Employee Reward System And Motivation Business Essay


Although it seems to be easy to manage people performances at work when you know their abilities and KSA`s, It can always be difficult when you actually drop into the real time scenario. This is because each task, competencies and knowledge is different from the other individual in a work place and moreover any individuals performance is not uniform all over his/her career. The level of performances is dependent of several factors such as stress, colleagues, family, hours of work, holidays, and recognition for work etc.

So let's consider performance in terms of recognition given to the employees for the efforts they put in. So, any individual requires some of kind of recognition or reward based on their work to motivate them and perform well.

Reward Systems: According to Aguinis (2008) this is a set of mechanisms for distributing both tangible and intangible returns as part of an employment relationship.

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When we consider the roles of reward system in managing performances of the staff in an organisation, it always tend be both positive and negative. The main motive of the reward system is to motivate people and reward them for service to the organisation expecting equal results from their performances that ultimately influence the overall organisation`s performance.

Armstrong (2002) says that the HR personnel concerned with reward management may spend much of their time making use of the existing reward processes but according to him the most important and challenging task is to continuously improve it and tailor it according to the strategies of the organization. That means using the existing reward policies does not make adequate benefits to the company but the way you manage the then existing policies according to current situation is what is required from the HR specialists. He also adds that if the Business strategy changes then the HR strategy must change and reward system must change accordingly.

Organisations need a reward management system that is strategic for staff and satisfies four main areas: compensation, benefits, credit and appreciation. The setback alongside this in many companies nowadays is twofold i.e. They are lacking at least one of the above elements (generally recognition and/or appreciation), and the areas that are focussed aren't clearly aligned with company's other strategies.

A successful company has to recognise and reward two main types of its employee activity performance and behaviour. Of two former one is the easiest to identify as you are just assigning tasks and judging on the outcomes. It is like rewarding the top 10 sales achievers in a given time.

Second being rewarding based on behaviour is very challenging the other as it is difficult to assess the behaviour and reward. It is like choosing between individual`s innovation or the amount of time they're sitting at a desk. There's clearly a significant difference between two activities.

When companies think about the reward management, they tend to put compensation on top list. The correct strategy has to always contain a compensation plan that clearly links to the objectives of the company for that particular time. Longer term rewards can be offered to some key personnel. This often includes a form of equity ownership.

Companies that don't exceed the compensation levels provided by their competitors face have difficulties in retaining key personnel.

Anyway the significance of recognition and appreciation as key elements of successful strategic reward system cannot be disregarded. These two seldom get attention they are supposed to but this is amazing as they are the low cost/high return ingredients. All workers in a company would be keen to know if they are doing good or bad, so it is very useful to make them aware of their performance.

Acknowledgement of an individual for their specific goals achieved and for their actions shown is called recognition. While appreciation means showing gratitude to someone for their actions. Expressing recognition combined with appreciation in the form of thanks in front of all the staff by citing examples of their actions that deserved appreciation.

Employee Reward system and Motivation:

Motivation of employees has been in practice and proved to be working for the organisations which started from 1930`s (Lee-Ross, 2002). It is defined as the process of gratifying internal needs of individual through different actions and behaviors. It pertains on the complexity of mental and physical drives, joint with the environment which makes the people perform the way they do (Lee-Ross, 2002, 55). Motivation is force that pushes the individual to act.

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So, without proper motivation at work place the employee`s contribution to the productivity remains limited and thus overall performance of the company is affected. Employees possess the KSA`s required to achieve the requirements of the company but they should be after all willing to contribute to the company`s growth. High motivation levels lead to higher levels of work commitment and this in turn results in high performance of the company (permagon Flexible Learning, 2005). Motivation can be through financial and/or Non-Financial offers from the employers. Both are proven effective to motivate people. Finally helping in maintaining their loyalty and retain them.

Reward system contains all components of organisation, that includes people, processes, rules and procedures, together with the decision-making activities, which involved the the process in allocating compensation and benefits to employees, in exchange for their contribution to the organization (Griffin and Moorhead, 2009).

