FACTORS DRIVING CHANGES TO REMUNERATION POLICY AND OUTCOMES

The aim of this study was to develop an in-depth understanding of the relative importance of the factors driving change to remuneration policy decision making and the impact on organisations. Data from 148 organisations was analysed and subjected to rigorous statistical analysis. The results show that the most potent drivers of remuneration policy are retention of key staff, financial results and organisation strategy. The greatest changes to remuneration policy were in the areas of variable pay, merit/performance related pay, market position, total package and job evaluation/ broadbanding policy. A strong correlation was found between the extent of change in Remuneration policy and impact on the organisation. This suggests that the greater the change in Remuneration policy the greater the impact on the organisation. 
 
 Opsomming Die doel van hierdie studie is om die relatiewe belangrikheid van die faktore wat verandering in die vergoeding besluitnemingsbeleid dryf asook die impak wat dit op organisasie het in diepte te verstaan. Data van 148 organisasies is geanaliseer onderworpe aan streng statisiese analises. Die resultaat wys dat die mees kritieke drywers vir vergoedingsbeleid die volgende is: retensie van sleutelpersoneel, finansiele resultate en organisasie strategie. Die grootste veranderinge in vergoedsbeleid was in die volgende areas: veranderlike betaling, meriete/prestasie verwante betaling, markposisie, totale pakket en rolevaluasie/‘broadband’ beleid? Sterk korrelasie is gevind tussen die vlak van verandering in die vergoedingsbeleid en die impak op die organisasie. Dit wys onder andere uit hoe groter die verandering in vergoedingsbeleid, hoe groter die impak op die organisasie.

i STATEMENT I certify that the dissertation submitted by me for the degree Doctor in Commerce (Leadership in Performance and Change) at Rand Afrikaans University, is my independent work and has not been submitted by me for a degree at another faculty or university.

Mark Herbert Raymond Bussin
November 2003 ii ACKNOWLEDGEMENTS: The successful completion of this study depended greatly on the efforts and assistance of many individuals to whom I wish to acknowledge my gratitude.
I wish to acknowledge the following persons who contributed significantly to this study: • To my promoter Dr Deon Huysamen for his wisdom and guidance • To family, friends, colleagues and clients for their understanding and patience • To RAU, the lecturers and Karel Stanz, it was a rewarding and challenging experience that added a dose of humility.

DEDICATION:
To my late father George Lionel Bussin (1914Bussin ( -1997, the wisest man I know.
iv The literature review and personal interviews yielded 24 factors driving change to remuneration policy and 18 components of remuneration policy.
These were grouped together into logical groupings and formed the basis of the questionnaire.
A review of the literature also yielded various impacts that remuneration policy has on organisations which allowed the dependent variable to be operationalised.

The empirical study
The study was split into 2 phases, namely a qualitative and quantitative phase. A qualitative study was undertaken to explore and identify key assumptions and characteristics identifying the main factors driving change to remuneration policies (Phase 1). The outcome of the qualitative phase formed the basis for the quantitative phase in which statistical analysis was used (Phase 2).
Data from 148 organisations were analysed and subjected to rigorous statistical analysis. Sense was made of these resulting in answers to the research questions. The results show that the most potent drivers of remuneration policy are retention of key staff, financial results and organisation strategy. The greatest changes to remuneration policy were in the areas of variable pay, merit/ performance related pay, market position, total package and job evaluation/ broadbanding policy. A strong correlation was found between the extent of change and impact on the organisation. This suggests that the greater the change the greater the impact on the organisation.
There are distinct differences in the extent of change and impact across organisation structure and industry sector.

Recommendations, contributions and limitations of the study
Recommendations are made regarding improvements and changes that should be made should the study be repeated. The main contribution of the study is that it is now known which forces drive remuneration policy decision making, as wel l as the strength of the force. The remuneration policy components which were changed in the last 3 years is now known, as well as the extent of the changes. Finally, remuneration policy decision-makers now know which remuneration components had a positive impact on the organisation.
Limitations of the study were identified and outlined. The main limitation was that this was the view of management and it would be useful to complement this with employees' views.
Recommendations for future research are made.

CHAPTER 1: INTRODUCTION
At a time when hunting for the 'next Enron' is an international sport, companies are uncertain as to what governance decisions they should be making. The clean-up has extended to insider selling, financial disclosure, even Chief Executive Officer (CEO) pay -all issues that feed the image of corporate corruption (Useem, 2002). In South Africa many stakeholders and the media are also baying for blood and newspaper headlines like, "The fat cats are still grabbing all the cream," (Sunday Times Business Times, April 27 2003, p. 1) hit sensitive nerves. There is a rising tide of resistance against executives who take huge pay rises despite poor earnings, both nationally and internationally.
The Johannesburg Stock Exchange (JSE) will be getting tough on complying with King II (Shevel, 2003), which means that organisations are in the spotlight too. Yet Watson Wyatt's 1999-2000 CEO Pay Study reveals a strong, positive correlation between changes in pay and corporate performance (Kay and Graskamp, 2001). The market value of the 2 800 companies traded on the New York Stock Exchange increased 24 percent in 1998, a time when CEO compensation plans were increasingly tied to company performance. This is also true for share ownership where research found that those companies with high levels of share ownership consistently outperform those without (Corporate Leadership Council, 2001a). Milkovich and Rabin (1991) argue that executive compensation is more complex than meets the eye and that a strategic perspective on compensation requires research that looks beyond how much executives earn. This dichotomy of attraction, motivation and retention of good executives versus tough corporate governance and media spotlights, places remuneration decision-makers in a difficult position (Merchant, 1989).
A company's ability to understand the 'drivers' of remuneration policy and CEO pay is therefore a critical component in determining its present and future success in good remuneration governance.
Remuneration committees and boards of directors are searching for answers and lean heavily on independent consultants for advice (King, 2002 (Martocchio, 1998). Indeed, some go so far as to argue that there are strong links between remuneration system design and organisational performance (Greenhill, 1988;Modise, 1993;Rodgers, 1999;Rynes and Gerhart, 2000;Young, 2002). Milkovich and Newman (1999) (Chingos, 1997;Corporate Leadership Council, 2001b;Fisher, 1991;Reda, 2002;Williams, 1994). Decisions are made on the basis of experience or market benchmarking, but not really on empirical evidence.
It has been argued that this source of information is an insufficient basis for such profound decisions (Hewitt Associates, 1991;Milkovich and Newman, 1999). This has been a problem for many organisations and Fortune  leads with the front page headline of "Oink! CEO pay in the US is still out of Control. Here's why". Put simply, organisations responded to new rules, boards eased up on higher salaries and instead ladled out vas t new grants of share options.
Even though organisation performance declined, CEOs got paid more than ever. "Have they no shame?" (Useem, 2003, p. 23 (Tomlinson, 2003). Revell points out the problem of stealth compensation: if you "think CEO pay is out of control? Wait till you see what these guys earn when they retire" (2003, p. 30). The point is that the problem continues long after executives leave the organisation.

