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In this fast pace economic conditions businesses are trying to get the best out of their employees and spending high amount of time and money to improve against their rivals. Not only companies try to get the best outputs from their inputs but they also want maximum output for reasonable amount of workforce put in. In the new business environment many businesses are trying ways to look for more growth while on the hand dropping their business operational costs. During these time periods a sturdy economical condition has resulted in a tight job market. In this scenario, as the businesses expecting more from the employees the employees on the other hand are expecting more from their managers. In such situations to produce high positive output businesses should be looking forward to reward their workforce on achieving companies goals and targets. In this way a strong sense of motivation could rise up amongst the employees to work hard and how dedication towards given tasks within any company structure. The reward and recognition programs which are specially designed for employees in order to gain competitive advantage in the economy and bring significant change in their work behavior are crucial for the success of the business and contain high value.
The reward system is also a vital part of a firm`s philosophy. It mirrors and strengthens the morals which the business puts on the work which workforces do, and on their skills, abilities, knowledge and attitudes. For example, the rewards such as pay raises and bonuses are given to these skilled employees who work hard and behave well while performing their business tasks. In terms of the administration of human resources those values concern brilliance, team work, class, elasticity and high performance. (Heriot-Watt University, Human Resource management by Tony Keenan and Janis Paterson)
NEED FOR RewardS AND REWARD SYSTEMS
The famous employee motivation theories have worked on the employee's needs and expectancies. One of the most commonly known theories of motivation is the hierarchy of needs theory, established by psychologist Abraham Maslow and promoted during the early 1960s.It claims that individual needs form five levels of hierarchy. (http://www.omafra.gov.on.ca/english/rural/facts/96-001.htm)
In the Maslow's hierarchy of human needs the ego, self-esteem need is at one of the top levels of human needs. This basic need can only be fulfilled by achievement, recognition, promotions and bonuses. Thus rewarding employees on the basis of their good performance. (Management by Kathryn M. Bartol and David C. Martin, Third edition)
Employee recognition program is a technique which rewards employees who from their work activities bring vital consequences to the business operational outcomes. Once you recognize individuals positively you expect that their performance should be repeated in the future as to bring company benefits. A decent employee recognition program should be simple, instant, and therefore should possess high reinforcing capabilities. While working on the recognition program it should be motivated that it's powerful for both the business and the workforce.
The Aims of Reward Systems
Hills, Berhgman and Scarpello (1996) define the aims of rewards systems as follows:
To capture candidates who possess the right qualities and qualification for the organization goods to fulfill. When measuring the comparative methods of different jobs, potential applicants usually focus on pay as a reference point because data about monetary rewards are more offered and visible than other essentials in the reward package.
To hold the workforce who possess the core skills and competencies which is required to the organization in future.
Employees mostly seek that their managers treat them honestly and justly.
Employees on the job performance and commitment are undertaken, as rewarding those refine both important issues.
At some point or the other managers should be rewarding their employees on their efforts.
The reward should be fair if organizations want them to act as a motivator for their employees.(Storey and sissons 1993),(Harrison 1993)
Tyler and Bies (1990) note those individual factors such as having their views taken into account when management decisions are being made and the reasons clarified. However pay research has by tradition concentrated on distributive equity and employers` strategies of offering pay increases, bonuses and other short-term remedies in an effort to enhance the `felt fairness` of workforces towards their rewards.(Jones, Scarpello and Bergmann 1990)
Five important issues which should be addressed if an organization wants their recognition program to be seen as motivating and rewarding and significant for the success of an organization.
Five Tips for Reward and Recognition
The performance involvement which constitutes rewardable conduct or plans should be created.
All the employees must be considered while recognition program is carried out.
Actions which are being rewarded and acknowledged must be known to both employee and the employer.
The recognition should be carried out early as to inspire the action which the employer wants from his workforce.
Designing awards such as "Employee of the month" and similar ones should not be considered as this type of process is usually taken as "favoritism" where managers are the ones who choose individuals to accept the recognition.
(Five Tips for Effective Employee Recognition by Susan M. Heathfield, About.com Guide)
(EXAMPLE 1) At Mobilink GSM Pakistan employees are not seen just as a cost but also as a resource in which the company has invested in, from which it expects valuable returns. The company uses technique of paying its employees above the normal market standards to retain the top talent available, which later can translate into highly effective and efficient work force. The incentive schemes and objectives are openly laid out to the employees on regularly basis.
Benefits of Rewards
Helps Increase employee productivity.
Improve workforce retention and engagement.
Enable greater consistency through performance assessment process.
Close skills gaps with directed training.
