing its rewards package, these include:

• What to pay for the job
• To place primary focus on internal equity or be concerned with external benchmarking.
• To operate a centralised or decentralised approach to reward
• To build a hierarchy into the reward system based on seniority or status or a harmonised single status approach.
• The precise nature of the reward mix.

Getting these decisions right is critical if the reward strategy is going to reinforce the organisation’s goals. The choices made must motivate individuals and align their actions and behaviour with those of the organisation. This can be an extremely difficult task as motivation is a personal and complex emotion and ITN must take that into consideration.

The two most commonly cited theories on motivation are by behavioural scientists Abraham Maslow and Frederick Herzberg. Maslow’s theory on motivation suggests the urge to satisfy as being the most important factor in motivating employees. Maslow argues that everyone’s needs could be represented in a hierarchical pyramid. The pyramid theory is based on five needs ranging from the base to the top and as each need is fulfilled, staff then move up to the next need until all their needs are fulfilled. At the base of the pyramid is the primary physiological need for food and shelter. Once this is satisfied people will move to satisfy their safety needs such as security and stability.

While Herzberg’s ‘Motivators and Hygiene Factors’ suggests that certain characteristics of a job are consistently related to both job satisfaction and dissatisfaction. He concludes that job satisfaction and job dissatisfaction are not opposites. For example, removing the causes of dissatisfaction will not necessarily lead to job satisfaction, likewise the converse is true. The mind Tools website (2017). Herzberg’s theory suggests that pay is a ‘hygiene factor’ rather than a motivator, indicating on its own, pay itself is unlikely to motivate individuals. Although pay needs to be adequate to prevent dissatisfaction among employees but other factors such as responsibility and autonomy may act as motivating factors.

These two theories attempt to explain what motivates people. Maslow did this via his hierarchy of needs which starts with the basic need to progress through the stages until self actualisation is achieved. Whilst evidence suggests that there are strengths to Maslow’s theory, such as self-esteem being a motivation, Herzberg’s argument that higher wages maintains motivation has far more weight to it. Reasons being, since the 2008 economic crash every European country, excluding Greece, has increased its national minimum wage in an attempt to stimulate recovery and growth. This would suggest that pay can have a direct impact on productivity and visa-vi motivation. The One Brief website (2017). While Herzberg’s model indicates that the highest level of motivation is reached when employees achieve growth in their work, responsibility and recognition. The lower level needs, known as maintenance factors, are still required to maintain the current state.

In Maslow’s theory, any unsatisfied needs act as motivators whereas in Herzberg’s theory only the higher-level needs act as motivators. A company the size of ITN with only seven hundred and fifty employees has major financial constraints in comparison to its much larger competitors like the BBC or Sky, whose huge budgets are far greater than ITN’s. ITN must be creative with the type of rewards and benefits it offers its staff in order to motivate and retain the best staff. One way of doing this is to have a flexible approach and offer some non-financial rewards which may motivate the workforce.

Benefits such as training, career development, generous annual leave above industry norms, and enhanced maternity/paternity leave are all effective examples of ITN’s attempts to motivate and retain their staff. For example, for an employee to be motivated and therefore to maximise productivity, the rewards have to be desirable to the employee’s. This is demonstrated by the ‘expectancy theory’ (1982). Vroom stated that employee motivation is the result of a complex set of decisions, an understanding of which can help organisations construct a clear ‘line of sight’ so that employees are not in doubt about what they need to do in order to gain the rewards offered.

Reward Strategy and Organisational Goals

Reward strategy is an approach concerned with the administration of pay and flexible benefits, which is linked in an innovative way with the aims of improving individual, team and organisational performance. Reward strategy has also been described as encompassing not only the development, maintenance, communication, and evaluation of reward processes, but it also includes the development of appropriate organisational cultures which supports the goals and increases the commitment and motivation of employees (Armstrong and Murlis, 1998).

Organisational goals are more than just the function of an organisation. The goals of an organisation will determine the nature of its inputs and outputs. The extent to which an organisation is successful in achieving its goals can also be the basis for determining the organisations performance and effectiveness. For goals to be effective they must be communicated to all members of the organisation. All employees must be aware of their key tasks and actions, and must know what is expected from them and their departments.