As mentioned earlier the primary objective of rewards is to attract, motivate, and retain employees. This helps to attain the equality of rewards offered to the employees, which are mainly relied on their performance and contributions to the company (Griffin and Moorhead, 2009).

Common types of rewards to attract and retain qualified employees include base pay, perquisites and awards, performance appraisal, indirect compensation, bonuses etc. (Griffin and Moorhead, 2009). One most important thing that requires employers' attention is though financial rewards serve as the primary tools to attract valuable individual, it is always the non-financial rewards that helps to retain valuable employees. This might be due to the fact that the non-financial rewards always point towards the emotional and psychological well-being of the staff. For example, providing flexible hours to the senior personnel. Women during required time will be very helpful.

Moreover, the reward system helps the organisation to record the individual performances of the employees and thus their achievements and contributions towards the company are recorded very frequently. So individuals work at their best as they are aware of the monitoring mechanism of the company, in terms of performance is connected to the reward system. In other words, they are motivated to work at their best levels in order to maintain their level of performance and co relate to the standards expected from the company. In addition to the above, the reward system helps to maintain useful competition within the organization.

A study suggests that bonuses and other financial benefits no longer influence the organisation`s long term goals but this may be not entirely true in every situation. According to many experts, an appropriate reward system in place is a must for every organisation and HR personnel must tailor that reward system to fit various departments of an organisation and efficiently correspond it to the workforce.

Performance and rewards

Belfield and Marsden (2003) discovered, as studying the data of the 1998 Workplace Operative Relations Survey led in England, forceful facts that the use of performance related remuneration increases the performance results, even though this connection is affected by the construction of workplace monitoring environments.

But, according to Yao (1997) worked on the effects of profit sharing and bonuses on the performance of Chinese state industries and stated that more than half of the value-added development of these industries might be due bonus payments.

Incentives vs. Results

Hollowell (2005), looking at the connection of high-incentive-based official wage contracts with the long-term stable performance discovered that firms that have a robust official compensation element display commensurate superior long-term stock-price performance. Finally, Lazear and Oyer (2009) recently gave an overview of effects of incentives in organizations. They went through many studies that conveyed that incentives can be a very significant managerial instrument for altering individuals' behaviour in a useful way. Specifically, productivity can be increased employing incentives like piece rates. Yet, Lazear and Oyer (2009) additionally debated studies that displayed that even nevertheless incentives worked, in the sense that they had a affirmative result on results, they did not always work consistently and from time to time even had unintentional and unwanted results.

Performance and performance appraisal based reward system

Performance-related rewards permit the highest performer to be awarded accordingly. According to Lyons and Ben-Ora (2002), successful performance-based rewards are those, perfectly begin, implemented and aligned with total reward strategy. When organizations structure the "reward systems" entirely according to the intent of their employees, it happens to human instinct to work hard in order to achieve their own and organizational objectives (Pfau and Kay, 2002). Among several key component of pay for performance "stock" is reckoned most pertinent and measurable way to relate pay to performance. The only way to enhance the Employees motivation and enthusiasm is performance appraisal system especially when efforts directly link with reward through particular and formalised individual objectives (Fay and Thompson, 2001). Seniority, internal equity, performance based incentive plans and traditional pays are highly ranked in Chinese culture. Brown (2008) suggested that evaluating, gauging and developing the efficacy of human resource pay and compensation practices have key prospective for the company in a service or knowledge based economy.

Pay and incentives linked to long-term performance.

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When characteristics of high performing companies are focussed, Kling (1995) discovered that relating/linking staff wage and incentives to long term achievements of the overall organisation had a useful relationship with the productivity. Although these findings from the works done years ago, in some companies it still remains the same criteria. While in 2011, Weller and Reidenbach say that, in the event of the recession and economic recovery, a critical balance between the incentives for the shorter terms and long run performance has to be achieved as currently corporate managers have strong incentives to achieve short term goals than to invest on long run productive techniques. As the research of Weller and Reidenbach is relatively new, this is current in many organisations in today's market. Many managers are assigned incentives based on monthly targeted sales and productivity.

