Reward practice design strategic use in performance

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In the present study we have examined the role of HR strategically and the main practices involved in concern with it. This article describes the various HR practices and gives a complete explanation about the causes to measure the efforts made by the HRs and has proposed a way of assessing the HRs. this in turn will help the organizations to determine the correlation between the HR practices and the respective effects on the business, find out the potentials for investments, etc. which helps to justify the budget allocation, and shows the accountability for the resources spent within the organization. We have explained the numeration for each of the HR activity and the demonstration of the value, which determines the potential of the investment that is made and the planning of the strategy to create a competitive advantage.

Does HR function give any contribution to the organization? There had been a lot of emphasis made upon the HRs as business strategic partners to add value to the organization. HRs can give a clear picture about the moral of the employees, commitment and the outcomes from the employees. HR function is always considered as the cost adding function to the organization instead of value addition.

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Ulrich (1997b) said "to fulfill the business partner role of HR, concepts need to be replaced with evidence, ideas with results, and perceptions with assessments".

This present framework has proven it to be very effective in showing how these HRs help in creating the value, and gather the information to increase the returns on investment in the particular function of HR and eliminated the unnecessary investments and to analyze the resources critically in the planning of the business strategically and allocating the budget. The companies that are included are ranging from fortune 500 to small to retail, financial, transportation and many other industries.

Understanding the Strategic Role of HR

Today, the organizations must be all the time updating their internal as well as external environment to face the challenges in addition to opportunities to retain in the competitive environment and sustain growth. The major factors that are responsible for driving the changes in the organizations are: the technology, globalization, workforce in demographics, bureaucracy in structure of organization, work-life balance. HR is the key source in identifying the competitive advantages. The HRs must focus upon the deliverables of the work of an individual rather than focusing on the results. Their role in the organization, as mentioned by Ulrich & Beatty is to add to the profitability, delivery of better results, do things to create a difference in the functions of the organization.

The major's roles to be carried out by players are to:

coach

design,

construct,

change the organization,

creating followers, and

Playing by the rules.

The other point of view on the role of HRM says that in pioneering companies, HRs perform the following four key roles:

strategic business partners,

innovators,

collaborators, and

Facilitators (Schueler & Jackson, 2000).

Being a part of strategic decision making, they are required to understand the nature of business that the organization is dealing in. this includes the financial, operational, and strategic and other aspects that is vital for the organization to make sure effective team building in employees.

Carrying out the role as an innovator, HRs needs to face up to incessantly searching for strategies which in turn will generate worth about the organization as well as not just function in a backward-looking manner. In addition, HRs will also hand out as the collaborators in the midst of senior leaders along with all employees in order to put into practice the various business strategies forming the strategic link all through the organization. As a facilitator, HRs functions as the revolutionizing agent on condition that readiness; carry out, as well as rationale meant for considered changes considered to hold up the strategies in business.

The need to understand HR practices to create a Reward system

Despite the fact that HRs are convinced by their efforts and also add significance to the organization's end result, in attendance there is regularly a little confirmation to show such faith. A current study of 54 companies carried out in the Midwest, USA discovered that 51 of the 54 companies accepted out little or no evaluation of the efforts made by their HR departments and so could not have given any quantitative actions of HR's worth to the organization.

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In a study conceded out as a result of Becker, Huselid, and Ulrich (2001) showed that a smaller amount than 10% of the 968 firms that took part in their study had a official judgment procedure to calculate HRM.

Measurement in most HR departments is usually restricted to processes measuring costs and not showing value added (HRPS, 1993). There is now the imperative need to justify each dollar invested, compare strategies to determine maximum worth, and to decide on where to invest especially as companies scramble to survive after the September 11 tragedy. Pepitone (1997) reiterated that HR leaders should know how to prove the value-added of their services because management is increasingly requiring departments to give evidence of their worth. In addition, Sorensen (1995) stated that the best way for HR to gain credibility so that it can make meaningful changes is for trainees to measure the cost and effectiveness of what they do. And they must put that into language that senior executives understand: financial results. HR managers need to measure the cost and effectiveness of their activities far more closely than they have in the past. Many organizations have been forced and are continuing to determine ways of being more cost-effective.

Many of the other functions including finance, accounting, and marketing are able to show a return on investment for their respective efforts, so given the increased emphasis on HR practices, it is imperative for HR to be able to show its effectiveness in creating value for the organization. The new HR is a transformed role comparing itself to any other function, not only through espoused value creation strategies, but through outcomes, qualitative and quantitative measurements, and direct relationships to profitability.

