qwertyuiopasdfghjklzxcvbnmqwertyui

opasdfghjklzxcvbnmqwertyuiopasdfgh
jklzxcvbnmqwertyuiopasdfghjklzxcvb
nmqwertyuiopasdfghjklzxcvbnmqwer
Reward Management
tyuiopasdfghjklzxcvbnmqwertyuiopas
dfghjklzxcvbnmqwertyuiopasdfghjklzx
[Writer]
[Institute]
[Date]

cvbnmqwertyuiopasdfghjklzxcvbnmq
wertyuiopasdfghjklzxcvbnmqwertyuio
pasdfghjklzxcvbnmqwertyuiopasdfghj
klzxcvbnmqwertyuiopasdfghjklzxcvbn
mqwertyuiopasdfghjklzxcvbnmqwerty
uiopasdfghjklzxcvbnmqwertyuiopasdf
ghjklzxcvbnmqwertyuiopasdfghjklzxc
vbnmqwertyuiopasdfghjklzxcvbnmrty
uiopasdfghjklzxcvbnmqwertyuiopasdf
ghjklzxcvbnmqwertyuiopasdfghjklzxc
 Page | 2

Reward Management

Introduction

In a business organisation, reward management refers to an approach through which such a

company establishes and enacts strategies, policies and practices to reward its staff members to a
fair standard and absolutely as per how the organisation give them importance and value.
Typically, reward management in an organisation is based strongly on the thorough business
analysing and controlling the remuneration of its employees and every single benefit and
incentive for them.

In a business organisation, one of the key aims and purposes of reward management is to reward
the employees in a fair even-handed manner for the tasks that they have fulfilled. The major
reason behind existence of the reward management in an organisation is to encourage the
employees so that they become hard worker and make effort to meet the business goals set out
by the organisation. An organisation’s reward management system consists of monetary or
financial rewards, which includes pay, and at the same time non-financial rewards including
employee acknowledgement, appreciation and recognition; employee training, education and
development; and increased job role and responsibility. Further, a company’s reward
management is all about designing, implementing and maintaining fair reward strategies, policies
and practices that are geared towards the employee performance enhancement and thus business
improvement.

The aim of this report is to explore and understand the business context associated with reward
and the use of reward intelligence and a case study of a plumbing, heating and air-conditioning
business owned by me. In doing so, this report explore and understand the key reward principles
and how the reward policies and practices are implemented, while reviewing the role played by
line managers in making reward decisions.

The Importance of Reward Management

For several years now, companies have been trying to reinvent themselves by every conceivable
means to increase their competitiveness. Some have chosen to optimise their processes to reduce
their operating costs, others to improve their management processes. But in a context where the
 Page | 3

competent workforce is increasingly scarce, all companies have the same goal: to manage their
human resources efficiently and optimally. This issue, which companies have been facing for
some years now, will only get worse, forcing managers to use a variety of strategies to attract
and retain the best human resources.

In a business organisation the components of reward management are the factors used by an
organisation to appeal potential employees to their business. Appropriate recognition and
rewards policy assists create a work environment where employees feel valued for their efforts
and contributions. This asset will help you attract, retain and motivate employees.

These are core elements including wages, incentives, bonuses, growth opportunities, and other
benefits in a variety of forms (Armstrong, 2007). The proper implementation of a reward
management system in a business organisation has the strong potential to provide numerous
benefits to a company, mainly in small and medium-sized (SME) organisations (Güngör, 2011),
such as the company owned by me, where the top management and line managers need to
develop and maintain good relationships with their employees. The effectiveness and benefits of
fair rewards programmes is numerous through which an organisation can motivate people, while
enhancing the employees’ and business performance.