Increase collaboration and communication among the employees.
Get a quick return on investment (ROI).
Reward Program Designing
The key aspects that generate ideal recognition programs are as follows:
Extracting information regarding the actions or performance required from employees that will strengthen the organizational goals and objectives.
Collecting data of a group`s earlier performance or behavior in terms of key measurements.
Planning and determining an ideal reward program.
Make an understanding to the employees of the reward system.
A reward program must be able to identify business or group goals and the employee behavior or performance for earning benefits such as increased productivity and motivation. At times corporations regularly attempts the mistake of rewarding behaviors or accomplishments that one or the other flops to further corporate aims or may be disrupting them. The amount work allotted by a business should not be undertaken while planning a reward program if value is an essential issue for an entrepreneur.
Correctly measuring the amount of enactment guarantees the program pays off in terms of corporate targets and goals. As rewards have an actual cost in terms of period or money, small business holders need to approve that performance has actually enhanced before rewarding it. Once again, the measures need to relate to a small business' goals. As Linda Thornburg noted in HR Magazine, "Business strategy should be linked to an overall performance measures in a recognition program. Many reward programs use numerous procedures which can contain such variables as better-quality financial enactment along with enhanced customer facility, improved client approval, and reduced defects." (http://hrview.blog.co.in/page/5/)
Making sure that the rewards program n has to be effective, the important points should be clearly spelled out to all the employees. Motivation relays' on what is asked from employees at all times and he or she is able to recognize it. After this procedure has been done, reinforce the initial original communication with organized meetings or memos promoting the reward program. The firm should keep their communications simple but regular to guarantee staffs are kept up-to-date of changes to the system. (http://www.referenceforbusiness.com/small/Di-Eq/Employee-Reward-and-Recognition-Systems.html)
(EXAMPLE 2) At Avira a new employee engagement program covering benefits, pensions, pay, website portal, total reward statements etc. are developed for their employees and colleagues.
Types of Reward Systems
There are several types of reward programs which are focused at both an individual`s and group performance.
Cash-based profit sharing: Profit sharing is the payment to eligible employees of financial rewards or shares related to the profits of the business. It is additional pay which recognizes and rewards collective effort. The aim is to strengthen the collaborative and co-operative links between employers and employees. The practice in some parts of Japanese industry of giving merit pay increases and large, company, performance-related bonuses at regular intervals seems to have revived interest elsewhere.
There are two main types of profit-sharing pay schemes:
The first type consists on conventional cash-based schemes where the share of profit is considered as a form of bonus distinct from and additional to normal pay. The second is a more recently developed model which uses the profit-linked element of pay to replace some portion of previously fixed earnings so that normal pay can vary with profitability.
The inspiration for this latter type of cash-based profit sharing came from Martin Weitzman, an American economist who suggested that two main theoretical macroeconomic benefits could result, full employment and economic stability. His contention was that linking a significant proportion of the payroll to a fixed percentage profit sharing pool would lead to an expansion of employment and a fall in cost-push inflation, provided profit related pay was linked to tax concessions. The employment creation argument goes as follows:
"If a company links 20% of pay to profits, basic pay rates are therefore in effect cut to 80% of the old rate. If the company employs additional workers, the cost is the new basic rate- 80% of the old rate. Since the pool remains as a fixed percentage of profits then because it is divided among a larger number of employees each employee receives a diluted profit related pay. Unless profits rise it then becomes economically advantageous to employ additional workers. (Tony Keenan and Janis Paterson)
Companies probably have less ambitious reasons for introducing profit-related pay than those put forward by Weitzman, but they expect the following benefits.
Employee will become more committed to company goals.
Employee will focus on key business objectives by taking a more active interest in the companies they work for.
Incentives for employees will become stronger as the proportion of pay which is profit related increases with rising profits.
Pay will fall when profits are low, thereby reducing the need for redundancies- the employment stability argument. (Heriot-Watt University, Human Resource management by Tony Keenan and Janis Paterson)
Employee Shareholding: Employee shareholding is a non cash version of profit sharing. There are several types of employee shareholding schemes, the most common being:
Approved Deferred Share Trust (ADST) - where shares are allocated to employees in proportion to basic pay and held in trust for a specified time after which they can be sold by the employee without incurring tax.
Save As You Earn Schemes- where employees make regular contributions to a savings fund over a period of several years at the end of which the money is used to buy shares at a pre-established, favorable price.
