The Need for Reward Management and Systems Essay Example

usage committees, piecework wage programs, incentive systems, group bonuses, and other forms of payment for performance. On the other hand, rank-based rewards encompass cost of living increases, benefits, and salary increases based on labor market conditions, seniority qualifications, and specialized skills. Membership-based rewards tend to attract employees because the extent of the rewards increases with seniority. However, these types of rewards have drawbacks such as discouraging poor performers from leaving the organization and indirectly motivating job performance. Conversely,seniority-based rewards reduce turnover because the cost of leaving increases with the length of service with the employer.

REWARD MANAGEMENT LINKED TO THEORIES OF MOTIVATION

Employees' motivation relies on their perception of achieving rewards and meeting their expectations.

Motivation theory is a framework that elucidates the factors driving individuals' actions in the workplace, providing guidance for organizations to inspire employees to leverage their abilities and dedication towards attaining both organizational and personal objectives. Each person possesses distinct needs and aspirations. Employees can instigate motivation within themselves through diverse approaches that foster assurance in accomplishing their goals, while management can stimulate employee motivation using strategies like compensation, promotion, and acknowledgement. Motivation assumes significance as it entails the notion of rewards.

People work because they have the need to fulfill their individual, household, and societal desires. These desires include the basic needs necessary for survival, as defined by Maslow's hierarchy of needs. According to this theory, the hierarchy begins with essential physiological needs and progresses to safety, social needs, and ultimately the need for self-realization. However, some critics argue that there is limited empirical evidence supporting this model.

Herzberg classified factors in the workplace into two categories: "hygiene" extrinsic factors like salary and management systems,

which can cause dissatisfaction if they are absent or inadequate, and "motivators" intrinsic factors such as the value of the work, achievement, recognition, responsibility, and opportunities for growth, which can positively motivate people. Maslow's Hierarchy of Needs and Herzberg's Two Factor Theory are both content theories of motivation. They both propose that needs must be fulfilled for employees to be motivated, but Herzberg argues that only the higher levels of Maslow's Hierarchy (e.g., self-esteem and self-actualization) have motivational effects.

According to Taylor, the needs for self-actualization and esteem act as incentives. If not explained clearly, the remaining needs can only cause dissatisfaction. Taylor stated that satisfaction and dissatisfaction are not necessarily related. He developed his theory of "scientific management" based on three observations: that individuals are motivated by maximizing their income, that people are considered as individuals, and that they can be treated like machines.

Taylor's belief was that money was the primary motivator in the workplace. He advocated for a payment system that would compensate workers according to their productivity, with lower wages for those who exerted less effort and higher salaries for those who surpassed expectations. However, this perspective disregarded the individual motivations of people and failed to recognize that money does not carry equal significance for everyone. It overlooked the fact that individuals engage in work for reasons beyond financial incentives. Consequently, alternative theories of motivation have arisen, including cognitive or process theories, which center on how individuals perceive their rewards.

Expectancy theory is a concept that identifies two factors - value and chance. People assign value to rewards based on their satisfaction of security, community esteem, achievement, and liberty. Armstrong supports the idea that

Expectancy is the likelihood that rewards are dependent on effort. In other words, greater effort leads to higher rewards. However, according to Marchington and Wilkinson, this is not a fixed concept and different expectations may exist at different times. In order for effort to benefit the organization, individuals must have the necessary ability and perception of their role. The theory suggests that low motivation is a result of jobs with limited worker control. Marchington and Wilkinson also highlight the importance of two other motivational theories.

Latham and Locke introduced the end theory, which asserts that having challenging and monitored goals, as well as receiving feedback on performance, can enhance both motivation and performance. On the other hand, the Equity Theory suggests that fair treatment is a key motivator while unfair and unwarranted treatment can lead to demotivation.

STRATEGIC REWARDS

A reward strategy serves as an expression of intent outlining the organization's long-term objectives. It also encompasses the development and implementation of policies, practices, and processes aimed at achieving these goals and meeting stakeholder needs (Armstrong 2006, p.643). Rewards extend beyond mere compensation and benefits; hence, a strategic rewards strategy should consider various aspects of the workplace to attract and retain valuable employees who contribute to organizational success.