Due to the nature of ITN’s output it is managed as four organisations under one umbrella organisation. The need for news coverage to be independent and unbiased means editorials powers are devolved to each news editor. Therefore, each news department i.e. ITV, C4N, C5 and ITN Productions have their own working practices and budgets.

The differences between the departments are further reinforced by their different audiences. ITV attracts a predominately female audience, while Channel 4 News who provide an in-depth news analysis of major UK and foreign stories cater to a more sophisticated audience. Channel 5 News has a younger audience who prefer brief news updates consisting of mainly UK news stories. ITN Productions has a mainly freelance workforce which is engaged as and when required for programme making.

These issues make it very difficult for ITN to have a set of goals that are aligned across all areas of the company. Apart from one common factor of news production there is very little interaction between the news rooms. In fact, they are often in competition with each other due to the pressure to deliver exclusive news stories for their channels and the need to win industry awards such as BAFA.

Arguably the most effective approach to reward strategy is based on the philosophy that is similar to the overall business strategy. The diverse working practices and departmental goals has meant that ITN does not have one overall business strategy. The difficulty for ITN is 40% of the company is owned by ITV Plc which is also its biggest customer with a £55m annual contract to provide ITV with its news contents. This contract is renewed every five years and is often put out to tender, which other news providers such as Sky would like to win. While this process ensures ITV Plc receives a competitive price for its news service it also means that ITN cannot always raise additional revenue to pay above CPI pay increases to its staff. The other two contracts with Channel 4 and Channel 5 are also negotiated on similar terms.

In most organisations there is a need to make a profit for its shareholders if this main goal is not achieved the management is either replaced or the organisation will cease to exist. ITN has only recently embraced the idea of raising additional revenue by investing in programme making for other customers via ITN Productions. Even this business venture has to be carefully considered as ITV Plc has strict clauses in its contract with ITN that stipulates any funds received from ITV cannot be used to subsidise any contents for other organisations.

Current rewards and benefits

When most people think of organisational benefits and rewards associated with their work, they tend to concentrate on the main reward of their salary. The current rewards strategy is predominantly based around controlling the high staff costs associated with news production, which can be very unpredictable. As a result of the old union agreements which meant that if staff worked any overtime the minimum payment would be twenty-three hours for operational staff and a minimum of eight hours for administrative staff. This resulted in staff earning tens of thousands of pounds per month when they covered major news stories which required them to work additional hours.

As a result of this, ITN introduced annualised contracts for all their staff and overtime was abolished. Now staff are rostered and managed by a large team of administrators who ensure there are an adequate number of staff available for operational purposes and work within the guidelines agreed with the unions over the year and do not contravene the European working time directive.

While the old defined benefit pension contribution scheme has been replaced by two salary sacrifice defined contribution schemes, the new schemes are still very generous in comparison to ITN’s competitors. Staff can elect to join the main scheme and receive an additional employer contribution of fifteen percent or join the auto enrolment scheme whereby a one percent contribution from the employee will result in an employer contribution of seven percent.

The full list of benefits (see appendix 2) shows the variety of rewards and benefits provided by ITN. This includes taxis from home to work for staff working unsociable hours. The reason for providing this benefit is not only the practicality of staff travelling to and from when public transport is not easily available, but also for the personal safety of staff travelling late at night in central London. ITN also pays the tax due on the benefit-in-kind via the monthly payroll.

Another benefit provided by ITN is the generous income protection and life assurance benefit at ten times annual salary which is much greater than that provided by organisations e.g. police force. Staff members can either take the full ten times cover or select a lesser amount and take the difference in the cost of the cover as a cash payment via payroll. The recent changes to the tax treatment of benefits has caused problems for ITN. This is due to ITN deploying staff to major incidences throughout the world which makes it virtually impossible for ITN staff to buy such cover, as no insurance company is prepared to provide this level of cover at a reasonable price. The tax due on the benefit-in-kind is going to prohibit and concern the majority of staff members.

To deliver the variety and complexity of the benefits provided by ITN, a new compensation and benefits portal has been developed at great expense which allows staff to select, trade and manage their benefits. When you delve deeper into all the rewards and benefits provided by ITN it becomes apparent there are many benefits to working at ITN which staff probably take for granted.

The current rewards and benefits certainly provides peace of mind for staff who know that should a life changing event occurred, then they and their families would be looked after through the benefits provided by ITN. This makes it easier for staff to concentrate on their work and encourage them to provide the highest level of performance instead of stressing about their family’s wellbeing. Thus, their line managers can expect higher quality of work, therefore helping obtain the organisations goal of making the highest quality news programme possible.

