Employee Performance And Rewards Systematic Elements Commerce Essay

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Employee performance and reward is one of the most important aspects of any organisation. Reward system is also a kind of a motivation and has a better success rates than any there methods of motivation. Obviously everybody wants to get rewarded for the work which they have done. People join into an organisation in order to full fill and satisfy their needs and desires. There are generally attracted towards the organisation which can satisfy their needs. These means are generally the incentives of rewards, which the organisations make use of effectively to make sure the employees contribute towards the organisational goals and objectives.

It has been done traditionally whereas firms have been offering rewards to their executives in the employee as a motivation strategy to get better performance from them . If we see both these words rewards and performance almost go hand in hand and this again can have a great role to play in employee job satisfaction.

Background Study

Financial rewarding is a system employed by organisations to distribute money and other benefits in exchange for the employee's availability, proficiency and performance. Financial rewarding is a system that has proved to be successful in organisations as it motivates workers to work harder and have greater value for their workplace. (McShane and Travaglione, 2003),

Organisational rewards encompass rewards such as employee share ownership plans, share options and profit sharing plans, devising an innovative work/life program, on site fitness services and support for child- care, low health care costs, absenteeism rates and life insurance plans. (Greenberg and Baron, 1997)

As identified by McShane and Travaglione (2003), there are several organisational rewards, one in which is employee share ownership plans. This is a reward system that is based on encouraging employees to buy shares in the company. Employers are then rewarded through dividends and market appreciation.

Job empowerment is described by Daft and Noe (2001) as the "newest trend" in motivation, where the delegation of power or authority is given to subordinates in an organisation. The increase of employee power enhances motivation for task accomplishment as people are able to improve their own effectiveness as well as being able to use their creativity.

. In almost every organisation, employees are rewarded for the status of their job in the organisation (McShane & Travaglione, 2003, pg. 187). Job evaluation motivates employees as it presents them with the opportunity to compete for positions higher up the organisational hierarchy.

Job specialisation occurs from the division of labour where each job has subsets of the task required to complete the product or service. Job specialisation increases work efficiency as employees have fewer tasks to manage and therefore spend less time changing activities. (McShane and Travaglione, 2003)


Money serving as a motivator can cause problems and may not be such a successful practice used for the workplace. Last but not least, people tend to identify themselves in terms of their ownership to money. Prince (1993) describes in his study that self-concept variables are related to two money attitude components. The self-concept of money envy has appeared to be connected with negative beliefs about other people and their money, about personal values which express norms of possessiveness. From the view of McShane and Travaglione (2003), men emphasise money in their self- identity more than women. This demonstrates the problematic nature of money itself, as it produces rifts and comparisons with ones' self- identity. Besides, the chance to earn more money may not be an effective motivator and financial incentive schemes are difficult to operate.

Job evaluation only motivates employees to increase their pay rate rather than trying to motivate them to step higher into the organisation for other benefits such as hierarchy. It was described by an American clothing retailer, Eddie Bauer, that "people knew they could change their pay by rewriting their job description, not by raising their productivity" (McShane and Travaglione, 2003, pg. 187). This demonstrates the unsuccessful nature of this practice that could eventually harm an organisation.

Although job specialisation tries to increase work efficiency, job performance is not necessarily improved. This is because the effects of job content are ignored through the specialisation process. The most problematic area of job specialisation is that it ignores the motivational potential of jobs.

Practices such as financial rewards and empowerment proved to have a great effect on the performance of employees and are successful enough for organisations to employ. However, practices such as job evaluation and specialisation appear to be less successful to use.

What Motivates People?

Why are some employees better motivated than others? Employee motivation is difficult to understand because it involves a variety of individual and organizational factors. The individual factors include needs, goals, attitudes, and abilities; the organizational factors include pay, job security, co-workers, supervision, praise and the job itself. A number of theories have been developed to explain employee motivation in organizations. These theories can be divided into two main categories: (1) content and (2) process. Content theories include the needs theory and the reinforcement theory. The needs theory indicates that human behavior is energised by internal stimuli ? needs; the reinforcement theory explains how behavior can be controlled by its consequences ? reward and punishment.

