Importance Of Reward Management Commerce Essay

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According to Alan Price (2007), the term 'reward management' covers both the strategy and the practice of pay systems. Traditionally, human resource or personnel sections have been concerned with levels and schemes of payment whereas the process of paying employees - the payroll function - has been the responsibility of finance departments. There is a trend towards integrating the two, driven by new computerised packages offering a range of facilities.

Financial rewards normally come in the form of monthly salary or hourly wages (Bratton & Gold, 1999). Most employees that work in organisations or company that have professional human resource management in the UK will attend appraisal which will allow both employees and employers to discuss about their current pay and if it should be increased. According to Allen & Kilmann, (2001) his studies has shown that assumption is not always true because solid evidences have confirmed that employees earning less than £25,000 per year can be motivated with the use of financial reward, while those who earn more than £25,000 per year are willing to stay with one job and do their best if they have high level of job satisfaction. This shows the more money an employer pays his or her employee the more job satisfaction expected by the employee in order to stay in the job leading to more reward management.

Research studies have shown that organisations have an interest in reward management because of two reasons. Cost effectiveness and profitability, which is based on organisational type and relative cost of workers (Romero & Kleiner, 2000). Organisations can save cost of employees in order to gain competitive advantage in the UK market, Which are done by reducing the cost of employees and make use of the benefits of reward management to motivate employees to apply their best efforts. They must also ensure that its pay meet the minimum requirement of employment law. Organisation use reward management as a tool to motivate their employees, influence their attitude and change their behaviour, with an aim to improve their work quality and responsibilities. Organisation can use reward management to help it maintain its competitiveness in its marketplace. Which are done by reducing the cost of its employees and make use of the benefits of reward management to motivate employees to put their best efforts in the organisation.

Bratton and Gold (2003), state reward can be divided into individual rewards, team rewards and organisation rewards

Individual reward: - This reward system will be paid directly to the employees which would lead to having different rate of pay depending on their years of experience in the organisation and energy commitment.

Organisational rewards: - In this case organisation offer rewards in form of profits with its employees which is increasingly employed by many organisations who has a custom driven culture. This enable organisation gets the best outcome in terms of employee's performance, staff commitment and organisational productivity.

Team rewards:- This reward has been increasingly been used and recognised in the UK. This is because the work system recognised self-management team in the organisation. Team reward is also believed to give greater performance and productivity from each worker (Yahya & Goh, 2002).

According to Gratton (2004) he states "while motivation is determined by both monetary and non monetary factors, money has come to play an overly important role in our thinking about the causes of behaviour. In most companies, very limited time and effort are spent on considering non-monetary sources of motivation" This has prove that financial rewards are important as a mechanism to aid recruit and retain talent, and as a means of providing tangible recognition of effort in the organisation.

Financial Reward

This the use of money as a tool to motivate employees in a working environment, whereby employees are rewarded in the form of pay, bonuses thereby leading to applying more effort to better financial reward in an organisation.

1 Instrumental theory

This theory states that money provides a means to achieve an ends. It is an instrument for gaining desired outcomes and its forces will depend on the strength of the need and the degree to which people are confident that their behaviour will earn the money they want to satisfy the need. Gellerman (1963), state that money in itself has no intrinsic meaning and acquires significant motivating power only when it comes to symbolize intangible goals. Firms use money as the powerful force which linked directly or indirectly to the satisfaction of all the basic needs of employees in the organisation.

2 Equity theory

This theory was developed by Adams (1965) which argues that satisfaction with pay is related to the perception about the ratio between what one receives from the job and what one puts into it compared with the ratios obtained by others. Lawler (1971) state equity theory is related to discrepancy theory which indicates that satisfaction with pay depends on the difference between the pay people receive and what they feel they ought to receive. According to Jaques (1961) he states they exist in an unrecognised system of norms of fair payment for any given level of work, unconscious knowledge of these norms being shared among the population engaged in employment and an individual is unconsciously aware of his own potential capacity for work, as well as the equitable pay level for that work. Organisation can establish this principle; its pay must be felt to match the level of work and the capacity of the employees to do it in the organisation.