Reward policies establish guidelines for implementing wage schemes and designing and managing wage procedures. Employers are required to comply with four key policies: internal alignment, external competitiveness, employee contributions, and wage system administration (White; A; Druker 2000). Numerous studies on wage schemes have shown that motivation is a complex process, and people are driven by multiple factors. While financial rewards are essential, other factors may also be important, if

not more important. The purpose of rewards is to encourage behavior that directly contributes to achieving the organization's objectives. Reward systems should align with HR strategy, business strategy, and organizational culture.

Job Evaluation

Job evaluation is a structured method used to determine the relative value or importance of jobs within an organization, in order to establish internal hierarchy.

It provides the foundation for planning a fair class and wage structure, rating occupations in the construction industry, managing job and pay relativities, and guiding the achievement of equal pay for work of equal value. However, there has been criticism of job rating by some HR practitioners in the late 1980s and early 1990s. Many organizations made significant charges against it. Critics argued that it was not only bureaucratic and inflexible, but also time-consuming and unsuitable in today's organizations.

Grade and Pay Structure

Pay classification is a system indicating the rate at which an employee receives basic wage. It is also a means to compare ranks, which may have different names in various services.

The Pay classs assist the employment process by offering a comprehensive range of salaries, while the Pay construction refers to the various levels of wages for occupations or groups of occupations, based on their position determined by job evaluation compared to market rate studies. It allows for salary increases in accordance with competency or contribution.

Market Rate Analysis

The market rate indicates the actual wage for certain occupations, which is determined by the supply and demand in the labor market. If an organization pays below the "market rate," it may face difficulties in recruiting and retaining suitable staff. To determine the market

rate, an organization must conduct pay studies.

Obtaining information on market rates is advantageous for a company as it helps them acquire and retain high-quality staff and respond to market pressures. There are various methods of gathering this information, such as checking with local employment bureaus, Job Centres, or through job advertisements in national newspapers.

Employee Benefits

Employee benefits refer to the indirect financial rewards that employees receive for their ongoing employment with the company. These benefits are provided to all employees and can include paid time off, health and life insurance, and child care facilities (Dessler 1997, p503). In today's world, organizations view benefits as a crucial aspect of reward management in order to gain a competitive advantage in the labor market. Both monetary and non-monetary benefits play a significant role in attracting, retaining, and motivating employees.

In order to attract and retain staff, it is crucial to provide both monetary and non-monetary perks. Non-financial benefits are customized to meet the specific needs of employees. Allowances serve as extra compensation, such as meal allowances that assist in covering meal-related expenses. Performance Management involves real-time monitoring of work progress and guiding individuals towards predetermined goals and competency skills, enabling them to achieve their objectives more effectively.

The text explores two ideas: honor and entire wages. Honor refers to the gratification derived from the occupation itself, such as recognition, success, duty, freedom, and top achievement, rather than monetary payment. Conversely, entire wages incorporate all the financial wages and perks received by an employee for their work in the organization. This encompasses monetary aspects like base salary, bonuses, and additional financial benefits, as well as non-financial benefits on both personal and organizational

levels. WorldatWork (2006) introduced a model for entire wages to enhance comprehension and implementation of this concept. Nowadays, professionals commonly use terms like "entire wages," "entire compensation," or "compensation and benefits" to describe these combined strategies.

The following text includes five elements of entire wages, each with their own plans, patterns, elements, and dimensions that define an organization's scheme to attract, motivate, and retain employees. These elements are Compensation, Benefits, Work-Life, Performance and Recognition, and Development and Career Opportunities.

There are many sectors of employment that use wage systems with direct relationships to individual performance and outcomes. Examples of these systems include payment by results (PBR), such as bonuses or piecework; committee-based strategies; work-measured schemes like pre-determined gesture time systems or measured day work (MDW); appraisal or performance-related pay; market-based pay; competence and skills-based pay.

Performance-related pay (PRP) is a form of compensation that ties pay advancement to an evaluation of individual performance.

