Study into Reward Systems and Their Effect on Employee Motivation

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Reward systems are one of the basic components of a performance management system and a reward system is a broad term and it encompasses to include all organizational components linked to rewards including people, processes, rules, regulations, procedures and decision making processes that are involved in allocating the benefits and compensation among employees in return for the contribution that have made to the organization in terms of the work achieved (Griffin and Moorhead, 2009).

Employee motivation is defined as the willingness or effort exerted by the employee in order to achieve goals of the organization and this phenomenon of motivation is universal and results because of certain unsatisfied desires of the employee. The basic motivation process has four steps; an individual has certain preferences and likes and dislikes that he/she wants to fulfill. When these wants and desires are not satisfied, a drive or motivation is created in that person to achieve that goal (Gunkel, 2006).

Keeping these two important factors in mind, this study is aimed at determining the significance and importance of the impact that reward systems have on employee motivation. A study conducted to determine the impact of reward on motivation found that there is a direct relationship between the level of rewards and intrinsic motivation, the higher the reward, the more will be the extrinsic motivation (Ryan and Deci, 1985). Another study was also conducted that endeavored to inspect the relationship between rewards and employee motivation and revealed that there is a statistically significant impact of payment, promotion, recognition, benefits on employee motivation (Khan, Farooq and Imran Ullah, 2010). Roberts (2005) also supports this and his findings reveal that better the reward and recognition systems lead to higher levels of motivation and satisfaction among employees and therefore may lead to higher levels of performance and productivity.

These facts revealed by various previous studies emphasize the importance of determining the relationship between reward systems and employee motivation and motivation affects the productivity of the employees and therefore has serious implications for the company. The purpose of this research study is to explore the relationship in a company specific setting using ASDA and determine how the total reward structure affects the employee motivation level in that company.

Problem Statement

The problem being discussed is current as well as relevant for any organization as employees are the main resource for any organization and these rewards directly have an impact on them. Motivation is an intangible and subjective term and is related to human behavior while reward systems are objective and clearly well defined and attempting to relate one subjective concept to an objective one is a daunting task.

The relationship between motivation and rewards can also be viewed from the perspective of human behavior and this problem existed and is likely to continue into the future as human behavior remains the same and employees bring their behaviors to the work place as well. Therefore the results generated by this study will have practical applications in rationalizing future reward systems. Human behavior is reinforced or abandoned depending on the consequences that action has generated. When the person experiences anything good or satisfying related to an action then it results in positive reinforcement and the person will try to repeat the behavior in future. On the other hand, negative reinforcement occurs if an action results in criticism. These principles are equally applicable to the employees in a workplace and rewards can be considered as factors that help in reinforcing a desirable behavior like good performance (Wilson, 2003). Therefore the purpose of reward system is to reinforce positive behaviors so that employees repeat these behaviors.

The problem therefore to be addressed by this research study is to investigate what motivates employees and what rewards are being offered to them. In case the reward is something that does not have any significance for the employee then it may not be enough to motivate the employee. Similarly, another problem to be addressed is that how the reward systems are developed and implemented so that these appear as positive consequences for showing the desired behavior which in this case is good performance and reinforcing this consequence which leads to motivation among employees.

The general purpose of this study is to investigate what are the factors that motivate employees to work and how these factors can be incorporated into a reward system and what is the impact of these rewards on employee motivation. In order to investigate these factors the sample of employees to be studied belongs to a company called Associated Dairies & Farm Stores Limited (ASDA). The basic overview of the research is that ASDA employees will be asked to fill out questionnaires through which their motivation will be judged in relation to the total reward system they are being offered.

Introduction to the Company

Associated Dairies & Farm Stores Limited (ASDA) was established in 1949 in Britain and over the years it has grown into a supermarket chain. Initially its product line was limited to grocery and general merchandise but over the years the product markets have been diversified and ASDA also operated a financial services segment as well. It is a very successful business and owing to its success, Wal-Mart decided to acquire ASDA and operate it as its subsidiary in the year 1999. It has been an innovative company that has introduced distinctive store formats in Britain like one stop shopping superstores during the 1970’s, introduction of supermarket owned brand and then finally moved into financial services business as well. This portfolio requires a large number of employees who specialize in their own areas of expertise and the company at present employs 170,000 colleagues in 400 stores [1] .

ASDA is one of the largest retailing chains in UK along with a few other notable names such as Tesco and Sainsbury. ASDA has more than 1000 employees managing and running its stores throughout the country. The total reward system of ASDA includes components include Bonuses, Colleague Discounts, Private Medical Cover, Share Plans and share save Plans, STAR Points, Colleague Share Ownership Plan, Pension, Voluntary Benefits, ASDA Stars, Long Service and employee recognition [2] . Reports have shown that ASDA has expansion plans on the horizon and the company is expected to acquire Netto stores in the UK which will help ASDA increase its number of stores and employees [3] .