Non Financial Reward

This is a method of identifying individual employees for a particular praise or acknowledgement. Rose (1998) state a non cash awards given in recognition of a high level of accomplishment or performance such as customer care or support to colleagues, which is not dependent on achievement of a pre-determined target.

Self-actualisation

Self-actualisation model is one of the most famous models of motivation. It was developed by Abraham Maslow (1954). This model explains that a person has a need to fulfil his/her capability and potential because a person has a desire for growth. Self-actualisation model is one of the most famous models of motivation. Ambitious and determined employees will seek and find these opportunities for themselves, although the organisation needs to clarify the scope for growth and development it can provide. Mullins, (1996) state "once a lower need has been satisfied it no longer acts as a strong motivator, the needs of the next higher level become the motivating influence" Organisation can use the self actualisation model to motivate employees to their best efforts if they know their highly demanded need, e.g. staff member wanting to build a career goal and development in a firm. Thus, putting the staff in the right training and human resource development program cannot only increase positive outcomes, but also gain his loyalty in the organisation.

Achievement

Achievement needs by McClelland (1975) is known for competitive success measured against a personal standard of excellence, which can be increased by organisations through processes such as job design, performance management and contributing skill in the organisation. McClelland also mentioned that power was a prime motivating force for managers, the needs for warm friendly relationships with others was also present to managers. Organisation policies for involvement can provide motivation by putting employees into situations where their view can be expressed, listed to and acted upon, thereby forming a means of empowerment in the organisation.

Motivation

Many contemporary authors have also defined the concept of motivation. Motivation has been defined as: the psychological process that gives behaviour purpose and direction (Kreitner, 1995); a predisposition to behave in a purposive manner to achieve specific, unmet needs (Buford, Bedeian, & Lindner, 1995); an internal drive to satisfy an unsatisfied need (Higgins, 1994); and the will to achieve (Bedeian, 1993).

Seligam(1990) also states that motivation may be rooted in the basic need to minimize physical pain and maximize pleasure, or it may include specific needs such as eating and resting, or a desired object, hobby, goal, state of being, ideal, or it may be attributed to less-apparent reasons such as altruism, selfishness, morality, or avoiding mortality. Conceptually, motivation should not be confused with either volition or optimism.

Workers in any organization need something to keep them working. Most times the salary of the employee is enough to keep him or her working for an organization. However, sometimes just working for salary is not enough for employees to stay at an organization. An employee must be motivated to work for a company or organization. If no motivation is present in an employee, then that employee's quality of work or all work in general will deteriorate.

4.5 Intrinsic motivation

This is described as the process of motivation by the work itself in so far as it satisfies people's needs or at least leads them to expect that their goal will be achieved. This is also a self-generated in that employees seek the type of work that satisfies them, but management in an Organisation can enhance this process through its values as well as empowerment, development and job design policies and practices in the firm. Research studies have indicated that this type of motivation is generally involved with educational enjoyment and achievement of many higher education students (O'Donohue et al., 2007). Intrinsic motivation has also been discussed and referred to by many researchers, such as attribution theory of Fritz Heider and cognitive evaluation theory of Ryan and Deci's (Guest, 1989).

Under the concept of intrinsic motivation, it can be assumed that a person can be intrinsically motivated or influenced if they give credit of their hard work outcomes to internal factors that they cannot control, e.g. an employee of an Organisation works hard to make sure that all of its customers get served within five minutes after their entrance into the restaurant. An employee can also be intrinsically motivated if he or she believes that their skills, knowledge and hard work can help the firm to achieve the desired goals. Intrinsic rewards can be explained under the scope of enjoyment, while another one is based on obligation, it also occurs when people are internally motivated to do something because it either brings them pleasure, they think it is important, or they feel that what they are learning is significant. (Herriot et al., 1997). Obligation refers to motivation of an employee and it's based on what he or she thinks it should be done or completed. E.g., an employee has a responsibility to serve customers well under limited time, but the quality of the service should exceed expectation. This would be seen as a challenge for the employee when they exceed the standard set by the firm, thereby leading to motivation in the organisation.

