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Employee Rewards

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  • Category: Employees

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Nowadays, all managers, regardless of their roles, recognize that outstanding employee performance is important in today’s world. According to Rummler and Brache (1995), the first thing to remember is that employee performance does not happen in a vacuum. Companies have to adopt a systems perspective and look not merely at its employees, but at the environments in which it expects them to perform as well. As other people say, if we put good performers in bad systems, the systems will win always.

We are aware that behavior in any aspect of our lives is a function not just of the individual, but likewise of the environment—more particularly, of the interaction of the individual and the environment as well (Harvard Business Review, 1973). Thus, behaviors at work, are a function of the contact of the employees and the work environment. Moreover, it is also important to note that it is behaviors that lead to performance.

The purpose of this paper is to discuss if available evidence suggest that the use of financial, or other rewards, is positively linked to improved employee performance and productivity.  Rewards Lead to Improved Employee Performance and Flexibility

Based on the readings, I believe that there is sufficient evidence that the use of rewards, financial or otherwise, is positively linked to improved employee performance and flexibility. According to Armstrong and Brown (2001), rewards and recognition can be potent tools for performance improvement and employee motivation. Several kinds of rewards and recognition have direct costs linked to them like stock awards and cash bonuses and a broad assortment of company-paid perks such as gift certificates, paid parking, and car allowances. Other kinds of rewards and recognition might possible be considered as less tangible, but still extremely effective (Thorpe and Homan, 2000).

Meanwhile, we will first discuss the major objectives of rewards and recognition. As Zigon (1998) contends, rewards as are something that increases the frequency of an employee action. This description points out an apparent preferred result of rewards and recognition, which is to improve performance. As asserted by Keller (1999), non-monetary recognition could be extremely motivating, helping to develop feelings of satisfaction and confidence. Another significant objective is increased employee retention. Jimenez (1999) said that an ASTD report on retention research revealed that constant employee recognition is a primary factor in retaining top-performing workers.

To attain desired objectives, reward systems must be directly aligned to organizational strategies (Allen and Helms 2002). For instance, a firm concentrated on a product differentiation strategy could devise their reward practices to promote innovation to offer exceptional products or services, whereas a firm, which specializes on cost reduction strategy, may possibly concentrate on rewards for ideas to lessen or do away with costs and employee stock awards to promote a continuing cost reduction emphasis.

According to Armstrong (1999), employee reward concerns how employees are rewarded in line with their value to an organisation. Armstrong (1999) added that employee reward involves both financial and non-financial rewards and includes the policies, plans philosophies, strategies, and processes employed by organisations to build up and uphold reward systems. Hence, the general purpose of employee reward is to support the achievement of the organisation’s short-term and strategic goals by means of helping to ensure that it has the competent, skilled, committed and well-motivated workforce it needs.

This denotes looking after the ongoing improvement of individual, team and consequently organisational performance, and implementing steps that contribute to the establishment of added value and the attainment of competitive advantage. Armstrong (1999) further said that a company’s performance depends eventually on the quality of its management and employees, and the reward system can facilitate to enhance that quality. However, the progress of organisational effectiveness cannot be just left to the reward system alone: the management style, values, and culture of the organisation, in conjunction with its employee development programmes and performance management, are just as significant. But reward systems, however effective and well conceived, are no replacement for good management.

According to Wiley (1997), job redesign strategies and reward systems might be employed to strengthen and to motivate workers to demonstrate productive behaviours. Even as controversy continues, pay or good wages is still normally appreciated by every employee, irrespective of age, income gender, occupation, or employment status (Wiley, 1997).

In Wiley’s article, good wages remains to be ranked among the top five factors that motivate employees in their jobs. Its importance might best be understood in terms of the various needs employees have. With regard to the Hierarchy of Needs Theory, pay is considered to be a vital reward for the reason that it might satisfy a number of the needs in the hierarchy. Moreover, it offers employees with the way to buy items which fulfill their physiological needs, and it enables them to meet their esteem needs, since it is one measure of relative worth (Thornburg, 1992).

Sekaran (1989) contended that workers who are more concerned in job-related decisions and communications, obtain reinforcement that they are experienced in their jobs, and they react by demonstrating greater motivation and involvement. Regarding empowerment, a number of factors should be present before employees can sense empowerment. Employees should think that their work is being carried out capably and that their work is having a positive effect on the organization. Furthermore, it is significant for employees to sense that they are in charge of their own actions (Thomas and Velthouse, 1990).

Definitely, incentive programs can play a meaningful role in motivating employees to improve their work performance. For instance, Pratt & Whitley’s compensation system was revamped after the company made a decision to improve management of individual and group performance (Eyes, 1993). The company established a task force to embark on this challenge.

After evaluating the company’s existing performance-management approach, the task force construed that the system was not supporting the company’s objective of focusing more closely on teamwork. The task force then formulated and implemented a comprehensive performance-management, recognition and rewards strategy that consisted of the determination of job requirements by both the employees and their supervisors. Moreover, the new compensation system involved the restructuring of present pay grades in order that they do not go against the rising values of participative involvement and teamwork.