Most importantly Bebchuk and Fried (2010) pointed out that it is the same issue in case of public sectors as well.

Reward systems that reinforce core values and strategy:

In 1996, according to Montemayor, High performing US companies used different types of pay policies where these were always aligned with the overall corporate strategy, while the low performing companies were characterised by the lack of fit among business strategy and pay policies. Best firms invented and implemented reward system that reinforces the core values and mission of that firm. (Lawler, 2003)

Rewards based on relative performance:

Sometimes rewards are based on relative performance versus competitors. Other form of relative performance is put forward by Guojin et al. (2011), which is rewarding individual`s performance after comparing it with others performances in the same activity.

Group compensation:

During the time of revising the emerging business concepts developed by the best firms to deal with increasing competitive environment, Hammer (2001), discovered that these developed firms adopted reward system that focussed on group performance over each individual performance. According to me, this is highly agreeable as many of the successful companies manage to deal competition and achieved high productivity rates through its pay plans. However, Jennings (2002) found all these company`s pay plans were based on group productivity-based compensation, which drove and strengthened the culture which in turn increased productivity.

Pay for performance.

According to Bae and Lawler (2000) Korean companies that employed high involvement human resource management (HRM) strategy achieved better outcomes than others which did not follow this type of HRM. The same results were discovered by Challis et al. (2005) and Knight - Turvey (2005) for Australian firms, Kok and Hartog( 2006) for Dutch businesses, chiang (2006) for south Korean firms, and Origo(2009) for Italian manufacturers. US firms used eight management techniques among which pay for performance is one. These findings are evident among American businesses.

I was working at Microsoft India and have an experience of nearly two years. I was working as a customer service representative. I enjoyed working for Microsoft and plan to establish a better career in the same organisation.

Overview of Microsoft India:

Our company, Microsoft is organized and established. The major business areas are serving customers starting from consumers to corporations. Individual but connected, every single business solely determines its own profits and gains

Microsoft Corporation India Private Limited (MCIPL) is the marketing arm for Microsoft's products in India, set up in 1990. MCIPL has grown to over 685 employees, across offices in the nine cities of Ahmedabad, Bangalore, Chennai, Hyderabad, Kochi, Kolkata, Mumbai, New Delhi and Pune. We look at the sales and marketing for enterprise, small and mid-market group and consumer segments, via a strong channel network of over 18,000 members, including over 550 ISVs. 

Working for Microsoft:

Working Experience for Employees at Microsoft

Working in Microsoft brings in a lot of unique experiences, along with a rewarding career prospect. The company believes in the potential of each individual and their future potential to make anything possible. So, apart from a high academic record, the company also looks for individuals who are exceptionally talented and have a passion to achieve the impossible. With its 6 business units in India, you can find a job best suitable to your knowledge and skills, which include product development, researching, providing business support and marketing the products. This company is certainly a unique one and with regular training and performance benefits helps a person to reach his or her career goals. Microsoft India serves as the perfect platform for learning new technologies, research the best solutions, and acquire knowledge about emerging market trends.Benefits play an important role in our choice of employer. Microsoft believes that work should be challenging, yet rewarding. It's vital to provide industry-leading benefits to all qualified employees. Starting with a competitive salary, bonuses, and stock package benefits, Microsoft continues to reward eligible employees based on their individual performance. Anyway these benefits do not stop at any level.

Microsoft aims to empower its employees with the resources, compensations, flexibility and job security and ensuring its employees live a healthy and balanced life.

It is widely known that, Microsoft is recognised as a leading organisation for providing the strongest and the most comprehensive incentives and benefits package in India. As mentioned earlier, Microsoft employees start off with competitive wages, bonuses and stock awards based on individual performance levels.

The main area of difference in Microsoft benefit packages in India is that it not offers flexibility in working conditions but also the flexibility in benefit packages. So, It is like employees can choose the mix of benefits that best suits them. This is in my view a great and very challenging approach because each employee has unique benefit needs and to meet that Microsoft offers flexible benefits.