Discretionary Share Option Schemes- where selected employees, usually senior executives, are granted options over shares as part of performance-reward schemes. If these options are exercised within a specified period of time after the date of the grant they are exempt from income tax.(Human Resource management by Gary Desler )
(FOR EXAMPLE 3) BP Employee Share Plan-commenced in 1990 and provides employees with an opportunity to acquire bp shares on favorable terms. Around 85% of eligible employees, or over 1650 employees, participate in the share plan where employees can purchase up to a maximum value and qualify for a matching number of shares provided freely by BT (the limit, which depends on company performance, has ranged recently from $3300 to $6000).When employees become the beneficial owners of all shares immediately, their purchased shares are restricted for 2 years and the free matching shares are restricted for 3 years.
VARIABLE PAY: Pay-for-performance or variable pay is such a reward program where a slight share of an individual`s pay is considered to be at risk. Variable pay can be connected to a company`s performance or an individual`s accomplishments or ant mixture of these. It includes the procedures as employee share ownership, bonus programs and one-time awards for important events or activities. Many organizations pay less than their rivals but on the other hand motivate them using a variable pay program instead. As said by Shawn Tully in Fortune, "the testing of a fair reward is simple. A reward program must be able to extract enough future performance from employees which exceeds the extra costs of the program. The goals must be in their reach and employees shouldn't be over-burdened."(http://www.referenceforbusiness.com/small/Di-Eq/Employee-Reward-and-Recognition-Systems.html)
BONUSES: Reward program as bonuses are in long use by many American corporations for years now. Its frequently use to inspire salespersons to generate added business or to achieve high level profits for the organization. These reward programs are also used to identify many team achievements. Business performance at team-work, departments, or corporation-wide level is considered then prizing individuals in many organizations now.
Motivators such as bonuses are short-term .Awarding employee's performance for the last year as said by critics usually says short-term inspiration rather than future oriented achievements. Such programs are needed to be wisely organized to make sure they are rewarded for above and beyond a team`s regular operations. If not it will more considered as a merit pay or entitlements rather than recognizing exceptional work performance.Moreover,experts says that bonuses are legitimate means of rewarding employees for their exceptional work and adds as a tool to boost future efforts.
(EXAMPLE 4) General Electric`s chief executive jack welch recognizes the power of recognition. He motivates employees by personally handing out bonuses for good work. He constantly sends handwritten notes to managers and employees thanking them for a job well done, suggesting improvement, and expressing encouragement during family crisis. (Organizational Behavior 9th edition; P.Robbins San Diego State University)
(EXAMPLE 5) Pets at home employees are rewarded through bonus schemes, instant cash rewards, Thank you notes etc. The company has been paying out record bonus payments to store managers and colleagues for the last the three years. The company have spontaneous and day-to-day recognition program.
GROUP-BASED REWARD SYSTEMS: In the increasing amount of team based organizational work many employees are looking to reward teams who are able to reach their objectives. Rewards such as bonuses, gainsharing and profit sharing are examples which organizations use to award their employees. A business person can either reward a group contribution or an individual or any mixture of the both. Group based rewards are based on the quantity of a team's overall performance and effort the members put together whereas individuals are rewarded for their individual share of performance. Such reward program also tend to reward struggling workers with average and above average workers moreover increases an inspiration of individuals efforts to shared business aims.
(EXAMPLE 6) Toyota was enthusiastic to show appreciations to its United Kingdom staff for their best-ever results in performance, thrashing their German colleagues with an 11% sales increase on the earlier year. Within days of getting this information, the Managing Director was able to publicize that all workers would be receiving a 'thank you' in the next day's mail. This was a smart gift wallet covering a Marriott encouragement award branded particularly for Toyota, offering two nights' deluxe accommodations for two people at any Marriott Hotel in the United Kingdom. Toyota also prearranged with Marriott that all main extras such as breakfast and dinner would be counted in. The hotel also set up dedicated toll-free phone reservations number for relaxed reservation. This employee incentive program was kindly received by all.
Flexible benefits: Benefits constitute the variable elements of the rewards package. Flexible benefit schemes offer each employee the opportunity to decide within certain make-up of his or her own benefits package. Schemes can include company cars, life insurance, private medical screening, childcare facilities and leisure clubs etc. Each employee is allocated an individual allowance to spend on benefits and this can be used on an annual basis to switch between benefits or choose new ones. (Heriot-Watt University, Human Resource management by Tony Keenan and Janis Paterson)
(EXAMPLE 7) At boots employees can earn up to 40% discretionary bonus based upon levels of customer care, sales and company profit. Further company also gives generous holiday allowances, flexible pension scheme, health insurances, life style benefits for employees and the family etc.
