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From this report we will see what is Total Reward Strategy, we will discuss and critically evaluate the model of total reward which made by Brown Duncan, 2005. We will understand the Total Reward model by looking the details and the structures of it.
We will also examine what approaches mangers can use to motivate their employees by looking at the Maslow's hierarchy of needs model, it will tell us what non financial rewards that the employee needs and want.
By examining what is the meaning of organization performance, we will know what approach that the organization can use to make the employees work more efficiently and effectively.
Last by not least, we will make conclusions and evaluate by reading the "International Journal of Business and Management: Total Reward Strategy, A Human Resources Management Strategy Going with the Trend of the Times", and this will help us to understand more about the total reward system.
3.0 Total Reward Strategy
Reward strategy that brings additional components beside of the standard remuneration is now called 'Total Reward'.
The additional components such as:
Learning and development
This is the Total Reward model from Brown, Duncan.
Table 1) Components of total reward
Source: Michael Armstrong and Duncan Brown,
New Dimensions in Pay Management, CIPD, 2001
To Use a total reward strategy successfully, both remuneration and the performance are needed to be contributed. It shows only pay would not lead to success of the reward program, but to have more powerful influence by the more underlying management practices.
This is aimed to give all employees a voice in the operation, leading to an engaged employee performance will be the return for the employer. This will increase the productivity of the company.
Employer will pay the employee for the services (i.e., time, effort and skill).
This included five core elements:
Base Pay- also known as "fixed pay", the pay will be given and not vary according to performance or results achieved.
Annual Bonuses- extra pay due to the level of performance or results achieve which will give out every year.
Long term incentives- are designed to focus and reward performance over a period longer than one year.
Shares- the shareholder will receive an equal claim on the firm's profit
Profit sharing- the employee will receive a share of the firm's profits determined by an agreed upon formula which made by the employer.
Employer uses programs to reinforce the pay for the employees.
These are some of the programs:
Pensions- periodical income received as a retirement benefit. Usually employer will encourage employee to join the pension plan, employee might need to give a part of their pay for the pensions plan.
Holidays- non-working days
Perks- have little or no cash value or tax implications, but employees are allowed to use the company facilities.
Flexibility- ability of a system enabled employees to perform a particular job successfully at anytime.
3.3 Learning & Development
Provide learning opportunities to enhance employees applied skills and competencies; Allow employees develop can make them perform better and their organizations people strategies can also be advanced.
Some examples for learning & development:
Training- imparting information to improve the employees' performance.
On the job learning- employee training at the place of work while he or she doing the actual job.
Performance management- An assessment of an employee to gauge progress toward predetermined goals.
Career development- Structured exercise undertaken to identify one's objectives, marketable skills, strengths, and weaknesses, etc.
Succession planning- development of potential successors for an organization, through a systematic evaluation process and training. Employer can find potential employee, and divided suitable jobs for each employee.
3.4 Work Environment
These are some components of work environment:
Organization culture- the extent to which autonomy and freedom is allowed in decision making, developing new ideas, and personal expression. Employees will satisfy when they can express themselves.
Leadership- coordinating and balancing the conflicting interests of all members or stakeholders is one of the things the leader will do. A good leader can encourage employees to work harder.
Communications- process of reaching mutual understanding but also create and share meaning. Poor communications will leads to misunderstanding which will affect the productivity.
Involvement- making suggestions for improvement. Employer will set goal and plan to monitoring of their employees' performance
Work life balance- employees can enhance their personal lives through their work environment and experiences well will reinforce the motivation of the employees.
Non financial recognition- this may included the relationship between the employer and employee or between the employees themselves. Personal feelings also will affect the employees' performances.
Source: ARMSTRONG, M. and BROWN, D. (2006) Strategic reward: making it happen. London, Kogan Page.
4.0 Employee Motivation Methods
Motivation is the key factor that when make employee to be continually interested in and committed to a job, and to put more extra effort in attending a goal. Employer can use the Maslow's hierarchy of need model to approach motivation to their employees. Which also related to the non-financial rewards in Brown Duncan' Total Reward method.
The Maslow's hierarchy of needs model is proposed by Abraham Maslow in 1943. From this model we can see that to motivate employees, we first need to satisfy their needs. From the Table 2 below, we can see that there are five levels of needs in the Maslow's hierarchy of needs model.
Table 2. Maslow's hierarchy of needs model
Source: Maslow, A. (1943). A theory of human motivation. Psychological Review, 50, 370-396. Retrieved June 2001, from http://psychclassics.yorku.ca/Maslow/motivation.htm.
Physiological needs are the basic requirements for human survival, it include: air, food, water and homeostasis etc. Employees are not able to work in an environment with out these basic requirements.
When the Physiological needs are met, employees will want to work in an environment that does not have the threat of physical and emotional harm. So the attraction will turns to safety and security. According to the Maslow hierarchy of needs model, employees will not be able to perform well and the needs in the further up of the pyramid will not get attention until meeting the safety needs. To fulfill the safety needs, the employer can provide a safe working area, medical insurance, job security and financial reserves for the employees.