Health and Wellness:

It offers comprehensive and flexible healthcare for its employees and their qualified dependants. It also provides dental and eye care coverage, onsite medical checks, health club membership reimbursement etc.

Family and parenting

Employee families enjoy a wide range of benefits such as maternity leave, paid time off for new moms and dads, and reimbursement of crèche fees etc.


provides an employee stock purchase program where they could purchase discounted shares of Microsoft stock.

Giving together:

One more remarkable approach is that they match the amount that employees contribute to community affairs like charities and educational institutions up to 50, 000 INR per employee/ year and contribute to causes. It is another way where Microsoft makes a significant difference.

Learning and development:

It always believes in constant learning so the staff can possess very current KSA`s. It offers over 2000 internal training programs which may either online, virtually, or via class room training. It invests a lot of amount on employee training and development.

Evaluating my previous employer's reward system based on the literature criteria done:

According to Griffin and Moorhead (2009) common types of rewards to attract and retain qualified employees include base pay, perquisites and awards, performance appraisal, indirect compensation, bonuses etc. Microsoft offers the employees more than all the above types of rewards so this can be considered as one of the basis for its success or survival.

Reward system at my previous employer, Microsoft India:

Performance and rewards

It believes in rewards according to the level of performance because it offers wide variety of benefits to the top performers. These top performers is mainly measured based on their innovation at Microsoft as the whole organisation runs on the concepts based on technology innovation methods. It also focuses on the employee working tenure as it offers pay rises depending on the number of years they worked for the company.

This could be understood clearly by the below table obtained from Indian resourcing consultancy called naukri hub

Median salary based on years of experience:


Median Salary/ Annum

1 year or less

Rs 700,000

1 to 4 years

Rs 840,000

5 to 9 years

Rs 1,005,815

10 to 19 years

Rs 1,508,368

More than 20 years

Rs 4,800,000

 (naukrihub.com, 2012)

Microsoft employee salaries vary depending on the region of the country or city they live in. This is basically because of the fact that the cost of living varies in India depending upon which city or state you live in. To understand, tables below can be observed:

Average Microsoft salaries in India according to Cities:

The median salaries for Microsoft employees in India according to the various cities have been mentioned below:

Name of the city

Median Salary

Mumbai, Maharashtra

Rs 2,075,000

Bangalore, Karnataka

Rs 868,646

Hyderabad, Andhra Pradesh

Rs 1,071,823

New Delhi, Delhi

Rs 1,500,000

Gurgaon, haryana

Rs 1,400,000

Pune, Maharashtra

Rs 500,505

 (naukrihub.com, 2012)

Median Microsoft Salaries according to States:

The median salaries for Microsoft employees in India according to the different states have been listed below:

Name of the State

Median Salary


Rs 1,238,973

Andhra Pradesh

Rs 1,062,408


Rs 875,709


Rs 1,775,000


Rs 1,160,000

Tamil Nadu

Rs 170,000

(naukrihub.com, 2012)

Competency Based Pay :

It follows a pay and reward system that is partly dependent upon the educational competencies and Qualification as it offers varied wage levels depending on the aboce criteria.

Salary Range by level of academic qualification:

Salary range of Microsoft employees according to the levels of academic qualifications have been given below:

Academic Qualification

Salary Range

Bachelor's Degree

Rs 370,000 to Rs 2,164,207

Bachelor of Engineering (B.E.)