Developing a reward system at ASDA and that keeps all or most of the employees motivated are a difficult task. There is a dire need to study how the total reward system of ASDA is viewed by the employees and what are the pitfalls of the system. Being such a large supermarket chain operating throughout the country with a large number of employees and plans of further expansion makes ASDA an ideal candidate to be studied for this study.

Aims of the Study

Developing and administering reward systems is one of the most important responsibilities of the human resource management department. Rewards are given to the employees in return for the work they contribute and are also a form of recognition for the employees. Rewards can be both monetary and non monetary. When one thinks about rewards, monetary rewards are the most obvious ones that come to mind however these may not necessarily be the most effective and include factors such as basic salary, bonuses, commission etc. On the other hand non-monetary rewards can be termed as career incentives or intrinsic rewards and include factors such as promotions, holiday trips and so on (Christiansen, 2000). The aims of this study therefore include:

Explore the significance of reward systems in determining motivation level of employees

Exploring the major components of the total reward system

Exploring they types and components of motivation

Objectives of the Study

The main components of any reward systems include policies, practices, structures, schemes and procedures (Armstrong, 2002) and the purpose of this study is to study these processes is ASDA and study how job evaluation and performance management, practices are being used for motivating employees through the use of reward systems. The objectives of the study include:

What type of reward systems are in place?

How have these reward systems been developed and how are these systems kept current and up to date?

Do the employees fully understand and appreciate these reward systems?

Do the employees view these reward systems as being effective and in line with their needs and requirements?

What is the level of job satisfaction and motivation in ASDA employees?

Do employees view the appraisal process as just, equitable and fair?

Does the reward systems discriminate employees on some basis such as age and gender etc?

Do the rewards systems address factors that motivate or de motivate the employee?

What are the missing links between what the employees want and what the reward system is offering?

Results Expected

The results expected from this study are to be able to generate a list of factors that serves as motivators and de motivators for the employees and what they are expecting form the reward system. The most important factors affecting employee motivation can be identified through this process. The study is also expected to help dissect the reward system of ASDA and compare whether this reward system addresses the employee’s expectations and what are factors that are lacking in the system. Finally, the comparison will reveal what elements need to be incorporated into the rewards systems o make it more effective in motivating employees.

Conceptual Framework

The research study will be based on primary data collection that will be carried out through questionnaires to be filled in by the employees of the company. The questionnaire has been designed to study the main components of the reward system of ASDA, whether this system has been developed keeping the employee and organizational needs in mind and how it does relate to the extrinsic and intrinsic motivation among the employees. A brief description of these three themes is discussed in the next few paragraphs.

.The main components of any reward system include policies, practices, structures, schemes and procedures (Armstrong, 2002). Processes are developed so that the worth of the job and the contribution of the employee can be measured and may include job evaluation and performance management, practices are for motivating employees through the use of reward systems, structures are developed to link the value of the position to the level of benefits offered, schemes are for providing incentives based on the performance and procedures refer to the ways in which the system is maintained so that it operates efficiently. In the same way, the total reward system of ASDA will be studied to determine how effective it is in gauging employees.

Even though a reward system is developed keeping in mind its intended audience which are the employees but it also needs to consider the needs and requirements of the organization. According to Griffin and Moorehead (2009), rewards carry both symbolic as well as surface value for the employees. The surface value refers to the objective value that the rewards offers to the employee and can be measured like for example a 20% pay raise. On the other hand rewards also have a symbolic or subjective meaning that carries some personal worth for the employee for example rewards that help an employee realize that his worth is more than the other employees. This study will explore how effective the reward system in ASDA is in dealing with the aspirations of the employees.

There are two aspects of motivation, extrinsic & intrinsic, which shows that motivation is subjective and has different meanings for different people. Extrinsic Motivation is defined as the desire to perform a certain behavior or task because of the contingent results or the positive consequences that action produces while Intrinsic Motivation is a desire to do something based on the enjoyment and interest in that task (Ryan and Deci, 2004). Intrinsic motivation includes factors such as job satisfaction, achievement of personal goals, compliance to standards, fairness, team spirit and ethical standards etc (Frey and Osterloh, 2002). The study will attempt to uncover whether the total reward system in ASDA deals with both extrinsic and intrinsic factors or not.

Outline of Subsequent Chapters

The introductory chapter will be followed by a review of the literature to build a foundation for this research study in the light of the studies carried out previously and will deal with the major theoretical themes relevant to this study. The next chapter will provide a detailed description of the methodology that will be undertaken for designing and filling the questionnaires to collect data for the research. The next chapter will them move to more specific issues and describe the current reward system being offered in ASDA while the section following this one will take on a critical approach and analyze and evaluate the system. After the analysis, data analysis and findings will be presented in a separate chapter and the final chapter of the study will summarize and conclude the entire research study.