(EXAMPLE 8) At IVRCC, India`s leading engineering procurement and construction company the retention plans are highly considered.They include vechile loan, marriage loans, education loan, abroad programs, empowerment etc.
Gain sharing: Gain sharing plans are sometimes referred to as cost-reduction plans the most widely known of these the Scanlon plan. The Scanlon Plan has two primary features. One is employee involvement through the formation of production committees at department level to develop cost saving suggestions for improving productivity and quality. These suggestions are then screened by more senior committees to assess their viability. The second feature is the distribution of the savings arising from the adoption of these suggestions. The suggestions are assessed in terms of an improvement in added value or other measures of productivity such as the ratio between labour costs and sales value. The value of the plan lies in the recognition that 'the effective use of participatory management requires congruence between the pay system of an organization and its style of management (Beaumont 1997)
Performance related pay: Performance related pay is an integral part of the on-going change in reward systems from those based on status to those based on contribution. Performance-related pay aims to link all or part of an individual's pay to some type of formal appraisal performance. It is typically used as a signal to express the organization`s intentions to create an entrepreneurial and self-motivated workforce (Morris 1990). The current performance related schemes have provide for additional (and variable) payments to base pay. Other companies compute pay based entirely on assessed performance. Performance may be measured against tightly defined standards, or achievements of agreed objectives.
Most Used Reward Tactics to Motivate Employees
Leaders' quotes employee recognition as the best used motivational tactic-recognition works for maximum situations within most business cultures. The following chart below indicates, employee recognition is the most predominant motivational strategy, with gift certificates the second most famous. Distinctive events, the third most named strategy, encompasses planned recognition programs for example award events, group parties or outings, and any of a number of special events to reward employees for their hard work. Clearly and supportively, although somewhat unexpected, face-to-face communication is a strong force in appealing about changes in employee behavior.
Of all the organizational interventions, reward systems have the most influence on employee behavior. Reward systems may include traditional schemes such as pay based on time at work and pay by results and contemporary schemes such as performance related pay, bonuses and employee shareholding. However reward systems such as non-financial rewards and indirect pay. Reward systems are used to attract, motivate and retain employees. Although there are no rules for identifying which reward systems organization's should adopt, employees expect their employer to adopt a fair day`s work with fair day`s pay.
In the restructuring process many companies do a thorough job analysis first which is required to run a company`s long run plans accordingly and efficiently. Job analysis involves many steps to run a proper implementation of the plan ahead. It is the systematic identification of the key tasks which have to be done in a job and the suitable skills and aptitudes required to perform these efficiently. One technique involves circulation of questionnaires to job-holders who are to describe their jobs. This method is relatively time consuming for employees. A second approach is to provide employees with a list from which they have to choose those items which apply to their specific job. With more complex tasks, one-to-one interviews between the analyst and job-holders may be preferred.
There is no magic formula for deciding which method of job analysis is most appropriate in any given situation. Ultimately the analyst must be guided by common sense and practical experience in deciding the appropriate method for any given set of circumstances.
On the other hand human resource planning includes estimation of how many qualified people are necessary to carry out the assigned activities, how many people will be available, and what if anything, must be done to ensure personnel supply equals personnel demand at the appropriate point in the future.
Job analysis and Human REsource Planning
Job analysis is taken for the following reasons.
It helps choose employees either from the ranks of the existing staff or the recruitment of new staff.
It supports setting out the training needs and requirements of a specific job.
It delivers evidence to help in choice making about the type of tools and materials to be employed with the work.
The evidence collected during job analysis, including recognized and profiled know-hows of employees in their work jobs, can be used as indication for future staff progress and promotion.
Lastly, the process assists identifying areas of risk and danger at work. (http://bgnentrepreneur.net/job-analysis/)
The job analysis may include these activities:
Studying the job tasks of present workforces.
Working on Internet study and observing sample work descriptions online or offline underlining related jobs.
Examining the work duties, responsibilities, and duties that needed to be accomplished by the member filling the spot.
Investigating and sharing with other enterprises that have related jobs, and
Articulation of the most significant consequences or contributions required from the position.
Important questions to be asked in the purpose of job analysis
Reality: What do people do in their jobs?
Perceptions: What people believe people do in their jobs?
Norms: What do people believe should be done in their in their job?
Future changes or plans: What should people be able to do in their future?
Job analysis is a critical starting point for an organization as to identify their future needs and requirements to smoothly run their operations. Human recourse planning on the other hand works as a second important stage which solidifies any organization's position in the working environment. Key elements of human resource planning are as follows:
Need and importance of human resource planning:
It forecast needs of future personnel needs to avoid the situations of surplus or deficiency of manpower in future, it is important to plan your manpower in advance. For this purpose a proper forecasting of futures business needs helps you to ascertain our future manpower needs. From this angle, HRP plays an important role to predict the right size of manpower in the organization.