The simple option of showing HR's value or becoming extinct as a department presents itself to HRs and given the strong belief of HR as a source of added value in organizations, there is no choice than for HRs to be able to quantitatively and qualitatively explain its strategic role in the organization. There has been substantial evidence over the years to show the relationship between HR and organizational performance as summarized by (Yeung & Berman, 1997). Some of the studies include MacDuffie and Krafcic (1992), US Department of Labor (1993), Pfeffer (1994), Arthur (1994), Huselid (1995), and Ostroff (1995).

Even though these studies exist, there still lacks a framework that is grounded in theory, yet practical enough for trainees to use that shows the major HR activities, outcomes of the respective activities, and how they can be measured. The framework describes clusters within the HR function and encompasses:

a) Strategic planning,

b) Selection,

c) Training and development,

d) Organization development and change,

e) Performance management,

f) Rewards system

HR's Activities & Outcomes

Despite the fact that there are quite a lot of classifications or assembly of HR actions, the author classifies them in seven groups that are the most strategic in addition to influential in realizing the business goals strategically. In the present scenario of economy the terms that dictates the organizations are the continually assessment of the external as well as internal environment and making the relevant changes in sort to hang about the competition. The author has researched each of these clusters as well as provides an explanation of all, its significance in arriving the business strategy, along with how it can be capable of be considering settling on its efficiency.

Strategic Planning

The role of the HR task has altered extremely over the past 10 years where HR function have formerly been seen as not being an essential center of the business and merely viewed as an managerial purpose to today's financial system where work force are additional regularly well thought-out business partners. As a virtual business partner, the ideal circumstances would be the addition of the department in the strategic business planning (SBP). "In the most basic sense, SBP involves choosing how an organization will compete" (Rothwell, 1994). The questions of what product to produce, anywhere be hypothetical to the product be sold, how many to make available, how the products and services be different from the rivalry are built-in as part of the business planning process. Reward strategy can also be distinct as the "process by which the essential task and objectives of the organization are set and the procedure by which the association uses its resources to attain their business objectives"(Tichy, Fombrum, & Devanna, 1982).

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How is it imperative for HR to be involved in the reward planning process? In developing strategies in today's multifaceted and vibrant business environment, there is the serious want for business leaders to repeatedly assess their talent pool to decide if the suitable proficiency desirable to execute the business strategies is on hand in the organization. If not, somewhere and how can the group acquire the essential skills? One more decisive area is to recognize what skills are required to be developed within for present employees to do at the stage essential for the organization to be ready for action. Does the organization require transforming at all of its existing policies and practices in order to gain the predictable behaviors of human resources? How should performance be considered and what kind of rewards should be certain for the expected behaviors? These are all basic areas of efficiently running an organization and crucial to be dealt with at the strategic planning stage. Naturally, the HR function has the hands on experience and knowledge in dealing with these serious issues. Strategic planning seek to recognize individuals managerial decisions and proceedings, which give way to the greatest benefit under various assumption about the organization and its environment. The integration of human resource function into the organizational strategy provide the basis to allow the human resource purpose to bring out and implement the tactical plan to attain a spirited advantage (Wofford, 2002). This plan offer for the maximization of human capital, decreases the wasted and incompetent labor and other monetary investment, and finally maximizes profitability.

By addressing these issues at the strategic planning stage, there is the elevated probability of more professionally attainment the business result and avoid chaos, massive layoffs, crises resultant from not having skilled workers to carry out meticulous tasks and to have the true fit among employees, business strategies, and company environment. C.K Prahalad (Prahalad, 1990) in unfolding the roots of spirited advantage, stated that the actual sources of competitive advantage could be found in management's capability to combine corporate wide technology and making into competencies that allow individual business to acclimatize quickly to changing prospect. Moreover, Tichy et al., (Tichy et al., 1982) reiterate that at hand are three foundation elements for organizations to work effectively and comprise mission and plan, business structure, and human resource management. Obviously, the HR purpose plays a pivotal role in formative of the business strategy through the appraisal of the organization's capability to effectively compete during a particular plan, formative the appropriate rewards system, influential appropriate organization structures, and rising strategies to augment employees' performance.

Given the meaning of strategic development as how an business will compete, the query arises as to how an business would be able to review the efficiency of its strategic plan. Pointer of a successfully designed strategic plan includes creating rewards that are sustainable over a extended time. Has the preparation resulted in a) the achievement of the organization's goals and objectives,

b) Financial profitability,

c) Positioning to create reward for the short-term and long-term, and

d) Created a sense of social responsibility. In quintessence, this process determines the decision and actions an association will take on to create and maintain competitive advantages.

