Every organization needs to develop a reward system

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Every organization needs to develop a reward system for compensating employees with regards to their past performance, current motivation and future retention. The Reward, as generally defined, is something given or received for worthy behavior, or compensation given as an inducement to cause a desired act or circumstance to occur. A reward usually offers a tangible, specific goal that a person can work toward. Whereas Compensation is payment or remuneration for work performed, injuries received, loss of employment, or other considerations. The rewards can be both financial and non financial. The nonfinancial reward, in employment, is a reward to a worker other than extra pay. Many nonfinancial rewards are perks, such as company cars, free private medical care, and free pension entitlement. However, an employee may be rewarded, for example, by being given a better office or a bigger budget to control, or by being given the choice of where to take a posting in a company. Nonfinancial rewards can be very cost-effective for companies because, in contrast with a pay increase, little or no income tax or national insurance contributions are paid.

The key is in motivating all employees across all levels, not only high performers but also those who struggle to perform. This shall deliver the positive message about the performance based rewards within the organization. By focusing on key issues of performance improvement, the reward to employees must be given consistently and equally according to their contribution. As that shall helping employees to develop key values such as customer services, quality etc., and reinforce existing positive values and cultures which foster high level of performance, innovation, quality and teamwork.

Motivation is the activation or energization of goal-orientated behavior. Motivation is said to be intrinsic or extrinsic. The term is generally used for humans but, theoretically, it can also be used to describe the causes for animal behavior as well. This article refers to human motivation. According to various theories, motivation may be rooted in the basic need to minimize physical pain and maximize pleasure, or it may include specific needs such as eating and resting, or a desired object, hobby, goal, state of being, ideal, or it may be attributed to less-apparent reasons such as altruism, selfishness, morality, or avoiding mortality. Conceptually, motivation should not be confused with either volition or optimism.[1] Motivation is related to, but distinct from, emotion.

Intrinsic motivation refers to motivation that is driven by an interest or enjoyment in the task itself, and exists within the individual rather than relying on any external pressure.[2] Intrinsic motivation has been studied by social and educational psychologists since the early 1970s. Research has found that it is usually associated with high educational achievement and enjoyment by students. Employees are likely to be intrinsically motivated if they:

Attribute their professional results to internal factors that they can control (e.g. the amount of effort they put in),

Believe they can be effective agents in reaching desired goals (i.e. the results are not determined by luck),

Are interested in mastering a skill.

Extrinsic motivation comes from outside of the individual. Common extrinsic motivations are rewards like money and grades, coercion and threat of punishment. Competition is in general extrinsic because it encourages the performer to win and beat others, not to enjoy the intrinsic rewards of the activity. A crowd cheering on the individual and trophies are also extrinsic incentives.

Social psychological research has indicated that extrinsic rewards can lead to overjustification and a subsequent reduction in intrinsic motivation. In one study demonstrating this effect, children who expected to be (and were) rewarded with a ribbon and a gold star for drawing pictures spent less time playing with the drawing materials in subsequent observations than children who were assigned to an unexpected reward condition and to children who received no extrinsic reward.[3]

Self-determination theory proposes that extrinsic motivation can be internalised by the individual if the task fits with their values and beliefs and therefore helps to fulfill their basic psychological needs. Internalised extrinsic motivation has been shown to lead to more positive outcomes, such as wellbeing, increased productivity and task satisfaction.

Incentive Reward Theory

A reward, tangible or intangible, is presented after the occurrence of an action (i.e. behavior) with the intent to cause the behavior to occur again. This is done by associating positive meaning to the behavior. Studies show that if the person receives the reward immediately, the effect would be greater, and decreases as duration lengthens. Repetitive action-reward combination can cause the action to become habit. Motivation comes from two sources: oneself, and other people. These two sources are called intrinsic motivation and extrinsic motivation, respectively.

