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Rewards, also known as compensation, may be anything tangible or intangible that an organization offers to its workers in exchange for their performance and contribution at work. By offering rewards, the employees themselves will feel a sense of satisfaction in their jobs. (Nankervis, Compton & Baird 2008)
WorldatWork (2010) defines organisation culture as the norms, belief and assumption adopted by an organisation to facilitate it to adjust to its external environment and combine people and units together. Culture is strongly influence by the values and performance of the management in an organisation. Thus, organisation cultural influences the workers behaviour and the work experience quality.
In this essay, I will discuss whether rewards is a driving tool to cultural change in organisation locally and if rewards play a vital role in managing the cultural change in firms internationally by focusing on the driving and managing factors of rewards locally and globally.
On the whole, rewards are based on the organization. Hence, an organization whose earnings or market share is steadily increasing is able to provide more bonuses and stock awards which will eventually leads to improvement to employee attitudes and behaviour at work (also known as the Virtuous Circle). Likewise, if the company is not doing well, bonuses and rewards will be lesser, thus potentially resulting to a decrease in employees' morale (known as the Vicious Circle). Hence, they are correlated base on the figure illustrated below.
(Compensation, Milkovich,Newman & Gerhart 2011 p.54)
Therefore, rewards make a powerful tool for driving change in organisation culture as it helps support the organisation in aligning the employees and corporation's values.
There are many types of rewards a company can adopt. The Total Rewards model from WorldatWork (2006) below demonstrates the relations of how rewards can be a driving tool to attract, motivate and retain the employees through job satisfaction, and ultimately achieve good business performances. In return, the company will also be able to provide more rewards for employees. (WorldatWork 2006)
Total rewards returns are more transactional. They include the most commonly use cash compensation as they are the most direct method such as base pay, performance-related pay, long and short-term incentives, allowances and work-life balance and psychological factors such as recognition, learning opportunities and job security. (Milkovich, Newman & Gerhart 2011)
Base pay is a part of cash paid on fixed basis for work performed rather than performance based. (Nankervis, Compton & Baird 2008) It varies from one another as it is usually based on the job, skill and competency of the employee. Like the name suggest, performance-related pay is paid accordingly to one's performance. Hence, it varies based on the results achieved and it is usually a one-time payment dependent on each performance. Long and short-term incentives are usually awarded on less than a year basis for short-term and more one year for long-term incentives. This is a variable pay that is on commission-based setting a target for employees to achieve over a period of time. (WorldatWork 2006)
Work-life balance enables staffs to have a balance lifestyle between work and personal matters. (Milkovich, Newman & Gerhart 2011) With a balance, productivity increases as employees are able to engage at work without worrying about private lives thus reducing absentism rates. (Ministry of Manpower 2010) By introducing a Work-Life strategy, it achieves a win-win situation for both parties. In recent years, Singapore government, Ministry of Manpower (2010), has been widely promoting work-life balance to increase business and work productivity. This includes the promoting of flexible work arrangement, enhance leave benefits and employee support scheme.
Psychological returns are intrinsic usually and non-momentary rewards. Adequate job recognition from work performances enhances future productivity. It can be in the form of monetary elements or a simple acknowledgement which will make the employees feel valued. These recognitions will drive employees to work hard and strive to perform knowing their hard work will pay off. (WorldatWork 2006) Learning opportunities allow employees to acquire new skills to perform better and improve the company's performance. Singapore Workforce Development Agency (2010) provides a wide range of subsidies and courses to encourage employers to send their workers for skill improvements. Career opportunities allow employees to feel secure in the job as they are able to advance in the organisation without feeling threatened.
Primarily, rewards system aims to attract the right people for the job, retain the talents through job satisfaction, develop the required workforce competency and ultimately motivating workers to give their best in their scope of work. (Nankervis, Compton & Baird 2008) With these objectives set, it will inevitably drive a change to the working culture in the organisation.
Attracting the appropriate people for the job is possible with the base wage and attractive benefits a company can provide. (Nankervis, Compton & Baird 2008) This allows the corporation to attract large pool of people with quality skills to be selected for the right roles and tasks that eventually leads high performance.
With recognition and rewards provided in the organisation, it will help to retain the capable staffs. Recognition is essential as it retain employees by satisfying their work-related by recognising their efforts contributed for the company making them feel important and valued. (WorldAtWork 2006) Rewards such as short or long-term rewards will motivate the staff to stay and achieve the target in order to achieve them (e.g. year-end bonus and commission). Additionally, trainings and development enhances employees' skills ensure they have the acquired knowledge for tasks set.