Meanwhile, Bucklin and Dickinson (2001) specified that nearly all of the common differences in incentive plans make no difference in performance. The study of Bucklin and Dickinson (2001) showed that performance did not vary considerably whether the amount to be earned as an incentive was 3 percent or 100 percent of total pay. As the study seems to show, any incentive plan, irrespective of its structure, is better than none at all. Bucklin and Dickinson (2001) likewise discovered that plotting results on a graph every day facilitated performance under incentive plans.

Other Claims on Employee Rewards and Incentives

A lot of incentive programs appears to function behind a veil of mystery. This is so because rewards are dangled in front of employees to achieve higher quality, faster production, and less re-work without any clarification why speed and rework are being targeted for improvement. Moreover, the problem with many incentive programs is that they appear random and conflicting. This is also a similar problem with other profit-sharing plans in companies because they totally failed to express any sense of the cause and effect relationship between profits and productivity, and between work and success.

According to Kohn (1993), this lack of cause and effect is a problem and that rewards do not take into account reason. Moreover, Kohn asserts that incentives do not change the attitude that triggers our behaviors. He also assumes that incentives are by definition blind rewards and that rewards do not produce lasting commitment because they momentarily and merely change what we do.

Meanwhile, according to Duncan (1998), profit related pay (PRP) will fail because from the contingency outlook of payment system choice and design, PRP is not just likely to prove ineffective but is damaging as well. In spite of the much-vaunted flexibility of the provisions of PRP, they advance only one type of scheme and method of linking pay to performance, which is not likely to be suited to the pay priorities, pay objectives, and individual circumstances of nearly all companies.

However, despite of these contradictory views on the relationship of rewards and incentives to employee productivity and performance, there are still several factors facilitate these relationship. Examples of these factors are job evaluation and performance management.

The Role of Job Evaluation and Performance Management

In the case of Pratt and Whitley’s compensation system (Eyes, 1993), the company’s job grading and evaluation were overhauled. As soon as the modifications in the performance-management system were in full swing, the Pratt and Whitley’s human resources professionals evaluated the human resource systems that supported the process. Then, a second task force assessed the method to job grading and evaluation to observe if the present evaluation system supported the new program’s goals.

The company’s employees were aging and at the same time dealing with more and more limited promotional opportunities, as the firm became a flatter organization (Eyes, 1993). Progressively more, it put a greater importance on matrix-type and cross-functional team approaches to problem solving. Then, the new approaches were proven to be successful, implying that a decreased importance on hierarchy may possibly be appropriate.

After establishing a performance-management, recognition and rewards task force, the company’s management decided to engross selected members of line management in compensation-design concerns. This provided the main user of the performance-management system the accountability of assessing practices and implementing the changes required to improve the company’s performance-management system. More important, instead of diminishing the influence and authority of the HR compensation group on the design of the program, the task force increased the ultimate effect by means of making sure that employee and management buy-in–compensation professionals became key advisers.

Pratt and Whitley’s new system continues to develop. In 1992, the modifications in the recognition-and-reward processes and performance-management, in addition to the new job-evaluation approach, were working positively (Eyes, 1993). The new system has allowed both supervisors and employees to obtain possession of performance evaluations and the use of rewards. Therefore, such words like mission statements, shared vision, key job requirements, and key personal competencies all have become part of Pratt & Whitney’s company language.  Moreover, Fowler (1996) also stresses that picking an appropriate job evaluation system is crucial to the performance of any company.

In addition to job evaluation and performance management, motivation is also crucial in the relationship between employee rewards and incentives and improved productivity and performance.

The Importance of Motivation

Times have changed and accordingly employees have changed too. Meaning, things that worked 10 or 15 years before are not suitable for today’s employees. To be effective and successful in establishing a positive motivational environment, we need to take a look at what characterizes today’s employees.
Nowadays, contemporary employees possess the following characteristics (Smith, 1994):
• They view compensation as a result of performance and, thus, expect and anticipate to be rewarded correspondingly.
• Employees are concerned with organizational recognition.
• They would like to participate in decisions that concern them.
• Employees regard and value communication with management.
• They are inclined to have a short-term goal direction.
• Employees want work to be interesting, exciting, and creative.
• They long for developmental opportunities.
• Employees have the tendency to put their priorities first with leisure, then family, and lastly work.

Employers should reflect on the repercussion of these characteristics on the workplace and their responsibility to motivate their employees. Research reveals that employee motivation can be classified into two categories: motivators and maintainers (Herzberg, Mausner, and Snyderman, 1959).

True motivators are causes that build an inner desire to work by satisfying specific needs that are important to the person like: achievement, the job itself, recognition, advancement, growth, and responsibility. On the other hand, maintainers are factors that should be kept at a satisfactory level and consist of the following: working conditions, job security, company policies, relationships, pay and benefits, status, and supervision.