Why a reward system is crucial, behold the following:

Mutually Beneficial

The reward system is beneficial for employees and at the same time for the organisation. By
establishing a reward system, employees feel more active and they ultimately become more
engaged in the work, and thus their and organisation’s productivity is improved. Productivity
gains will benefit the entire organisation, and therefore, the reward system is mutually beneficial
for employees and organisations simultaneously. (Bartol and Srivastava, 2002)

Employee Motivation

A good reward system has the strong potential to encourage employees by reaching certain
targets and goals set out by an organisation in return for rewards. An organisation’s fair reward
system or programme is great at encouraging staff members but they can also be motivated to
establish themselves to the business. (Tharenou, Saks and Moore, 2007)
 Page | 4

Employee Absenteeism

An organisation’s good reward system has the strong potential to minimise the employee
absenteeism rate. Employees like being honoured, recognised and rewarded for a job well done
and in the existence of a fair reward system, there is very limited chance for them to not show up
for work due to a variety of probably fake reasons and sickness is one of them. If an organisation
has a fair reward system, the employees will be clearer regarding the certain business goals and
targets because they believe they will be acknowledged by rewarding once a certain target is met
on time. Therefore, due to a fair reward system as an incentive in a company employees are less
likely to be absent and they become ultimately the valuable assets of the business. (Benson and
Dundis, 2003)

Loyalty

A reward system in an organisation helps in developing and enhancing the employee’s loyalty to
the business organisation. Due to a fair reward system or programme, more importance is felt by
the employee because he or she knows that the organisation vales his/her views. The employees’
satisfaction with the reward system means that they are more likely to take the business
ownership by appreciating the organisation and thus they remain loyal. (Benson and Dundis,
2003)

Morale

The employees’ morale is very important and it can be boosted by having a good reward system
in place through which they are provided with recognition, benefits and incentives. By
motivating and boosting the morale of employees to meet the business targets and goals, a proper
reward management system gives employees clear focus and purpose. Once the morale of
employees is enhanced, the entire organisation’s morale is increased dramatically. (Chiang,
2005)

Collaboration and Teamwork

Collaboration and teamwork is another key reason behind the importance of reward management
system in business organisations. An organisation’s fair reward management system fosters the
collaboration approach, while promoting teamwork to the staff members. Due to a best reward
 Page | 5

system an employee works with collaboration as a key part of a group or team with the one
single aim of meeting the team’s targets in exchange of recognition and rewards. Collaboration
and teamwork within the organisation has the strong potential to assist enhance the efficiency
level, whole establishing a happier environment in the workplace. (Turkyilmaz et al., 2011)

Types of Reward Systems

There is a variety of approaches through which the reward system can be grouped. However,
some approaches or ways, intrinsic rewards and extrinsic rewards; direct, indirect and non-
monetary rewards; and performance-based rewards and membership-based rewards, are the most
common types.

Intrinsic Rewards and Extrinsic Rewards

The intrinsic motivation refers to a behaviour driven by internal rewards. In other words, the
motivation to engage in behaviour comes from within the individual because it is intrinsically
rewarding. This contrasts with extrinsic motivation, which involves engaging in behaviour to
gain external rewards or avoid punishment (Cho and Perry, 2012). Researchers have discovered
that offering external rewards for an already rewarding activity can make the activity less
rewarding in itself, a phenomenon known as the over-justification effect (Benson and Dundis,
2003; Gallo and Rinaldo, 2011; Cho and Perry, 2012). The reason is because the intrinsic
pleasure of a person from an activity provides sufficient justification for their behaviour. With
the addition of extrinsic reinforcement, the person may perceive the task as over-justified and
will try to understand their true motivation (extrinsic / intrinsic) before participating in the
activity (Gallo and Rinaldo, 2011).

Experts also suggest that people are more creative when they are intrinsically motivated
(Cerasoli, Nicklin and Ford, 2014). In the workplace, productivity can be increased by using
extrinsic rewards such as bonuses, but the actual quality of work done is influenced by intrinsic
factors. If employees or a team of employees do something and they find rewarding interesting
and challenging, they are more likely to come up with new ideas and creative solutions.
(Cerasoli, Nicklin and Ford, 2014)

Direct, Indirect and Non-Monetary Rewards

 Page | 6

By definition, remuneration is the total amount of the monetary and non-monetary contribution
paid to a person in exchange for his or her work. This act includes three types of remuneration,
direct, indirect and non-monetary.