Environment context and remuneration
The management of remunera tion was once straightforward with a strong link between job level and pay. It is no longer that simple because of the pressures of knowledge work, global competition, volatile financial markets and shifting social values on compensation frameworks (Berger, 1991;Bergman and Scarpella, 2001).
Organisations' radar screens need to extend beyond myopic benchmarking and experience to a comprehensive environment scan (Armstrong and Murlis, 1998;Beeson, 2000;Carver and Oliver, 2002 In other words, a deeper understanding of the role of the factors driving remuneration policy design will be sought.

Remuneration policy components
The way in which the various components of the remuneration structure and mix are put together has an impact on organisation performance (Burnett, 2000;Bussin, 1994;Milkovich and Rabin, 1991).
Remuneration policy guides the way in which the remuneration mix is decided upon. This study will proceed by listing each possible item in a remuneration policy (drawn from an extensive review of the literature), and research respondents will indicate the extent to which each policy item has been changed since the year 2000. Three years back is considered appropriate as it includes the longest cycle of remuneration policy design, typically long term incentives or share schemes.
Little is known about the inter-relatedness of the factors driving remuneration policy, which policy items were changed and what the impact was on the organisation. The dependent variable is outcomes in the form of perceived impact on the organisation. Respondents will indicate whether the remuneration policy changes had a positive or negative impact on the organisation.
A list of factors driving remuneration policy decisions will be presented to respondents who will indicate the extent to which each factor drove remuneration policy decisions in their organisations.

Motivation for the study
Six reasons can be offered regarding the motivation for the study.
These are ordered in the same order as the research constructs shown previously in figure 1, and flow from external to the organisation to internal as follows: The way that work is organised and managed is constantly changing. This change is triggered by technological break-throughs and the mounting pressure of global competition (Risher, 1999). The changing world of work demands radical new people management approaches and especially new remuneration practices.
Many remuneration principles were conceived over 50 years ago. " In recent years the environments of organisations have moved from being relatively stable, simple, orderly, predictable and local to one of discontinuous change complexity, chaos, ambiguity and globalisation" (Veldsman, 2003, p. 33). In response to these changes organisatio ns have been forced to find ways to become more competitive. The pressure of keeping up with fast-changing technology and improving performance is driving employers in every sector to change the way they operate. Not enough is known about the remuneration systems required to underpin these new ways of work. Wright (2001) speaks of a pay revolution that is being created from a work revolution.

Investor confidence
Corporate image and governance have a large influence on the market price and perceived value of a company (Ernst and Young, 2002 Members of the committees making remuneration policy decisions are under the spotlight and "there's nothing more important than restoring investor confidence in the captains of the ship" (Useem, 2002, p. 25).
Empirical research would boost confidence in decisions taken.
Organisations that wish to understand the drivers of the various components of remuneration policy, the extent of each driver's influence, and the outcome thereof could use the results of this study to make remuneration policy decisions.  (Myburgh, 2003).
The implications for directors, managers, board committees, consultants, investment analysts, asset managers, pension funds, the accounting profession, regulators, politicians and the person on the street have been enormous. Remuneration policies are now being questioned far more frequently and closely. In a nutshell, business practices will never be the same (Young, 2002).

Attracting and retaining high-performing employees
There is a greater need now for competitiveness in attracting and retaining high-performing employees than at any time in the history of work. Recent dramatic changes in the nature of the workplaceglobalisation, diversification, flexible time, and telecommuting -mean that organisations can no longer offer a single reward solution.
Successful organisations are designing solutions that truly link remuneration to business performance -or they are losing their best employees to competitors who do (Fay, Knight and Thompson, 2001).
It is hoped that this research will be an essential guide in this increasingly competitive world.

Return on investment
No investment offers a greater potential for return than one in human capital, yet it is often the most neglected. Remuneration is most organisations' single largest expenditure, yet organisations often fail to maximise their options. HR professionals can no longer afford to be behind in remuneration strategy (Brown and Armstrong, 1999;Lawler, 1990;Risher, 1999).
The cost of staff turnover has been estimated at 70% of the person's total package. This is made up of the cost of the staff member winding down, the cost of recruitment, and the cost of training the new hire.
With an average staff turnover rate of 8% in South Africa (P-E Corporate Services, 2002), the costs of unnecessary voluntary staff turnover is costing South African organisations billions of Rand each year.
This research will provide information about remuneration policy changes and the impact of the change. More needs to be known about the causes of a positive impact on the organisation.

Research goals
The overriding research goal is to determine the factors that drive remuneration policy decisions and the impact of those decisions on organisations. This overall goal has been broken down into five subgoals: Sub-goal 1: To identify the factors from the literature and pilot study interviews believed to be important in driving remuneration policy decisions.
Sub-goal 2: To determine to what extent these factors influence decision-making.
Sub-goal 3: To determine which components of the remuneration policy were changed and the extent to which they were changed.
Sub-goal 4: To determine the impact on the organisation of the changes made to the remuneration policy.
Sub-goal 5: To determine if there are differences in the responses for different participants.

Value of the proposed research
It is hoped that a better understanding of the incidental, associative and causal links between the factors driving remuneration policy and the latter's impact on the organisation will be gained. Figure  changes to remuneration policy will be gained. The strength of each factor will be indicated by respondents and factor analysis will reveal any groupings in the factors. The contribution to organisations will be the provision of a more sophisticated 'radar screen' alerting them in which direction to look. A better understanding of the changing nature of work and how it drives remuneration policy will be gleaned.

Remuneration policy changes
Organisations in South Africa will have a good fix on which components of the remuneration policy have changed over the past three years.
There are a myriad of options open to organisations when overhauling their pay system, and key trends will be known. The extent of the change on each component of the remuneration policy will also be revealed. The two answers together will give a good indication of the extent of pay transformation in South Africa. This research will ensure a better understanding of the changes to remuneration policy and linkage to attra ction and retention of employees. A better grasp of the subject and subsequent application of the learnings will improve governance and investor confidence. It is anticipated that the application of the learnings will enable remuneration committees to improve the return on remuneration investment.
It is hoped that the research will contribute to the body of knowledge on factors influencing remuneration policy decisions and will put them on the radar screen. Remuneration committees and boards could be guided by the results of the research when making decisions on the various components of the remuneration structure. It is also hoped that this study will enhance the body of knowledge on what the possible outcomes are and close the loop on what changes to make to remuneration structures and policy.