The concept of performance wage refers to a wage system where a portion or all of the wage is based explicitly on the assessed work behavior and/or measured consequences of employees (Shields 2007, p.348). Performance related wage is commonly used when it is not possible to appropriately measure employee performance in terms of output or sales achieved. Similar to piece-rates and commission, performance related wage is a form of incentive wage. Individual performance is regularly evaluated (typically once per year) against agreed objectives, which is known as performance assessment. Subsequently, employees are grouped based on their performance, which determines their respective wages.

The concept of wages involves providing a financial bonus and/or increase in pay rate or salary. However, researchers have different opinions about the effectiveness of

performance-related wages. According to Thorpe and Homan (2000), one benefit of performance-related wages is that they attract and retain talented employees. Conversely, other research suggests that performance-related wages do not effectively motivate employees, and that employees generally consider the system unfair in practice. Additionally, rewarding employees individually through such schemes may do little to encourage teamwork, and these strategies are typically implemented only once a year during appraisals and payouts, which may weaken any motivating effect. If a worker receives no increase at all under an appraisal wage scheme for being rated less than satisfactory, their motivation and morale may be significantly impacted.

Therefore, it is important to focus assessments on performance appraisal, identifying training needs, and setting goals, rather than dependent pay.

The purpose of Individual Payment by Results (PBR) strategy is to establish a direct relationship between wage and productivity, where higher effectiveness leads to higher pay. This direct connection makes incentives stronger compared to other strategies. However, traditional bonus, piecework, and work-measured strategies have declined in recent years. Many employers now use 360-degree feedback, also known as 'multi-rater feedback', which provides employee development feedback from all around the employee. Despite this shift, payment by consequence fails when material shortages or delays impact production and when individual skills are not recognized or rewarded. As a result, highly skilled individuals may end up assigned to more complex and potentially less rewarding work.

Piecework, bonus schemes, and commission are methods of PBR. Piecework involves paying workers a specific rate for each unit of output.

This means the system is easy to operate and understand, although vulnerable to the disadvantage that it is often at the expense of quality. Pieceworkers

must be paid at least the national minimum wage. Incentive bonus schemes are when, for example, an additional payment is made when production exceeds the established threshold, or when there is an increase in sales which surpasses given targets. Variable bonuses can also be paid based on achievements against predetermined standards, so that the higher the performance achieved, the greater the amount of bonus earned. However, Armstrong (2006, p.635) stated that bonus payments are linked to achieving profit and/or other financial targets.

Time rates are used when employees are paid for the amount of time they spend at work. The typical form of time rate is the weekly pay or monthly pay. Usually, the time rate is set in relation to a standard working week (e.g. 40 hours per week). Time worked above this standard is referred to as overtime. Overtime is typically paid at a higher rate than the standard time rate.

It represents the surplus portion of the employee. The main benefits of time-rate wages are that they are suitable for organizations that wish to employ workers for general tasks (e.g. financial management, administration, and maintenance) where employee performance is difficult to evaluate. Commission is a remuneration given to employees based on the sales achieved.

Illustratively, in sales occupations, the seller may receive a percentage of the selling price or a fixed amount for each unit sold (Werther & Davis 1997 p.411). The commission rate depends on the selling price and the level of effort required in making the sale. Armstrong (2006, p.638) emphasized that commissions offer direct financial incentives and attract high performing sales personnel.

Measured Day Work

Measured day work (MDW) has been derived

from both individual PBR and basic pay rate strategies. Salary remains constant and does not fluctuate in the short term as long as the targeted performance is maintained.

The implementation of public presentation standards for MDW systems necessitates following a specific model and making necessary changes as needed. This process requires the wholehearted involvement of management, employees, and trade unions. The salary structure is regularly determined based on job evaluation and with the complete comprehension of the employees. MDW is atypical in nature now. It is suitable for organizations that prioritize a consistent, secure, and anticipated level of performance rather than individual excellence at the highest level.

