This essay has been submitted by a student. This is not an example of the work written by our professional essay writers.
The distribution of rewards in organizations has important behavioural consequences, and one of the most important rewards allocated in work organizations is pay.(Harder 1992) Organisations reward employees in accordance with their value to the organisation and these rewards are classified as either financial or non-financial (Armstrong 2002).Based on a review of existing literature, it is hypothesized that, under rewarded individuals behaved less cooperatively and more selfishly, while over rewarded individuals behaved more cooperatively(Harder 1992) However, it is seen that organisations also adopt two major strategies in rewarding their employees; team incentive plan and individual incentive plan (Freund and Epstein 1984) and sometimes, according to Martin Wolf a third strategy which is a combination of both(Algren et al 2007). This review examines the effects of individual reward in Zenith Bank Plc, Nigeria a typical context where individual performance is key in determining individual reward. Zenith Bank Plc is a one of the biggest and most profitable banks in Nigeria, with a reputation for the high quality of its human capital. The bank advocates a teamwork philosophy, but rewards individual performance, hence implementing the individual incentive plan as a strategy for rewarding its employees in the marketing department.
This review will also examine the current reward structure in Zenith bank, analyze the impact of the individual reward plan on the performance of the marketing teams in the bank ,as seen in theory by analyzing the positive and negative effects it has on team performance. It will also analyze the arguments for and against the team incentive plans.
We conclude by making a few propositions that will ensure better harmony and performance among individuals in a team and also help the company meet its bottom line with maximum efficiency.
Reward structure in Zenith Bank Plc
Organisations today in an attempt to keep up with interests in business processes advocate that individual goals must consistent not just with the departmental or functional goals but also the process goals(Williams 2002),this is clearly demonstrated in Zenith Bank Plc, each of the branches has a marketing department with a staff strength proportional to the size of the branch and the size of the branch's target market. The marketing department is further split into units of 4. Each unit is given a target for the number of accounts to be opened, amount of deposit to be mobilized and profit to be made over a given period of time. This target is divided among the marketing staff according to the hierarchy, with the lowest level staff, getting the least. Members of each unit are usually encouraged to work together to meet both the individual and unit targets.
However, at the end of the financial year, bonuses are paid, and staffs are promoted based on their individual contribution in achieving the bottom line. This is the individual contingent pay structure as put forward by Armstrong (2002) "
Effects of individual pay on Team performance.
Armstrong (2007) agrees that the most powerful argument for individual contingent pay is that those who contribute more should be rewarded more and in a tangible way. Also Dailey and Mardsen (1987) argue that it is an ethical imperative to reward the performer. This however produces some far reaching effects on the motivation and performance of the team as a whole. These effects are both positive and negative.
Gomez et al (2010) are of the opinion that performance that is rewarded is likely to be repeated. This was very evident in the bank that a majority of the top performers who were rewarded in the past were meeting their targets more consistently than average marketing staff because they were more motivated. The Expectancy Theory as put forward by Vroom(1964) also came to the fore as it was noticed that branches that were rewarded with higher bonuses and promotions in the previous year, also performed very well in the subsequent year showing that the average level of motivation in the branch was high as the staff all worked very hard to meet their individual targets and consequently the branch's target and the organisational objectives were met consistently as a result of the improved productivity.
Another effect of the individual reward strategy seen was that the top performers who were rewarded with promotions and large bonuses are also the most reluctant to quit their jobs. They are usually very focused on the most important part of their job,which is increased profitability,this in accordance with Armstrong (2007) that staff are likely "to focus attention on key results and values and also to attract and retain high quality people. Another effect seen as proposed by .Algren et al( 2007).is that there was a certain degree of healthy competition existed amongst employees, this was also very good as the seeming competition translated to higher output for the organisation.
Situations abound where employees feel that their efforts were not rewarded adequately,and their manager or line supervisor was biased in appraising their performance. This leads to frustration and dissatisfaction on the job. This scenario was captured by Armstrong (2007) when he said "financial rewards may possibly motivate those who receive them and can also demotivate those who don't".
The individual reward system evidently creates unhealthy competition and rivalry and destroyed cooperation among peers within the bank. In many instances it soured the relationship between subordinates and supervisors. This view is also held by several authors.(Gomez et al 2010, Armstrong 2002 etc)
A greater majority of employees are of the view that the performance bars will be raised constantly even after each target has been met and as a result, don't attempt to met any of the set targets. This lowers productivity.
This strategy has also proven to be difficult to manage since in some scenarios, two or three members work together to open a particular high deposit account, there is no standard way of measuring each team member's contribution. This was predicted by Armstrong (2002). He pointed out that reliable ways of measuring contribution, performance and competence might not exist in the individual contingent plan.
GROUP INCENTIVE PLAN
The group/team based plan however, presents some advantages to the areas where the individual plan is deficient. Several authors and studies have illustrated that organisations adopting the team based reward structure tend to be more successful. However there is no clear cut evidence to support the idea as different organisations have different goals and different work conditions. Armstrong (2007) stresses that team pay would encourage cooperative and team working behaviour, clarify team goals and priorities to integrate organisational and team objectives as well as serve as a means of developing self managed and directed teams. Myers (2009) suggest that a team bonus is more effective as people tend to motivate each other to perform well and meet targets.
On the contrary, some authors believe that team pay would create what economists call 'the free rider problem' where employees benefit from the hard work and ideas of others (Gomez et al,2010). It is noted also by Gomez et al (2010) that a team could become too focused on maximising its performances that it ends up in conflict and competition with other teams.
Teams could also pressure their members to limit performance as a way of getting a message across to management or other teams.(Gomez et al,2010)
According to Martin G wolf, the best way to reward employees is to have a middle ground between the individual reward and the team reward.(Algren et al 2007). This line of reasoning is based on the fact that one can motivate individuals as well foster cooperation and team work in organisations and it is referred to as the simultaneous reward system. It may have some high cost implications, but if properly implemented, will be very beneficial.
In Zenith Bank, part of the reasons for high staff turnover can be traced to staff dissatisfaction with the reward strategy. In order to reduce this and increase staff motivation and output, the bank should attempt to strike a balance between compensating outstanding marketing teams and outstanding individuals. This can be done by reducing the margin paid to individual performers by an appropriate fraction and spreading it across members of the team. This approach is likely to increase motivation and enhance teamwork, by extension increase productivity.
The reward systems highlighted in the review can reasonably improve motivation and productivity, but the management has to carefully examine all the challenges in their design and implementation. The review acknowledges that none of the plans can also be endorsed or rejected universally as being successful or unsuccessful, as there is no significant evidence to back up the claim. They are only applicable in specific situations.
It was however observed that the use of the individual contingent plan as seen in Zenith bank had some undesired effect on productivity as we highlighted the negative impacts which outweigh the positive. A meticulous implementation of the strategy recommended,would go a long way in increasing productivity and overall staff motivation.