Belongingness & Love Needs
As known as Social Needs, after the physiology and the safety needs are met. Higher level motivators will awake, the third level of the pyramid will involve feelings of belongingness and social interact of the employee. It includes emotionally based relationship such as friendship, intimacy and family. The lack of base relationship will cause loneliness, social anxiety and clinical depression which will lead to poor performance.
Esteem needs can be categorized as external motivators and internal motivators. Examples of the external motivators are recognition, attention, and social status. On the other hand, accomplishment and self-respect are examples of the internal motivators. Employer should provide external and internal motivators for their employees, to allow employees have a healthy self-respect as based on earned respect. Therefore, when the esteem needs are fulfill, the employees will be more motivated
Self- Actualization Needs
When all the other levels are met, the employees will now pay attention to the summit of Maslow's motivation theory. The self-actualization needs focus on reaching a person' full potential, however, it will be never fully satisfied due to continue growth on the person psychological needs, which unlike the other lower level needs. It tends to have motivators such as truth, justice, wisdom and meaning. In addition, there are very small percentage of employees will reach this level. Employer need to know their employees very well to provide these elements to their employees, employees reach this level usually will have a great performance and very willing to reach higher goals in their job.
When the employer motivate their employees using the Maslow' hierarchy of needs model, it will motivate their employees by fulfill their needs, which will be part of the non-financial rewards in Brown Duncan' Total Reward method.
5.0 Organization Performances
Establishing the goals of the organization, and monitor the progress towards the target are some of the multiple activities that an organization performance included. To accomplish goals more efficiently and effectively, using the organization performance can help to make adjustments.
Employer usually frustrated about the organization performance, because the planned results are unable to achieve even though the employees work hard, and do their job well due to the unexpected events and good fortune rather than the efforts that the employees made.
To increase the performance of an organization, there are a number of major movements and methods. Regular recurring activities that are used to establish the goals of the organization are included in each one of these methods. To achieve the desired targets more effectively and efficiently, the activities are used to make adjustment, which are also required to establish the goals of the organization.
These are some of the approach; a planned strategy can increase the organization performance to achieve the desired targets.
In order to gain a perspective, this method uses a standard measurement in an industry or a service to let the organization compare with others about their growth. To improve the overall performance and processes of the organization, it will need the results that are acquired by the comparison. It is a process of understanding. Identifying and adapting the prominent practices that are being used by organization's around the globe. This would assist your organization in improving its performance.
To monitor the progress of the organization towards the strategic goals, it will include on four indicators which are Internal Business Processes, Customer Perspectives, financing, growth and learning. Focusing on different performance indicators will help the progress to reach the organization's desired targets.
6.0 Journal and Research
From reading the "International Journal of Business and Management", they propose that total reward strategy is a modern reward management method. It can be used to make work more effectively and perfectly, however, unlike the other mature human resources management approaches and strategies, total reward strategy need to be analyzed and practiced throughout the time.
Total reward included two main elements which are financial and non financial rewards. Financial reward could be satisfy by total remuneration, however, the non financial reward are usually hard to be satisfy as it also include personal emotion. From the article, they suggest using the Maslow's need hierarchy theory (1943), the Alderfer's ERG theory and the two-factor theory(1966) can be used to learn more about how to fulfill the non financial reward for the employees as the non financial reward will mostly refer to motivation that the employer give to their employees.
The journal also suggest that the more statistical generalization that the employees get, the higher chance that the employee will perform well in their job. Therefore, according Ittner and Larcker(1995) and Adams & Ferreira (2008), if the organization has more channels to acquaint with employees' work life and other needs, the employee can be less stressful or treated, and it can keep positive attitude to organization.
It can also conclude that in the modern business, organization will need to be able to satisfy employees not only the financial reward, but also the non financial reward.
Source: International Journal of Business and Management vol.4 no.11, Total Reward Strategy: A Human Resources Management Strategy Going with the Trend of the Times. Zhou Jiang. November 2009
The Total Reward Model by Brown Duncan, 2005. shows that there are financial and non financial rewards in the model. It will include four elements: pay, benefits, learning & development and work environment.
Also from the Maslow's hierarchy of needs model, we can see that the managers can motivate their employees by satisfy their employees with different levels of needs. Physiological needs are the basic needs of a human being; safety needs are the job security and the personal safety; social needs are the employee's emotional base relationships; esteem needs are setting goals/ targets in a job and the employees self esteem and finally self- actualization, it will never be fulfill since it will change through time. From the five levels of the Maslow's hierarchy of needs, the higher levels will not be reach at least the lower level were met.
By looking at the organization performance and the journal, we can see that the organizations need to focus on the total reward system to allow the employees to work more effectively and efficiently. It is the modern reward system and unlike the other mature human resources management approaches and strategies, total reward strategy need to be analyzed and practiced throughout the time.