Rs 1,002,500 to Rs 1,581,000

Bachelor of Technology (B.Tech)

Rs 166,107 to Rs 2,483,233

MBA (Master of Business Administration)

Rs 610,419 to Rs 1,965,270

 (naukrihub.com, 2012)

Skill based Pay :

It relies on its employees' skills and it gives different salary packages to individuals based on their skills and area of competence. It is sometimes interrelated with competency based pay and therefore cannot be much differentiated. Different level personnel are paid different pay packages like many other organisations. For instance based on their designations this can be considered:

Salary range for other Designations -


Pay Scale

Support Engineer

Rs 792,143 per year

Software Development Engineer II

Rs 1,320,000 per year

Program Manager

Rs 1,600,000 per year

Program Manager II

Rs 1,710,000 per year

Test Lead II

Rs 1,150,000 per year

Associate Consultant

Rs 966,667 per year

Support Engineer II

Rs 870,000 per year


Rs 38,157 per month

(naukrihub.com, 2012)

Group Rewards:

As it is an IT firm it consists of several departments and group projects. So the awards are frequently given to the eligible teams, However there will be a group leader or a department head who indirectly receives extra credit among the team.

For instance in the 2nd half of the year I was working on a project on one of the top hotel chains of India and we as a team were given a deadline of 3 weeks. All the individuals in the team were assigned a specific job and everyone worked hard and somehow managed to complete our respective tasks in 2 weeks and presented the final presentation in less than the time allotted to us. At the end of the year our group was awarded best group performer award. This rises the motivation levels of all the members of the group but the team leader who contribution was less compared to the team members was awarded the best performer award. This can sometimes have a negative effect on the rest of the group members.

Transparent and fair Appraisal:

As the employees of the company every staff member has the right to know his/ her contribution to the growth/ performance of the company. Microsoft has a fair and transparent approach in its performance evaluation and there by ensure fair appraisal is established. It provides an online portal showing detailed information about each individual's performance over certain period of time. In this portal, it gives a clear picture of how many projects were undertaken by each employee, how many of them completed on time and how many before deadlines, data about financial gain through various projects, punctuality of employees, what areas needed to be improved by the personnel, feedbacks, what type of rewards are available etc. So when employees know what is expected from them by the company there is better chance for them to compete and work hard to gain the rewards and atleast improve their performance to next levels.

Profit sharing:

This is more related to higher personnel and marketing staff. The marketing and resourcing groups of the company are given incentives and profit sharing benefits based on the sales they attain and clients they procure from the market. It is similar to some retail markets where managers have to reach certain sales targets and they will be eligible to increase their bonuses based on the sales and profits they bring to the company.

Annual lump sum financial rewards:

This is more of rewarded to most of the full time employees at my work place where they are deposited with some lump sum payment depending on various aspects like their experience at the company etc. More or less, this type of rewarding also plays a vital role in acquiring and retaining people.

Contributions of rewards in the HR management at Microsoft:

Reward system play a vital role in Human resource department of any company and it is the same in Microsoft as well. Analysts opined that Microsoft is largely successful due to its effective employee retention strategies. After the global recession crisis there was an increased responsibility on the shoulders of HR personnel. HR management has to be extremely strong and efficient to retain the top employees by providing better compensation and benefit packages.

According to Joe Wilcox (2000) one of the company's representatives, Microsoft is constantly exploring ways to ensure the compensation levels are competitive and make sure that the staff are not only recognised for their work but are appropriately rewarded. According to Ian, General Manager at windows presentation foundation, Microsoft, "It's been new roles, new titles, new challenges every year or so. I stopped putting my title on my business cards years ago as it was getting out-of-date so frequently"

Microsoft has been providing stock options at discount to employees since 1986, when it was listed on the stock exchange. (Barnali Chakraborty, 2010)

Rewards like reimbursement of tuition fee for its employees to gain access to work related courses is one of the unique approaches brought up by Microsoft and is equally benefits the strategic HR management as it boosts the staff's interest to learn more and perform more which is ultimately beneficial to the overall company performance.

Better the rewards management, better will be the employees' motivation levels to perform more and thus Strategic HR is ensured and thereby the organisation's overall strategy.

Therefore Microsoft Corporation received several awards and recognitions and few among are:

2008 #1 Best Companies to Work for in India - Business Today

2008 #1 Most Preferred Employers in the Top 50 India Engineering Colleges - Economic Times/AC Nielsen

2007 America's Most Admired Companies, Fortune

2009 #1 Great Places to Work for in Ireland ( Microsoft awards and recognition)