Applying proper motivational techniques can be much harder than it seems. Steven Kerr notes that when creating a reward system, it can be easy to reward A, while hoping for B, and in the process, reap harmful effects that can jeopardize your goals.[4]

A reinforcer is different from reward, in that reinforcement is intended to create a measured increase in the rate of a desirable behavior following the addition of something to the environment.

Incentive theory in psychology, treats motivation and behavior of the individual, as they are influenced by beliefs, such as engaging in activities that are expected to be profitable. Incentive theory is promoted by behavioral psychologists, such as B.F. Skinner and literalized, by behaviorists, especially by Skinner in his philosophy of Radical behaviorism, to mean that a person's actions always have social ramifications: and if actions are positively received people are more likely to act in this manner, or if negatively received people are less likely to act in this manner. Incentive theorists tend to distinguish between wanting and liking, where liking is a passive function evaluating a stimulus, but wanting adds an active process "attracting" the person towards the stimulus.[5]

Incentive theory distinguishes itself from other motivation theories, such as drive theory, in the direction of the motivation. In incentive theory, stimuli "attract", to use the term above, a person towards them. As opposed to the body seeking to reestablish homeostasis pushing it towards the stimulus. In terms of behaviorism, incentive theory involves positive reinforcement: the stimulus has been conditioned to make the person happier. For instance, a person knows that eating food, drinking water, or gaining social capital will make them happier. As opposed to in drive theory, which involves negative reinforcement: a stimulus has been associated with the removal of the punishment-- the lack of homeostasis in the body. For example, a person has come to know that if they eat when hungry, it will eliminate that negative feeling of hunger, or if they drink when thirsty, it will eliminate that negative feeling of thirst.

Employee motivation

Workers in any organization need something to keep them working. Most times the salary of the employee is enough to keep him or her working for an organization. However, sometimes just working for salary is not enough for employees to stay at an organization. An employee must be motivated to work for a company or organization. If no motivation is present in an employee, then that employee's quality of work or all work in general will deteriorate.

Keeping an employee working at full potential is the ultimate goal of employee motivation. There are many methods to help keep employees motivated. Some traditional ways of motivating workers are placing them in competition with each other. When motivating an audience, you can use general motivational strategies or specific motivational appeals. General motivational strategies include soft sell versus hard sell and personality type. Soft sell strategies have logical appeals, emotional appeals, advice and praise. Hard sell strategies have barter, outnumbering, pressure and rank. Also, you can consider basing your strategy on your audience personality. Specific motivational appeals focus on provable facts, feelings, right and wrong, audience rewards and audience threats.[6]

Businesses; Motivations and Rewards

At lower levels of Maslow's hierarchy of needs, such as physiological needs, money is a motivator, however it tends to have a motivating effect on staff that lasts only for a short period (in accordance with Herzberg's two-factor model of motivation). At higher levels of the hierarchy, praise, respect, recognition, empowerment and a sense of belonging are far more powerful motivators than money, as both Abraham Maslow's theory of motivation and Douglas McGregor's theory X and theory Y (pertaining to the theory of leadership) demonstrate.

Maslow has money at the lowest level of the hierarchy and shows other needs are better motivators to staff. McGregor places money in his Theory X category and feels it is a poor motivator. Praise and recognition are placed in the Theory Y category and are considered stronger motivators than money.

Motivated employees always look for better ways to do a job.

Motivated employees are more quality oriented.

Motivated workers are more productive.

The average workplace is about midway between the extremes of high threat and high opportunity. Motivation by threat is a dead-end strategy, and naturally staff are more attracted to the opportunity side of the motivation curve than the threat side. Motivation is a powerful tool in the work environment that can lead to employees working at their most efficient levels of production.[7]

Nonetheless, Steinmetz also discusses three common character types of subordinates: ascendant, indifferent, and ambivalent whom all react and interact uniquely, and must be treated, managed, and motivated accordingly. An effective leader must understand how to manage all characters, and more importantly the manager must utilize avenues that allow room for employees to work, grow, and find answers independently.[8]

The assumptions of Maslow and Herzberg were challenged by a classic study[9] at Vauxhall Motors' UK manufacturing plant. This introduced the concept of orientation to work and distinguished three main orientations: instrumental (where work is a means to an end), bureaucratic (where work is a source of status, security and immediate reward) and solidaristic (which prioritises group loyalty).