Summary
This chapter covered the background to the problem and showed the

Importance of remuneration
It has been said that 'what gets rewarded gets done'. Remuneration is one of the most powerful motivators of behaviour (Currin, 1997). An evergreen reading on the importance of remuneration is summed up by the question: "How does an employer motivate employees?" (Herzberg, Mausner and Snyderman, 1957, p.11 Regardless of which theorist or author is referenced, one thing is common to all -salary is an essential and important ingredient to the questions asked. The remuneration system should drive the right executive behaviours that can withstand governance questions, media and stakeholder scrutiny (Corporate Leadership Council, 2001d;Elson, 2003).
Organisations put governance structures and committees comprising independent or non-executive directors in place to assist with compliance and ensure that the right behaviours are rewarded. A more comprehensive guide is required, and it is hoped that this research will provide this. The importance of remuneration is set out under five main headings sorted in order of importance going from internal to external focus.
2.2.1 Motivation theory Ellig (1982) makes the point that the objective of a sound compensation programme is to pay correctly in relation to performance. Yet, for some enigmatic reason, the role of financial compensation in employee motivation and performance remains one of the most frequently discussed but under-researched areas in organisational psychology (Steers and Porter, 1985). When investigating the relationship between incentive schemes and company performance, one needs to consider whether or not the added remuneration really does motivate executives (Modise, 1993).
In motivation theory, there is a movement away from "external rewards to an appreciation for the intrinsi c motivators that give us great energy" (Wheatley, 1999, p. 14). The popular misconception, however, that money is not a motivator is debated by Stewart (1993, p.7) who argues: "A world without A's, praise, gold stars, or incentives? No thank you, Communism was tried and it didn't work." Lebby (1993) is in agreement with this notion and poses the question, if there is no relationship between incentives and performance, why do managers hold on to such ineffective methods? "Why is it that they refuse to provide those things that employees say they want, that directly relate to increased productivity, and that have little or no financial cost?" (Lebby, 1993, p. 18). The models of Lawler (1983) and Adams (1965) support the supposition that incentives will motivate executives to perform better if certain conditions are met, such as attractive rewards, a belief that behaviour will lead to rewards and a conceivable chance of success.

Performance management tool
The most successful organisations have performance management systems in place (Greenhill, 1988). It has been argued that linking the performance management system to remuneration enhances the effect and more strongly focuses attention on what needs to be done (Rappaport, 1998). The trend towards performance-related pay has grown in recent years and is set to continue into the future (Sanders, 2001 Knight, Durham and Locke (2001) it was shown that there is a positive link between performance management, incentives and team performance. Teams with both difficult goals and incentives achieved the highest performance.

Driving strategy
There are many drivers of enterprise strategy, but one of the more seductive drivers is the reward and remuneration attached to achieving a goal. The design and payout of bonus incentive schemes is probably the most visible part of the remuneration 'iceberg' -it is the part that is seen and creates the most discussion (and panic). In some countries, for example the USA, organisations have to declare the nature of the bonus scheme in place for the executives and the payouts (Reda, 2002). This is not yet a legal requirement in South Africa but it is being increasingly reported. In preparation for this type of reporting, more needs to be understood around the reward scheme design that actually drives enterprise strategy.
The links have to withstand criticism and be closely connected. Rappaport (1998)

Cost -ROI (Return on Investment)
Benchmarking is a critical part of any well-managed remuneration system (Milkovich and Newman, 1999). This type of information certainly feeds in to the pack of information distributed to those making remuneration decisions. Remuneration decision-makers would normally ask, 'for what outcomes are we paying our directors, or, what return are we getting relative to competitors and others in our industry sector'?
Based on the answer and a mix of other relevant information such as company performance, skill and experience of the executive, one would know how to adjust the performance-related pay mix.
It has been contended that continual benchmarking, with most employees trying to pay on the upper quartile, creates an inflationary effect on the economy and a spiralling salary and wage bill (Rappaport, 1998). As Jensen and Murphy (1990) contend, it is not how much you pay, but how. Their study showed that there was virtually no link between how much CEOs were paid and how well their companies performed for shareholders.
Return on invested remuneration spend i s therefore a touchy subject with all stakeholders. Everyone wants to know that they are being treated fairly (Kelly and Monks, 1998).

Agency theory
Agency theory describes a situation where the shareholders are not physically running the organisation they own, having hired directors and managers to do so. A primary function of executive remuneration is to control the conflict of interest between management and shareholders (Abowd, 1990;Culpan, R., Murti, Culpan, O., 1992;Jensen and Murphy, 1990;Kraus 1980;Lambert and Larcker, 1990;Rappaport, 1998). The costs of resolving this conflict of interests are called agency costs (Ross, Westerfield and Jaffe, 1990). These agency costs need to comply with corporate governance principles. Increasingly, th ese costs are becomingly more transparent and investors want to know, by director, what the costs are.

Factors driving and influencing remuneration policy
Remuneration policy is influenced by many factors. Decision-makers usually do not know how much 'weight' to give each factor, and are often reactive to situations that develop. Detecting environmental signs before others is what often gives the competitive advantage. Often, the driver is based primarily on what the committee can 'sell' to shareholders, and hence may not be the most appropriate solution. It would be of great assistance if more empirical evidence were available that could assist in putting the most appropriate recommendations forward with confidence. Understanding the extent to which eac h of the factors drives remuneration decision-making will inform the relative weight that needs to be attached to the driver when making the remuneration changes.

Detecting environmental signs
Daft (2001)  branches of science and the phrase "order out of chaos" (Wheatley, 1999, p. ix) has become common knowledge. If we can understand how life changes and the forces affecting remuneration policy, we may be able to "dance more gracefully" (Wheatley, 1999, p. ix) in the world of remuneration. Many external factors cause turbulence and uncertainty for organisations, and it is hoped that this research will assist in understanding the linkage between the drivers, changes required and the outcomes of the changes.

Factors driving changes to remuneration policy
Compensation is widely accepted as being the most important mechanism for managing and motivating employees (Cappelli, 1999).

External forces -Advanced technological developments
Often there is a requirement for a new set of skills when there is a step change in technological advancement. Sometimes new skills have to be hired in at a premium, which has an impact on the current salary curve (P-E Corporate Services, 2002). This affects market positioning and the remuneration mix. Where organisations train and develop from within the organisation, this could lead to payment for the additional competence in the form of competency-based pay, or sharing in the results of the improved business performance.

-Competitors
For many organisations global competition and globalisation play a big part in setting remuneration policy (Pfeffer, 2001). Cognisance needs to be taken of international remuneration levels as executives and professionals become increasingly mobile. Those organisations facing stiff competition in the local market from international competitors need to match the cost and quality of the local service or product. This has a bearing on remuneration of staff, which can account for half of the fixed costs of running a business. -

Corporate failures
One of the first stones overturned in the event of corporate failure is the pay levels, share options and pension arrangements of the top directors (Myburgh, 2003;Young, 2002). The media have a field day and publish anything mildly out of the norm in the press. This serves as a huge deterrent to directors in other organisations, who take cognisance of it and put it on their remuneration radar screen.

-External advisers
Auditors are a compelling driver of remuneration policy, usually related to compliance with tax legislation or fiscal governance. Consultants advising remuneration committees and boards play a sapiential leadership role in decision-making, as the advice often pertains to market benchmarking information (Reda, 2002). Boards rely heavily on this information when making remuneration decisions.

-Investment / Stock exchange analysts
Investor relations play a role in share price determination, and analysts need to know as much as possible to make favourable comments about organisations (Beeson, 1992). Investors want to know that there is good corporate governance and this plays a role in influencing remuneration policy. Rappaport (1998) maintains that the price of the shares tells us the market's expectations concerning the company's future performance. By interpreting the market signals, organisations can compare their own plans and expectations with those of the market.