The first part of the model identifies a set of motivational determinants. These key variables can be described as:

1. Employee needs. People have a set of needs they want to satisfy: (a) existence (biological and safety), (b) relatedness (affection, companionship, and influence), and (c ) growth (achievement and self-actualization). These internal stimuli energize behavior.

2. Organizational incentives. Organizations have a set of rewards that can satisfy employee needs. These include: (a) substantive rewards (pay, job security, and physical working conditions), (b) interactive rewards (co-workers, supervision, praises and recognition), and (c ) intrinsic rewards (accomplishment, challenge, and responsibility). These organizational factors influence the direction of behavior.

3. Perceptual outcomes. People develop a set of perceptions regarding: (a) the value of organizational rewards, (b) the relationship between performance and rewards, and (c) the like hood that their efforts may result in task performance.

The second part of the model explains the process by which people make motivational choices and decisions. This process describes the motivational efforts involved in deciding to perform effectively. The specific element involved is:

4. Motivational efforts. If they have the ability and authority, people make motivational decisions based on how they perceive the value of rewards, the instrumental relationship between performance and rewards, and the like hood of task accomplishment. Generally, positive perceptions lead to high motivation.

The last part of the model explains the outcomes of employee motivation. It shows the relationships among motivation, performance, rewards, employee satisfaction and organizational productivity. These key variables can be described as:

5. Performance levels. Performance is a function of ability and motivation. Ability determines what a person can do, while motivation determines what a person will do. Employee job performance influences organizational productivity, which in turn affects the levels of organizational rewards.

6. Rewards. Performance may be either rewarded or not rewarded. Equitable rewards lead to employee satisfaction; inequitable rewards or no rewards lead to dissatisfaction.

7. Satisfaction. The amount of satisfaction modifies the type and intensity of employee needs. This modified need structure influences the individual's future behavior.

This conceptual model identifies a number of factors influencing employee motivation, satisfaction, and performance.


Expectancy theory explains the process by which people make motivational choices. According to this theory, people make motivational choices based on how they perceive (1) the value of rewards, (2) the instrumental relationship between performance and rewards, and (3) the chance of getting the job done.

The expectancy theory starts with the assumption that people are rational beings who want to maximize their gains in their goal-directed endeavors. Therefore, when they are faced with a number of behavioral options leading to need satisfaction, they will evaluate the potential outcomes of these options and select one that promises an optimal result. In evaluating these behavioral options, a rational person will analyze (1) the value of the rewards that the organization offers (valence), (2) the relationship between performance and rewards (instrumentality), and (3) the perceived chance of accomplishing the required task (expectancy). The tendency to act (motivation) is said to be a function of the valence (V), the instrumentality (I) and the expectancy (E). Using the initials of these three variables, expectancy theory is often called the VIE theory. Now let's discuss each of these key elements.

Valence of Rewards

Valence is a subjective value attached to an incentive of reward. People attach a valence to an incentive because they believe it satisfies some of their needs. Since it is subjective, people differ in the value they attach to a given incentive. For example, one person may attach a high value to a promotion, while another person can avoid it. The former may like it because it brings money and power, while the latter dislikes it because it means more responsibility or the headaches of dealing with other people's problems.

Also since it is subjective, managers have little control over the valences their employees attach to organizational incentives. However, managers can influence the valence if incentives by matching rewards to employee needs. Valence usually increases when (1) an employee has strong needs, (2) the incentive matches one or more needs, and (3) the size of the incentive is large enough to satisfy the aroused needs. For example, an employee will probably attach a high valence to money if (1) he or she has a strong economic need, (2) money used as an incentive, and (3) the size of the monetary incentive is sufficiently attractive.

Performance-Reward Instrumentality

Instrumentality refers to the relationship between performance and reward. People ask, "Will I be rewarded if I perform the job well?" If the answer is affirmative, they will be motivated to exert an effort and increase the level of task performance. If the answer is negative, their motivational efforts will be reduced. As with valence, the measures of instrumentality can be positive or negative. If people perceive that their performance is generally rewarded, the perceived instrumentality will be positive. If they perceive that performance does not make any difference to their rewards, or if poor performers are rewarded as much as or more than high performers, the instrumentality will be low.