Direct monetary remuneration is the most known and recognised form. Direct compensation is
the amount paid directly to employees in exchange for their work. This includes hourly wages,
bonuses, tips and commissions. (Rebitzer and Taylor, 2011)

Indirect pecuniary remuneration includes any amount paid to an employee that is not included in
direct compensation. This form of pay is often seen as part of an employee's contract that covers
such aspects as a temporary leave, benefits and a pension plan. (Rebitzer and Taylor, 2011)

Non-monetary compensation differs from direct and indirect compensation in that it has no
monetary value. Non-monetary incentives are types of reward that are not part of an employee's
salary. Non-monetary incentives are usually given to employees who are satisfied with their
salary or who have been in their position for a long time. Compensation for this order may
include: Achievement Rewards, Team Leadership Opportunities, Personal Days, Prizes, Paid
Training, Gift Cards, New Office, Enhanced Workspace, Paid Parking, or Transportation
Tickets, and so on. (Rebitzer and Taylor, 2011)

Performance-Based Rewards and Membership-Based Rewards

The rewards given to employees by their business organisation can also be based on the
performance and membership criteria of employees. As far as the performance-based rewards are
concerned, they are explained by the use of commissions, employment pay plans, schemes of
incentive, group bonuses, pay based on merit or other pay types for performance plans (Güngör,
2011). On the other hand, membership-based rewards are related to increment in the living cost,
increase in wage and benefits, seniority rank, credentials or future potential (Güngör, 2011).

Case Study of Business Organisation

I established a plumbing, heating and air-conditioning business in the UK in 2010. In the

beginning, the organisation experienced a major problematic issues and challenge. The
commercial property management businesses were the main customers of the company and they
wanted to reduce costs. For this, it was decided by them to end their contract constituted between
 Page | 7

the company and them, and hire their own "handymen". However, the company did not want to
discharge any of the employees working in the organisation. Thus, a decision was made to
reconstruct the entire workforce into different territories. Consequently, each worker was
assigned a separate territory, and told to operate and run the territory as own business. In doing
so, the company put area manager for each territory by means of training and development in
different techniques of sales, cost estimating, budgeting, negotiating, and handling complaints
made by customers.

The company’s owner believed strongly that if he had superb with regard to technical skill, more
friendly and motivated employees, they could productively run the business like small-town
"handymen", albeit they would be an integral part of an organisation operated at the larger scale.

The company’s reward management programme proved to be quite effective. The managers of
each territory helped the company by developing a strong sense of ownership in their line
managers and subordinates. Consequently, all the employees developed the ability to plan and
schedule their own work and handle their own equipment, while developing their own estimates
and campaigns related to advertising. And these were the key rewards which were desired by
employees.

The company’s reward management system increased the salaries of employees. A normal
employee in the company before he or she introduced the reward system was making £50,000.
When the system was implemented, an employee earned £100,000 in the first year of the system
introduced, and then made £125,000 in the second year.

From a perspective of reward management, the company’s employees are very satisfied and the
company itself grew dramatically by almost 150% just within two years.

Literary Review

According to Chiang (2005), to make the reward package successful, a business organisation
needs to achieve the objectives mentioned below:

Organisations, as in the above mentioned case study, needs to appeal potential employees and
develop their interest to work there, and for this the company’s needs to develop effective human
resource plan and recruitment and selection techniques. The reward package should be both
 Page | 8

intrinsic and extrinsic, including a perfect blend of pay, benefits and incentives to motivate
existing and to appeal suitable potential people (Chiang, 2005).