-Legislation
In many countries, legislation dictates that the top executives' pay must be reported in the annual financial statements (Reda, 2002). Those South African companies that are listed on foreign stock exchanges need to comply with this legislation. This requirement goes some way in ensuring that the now public salaries are defensible. It is anticipated that such legislation will be promulgated in South Africa. Even though not required by law, some organisations are publishing their top executives' pay levels anyway. This is a powerful driver of remuneration policy. -Publicity The media has consistently been the public watchdog on executive pay, especially when it comes to large bonuses or share options. In Positions are matched according to job content and size. Typically, organisations would try to match the market relative to their policy, the most common of which is market median (Hewitt and Associates, 1991;White and Drucker, 2000).

-Turbulence in business environment
Turbulence causes executives to behave in many ways, not the least of which is containing costs in the downswings (Kessler, 2001).
Remuneration policy decisions are influenced by turbulence in that the onerous salary and wage bill is tied to the fortunes of the business in the form of variable pay and cost containment in t he form of total package.

-War for talent and retention
This is perhaps the single biggest driver of remuneration policy, as without the right calibre people it is difficult to achieve the desired business performance. Having the right people in place will be the biggest stumbling block for organisations in achieving their goals (White and Drucker, 2000). This poses a business risk and drives remuneration policy. This was the most commonly added topic under the 'other' section of the pilot study.
Respondents have added this to their remuneration policies in a response to retain key staff. It is anticipated that this will become an increasingly important driver of remuneration policy decision-making in the future (Wright, 2001).

Internal factors
-Affordability / Rising costs Rising costs, inflation, currency fluctuations and competition have a bearing on the cost of doing business (Milkovich and Newman, 1999).
Organisations are always on the lookout to be as cost-effective as possible and hedge their costs where possible. This sometimes leads to retrenchment, where those left behind usually fill the space and tend to work harder or smarter. The credo for many organisations is higher skill and greater output leads to higher pay. There are many ways fo r organisations to cut their salary and wage bill, depending on the extent of the cost squeeze. -

Board of directors
In most organisations, the board of directors would commission the compensation review process (Reda, 2002;Useem, 2003). So too would they put the recommendations forward to the committees and shareholders. They probably have the single biggest influence on the remuneration policy proposals (Myburgh, 2003).
-Change in culture A major issue in designing a compensation plan is the trade-off between absorption of risk by the organisation and the provision of variable pay (Bento and Ferreira, 1992). Bento and Ferreira make the point that organisational culture and compensation design are inextricably linked. Culture 'allows' certain policies and rejects other policies that do not fit.

-Development / Career progression
Paying for individual and team contribution is gaining momentum and individuals place development needs high on the list when choosing preferred employers (Brown and Armstrong, 1999).

-Economic restructuring and different work patterns
Over the past decade, organisations have restructured to be more efficient, competitive and customer-focused. Business processes were streamlined and reengineered to create whole jobs. The effect of this has been flatter structures, new careers and problem-solving at source.
Remuneration administration has been sluggish to change and underpin these new structures. Where it has happened, it has mostly been in the form of broad banding and more modern job evaluation systems (Armstrong and Murlis, 1998 and employees can structure their pay, benefits, leave and any other condition of employment as they wish. It is anticipated that there will be a strong linkage between this driver and the retention driver.

-Financial results
Affordability is a prominent driver of remuneration levels and remuneration policy. In good years, there is more to share and wealthsharing is relatively easier than in bad years. In bad years or for organisations that have low returns, one still has to retain key staff.
Regardless of what competitors are paying, an organisation may not be able to pay the market rate because of its financial situation. This causes such an organisation to be more discerning than other organisations in its remuneration policy because it needs to get the biggest bang for its buck. These organisations tend to differentiate more strongly between good and poor performers (Rappaport, 1999).

-Financial / Organisation success
When those who create the wealth see it in the financials or hear about it via the grapevine, it is only natural to want to share in some of it.
Pressure is exerted on the top echelons to pay out some of the profits to the workers. Indeed it is the remuneration committee or board who makes those decisions usually after obtaining approval from the shareholders. Useem (2003) describes certain CEOs as being shameless, as they feather their nests even when the company has performed badly. Although more acceptable when the organisation does well, this is only sustainable if fairness is perceived by all.
-Governance and King II report Governance has become an increasingly more important factor, but has not yet been legislated. The King II report on governance and the Institute of Directors offer guidelines, but no more. Organisations are left to fend for themselves regarding compliance with the guidelines.
Investors and analysts view organisations with good governance principles in place more favourably (Ernst and Young, 2002;King, 2002 -Productivity The compact between management and staff i s often around increasing productivity (Mahesh, 1993). Staff realise that this means producing more with the same number of colleagues, which translates to working harder. In principle, given that the job market is tight, workers have no problem with the c oncept, as long as they are rewarded for the extra effort (Stajkovic and Luthans, 2001). Target setting and negotiations take place to arrive at the fairest formula, and this shapes precedent and future policy. Abowd (1990) states that performance-based compensation enhances corporate performance and productivity. With increasing competition and the need to be more productive, productivity-related remuneration systems form an important component of any organisation's remuneration policy (Armstrong and Murlis, 1998).
-Staff loyalty Boyle (1995) outlines the secrets of a successful employee recognition system designed to enhance staff loyalty. Organisations are looking deeper into this realm to secure staff loyalty and formal recognition schemes are being added to remuneration policies.
-Strategic thrust Remuneration is a powerful driver of strategy, especially when the link is obvious (Miller, Wiseman and Gomez -Mejia, 2002). It has often been said that what gets rewarded gets done. Identifying several key strategies and paying for their achievement makes this a compelling driver of remuneration policy. Remuneration policy and strategy should be designed in such a way as to underpin and drive organisational strategy and performance (Gerhart, 2000).

The main components of remuneration policy
Organisations all have different remuneration policies with different content. It is what gives them their competitive advantage (Fay, Knight and Thompson, 2001). There were, however, common themes derived from the literature review as indicated in Armstrong and Murlis (1998), Bergman and Scarpello (2001), Burnett (2000), Chingos (1997), Fay et al., (2001), Fisher (1991, King (2002), Martocchio (1998), White and Druker (2000), and Young (2002) • Share schemes -any type of share scheme, the most common being share options, performance shares, share purchase schemes • Short term incentives -incentive schemes where the measurement period is around one year and payments are in cash (e.g. profit share, gain share, commission, bonus scheme)

Remuneration process, systems and policy
• Job evaluation or broad banding -the system used to rank the relative worth and complexity of one job against another in the organisation and in the market • Legal compliance -complying with any law (e.g. Employment Equity Act, SARS) • Market position policy -refers to where -relative to salary surveys -a com pany wants to pay its employees • Remuneration governance -the governance issues that apply to remuneration including how decisions are taken and limits of authority • Remuneration mix -the mix or ratio between guaranteed pay (e.g. base pay or total package) and variable pay (e.g. short term incentives, long term incentives and share schemes) • Retention strategies -strategies put in place to retain employees

Gaps in remuneration policy
Nowhere in the literature is a link drawn between factors driving change to remuneration policy and extent of change in components of remuneration policy. This research attempts to link these factors.