Market-Based Wage

The concept of market-based wage refers to the salary level that is available in the market for the same type of work. Various factors help determine the market rate, such as the availability of necessary skills, the overall unemployment rate versus the employment rate, and the demand for specialized skills within a particular occupation. Market-based wage is typically used in conjunction with other rewarding strategies, such as performance assessment, but it can also be a part of a comprehensive compensation plan that incorporates multiple performance elements.

Competency and Skills-Based Wage

Competency and skills-based wage strategies are increasingly common in today's workforce.

There is a direct link between a person's wage and their ability to attain, develop, and effectively utilize skills and competencies. Competency and skills-based approaches assess the contributions an employee makes to their job. Using competencies in staffing and performance evaluations for non-monetary reasons, such as training, has led to the popularity of competency-based systems in many organizations. It is

becoming more common for wages to be tied to an individual's abilities.

Competency-based wage is a part of a broader wage strategy that focuses on rewarding employees not just for their performance, but for their skills and competencies. Instead of solely basing rewards on performance, competencies such as leadership or team-working are considered. Employees are rewarded for both the skills they have already acquired and for acquiring new skills that can be used in other roles within the same field. This approach encourages employees to develop multiple skills and enhances their flexibility in the workplace.

GROUP AND ORGANISATIONAL REWARD SYSTEMS

The group and organisational reward systems involve strategies that are based on the performance of the team, department, or company. With the growing emphasis on teamwork, team-based rewards have gained significance. These rewards are designed to reflect the collective performance of the team, although it can be challenging to specify the team, its goals, and appropriate rewards. Additionally, peer group pressure can be beneficial in enhancing the overall performance of the team.

The wage strategies of company-based public presentations are typically based on the overall performance of the administration. Common forms of this system include profit sharing and gainsharing systems. These strategies are effective when communication and employment relations are good. Share incentive programs involve the provision of shares to employees. In the Journal of Knowledge Management, Milkovich and Wigdor (1991) argue that team-based rewards can potentially decrease motivation due to feelings of unfairness and the use of an equality principle in allocating rewards rather than an equity-based principle (Milne, 2007, p.33).

Gainsharing
Gainsharing is a wage strategy that ties workers' pay to the achievement of

organizational goals by rewarding performance above a predetermined target. This is always measured by productivity, performance, and quality.

The purpose of gainsharing is to improve communication, employee engagement, and teamwork in order to develop these indexes. It should be a part of a comprehensive long-term strategy to maintain an effective system through engagement and sharing. Instead of using bonus/piecework strategies, which can sometimes sacrifice quality for quantity, gainsharing can be used. All employees and management involved in the company's production should be included in any gainshare program.

In their study, Marchington and Wilkinson (2006, p. 336) emphasized the benefits of implementing strategies that encourage employees to perceive themselves as part of the overall administration effort, rather than individual units. They also highlighted the impact of gainsharing programs on trade unions, suggesting that collective bargaining may become less significant in determining rewards when employees feel more committed to the organization.

Profit Sharing

Profit sharing is a method of rewarding employees by giving them a percentage of the company's profits. According to Singh (2006, p. 385), "profit sharing typically involves determining the organization's profits at the end of the financial year and distributing a percentage of those profits to eligible workers."

Net income sharing is a method that assists employees in sharing a portion of organizational success. However, according to Beardwell and Holden (1997, p.574), there is limited evidence suggesting that such strategies have a significant impact on employee performance, motivation, or attitudes. One strategy for offering shares to promising employees in businesses whose stocks are traded on a stock exchange is through Share Ownership Schemes. These schemes can motivate employees to remain committed to the company in the long term.

There are various strategies available for companies to offer shares, including the following:

- The employer can directly give employees shares or ask them to purchase shares. This encourages staff to be involved in the company's performance. An example of this is the Share Incentive Plan (previously known as the employee share ownership program). In the UK, a company using an ESOP can provide employees with shares worth up to ?3,000 each year.

- Under this strategy, all employees and managers benefit. All members of the strategy have the right to purchase a certain number of shares (usually at a lower price than their current value) after three, five, or seven years. During this period, employee members save a predetermined amount to pay for the shares. If the shares increase in value, employees make a profit when they buy the shares. Any gains made on these shares are not subject to income tax.The text within the