Other theories which expanded and extended those of Maslow and Herzberg included Kurt Lewin's Force Field Theory, Edwin Locke's Goal Theory and Victor Vroom's Expectancy theory. These tend to stress cultural differences and the fact that individuals tend to be motivated by different factors at different times.[10]

According to the system of scientific management developed by Frederick Winslow Taylor, a worker's motivation is solely determined by pay, and therefore management need not consider psychological or social aspects of work. In essence, scientific management bases human motivation wholly on extrinsic rewards and discards the idea of intrinsic rewards.

In contrast, David McClelland believed that workers could not be rewarded/motivated by the mere need for money-in fact, extrinsic motivation (e.g., money) could extinguish intrinsic motivation such as achievement motivation, though money could be used as an indicator of success for various motives, e.g., keeping score. In keeping with this view, his consulting firm, McBer & Company, had as its first motto "To make everyone productive, happy, and free." For McClelland, satisfaction lay in aligning a person's life with their fundamental motivations.

Elton Mayo found out that the social contacts a worker has at the workplace are very important and that boredom and repetitiveness of tasks lead to reduced motivation. Mayo believed that workers could be motivated by acknowledging their social needs and making them feel important. As a result, employees were given freedom to make decisions on the job and greater attention was paid to informal work groups. Mayo named the model the Hawthorne effect. His model has been judged as placing undue reliance on social contacts at work situations for motivating employees.[11]

In Essentials of Organizational Behavior, Robbins and Judge examine recognition programs as motivators, and identify five principles that contribute to the success of an employee incentive program:[12]

Recognition of employees' individual differences, and clear identification of behavior deemed worthy of recognition

Allowing employees to participate

Linking rewards to performance

Rewarding of nominators

Visibility of the recognition process

Seligman, Martin E.P. (1990), Learned Optimism, New York: Alfred A. Knopf, Inc., p. 101, ISBN 0-394-57915-1 

^ http://giftedkids.about.com/od/glossary/g/intrinsic.htm

Lepper, M.R., Greene, D. & Nisbett, R.E. (1973) Undermining children's intrinsic interest with extrinsic rewards: A test of the overjustification hypothesis. Journal of Personality and Social Psychology, 28(1), pp. 129-137.

Kerr, Steven (1995) On the folly of rewarding A, while hoping for B. http://pages.stern.nyu.edu/~wstarbuc/mob/kerrab.html

"Psychology", Bernstein, Penner, Clarke-Stewart, Roy, Houghton Mifflin Company, 2006, ISBN 0-618-52718-4.

Thomas, Jane. Guide to Managerial Persuasion and Influence. Upper Saddle River, N.J.: Pearson Prentice Hall, 2004. Print.

^ Steinmetz, L. (1983) Nice Guys Finish Last: Management Myths and Reality. Boulder, Colorado: Horizon Publications Inc.

^ Steinmetz, L.L. (1983) Nice Guys Finish Last: Management Myths and Reality. Boulder, Colorado: Horizon Publications Inc. (pp. 43-44)

^ Goldthorpe, J.H., Lockwood, D., Bechhofer, F. and Platt, J. (1968) The Affluent Worker: Attitudes and Behaviour Cambridge: Cambridge University Press.

^ Weightman, J. (2008) The Employee Motivation Audit: Cambridge Strategy Publications

^ Human Resources Management, HT Graham and R Bennett M+E Handbooks(1993) ISBN 0-7121-0844-0

^ Robbins, Stephen P.; Judge, Timothy A. (2007), Essentials of Organizational Behavior (9 ed.), Upper Saddle River, NJ: Prentice Hall, http://wps.prenhall.com/bp_robbins_eob_9/64/16396/4197506.cw/index.html 

Wikipedia and Microsoft ® Encarta ® 2009.

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