Outcomes from changes to the components
Milkovitch and Newman (1999) and Lawler (1990)  The link between remuneration and company performance has been researched and a positive correlation has been found (Armstrong and Murlis, 1998;Lawler, 1990;Milkovich and Rabin, 1991 It is hoped that this research will show which parts of the remuneration systems had the greatest effect on participant organisations.

Gaps in outcomes
The literature review did not r eveal the link between changes to remuneration policy and the impact on the organisation. It further found that no link has been demonstrated between drivers of change and the impact of changes.

The void that exists
The void in knowledge that exists is the linkage between each of the major constructs: • Factors driving remuneration policy decisions • Remuneration policy changes that took place in South Africa • The impact of these remuneration policy changes on the organisation Also, the strength and importance of the drivers are not known.
Organisations do n ot know how to 'weight' the importance of each factor. It is also not known which components of remuneration policy were changed as a result of the drivers and the extent to which they were changed. The null hypothesis is that components of the remuneration policy identified in the literature study are valid components.

Construct 3 -Impact of remuneration policy changes on organisation
Question 4: What impact did the changes to the remuneration policy make on the organisation?
The null hypothesis is that a correlation exists between the extent of changes in remuneration policy and the impact on the organisation.
Question 5: Are there differences in the responses for different participants?
The null hypothesis is that the mean extent of change in remuneration policy is equal across categories of characteristics of organisations.
It is hoped that the results of this research will close the gap in our current knowledge.
A review of the literature and the pilot study yielded: • 24 factors driving remuneration policy • 18 elements in a remuneration policy • 11 main outputs or impact on organisations The table be low summarises the constructs:  The main void that exists is the linkage between factors driving policy change, which components of remuneration were changed, and the impact on the organisation.

Summary
A comprehensive review of the literature was undertaken to establish primarily the following:

•
Which factors drive remuneration policy decision making • What components comprise a re muneration policy

•
The impact these remuneration policy decisions had on organisations • Whether or not there were any demographic differences in previous research The gap in our knowledge is the relative strength or importance of the drivers, the extent to which remuneration policy has changed, and whether it had a positive or negative impact on the organisation.
The next chapter outlines the research design proposed for this study.

CHAPTER 3 -RESEARCH DESIGN
The previous chapter covered a review of the literature and several research questions were posed.
In this chapter the research design is discussed regarding the population and sampling, the measuring instrument and data -gathering methods, the research procedure and statistical analysis techniques used. The headings are discussed in two phases , namely, the pilot study and quantitative study. The chapter is closed with a summary detailing the outcomes to be determined.

Research approach
In this chapter the 'blending' methodology as a way to resolve the qualitative / quantitative dichotomy of the components of this study is described. Creswell (2003, p.10) refers to this dual approach as "triangulation" and the dual approach is sequential and dominant-less dominant design. The qualitative, les s dominant phase will precede the dominant quantitative phase.
The triangulated research model that was adopted, comprised two phases: • Phase 1 -A pilot study that was qualitative, involving individual interviews with experts in the field and content a nalysis. This qualitative step was carried out to define valid constructs for the questionnaire for phase 2 • Phase 2 -The main study that was quantitative and involved questionnaires and statistical analysis The survey method that was to be used is described by Creswell (2003) as a quantitative or numeric description of some fraction of the population -the sample -through the data collection process of asking questions of people. The data was to be used to generalise the findings to a population within the constraints of the sampling method. The secondary independent variable factors driving changes was to be operationalised through the use of a semantic differential scale ranging from 1 = to no extent to 7 = to a very large extent. All major variables were obtained through personal interviews and a comprehensive review of the literature.

Population and sampling
Phase 1 -Pilot study (Qualitative) The purpose of the p ilot was to obtain valid constructs for the questionnaire and to supplement the literature review. Interviews were held and the questionnaire was amended to incorporate all variables not covered in the literature review (Cooper and Schindler, 1998).
The purposive method of sampling was used to identify the sample for the pilot study (Zikmund, 1997). This is a non-probability method of sampling to determine the delimiters in the research that narrowed the scope of the study (Creswell, 2003). The outcome of this phase was to integrate the research methodology and the research questions. The population needed to be more narrowly defined where the following mix of 10 interviewees were selected: • Listed companies employing more than 5000 employees -2 interviews with dedicated remuneration professionals • Companies employing less than 5000 employees -2 interviews with dedicated remuneration professionals • Remuneration committee members who are not dedicated remuneration experts -4 interviews • Managing Directors -2 interviews This sample was to conform to criteria that serve the purpose of the study -a method commonly used in exploratory research. Welman and Kruger (2001)

Measuring instrument/ Data-gathering methods
Two measuring instruments were used. if the questions in the interview elicited the type of information that was sought (Leedy, 1997). This data was content analysed to generate research constructs and variables in addition to the ones obtained from the literature review.
Conceptualisation and operationalisation occurred at the same time as the data collection. Understanding people's perspectives was the focus, rather than truth (Taylor and Bogdan, 1984). This study focused on the ways respondents make sense of their circumstances with regard to remuneration policy. Following this, the meaning of the data was induced and linked to the literature study.

Phase 2 -Main study
For the second phase a closed-ended questionnaire constructed from theory and results of the pilot study was used. Biographical data was collected and then t he constructs (independent variables) were measured to determine the relative importance of each factor in the remuneration decision. The questionnaire was pre-tested to check for design errors.
Two batches of questionnaires comprising 10 pilot respondents were sent via e -mail (two pilot runs). The first pilot selected every 100 th record in the consolidated mail list until a sample of 10 was obtained.
The questionnaire was amended based on the results and it was also automated to shorten completion time and to enhance the chances of respondents completing the questionnaire. Definitions of the variables were added as a result of this pilot run.
The second pilot run selected the second name on every hundred records in the mail list until a sample of 10 was obtained. Final amendments were made to the questionnaire based on the results of this pilot. Following these changes, the final questionnaire was e-mailed to every entry in the database. The person who is custodian of the remuneration policy was asked to complete the questionnaire. The data was verified on capturing and suspicious data was telephonically confirmed.

Research process
Phase 1 -Pilot study The individual interviews had open-ended questions to elicit further constructs and to let respondents interpret and to avoid bias based on the researchers questions. Appointments were set up with a sample of 10 interviewees. These interviewees were selected through quota sampling from the mail list. Self-administered questionnaires were used (Leedy, 1997) and data was gathered using the intercept method (Cooper and Schindler, 1998). The two-stage design using open-ended questions was particularly useful to ensure content validity for the questionnaire.
Any constructs identified in the literature research were included at this point.