4.6 Extrinsic motivation

This is what is done to and for people to motivate them. It arises when management in a firm provides rewards as increased pay, praises or promotion. Research studies have revealed that threat of punishment is also recognised as common extrinsic motivations (Cooper et al., 1999), e.g. management of an Organisation can deduct their pay if they are more than 15 minutes late for work. This kind of punishment is part of extrinsic motivation that can influence employees to get to work on time in the restaurant.

Incentive theory of motivation

This refers to a reward, which are both tangible and intangible forms. Incentive reward is likely to be presented to a person after the occurrence of an expected action or behaviour. Such reward is given to a person with an intention to cause desired behaviour to ensure that it happens again. This can be done by relating positive meaning to action or behaviour of a person (Clutterbuck, 2005). If an incentive reward is not presented immediately, it is likely to decrease satisfied behaviour (Guerrero & Herrbach, 2008). This can be believed that if an organisation uses repetitive action reward combination, it can lead to certain action or behaviour to become a habit. Applying proper motivational techniques can be much harder than it seems. Steven Kerr notes that when creating a reward system, it can be easy to reward A, while hoping for B, and in the process, reap harmful effects that can jeopardize your goals (kerr, 1995).

The social model and rational economic model of Motivation

This explains that the needs of friendship and acceptance in a working environment can be used to motivate employees in an organisation. This means employees in an organisation need to form identity through relationship with employees in the working environment. This is because people sometimes come to work in order to belong to a group and thus, they want to seek meaning in social relationship at work (Beaumont & Partridge, 1981). This model also proves that employees are more responsive to pressure from their colleagues in the organisation when compared to pressure from incentive control from the manager. In other words when an Organisation gives its employees the needs of belonging in a working environment, they would perform their assignment responsibilities and task well thereby leading to productivity in the organisation.

Rational-economic model: - This explains that an individual can be influenced by an economic of self-interest in an organisation. Based on this concept, a person will act and behaviour with an intention to increase their own material and financial rewards (Rowley, 1996). This shows that financial rewards can influence desired behaviour from employees in an organisation. This indicates that without financial rewards, employees would not be willing to take any responsibility in an organisation.

4.9 Expectancy theory

Victor Vroom (1964) was the first to put forward his theory of expectancy, which was specifically aimed at work motivation. He produces a motivational force notion, whereby the product of valence and expectancy, is the motivational force.

Vroom Valence expectancy theory is that employee effort will lead to performance and performance will lead to rewards. The employee would be more motivated when the reward is positively high, the more negative the reward the less the employee will be motivated. Galbraith and Cummings (1967) found little support for Vroom's model they outline difficulties with the methodology and the concepts involved and found it very hard to apply to organisations.

This theory is applied by organisation by setting a target for employee's e.g. sales target; this will enable employees to carry out his or her daily activities effectively in return for values, goals which lead to an effective performance in the organisation. Vroom distinguishes valence from value Mullins (1996) "This is shown in that a person may not gain as much satisfaction from receiving an object as from the desire of obtaining it" In this situation an employee may not gain as much job satisfaction from receiving an object e.g. money and employee may find more satisfaction in the working environment than expected from an object in the organisation. (Armstrong,2000& Mullins, 1996)

THEORY OF MOTIVATION

According to Maslow, employees have five levels of needs (Maslow, 1943): physiological, safety, social, ego, and self- actualizing. Maslow argued that lower level needs had to be satisfied before the next higher level need would motivate employees. Herzberg's work categorized motivation into two factors: motivators and hygienes (Herzberg, Mausner, & Snyderman, 1959). Motivator or intrinsic factors, such as achievement and recognition, produce job satisfaction. Hygiene or extrinsic factors, such as pay and job security, produce job dissatisfaction.

Vroom's theory is based on the belief that employee effort will lead to performance and performance will lead to rewards (Vroom, 1964). Rewards may be either positive or negative. The more positive the reward the more likely the employee will be highly motivated. Conversely, the more negative the reward the less likely the employee will be motivated.

Adams' theory states that employees strive for equity between themselves and other workers. Equity is achieved when the ratio of employee outcomes over inputs is equal to other employee outcomes over inputs (Adams, 1965).

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