Performance Management

Performance management system makes obvious to employees about what is anticipated of them? and also to assure to line managers as well as strategic planners so as to analyze the employee behaviors that will be in contour with the company's objectives" (Noe, Hollenbeck, Gerhart, & Wright, 2003). a lot of organizations still depends upon the performance appraisal to analyze the ceremony as well as first and foremost of the accountability of the HRs. As per present economy the highest of running performance in the direction of creating a aggressive advantage Noe, et al (2003) team performance management interested in three categories of:

defining performance,

measuring performance, and

The feedback aspect of performance.

Performance management systems must be geared to make sure that every employee inside the organization, depending upon beforehand carried out job analyses is performing the everyday jobs anticipated at the projected level to carry out the strategic goals of business. The thoughts of HR trainees in addition to other business leaders are that a yearly performance appraisal depending upon the performance management be obliged to become out of date. Effectual performance management entails a procedure where every employee is completely conscious of his or her function in the organization, what kind of production is predictable, and how the production will be calculated.

How would individual settle on the efficiency of the performance management arrangement in making competitive compensation intended for the organization? Here answering this type of question, the subsequent areas are supposed to be addressed:

To make sure that job descriptions are urbanized from beginning to end appropriate and effectual job analysis.

Job descriptions are rationalized on a usual base in order to replicate to altering business surroundings.

Feedback is common and made incessantly in the middle of all stakeholders.

Each employee is completely conscious of his or her function in the organization that can effortlessly be expert in the performance setting up stage of the procedure.

There are quantifiable outcomes rendered to each job reflecting the role of the place in addition to present in achieving the goals of the organization.

There must be uniformity in performance actions crossways the complete organization as well as performance principles should for all time be calculated time and again.

The procedure and the scheme must be considered as plausible, pale, suitable, as well as dependable.

A review with mathematical ratings can be used by staff as well as supervisors to evaluate if someone's role plus responsibilities are completely associated with the objectives of the organization, happiness with the real procedure and fulfillment with the supervisor's administration of the performance administration procedure.

Rewards System

(Lawler, 1990) says that the initial point for any reward system design process needs to be the strategic agenda of the organization. By understanding where the organization is positioning itself for various intervals in the future, an organization could design the reward system to provide incentives specifically designed to foster behaviors, attitudes, and outcomes among the workforce that directly correlate with the strategic agenda of the organization. As indicated by Lawler (1990), numerous studies including (Vroom, 1964, Lawler, 1971, and Kerr, 1975) have shown that effective rewards systems can significantly increase the motivation of individuals to increase their performance. As inferred from these studies, the fundamental intent of rewards in organizations is to provide incentives to achieve individual and organizational behaviors that would enable the organization to create competitive advantages and maximize the value of the shareholder's investment.

Given such premise, the question arises as to how one can determine that the actual rewards provided to the workforce is fostering behaviors from individuals and the organization in general enabling the organization to maximize its profitability. A core outcome of an effective rewards system is the role in assisting in attracting and retaining critical employees. In measuring the effectiveness of the rewards system, the following factors should be considered:

Does the current rewards system represent and provide incentives that reward behaviors to carry out the business strategy?

Are new employees accepting offers with the organization based in part to the rewards system?

How does the rewards system reflect the employees' personal values and the overall culture of the organization?

What percentage of employees and role within the organization does the reward system assist in retaining?

What is the overall satisfaction level of the workforce with the rewards they are offered?

Is the rewards system flexible enough to be changed if there are external challenges and opportunities that would create a need for changing the system?

What is the overall cost of the rewards system as compared to its overall benefits?

A survey carried out by Watson Wyatt (1998), concluded that organizations whose reward systems are linked to business strategy to a great extent have higher returns than those with less of a linkage. Schuster (1996)also concluded that organizations using strategically designed pay systems perform better than the traditional pay counterparts based on financial objectives such as earnings per share, return on assets, profit per employee, and cash flow. The outputs, therefore, of an effective rewards system are centered on the financial profitability of the organization and to create competitive advantages for the organization

The crucial factor of success of any good reward system is the ability to comprehend the one's workforce, be able to influence their performance, and envisage their effectiveness in any given circumstances. Precisely, the HR function may not purview this as an integral part of their key responsibilities, but in veracity if is certainly their accountability to understand the desires of their workforce and how any provided reward policy or practice may have an effect on the performance of the employees. McShane & Von Glinow (2002) defines organizational behavior as the study of how people think, feel, and do with their organizational objectives. As a linkage to organizational behavior, it's essential to have an emphasis on reward structure also, as its seen as an integral part of the employee benefits and welfare which the company endorses. The significance of focus on reward structure is to consider the way employees are thinking, feeling, and perform communicate to the strategic aim of the organization and make the outcomes required for the accomplishment of the organization's business objectives.