(EXAMPLE 9) Toshiba`s work analysis and support system: On the engineering shop floor, since the detection of waste and improvement had been grounded on opinion by persons, the time necessary for improvement was double as long as the time compulsory for observation. This encouraged Toshiba to generate a work analysis system for supporting the detection of waste in assembly work and transportation work by using audiovisual cameras and wireless tags to detect worker movements and excerpt aspects of repetitive work that vary from the norm and regularly occurring work patterns. A drop of 70 to 75% in surveillance and analysis time associated to conventional methods is estimate in the case where the effort of four workers for one day is calculated. This will make likely labor saving and superior speed in work upgrading activities. Currently Toshiba HA Products Co., Ltd. is assessing this system. (http://www.toshiba.co.jp/rdc/rd/fields/06_t31_e.htm)
(EXAMPLE 10) Harley Davidson was supported by Accenture for their business improvements by implementing the Accenture Human Capital Development framework; it helped the company to understand its strength and weaknesses. Furthermore Harley Davidson was able to support their pursuit for great performance in the future. (http://www.accenture.com/Global/Consulting/Talent_and_Organization/Human_Resources_Mgmt/Client_Successes/HarleyFunction.htm)
Cope with change: HRP enables an enterprise to cope with changes in competitive forces, markets, technology, products and government regulations. Such changes generate changes in job content, skills demands and number of human resources required.
Resistance to change & move: The growing resistance towards change and move, self-evaluation, loyalty and dedication making it more difficult to assume that organization can move its employees everywhere. Here HRP becomes very important and needs the resources to be planned carefully.
Improved planning of projects to develop managers.
Administration can forestall imbalances before they become uncontrollable and costly.
Additional time is delivered to locate talent.
Higher administration has a superior view of HR dimensions of business.
A healthier opportunity exists to embrace women and minorities in upcoming growth plans.
Human resource system helps in:
Creating good business environment.
Completing organizational goals.
Forecasting manpower needs.
Measuring manpower supply.
Matching manpower demand-supply elements.
(EXAMPLE 11) Indian Oil received the prestigious scope award for best practices in human resource planning for the year 2005-06.The award was given for their best HR activities and committed for its employees. Indian oil has been throughout benchmarking its human resource activities.
Once successful implementation of Human resource planning has been done. Firms should seek that every element of the plan runs smoothly and accordingly. But in certain cases when firms merge together and things don't go according to plans there should be redesigning of jobs and procedures to ensure processes runs normally. In times of mergers many employees are not capable of handling such jobs which they are not trained for so their performance levels go down. Redesigning the job helps them to overcome these factors.
Job redesign is a series of methods that challenge to raise the diversity of tasks that employees achieve in command to progress motivation and satisfaction at workplace. One method is 'Job Enlargement' which is the procedure on increasing the quantity of tasks are given to employees for the sake of learning new activities at workplace. An unconventional technique called 'Job Enrichment' is considered preferable as it not only increases the number of allotted tasks but also give chance to employees to perform some high skill work. In many contemporary organizations careers have been enriched by making employees accountable for the improvements in the job they do.
In another case employees are asked to perform much variety of jobs so they move from one place to another inside the organization at several times within the operational day or operational week. As they have the right aptitude to perform a variety of jobs. Such activity of job movements is known as 'Job Rotation'.This technique means that workers are fully elastic, and it might (although not every time) require them to accept tasks of various proficiency levels-in such occasions, rotation involves both enlargement and enrichment.
(Example 12) At Mobilink GSM Pakistan Ltd (cellular company) supervisors and employees create development plans that includes training, new assignment, job enrichment, self-study or work details etc.
Job analysis and human resource planning are important factors which run together for a company`s long term growth and stability. Analyzing the job first and planning human resource accordingly is a key factor which must be undertaken by every successful organization. Important factors which are related to both the steps must be kept in mind while taken all the decisions for a company`s future. Later if the human resource planning fails to deliver what it promised the process of job redesign must be undertaken to ensure organization succeeds in the future.
Heriot-Watt University, Human Resource management by Tony Keenan and Janis Paterson.
Management by Kathryn M. Bartol and David C. Martin, Third edition
Human Resource management by Gary Desler.
Organizational Behavior 9th edition; P.Robbins San Diego State University.
Five Tips for Effective Employee Recognition by Susan M. Heathfield, About.com Guide.