So, why do companies need motivated employees? The answer is survival. Motivated workers are needed in today’s swiftly changing workplaces. Motivated workers will definitely help companies survive because motivated employees are more beneficial and productive (Smith, 1994). To be efficient and effective, managers have to understand and recognize what motivates employees within the context of the roles they carry out. Of all the tasks a manager carries out, motivating employees is possibly the most complex.

Partly, this is owing to the fact that what motivates employees changes continually. For instance, research advocates that as employees’ income raises, money becomes less of a motivator (Herzber, Mausner, and Snyderman, 1959). In addition, as employees become older, interesting work turns out to be more of a motivator.

Despite of vast research, basic on top of applied, the subject of motivation is not evidently understood and more frequently than not poorly practiced. To be able to understand motivation one must understand human nature itself (Arnold et al., 1996). And there rests the problem. Human nature could be exceedingly simple, nonetheless extremely complex too. An understanding and awareness of this is a requirement to efficient and effective employee motivation in the workplace and thus effective management and leadership.

Relatively distant from the benefit and moral value of an altruistic method to treating coworkers as human beings and respecting human self-respect in all its forms, observations and research prove that well motivated employees are more creative and productive (Lawson). Likewise, the opposite holds true.

There is an old adage you can take a horse to the water however you cannot force it to drink; it will drink merely if it’s thirsty – the same with people. They will do what they would like to do or else motivated to do. Whether it is to do extremely well on the workshop floor or in the ‘ivory tower’ they should be driven or motivated to it, either by themselves or by means of an external stimulus.

Are they born with the drive or self-motivation? Yes and no. If the answer is no, they could be motivated, since motivation is a skill which can and should be learnt (Scholl, 2002). This is necessary for any company to survive and succeed.

Performance (Connolly, 1976) is viewed to be a task of ability and motivation, hence:
• Job performance =f(ability)(motivation)
Ability consecutively relies on education, training and experience and its development is a slow and long process. Then again motivation could be improved swiftly. There are several options and an inexperienced manager might not even know where to begin.


Based on the discussion in this paper, it can be said that there are available evidence that supports the claim that employee rewards and incentives, financial or otherwise, is positively linked to improved employee performance and productivity. However, it is also important to note that aside from these employee rewards, there are still several factors that contribute to improved employee performance and productivity. Moreover, in determining how to reward employees, it is important to identify what motivate them.

So how will an organization motivate employees? Since motivation is considered to be an inner force whereby an individual has to achieve specific goals, it becomes the challenge of the management to look for ways that would enable the employees to meet personal goals on the job while at the same time doing a fair share of the work to accomplish performance requirements.

By using the Expectancy Theory of motivation (Arnold, 1981), it will help the management in understanding how the employees come up with decisions concerning behavioral alternatives. This theory is all about the direction aspect of motivation, that is, once behavior is energized, what behavioral options are persons probable to pursue. By using this theory, the management can employ the following steps in dealing with the employees:

First, management should use suitable methods of reinforcement. As stated by White and Drucker (2000), rewards must be linked completely to performance. Once the employees realize that delivering quality service is imperative, then their accomplishment in delivering that service must be rewarded.  However, the management should also remember in giving rewards that reinforcement is personal (Thorpe and Homan, 2000). This means that what reinforces one worker may not reinforce another worker. It is also significant to give out reinforcement immediately following the desired performance.

Next, management should provide employees with choice and flexibility. At whatever time possible, the management should give the employees an opportunity to make decisions — especially when this deals with their performance and pay (Flannery, Hofrichter, and Platten, 1996). The personal commitment and the option that results are fundamental and necessary to motivation.

Meanwhile, the management should also persuade the employees to set their individual goals and objectives. Furthermore, managers should allow the employees to participate enthusiastically in the goal-setting process and performance management (Armstrong and Baron, 1998). Through this, the employees will be aware of their own capabilities and limitations. Further, personal goal-setting leads to a commitment to goal achievement. Then they must sit down and assess the goal.

Another crucial and important step is that management should demonstrate to the employees how their tasks correlate to personal and organizational goals (Herriot, 1996). Routine work can lead to passivity and monotony if not the employees are conscious of how the routine tasks play a part to their own development and the success of the department. Managers should stress how the employees’ tasks fit into the big picture. Little extra minutes can boost productivity immensely.

Meanwhile, several managers pride themselves on dealing with everybody the same. This false impression can be risky. The managers of the company should bear in mind that employees are individuals with individual needs. So a manager needs to treat everybody fairly but not essentially the same. An open and flexible management style also denotes that the management varies its approach not just to the employees but also to the situation. This way, teamwork and unity will exist among the employees of the corporation.

All in all, when the company takes note and follow of all these factors and recommendations, it can be proven that employee rewards and incentives can lead to improved employee performance and productivity.

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