Phase 2 -Main study
Questionnaires were e-mailed to 1700 companies. The person who is the custodian of the remuneration policy was asked to complete the questionnaire. Creswell (2003) discusses how the items in the s urvey instrument must be closely aligned to the research questions, the variables from the literature and the proposed statistical analyses. The questionnaire asked closed-ended questions through an electronic form which allowed for the efficient capturing and processing of the data, and which was suitable for highly educated respondents (Cooper and Schindler, 1998). The collected data was in a format where it could be statistically analysed using the appropriate method.
The questionnaire comprised 3 main sections. Demographic data was collected at the beginning of the questionnaire (section 1) to enable data to be analysed by classification to identify differences relative to outcomes. Section 2 interrogated factors driving change to remuneration policy using a 7-point scale to determine the extent of each factor. The extent to which the components of the remuneration policy changed since the year 2000 were tested using a 4-point scale ranging from 'to no extent' to 'to a large extent' in section 3. The impact of these changes on the organisation were also tested in this section using a 5-point scale and the option to indicate if the change was not applicable to impact on the organisation. Participants had the option of completing their details (if they want to receive an executive summary) or remaining anonymous. The outcome of the pilot study formed the basis for phase 2 by identifying the interviewees' beliefs and values regarding remuneration policy and factors driving it. Consequently their behaviour was viewed as intentional and creative and it could be explained but not predicted in the outcome (Schurink, 2003). The outcome was conceptualised as themes and categories (constructs) that formed the basis for phase 2namely, the factors driving change in remuneration policy and remuneration policy components.

Phase 2 -Quantitative study
Phase 1 resulted in certain themes and/or categories of factors driving change in remuneration policy and remuneration policy components, and phase 2 then studied these constructs in four steps from a quantitative pers pective. This was done using a detailed questionnaire sent out to the participants in the study. The data was analysed by Statkon (the 'Statistics Consultancy' at Rand Afrikaans University).
The methodology is discussed in more detail.

Recorded frequencies
The background information was analysed for recorded frequencies.
Information on respondent position, organisation type, organisation structure, organisation size, industry sector, organisation age and whether the organisation is listed or not, was elicited by the questionnaire. Where recorded frequencies of data were too low, the data was reduced into broader categories i.e. broader categories were defined. The background information of the recorded frequencies is referred to as the characteristics of the recorded frequencies hereafter.
The broader categories of recorded frequencies of background information will be referred to as the categories of the characteristics of the recorded frequencies.

Factors driving change in remuneration policy -construct 1
The Semantic Differential technique was used to illicit the strength of each factor driving change to the company's remuneration policy over the past 3 years (i.e. since 2000). This scaling method is based on the proposition that an object can have several dimensions of connotative meanings which can be located in multidimensional property space, called semantic space (Emory and Cooper, 1991). Bipolar rating scales were developed on a seven-point scale (from 1 to 7) for the constructs.
Whilst the seven-point Semantic Differential scales can be highly generalisable, specific tailor-made bipolar rating scales were used that permit connotative perceptions. Scales were linear between polar opposites and passed through the origin.
The chi-square test was used to determine the dependence of the categorical variables (background information) and the independent variables (factors driving change). In other words, the null hypothesis was that the extent of the factor driving change is independent of the characteristics of recorded frequencies. This test allowed for testing for significance in the analysis of frequency distributions. The observed frequencies (Oi) were compared to the expected frequencies (Ei) based on expert theoretical ideas or presupposed proportions. This informed the closeness of fit of the observations with expectations (Zikmund, 1997). Testing was done at a significance level of 0.05 after the degrees of freedom for each construct had been determined. The The business outcomes were inherently multidimensional because three or more variables were involved. The relationship between one dependent variable and several independent variables was specified.
One criterion variable (dependent variable -impact of remuneration policy changes) was to be related to multiple predictor variables (independent variables -factors driving change in remuneration policy).
A first order factor analysis was done on the 24 factors driving change to remuneration policy. The method used was principal factor analysis and followed the same diagnostics as that of the analysis on the extent of change in components of remuneration. A Varimax (orthogonal) rotation was used and then the Kaiser criterion to decide on the number of factors driving change to remuneration policy. The first order factor analysis was repeated on the remaining number of factors driving change to yield a number of first order factors. Various factors driving change to remuneration policy were grouped in each factor through the process.
The outcome of this identified first order factors driving change to remuneration policy.
A reliability analysis on the first order factors was performed and tested using Cronbach's Alpha. First order factors with a value < 0,6 were excluded and then a second order factor analysis was performed on the first order factors using the same method and diagnostics. Finally the correlation between the resultant second order factor/factors and extent of change to remuneration policy and impact of change on the organisation was tested using a Pearson Correlation.
The outcome of this step was to see if any meaningful interpretation could be given to factors driving change to remuneration policy and impact of changes to remuneration policy.

Reliability and validity of the research results
In this section compliance to reliability and validity of the research results is discussed. The central consideration concerning the process of data collection is that of reliability (Mouton and Marais, 1996).

Reliability of observations or data is influenced by four variables;
namely, the researcher, the participants, the measuring instrument and the research context or circumstances under which the research is conducted. In this study compliance with reliability and validity were attained through the detailed research approach, design and execution that followed to ensure that the study could be replicated and results in the same findings. Reliability tests were performed at all stages of the analysis to test the validity of the Repertory Grid (Fransella and Bannister, 1977). The Grid revealed a pattern of relationships between the constructs by revealing a pattern in the way in which the person has ranked elements.

Strengths and weaknesses of the study
The study was conducted with the belief that people construct their worlds according to their perceptions. The random selection of participants in phase 1 of the study may not be representative of the population.
Organismic variables are attributes such as gender, nationality, age, socio -economic status and education level. These variables may have had an influence on the study: • The education level of the researcher • The race and gender of the researcher versus the participants

• Prior knowledge of the researcher by participants
Researcher orientations such as attitude-structure expectations, bias producing cognitive factors and expectancy effects in a diverse culture could have influence the study reliability and validity.

Summary
A qualitative study was undertaken to explore and identify key assumptions and characteristics identifying the main factors driving change to remuneration policies (Phase 1). The outcome of the qualitative phase formed the basis for the quantitative phase in which statistical analysis was used (Phase 2).
The statistical analysis determined: The next chapter provides an analysis of the data and results.

Introduction
In the previous chapter the research design and methodology was presented. In this chapter the results of the data analysis are presented.
The primary objective of the study is to understand the drivers of the various components of remuneration policy, the extent of each driver's influence and the outcome thereof.

Organisation profiles
In this section the demographic details of the survey respondents is • Characteristic 9 -Position title Table 2 shows the sector that the respondent organisations fall into.
The private sector makes up 75% per cent of the organisations that responded:  100.0 Table 4 indicates the organisational structure of the respondent companies. This missing data includes the applicants who found that the options presented to them were 'not applicable' or structured differently.    Table 7 illustrates number of years the organisation has been in existence. The number of respondents was closely split between organisations older than 50 years and those organisations less than 50 years old.  Table 8 indicates the status of remuneration committees in the respondent organisations. Only 3% of respondents were not aware whether there was a remuneration committee in place or not. 100.0 Table 9 illustrates the varying number of industry sectors that are illustrated by the respondents. The broader categories are as follows: • Category 1 -Resources (e.g. Mining, oil and gas) and basic industries (e.g. Chemic als, forestry and paper, steel and metals, construction and building).
• Category 2 -Financials (e.g. Investment companies, banks, specialty and other finance, life assurance, insurance, real estate), Information technology (e.g. hardware, software and computer services) and professional services (e.g. legal, audit, consulting).
• Category 3 -Non cyclical consumer goods (e.g. beverages, food producers and processors, health, pharmaceuticals and biotechnology) and cyclical consumer goods (e.g. household goods and textiles, automobile and parts).
• Category 4 -Cyclical services (e.g. general retailers, support services, leisure and hotels, media and entertainment, transport), general industries (e.g. d iversified industries, electronic and electrical equipment, e ngineering and machinery), non-cyclical services (e.g. food and drug retailers, telecommunications services, development capital, venture capital) • Category 5 -Other (e.g. parastatals and public service).  Table 9 can be represented graphically as in figure 3:

Financials
Non cyclical consumer goods Cyclical services

Figure 3: Industry sector -pie chart
Resource organisations make up the largest part of the population followed by financial organisations Table 10 indicates that half of the respondents who answered the questio nnaire are not directly in th e human resource field. 'Other' included titles such as remuneration / compensation manager, finance manager / director, managing director / CEO, operations manager / director and remuneration / compensation analyst.