Since perceived instrumentality is a subjective judgment, managers do not have direct control over it. But they can positively influence their subordinates' perception of the instrumental relationship by matching rewards to performance and by communicating this fact effectively to the subordinates. For example, managers can improve instrumentality by using performance-contingent pay systems such as piece rates, merit rates, or performance bonuses, and by managing such systems fairly.

Effort-Performance Expectancy

Expectancy is the belief that effort leads to performance. It is a subjective feeling that people attach to the like hood of accomplishing a task. They may ask, "Can I perform and accomplish the task goal?" "How much effort would the task require?" If they feel there is a close relationship between their effort and task accomplishment, expectancy will be favorable. However, if the task is too simple or too complex relative to their ability, then they may feel that their effort is not related to task performance.

Like other motivational concepts, expectancy is subjective; people attach varying expectancies to an outcome. A task may seem simple to some but not to others. A person's ability and personality influence his or her effort-performance expectancy. Competent and secure individuals tend to perceive expectancy more positively than incompetent and pessimistic individuals.

Managers have no direct control over how their employees perceive the chance of achieving an outcome or task, but they can influence the employee's expectancies positively by matching people to jobs. When people are matched with jobs, employees can utilize their job skills and energies effectively. Consequently, effort-performance expectancy will be increased.

Matching Rewards to Performance

By relating organizational rewards to job performance, management can increase the chances of attaining both individual and organizational goals. This strategy favorably affects the performance-reward instrumentality. There are several things that managers can do in this effort.

1. Use performance-contingent reward systems. Some reward systems lack motivational value because they are not tied to performance. Annual bonuses and fringe benefits are often not tied to performance; they are usually given to employees instead for maintaining organizational membership. Incentive pay and merit systems are examples of relating rewards to performance.

2. Maintain equity in reward systems. Matching rewards to performance also means that the amount of reward should be commensurate with task complexity, labour availability, prevailing wage level, and amount of responsibility. When there are no objective performance criteria, managers need to be cautious in evaluating the performance of their employees.

3. Communicate performance-reward contingencies. It does not matter whether or not rewards are actually tied to performance. Unless the performance-reward contingencies are clearly communicated to employees and perceived by employees as such, the reward systems cannot have a strong impact on employee motivation. Performance feedback, followed by reinforcement, is essential in maintaining a high level of performance.

Matching Jobs to Employees

Matching the technical, physical, and psychological requirements of the job to the employee's qualifications enhances the effort-performance expectancy. If the job is either too simple or too complex, the employee may not feel that his or her effort has been effectively utilized in the task performance. The matching process involves the following actions.

1. Design the job to suit employee needs. People want different levels of job challenge. Some employees may prefer complex and challenging jobs; other may prefer simple tasks. Task complexity needs to be differentiated to reflect the technical and psychological qualifications of employees.

2. Match employees to jobs. The match between jobs and people can also be achieved by hiring people who will fit the jobs. When it is economically and technically impractical to redesign jobs, it makes more sense to fit employees to jobs than the other way around.

Improve employee job skills. Another way of fitting people to jobs is by training. When employees are under qualified to perform their jobs, training can help them find a better fit. Training also enhances effort-performance expectancy.

4. Set challenging but attainable goals. Set performance goals that are challenging but attainable. If the task goals are ether too high or too low, employees are not likely to feel that their efforts are related to task performance. When the task goals are challenging but attainable, they are more likely to perceive the relationship between effort and task accomplishment


My work presents a model of motivation, describes a set of motivational principles. Here also shown in short the expectancy theory, which explains how motivational decisions are made.

People make motivational decisions based on how they perceive the relationship between their needs and organizational rewards (valence), their performance and rewards (instrumentality), and their efforts and task performance (expectancy). Generally, work motivation increases when they perceive these relationships favorably.

A set of motivational principles can be derived from the expectancy theory. The valence, instrumentality, and expectancy of performing a task can be improved by adopting the following three principles:

1. Match rewards to employee needs (valence).

2. Match rewards to performance (instrumentality).

3. Match jobs to employees (expectancy).