Reward is one of the most powerful tools implemented to encourage the employees to perform in their best ability leading to high productivity and performance to business. There are two types of motivation - intrinsic and extrinsic. Intrinsic motivation is gained from the content of job whereby individual is given responsibility and authority at work, freedom to act, and able to develop skills, knowledge through challengers at work and advancement. Extrinsic motivation is what drives the people to work harder. This includes praises, pay increment or even promotion. (Armstrong & Mirlis 2004)
Extrinsic motivators are often seen as an effective and immediate tool to use but it is unlikely to last long. On the other hand, intrinsic motivators often last longer as compared to extrinsic motivators as they are embedded into the employees.
Marslow need's hierarchy
Marslow need's hierarchy below illustrates how people are motivated to meet higher needs. (McShane & Travaglione)
(McShane &Travaglione p. 139)
The diagram shows clearly the importance of needs for people with physiological basic needs and self-actualisation as a growth need as people yearn more rather than less of it when satisfied. An organisation that holds with good understanding of the theory above will be able to motivate the staffs and provide high satisfaction, commitment and engagement for them. As a result, employees will be motivated by rewards and benefits which the corporation are able to satisfy their personal needs or goals.
Aside from rewards, the motivation level varies with the environment and culture. (Armstrong & Murlis 2004) Thus, together with strong value and management style, managers are capable of influencing the team to be stay focus in achieving their desired target.
Strategic market mind-set
On the whole strategic market mind-set focus on the strategic approaches no longer matches the national system. It is beginning to shift to total pay system with use of global business policy to adapt to local context. (Milkovich, Newman & Gerhart 2011)
Localizer: "Think Global, Act Local"
For a localizer to operate in numerous different countries, it may have many different systems. It is set up independently of organisation headquarters. The strategic market concept is to look for the competitive edge by adapting into local context. This means that management method of the organisation has to change to adapt to the culture.
Globalizer: "Think and Act Globally and Locally"
Globalizer seeks a similar system that can be used as part of the bond to support the uniformity across the globe. The headquarters and the operating units are closely connected to share common ideas, goals and knowledge. Managers believe that pay structure is to aid the business.
Nowadays, compensation is adopted using a global aspect as organisation needs to think and act as a whole. This helps to ensure the standardised the company values, objectives as a whole before they can act locally.
Rewards can be a powerful to drive a culture change in the organisation in improving operational efficiency. Hence it is important to manage the change to ensure rewards remain useful in attracting, retaining and motivating employees and not abused by them.
A well-designed and administered reward system needs to be equitable, fulfilling, legal, affordable, cost effective and strategically-aligned. (Nankervis, Compton & Baird 2008) However, it is unlikely that all organisations will practice and achieve all of the mentioned. Only those that are relevant to the organisation will be applied.
It is important to be fair and just with no elements of biasness. Having fair and equal rewards should be seen as being both proportionate with the employees' contribution and suitable by comparing with rewards level received by others. By practicing fairness in the organisation, it will create a culture that everyone effort will be recognised no matter what position the hold in the company. This not only retains the staffs, it will also create a positive image for the company in attract new staffs. (Nankervis, Compton & Baird 2008)
Rewards should be of a value that gives employees a sense of satisfaction with regards to personal motivational needs. Therefore, organisation need to ensure they feel fulfilled in their position as company's business work closely together with the employees' motivation level. It will lead to high turnover if employees are unhappy with their job. (Reh 2010) With an inconsistent team of employees, the company culture is hard to maintain as each individual has their own value and practices which will result in poor business performance.
Compliance of relevant legal requirement is vital for rewards as legal requirement provide a guideline for the employers to abide to the entitlements, employee rights and minimum wages and benefits standards.
Rewards allocated should be affordable and within the capabilities of company's financial means. They are based on the business performance as mention above it is a vicious or a virtuous cycle. Hence, high rewards returns will require the employees to work harder.
In addition, compensation has to be cost-effective whereby the output of rewards should maximise profitability of the organisation. Employers ensure that rewards given are not excessive as too much reward will not be beneficial as it discourage risk taking and increasing tension in the organisation which will lead to lower productivity. (Nankervis, Compton & Baird 2008) Hence, reward system must be well thought.
Lastly, reward system should be devised in a manner that support and synchronised with the corporate strategic objectives and values. With the right reward management system planned, it will enhance the business performance.
To conclude, in today' context, compensation need to adopt a global perspective. Be it internationally or domestically, rewards are powerful tool for driving and managing change in organisation culture as help to support the organisation aligning the employees and corporation with the same values.
Rewards are essential elements in managing people. The most immediate rewards are monetary rewards as money is important to everyone. With adequate reward, it motivates employees. This will lead to having shared values, the organisation will be able to progress together therefore, leading the company business excel. Most importantly, all organisations must bear in mind that the business and the relationship with the employees are closely related. With a balance, it will maximise profitability.