Why might a company reconsider its reward program design?

A company might reconsider its reward program design for various reasons, one of which is the proportion of compensation relative to overall costs. When compensation constitutes a significant percentage of a company's costs, particularly in sectors where labor is a major expense, it becomes crucial to evaluate whether the compensation structures are sustainable and effective at driving performance.

In such cases, companies will often analyze their reward programs to ensure that they not only attract and retain talent but also align with their financial goals and ensure long-term viability. This leads to a reconsideration of compensation levels, structures, and total rewards offered to balance investment in human resources with the organization's financial health.

While aligning with industry trends, responding to employee requests, and changes due to mergers can also necessitate a review of reward programs, the strong influence of compensation costs on overall budgeting and resource allocation places particular emphasis on that aspect. An awareness of cost implications helps ensure that the reward program is both competitive in the market and supportive of the company's strategic objectives.