Analysis of research propositions and re sults
The research propositions for each of the following are discussed under this section: • recorded frequencies    The following factors driving change in remuneration policy are independent of the broader categories of the characteristics (i.e. p -value > 0.05) and listed in increasing p-value:

Factors driving change in remuneration policy
• Strategic thrust • Turbulence in business environment

• Competitors
• Publicity   Of the factors driving change in remuneration policy that may be dependent on the characteristics, the following characteristics are dominant: • Number of employees The gap that is closed through information in this table is that remuneration decision-makers are now aware of which factors to consider and to place more emphasis on. It is a strong guide when considering factors that influence organisation characteristics.     First order factor analysis suggests that there is an interdependence of the components of each factor and these have been grouped into 5 descriptive labels given in table 18.    Second order factor analysis suggests that there is an interdependence of the components of each factor that could be grouped as a single descriptive label, Remuneration Policy. In other words, these five factors make up remuneration policy.
b. Results of the analysis Factor analysis of the data was performed on two levels according to a procedure suggested by Schepers (1992)  The null hypothesis test is that a correlation exists between the extent of changes in components of remuneration policy and the impact on the organisation. A reliability test was performed on the matrix to yield a Cronbach Alpha coefficient value of 0,7987 indicating that a good correlation exists. Therefore, the null hypothesis is accepted. Cortina (1993) indicated that a Cronbach Alpha of 0,7 and greater is significant.
The correlation between the second order factor extent of change in components of remuneration policy and the second order factor: impact of change on the organisation was calculated to give a Pearson Correlation of 0,843. This shows that the correlation has high significance as significance exists at levels of 0,02 (2 -tailed). The

a. Testing hypotheses
The null hypothesis that the mean extent of change in components of remuneration policy is equal across categories of characteristics was tested. Also, the null hypothesis that the mean impact of change in components of remuneration policy on the organisation is equal across categories of characteristics was also tested.  The extent of change was defined as: 1 = small extent ('to a small extent' rating from questionnaire) 2 = moderate extent ('to a moderate extent' rating from questionnaire) 3 = large extent ('to a large extent' rating from questionnaire).
If 'to no extent' was marked in the questionnaire, it was rated as no impact.       The top 5 changes to remuneration policy, in the public sector, were: • Job evaluation policy     Anti-image correlation on all 7 factors excluded factor 6 (competitors) from the second order factor analysis because its MSA value was equal to 0,556 (below 0,7). In other words, competitors do not have as direct a bearing as a factor driving change. The resultant factor analysis Eigenvalues were calculated on this matrix to yield one factor (business strategy) that had an Eigenvalue greater than unity (Kaiser, 1970  Second order factor analysis suggests that there is an interdependence of the components of each factor that could be assigned a single descriptive label as business strategy.
Finally, the second order factor driving change to remuneration policy was correlated to the second order factor: extent of change to remuneration policy and to the second order factor: impact of change to the organisation as shown in table 32.

Summa ry
In this chapter, the results of the analysis for each construct were reported. The forces driving change to remuneration policy were validated, as well as the strength of each force. It is now known which components of remuneration policy were changed and by how much.
The impact each policy change had on organisations is also known.
Differences between respondents and organisation type and the effect on the dependent variable , is also reported on.
In the next chapter, the results and conclusions drawn from the literature survey and the empirical research are discussed.
Interpretation is provided for the key findings.

Introduction
This study attempted to establish and quantify the relationship, dependence and / or correlation that exists between factors driving change in remuneration policy, the extent of changes in components of the remuneration policy and the impact of these changes on the organisation. To distil meaning from a large number of drivers and components of remuneration, the descriptive factors are submitted in  The linkage between each construct is now known. The extent of change of remuneration policy has a high correlation with the impact of changes in remuneration policy on an organisation (response or outputs).

Construct 3 -Response / Output
The greater the extent of change in remuneration policy, the greater the impact on the organisation.
The policy components that had the most positive impact are total package, competence based pay, long term incentives, market position, merit pay / PRP, total package, remuneration mix, short term incentives and retention strategy.
The results of this study support the relationship between the factors driving change to remuneration policy and the impact of the changes of the remuneration policy on the organisation. This finding has closed the gap in our current level of knowledge.

Construct 1 -Factors driving change to remuneration policy
A summary of the factors driving change to remuneration policy, their relative strength and the extent of change is shown in table 34.  (Rose, 2003). A possible explanation for this low ranking is that South African organisations still have some way to go in the remuneration governance arena. Organisations in South Africa have not begun reacting to remuneration governance significantly yet but governance is one of the key drivers of remuneration change. This is an important finding for remuneration decision-makers.
There is a link between organisation size and the number of factors driving change in remuneration policy. The larger the organisation, the more elastic the relationship on factors driving change to remuneration policy. An implication of this is the staffing levels required or the extent of external assistance required for the larger, more complex organisations.
It is now known which factors driving changes in remuneration policy are independent of organisation characteristic, and should be on the radar screen for all entities. Organisations with different characteristics are able to place additional focus on the factors that may be dependent on their characteristic. This allows remuneration decisionmakers to hone in on these drivers. The findings support the literature review regarding the drivers of remuneration policy. What is now known is the strength of each driver.