The one criticism of the current reward strategy is that staff resent working additional hours under difficult conditions and unsociable hours. For this contribution staff are not paid overtime however the additional hours are counted towards their total annual hours which they are expected to work. When staff members are not available or willing to work additional hours to cover breaking news stories, ITN relies on the freelance population to provide adequate cover to ensure news coverage is not affected.

External Factors Influencing Change

An analysis of the external factors that can influence change using a simple diagnostic tool can help influence business decisions and focus attention on how to manage the change process. All the following external factors such as political, economic, social, technological, legal, and environmental factors can impact ITN and drive change as demonstrated by the PESTLE analysis.

The political and legal decisions that impact ITN’s strategy includes how the broadcasting bill and government appointed heads of Ofcom manage the industry, including the ownership of news organisations and their independence.

Like all modern global organisations in the communications industry, the economic factors such as exchange rates can influence ITN’s decisions and its cost base. The pace at which technological advancement is progressing means ITN has to keep investing substantial amounts to keep up to date and manage the technical challenges of broadcasting news from every part of the globe which also includes investing in the infrastructure and training staff to use the latest technology.

Every organisation is influenced by numerous external factors, a diagnostic tool like PESTLE analysis can help managers understand the external factors which can impact organisation strategy and influence business decisions.

The political factors that can influence ITN’s decision making is not only influenced by the news generated by everyday policies, but also by the actual decisions made by the politicians. This can be as simple as the Brexit election which caused an immediate increase in news coverage costs. If free travel between European countries is abolished, ITN may have to establish additional news bureaux in major hotspots such as Brussels, Paris and Madrid in order to ensure ITN can provide immediate news coverage of major breaking news stories; an example being the 2017 shootings in Paris.

At the moment there is a political consensus that television news providers should be independent and unbiased in their news coverage which should also be reflected in their ownership. Unlike newspapers which can have political allegiances and reflect this in their new coverage i.e. in the previous general election the Sun newspaper switched its supported from Labour to the Conservative party. If this view changes then ITN would be a prime target for a takeover.

Design Considerations

No reward or benefits strategy is perfect especially in a constantly changing modern business environment. To reflect this, the strategy needs to be flexible and above all, it should be fair and equal.

No organisation would willingly have a pay strategy that causes conflict and does not motivate staff. Having a pay and reward strategy that results in two staff members doing same job working side by side, but paid different rates would undoubtedly cause conflict between both staff and management. The impact of such a scenario would cause conflict between the two employees and could lead to one employee being dissatisfied which could impact the employee’s output and well-being. This could also lead to legal action possibly resulting in a pay audit

Action points

Whilst most elements of ITN’s pay strategy and benefits meets its needs, there is one area that could be improved upon to help resolve the conflict caused by the vast number of freelancers who work on a regular basis to cover the unpredictable scheduling issues that exit around news production. One way of resolving this would be to introduce a voluntary scheme that allows staff to cover a shift on their non-rostered days which may have been offered to a freelancer.

This would enable staff to earn overtime and allow managers to employee someone who is familiar with all ITN’s procedures. This policy would be cost neutral and would improve staff morale and motivation. The number of additional days would have to be monitored to ensure compliance with the company rostering guidelines and the European working time directive.

As the number of discretionary pay awards to employees has increased over the last few years it would be beneficial for ITN to conduct a pay audit to ensure there is no discrimination between staff who do the same job. This would also help highlight any issues which may become apparent when ITN has to publish its gender pay details.

When designing its reward and benefits strategy ITN should incorporate a flexible package which benefits its entire workforce. This strategy must innovate and encourage staff, raise the company’s profile, motivate staff and achieve the organisation’s goals. For example, by offering journalists rewards e.g. bonus for nominations to industry awards or exclusive stories.

Conclusion

In summary, ITN’s reward and benefits strategy has obvious benefits such as the aforementioned life assurance policy, income protection, and flexible holidays, all of which go towards providing staff with the best quality of care throughout their time with the company. Of course, every organisation has room for improvements, ITN being no different; overtime payments and the use of freelancers being just one hurdle that must be overcome to maintain motivation, employee retention and achieve ITN’s goals.