In the midst of an augment in managerial turbulence (Daft, 2001), it is a lot more difficult to forecast how organization will act in specific circumstances as demonstrated during the many layoffs and reformation of organizations after the September 11 terrorist attacks. However, organizations can be to a great extent successful if HR division and other privileged are competent to examine historical data, benchmarking other divisions and organizations, and still using simulation in preparation and implementation of future interferences. It is also decisive for HR and other privileged to recognize the theories that are pertinent to managing human resources within explicit contexts and what strategies may be more successful in humanizing presentation among the workforce.

The capacities, so, for organization theory and performance would be the capability of HR and other leaders to rationally forecast and plan therefore for the prospect dependent on past data and present environment. Adding up to this, it is essential for the team to be fully aware of what of is emerging in other organizations across the verticals, opinionated and economic developments, and industrial changes and the doable effect on one's organization. Being able to be logical to appreciate and predict the behaviors of employees provide a exact spirited benefit in making applicable changes to take advantage of on present and future opportunities.

With the significance of imaging how good reward systems contributes to the business strategy and to be considerate about how to determine the level of HR's efficiency in causative to the productivity enhancement for of the organization, it is probable that these approach be used to improve the job in creating high levels of value for organizations. The subsequent outline lists and momentarily portrays the relevant HR cluster, its outcomes, and possible measurement to determine its effectiveness in creating value:

Outcomes Measurements

Strategic Planning

Analysis, decisions, and actions needed to create and sustain competitive advantages

Financial profitability

Social responsibility - viewed by society as ethical, moral, and a choice employer

Integrated all areas of the organization

Efficiently utilized available resources

Performance Management

Each position and the tasks performed by the incumbents adequately carry out the strategic goals of business of the organization.

The process is effective in maximizing employee performance

Job descriptions are developed through timely and effective job analyses.

Feedback is shared continuously among all stakeholders.

Every employee is fully aware of his or her role in the organization.

Measurable outcomes identified and measured for each position.

The process and the system viewed as credible, fair, valid, and reliable.

Rewards System

Rewards system viewed as motivating for employees to increase their performance.

Provide incentives to achieve individual and organizational behaviors aligned with business strategies. investment

New employees accept offers with the organization based in part to the rewards system

Rewards system reflect the employees' personal values and the overall culture of the organization

Outcomes of the rewards system are cost-effective.

Organization Behavior &Theory

Understand, predict, and influence employees' behaviors

The ability of HR and other leaders to reasonably predict and plan accordingly for the future based on present scenario.

Measurement in most HR departments is usually restricted to processes measuring costs and not showing value added (HRPS, 1993). There is now the imperative need to justify each dollar invested, compare strategies to determine maximum worth, and to decide on where to invest especially as companies scramble to survive after the September 11 tragedy. Pepitone (1997) reiterated that HR leaders should know how to prove the value-added of their services because management is increasingly requiring departments to give evidence of their worth. In addition, Sorensen (1995) stated that the best way for HR to gain credibility so that it can make meaningful changes is for trainees to measure the cost and effectiveness of what they do. And they must put that into language that senior executives understand: financial results. HR managers need to measure the cost and effectiveness of their activities far more closely than they have in the past. Many organizations have been forced and are continuing to determine ways of being more cost-effective.

Many of the other functions including finance, accounting, and marketing are able to show a return on investment for their respective efforts, so given the increased emphasis on HR practices, it is imperative for HR to be able to show its effectiveness in creating value for the organization. The new HR is a transformed role comparing itself to any other function, not only through espoused value creation strategies, but through outcomes, qualitative and quantitative measurements, and direct relationships to profitability.

Conclusion

Do good reward systems contribute to the effective performance development in an organization? Given to facilitate more than a few large-scale researches have proven that reward system is also very critical driver in an organization's overall performance, it is crucial for HR and other leaders to appreciate the serious nature and utmost value of accepting the effectiveness of reward systems and activities in creating value for the organization. It is only during quantifying the scope HRM that one can really eloquent the payback of HR strategies in accomplishing the organization's business strategy and in the method improve the credibility of the HR profession.

The HR work is at a stage where determine HR's efforts is not immediately a pleasant thing to do, except be imaginary to be a central part of an HR department's combination process. There will be apprentice that would obviously defy this vital aspect of HR, but through coaching, training, and practice, expertise will be developed and eventually improving their routine and the efficiency of the HR function. It is merely through such hard work that HR can corroborate its claims that it is a tactical business partner and a value-added division within the organization.