Construct 2 -Components of remuneration policy
The literature review and pilot study yielded 18 components of remuneration polic y. What was not known was the extent on change of these policies in South Africa over the past 3 years. Table 35 shows each remuneration policy component. Firstly, they are rank ordered by mean extent of change. Secondly, they are ranked by the mean impact of the remuneration policy change on the organisation. A score of 1 = small extent, 2 = moderate extent, and 3 = large extent. in South Africa.
The groupings of the first order factors into 5 groups yields insight into the development of a remuneration framework that transcends current thinking and the findings in a review of the literature. The groups yielded are: • Remuneration mix and governance Given the relatively small changes made to Rand hedging of salaries and international remuneration, it seems as if organisations believe that the overseas moves are attributed to other factors, not remuneration. This is borne out by the literature review, where it states that money on its own is not a motivator and it needs to be complemented by sound management practice.
Variable pay remains an important part of remuneration and enjoyed amongst the greatest extent of change in participating organisations.
The insignificance of competence based pay and retirement fund policy is an unexpected finding. This could be due to the relative newness of competence based pay and the fact that retirement provisions are seen as a 'given' in the employment deal. There is also relatively little competitive advantage that can be gained by the retirement fund policy, as they are all similar in nature. The relatively large impact of competence based pay was, however, shared by both private and public sector and should therefore be watched as it unfolds in future years.
Another unexpected finding was the small extent to which share schemes were changed. With imminent changes to share scheme accounting procedures, this is likely to change over the next few years. There is an association between the factors driving change to remuneration policy and the impact on the organisation. Business strategy seems to have the greatest single impact as a driver. This is a compelling finding for remuneration decision-makers, and is Although excluded now, it should be kept on the radar screen during times when the Rand is weak in order to attract and retain talent, particularly for internationals.

Linkage to research questions
A synopsis of the major findings linked to the research questions is provided below in summary format. This closes a gap in current knowledge and provides a guide to remuneration decision-makers. The research has shown that there is a strong correlation between t he factors driving change and the extent between the factors driving change and the impact of change. The factors therefore influence decision making directly.
Question 3: Which components of the remuneration policy were changed and to what extent were they changed?
The research provided a good indication of which components were changed and the extent to which they were changed. For private sector participants, the top 5 changes in order of extent of change were in: • Fringe benefits policy The need to review market position policy is possibly linked to the retention driver. There is also a move in the market to focus on market related guaranteed packages pegged at the median or upper quartile. This is a shift from the common wisdom over the past 10 years where organisations aimed for a lower guaranteed package relative to the market and used to aim for lower quartile to the median.
Question 4: What impact did the changes to the remuneration policy make on the organisation?
The greatest positive impact in the private sector in order of strength for the top 5 was in the following areas: • Total package policy There are distinct differences in the extent of change and impact of change across organisation structure and industry sector and particularly between private and public sector. This is telling from a survey and benchmarking point of view, in that the best data for comparative purposes will come from organisations structured similarly and in the same industry sector.

Summary
All research questions have empirical data to support remuneration decision making. The strength of the forces driving remuneration policy decision making are known. So are the extent of remuneration policy changes over the past 3 years. The impact of each policy on the organisation is now known and this provides a useful guide to remuneration policy decision-makers. It is hoped that decisions can be taken with more confidence and that the main gaps in knowledge have been closed somewhat.
In the next and final chapter, a summary is provided with conclusions and recommendations.

Introduction
In this chapter a summary is provided of the motivation for this study, the aims and contribution of the research. Recommendations, further research and limitations are outlined followed by conclusions.

Motivation for the study, aims and contributions
The motivation for the study was driven by the following : •

Return on investment
The main findings of this research revealed that these are important issues. It has filled gaps in our knowledge which allow remuneration decision-makers to focus on specific areas with more confidence. It is envisaged that a better understanding of the incidental, associative and causal links between the factors driving remuneration policy and the impact on the organisations, will positively affect remuneration policy decision making.
Remuneration decision-makers now have a clear understanding of the strength of the relationships between the variables. The contribution of this research is to improve remuneration decision making which will have a greater positive impact on the organisation in that: • Reward underpins organisation strategy There is a strong ink between performance and pay • Publicity is positive

•
The organisation performs better financially • Remuneration costs are maintained

Recommendations
Recommendations are made from a methodological and practical perspective.

Recommendations in terms of methodology
It is recommended that: • The questionnaire has fewer biographical questions which would tighten the focus • The scale on impact of change be expanded to provide alternative answers. This would enrich the study 6.3.2 Recommendations in terms of practice It is recommended that:

•
More emphasis be placed on the qualitative part of the study. In this way, it is believed that richer meaning will be distilled from respondents • A greater cross section of management participates in the research

Value add: what is now known
The results of this research provide useful insights to remuneration policy decision-makers. Firstly, the forces driving change to remuneration policy are known as well as the strength of each force.
The forces dependent on the type of organisation are also known.
Secondly, the changes made to remuneration policy over the last 3 years is also known as well as the extent of the changes. This provides guidance to the focus areas and indicators as to which components need to be watched over the next few years. Thirdly, the impact of change of each component of remuneration policy on the organisation is known. This guides remuneration policy makers as to the most positive impacts on the organisation.
More important is the discovery of those components that have a neutral impact on the organisation. Expectations can therefore be managed accordingly. Finally, the differences between the various types of organisation are known and that has implications for the remuneration strategists regarding what to keep on the 'radar screen.' The estimated value for remuneration policy makers and organisations is that: • Guidelines are provided as to the forces driving remuneration policy change • The strength of each force provides a guide as to how much research and emphasis should be placed on each driving force • Guidelines as to the changes made to remuneration policy are reported and it is now known where the focus areas have been.
This informs remuneration policy decision making and provides competitive advantage • The impact of each remuneration policy change on the organisation is known and this provides clear guidance on how to manage the implementation of the policy. Those policies that have a neutral impact should not be hyped up by management and implemented routinely without unrealistic expectations • Guidelines as to which driving forces play a role by organisation demographics are reported. This allows a focused approach when doing the annual compensation review

Limitations of this research
The following limitations need to be considered relative to this study: • The main focus was on the quantitative study and the completion of the questionnaire. This results in a respondent's perception, which would have been better captured in conjunction with a more thorough qualitative analysis • The dependent variable -impact on organisation -was described in broad terms. This needs to be expanded on so as to provide deeper understanding of the impact of remuneration policy changes on organisations • This study captures management's view of the si tuation. It would be useful to complement this with the views from employees

Future research
Emanating from this study, the following research is suggested: • There is an increasing interest in the needs of generation X and Y employees (Huysamen, 2003). It would be useful to repeat this study with a special emphasis on these categories of employees • An in -depth study of other important components of remuneration policy i.e. remuneration mix and retention is recommended. It may include design issues and application of t he strategy and implementation • It is recommended that a more detailed understanding of the impact on organisations is researched. This study was limited to a positive , neutral or negative impact, which could be expanded to provide richer understanding • Lastly, the linkages between retention of key staff and the organisation scorecard measures like customer loyalty, finance, learning and growth and organisation processes could be explored

Conclusions
Whilst the literature review provided a useful insight into all the drivers and remuneration components, little was known about the strength, extent and links between these. This research provided answers on which to base remuneration decision making. There were expected and unexpected findings, both of which provided rich insight and scrambled some assumptions.
It is hoped that this research will provide a useful base from which to build and further enhance our understanding of a subject that touches all working people's pockets. Money matters.

Remuneration changes
To what extent did the following components of your organisation's Remuneration Policy change since 2000, and what impact did the change have on your organisation? Please note: Two responses are required for each of the components listed below: Please indicate (1) the extent to which the component was changed, as well as (2) the impact that change had on the organisation? In each case, use the scale provided.
(1) Extent of change (2) Impact of change 19. Other (please specify and specify the extent to which the component was changed as well as the impact that change had on the organisation): Thank you for your time and effort to complete this questionnaire.
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