A reward management system and package should be fair and help an organisation in retaining
its talent pool. Thus, such a reward package needs to be perceived from the inside by the
employees as unbiased and fair, and it should be perceived externally as more competitive.
Internally, it is necessary for a company that its employees should be satisfied with rewards,
while knowing that the rewards they gained is quite competitive than other organisations. The
outcome of this approach would be positive because employees would not want to switch the
company and perform in the best interest of business, as in above mentioned case study. (Chiang,
2005)

Moreover, a reward package also needs to be motivational for employees. In doing so, an
organisation needs to establish a reward package in such a way that assists it in encouraging
employees to work as a team to achieve the business goals. Further, a reward management
system in an organisation should contribute to HR and strategic business plans by creating a
rewarding and accommodating workplace environment and hence it should be perceived as an
appealing environment by employees. This approach will be beneficial to the organisations
because they will be able to attract the talent pool. In business organisations, a fair reward
management system has the strong potential to assist organisations in retailing best employees
and in appealing potential people, while influence performance and behaviour at work. (Chiang,
2005)

According to Lawler (2000), a fair reward management system has strong impact on different
HR processes, strategies and practices, which directly influence the performance as a whole at
the organisational level, from top to bottom. While explaining the concept of influenced
recruitment and retention, it is concluded by Lawler (2000) that any organisation with having a
fair reward management system has the strong potential to retain its existing employees and
appeal potential candidates. The recruitment and retention processes of HRM are also influenced
by it, and hence it is confirmed in studies that performance-based systems have more potential to
appeal best-performers. As an instance, if employees are rewarded by an organisation by
increasing wages, it will be able to appeal more employees, allowing the business more of a
 Page | 9

choice over decisions regarding selection and hiring. This approach may also help in reducing
employee turnover rates (Lawler, 2000).

Regarding influence motivation, it is seen by employees that an organisation’s fair reward

system puts an importance on a variety of activities and tasks (Lawler, 2000). Hence, a fair
reward system of a company has also wonderful motivational impact on workers. Nevertheless,
the management, including line managers, need to make right decision about integrating the
reward system with the behavioural approach they anticipate from workforce (Lawler, 2000).

Influence corporate culture is a conceptual approach through which the workforce is rewarded
and this approach has a direct influence on the organisation’s corporate culture (Lawler, 2000).
As an instance, if an organisation’s reward system facilitates long-serving employees with
benefits and incentives, the existing organisational culture will more likely be converted into one
where employee loyalty is considered as key to make sure the business success (Lawler, 2000).
Nevertheless, if an organisation’s reward system rewards the employees for their innovative
behavioural pattern and views they have, this approach is more expected to convert culture into
one where the factor of creativity and innovation is very crucial (Lawler, 2000).

Cost as an influence is also a major factor influencing an organisation’s reward management

system. There are some organisations that may lack the ability to afford to establish and sustain a
fair reward management system because of high cost involved. However, some lacks the will to
waste wealth on employees for rewards. This approach de-motivates employees and badly
affects their morale because they will feel not valued. Consequently, a direct impact will be on
their overall performance and productivity which thus affect the business performance as well.
(Lawler, 2000)

In order to properly manage costs and ensure fairness and objectivity in decisions, organisations
must establish clear procedures for nominating individuals or teams and awarding rewards.
Again, appointments can be between peers, supervisors and subordinates; but final approval,
especially for awards of significant value, usually goes to a special committee or to senior
management. According to Lawler (2000), to make a reward management effective, such a
system needs some important features, including the following:
 Page | 10

 Level of Reward: To make a reward management system successful, the employees must
be satisfied by reward package by meeting their basic needs of self-development and
security.
 Individuality: The reward system of an organisation needs to be more flexible, so that
varying individual needs of employees are met well.
 Internal Equity: The reward management system of a company must be perceived by
employees as fair. The reasons and decisive factors for reward allocation should be even-
handed and apparent to all working in the company, and the reason behind such an
allocation should be clearly communicated and acknowledged by all.
 External Equity: The rewards must be perceived by employees as fair and equal when
they compare them with others outside the organisation.
 Trust Factor: Both the management and the employees must be on the same page by
believing in the reward system in place. The belief of employees is that they will gain
incentives and benefits by meeting the pertinent criteria, whereas the management needs
to trust subordinates that they will make effort and perform well.

Conclusion

This report explored, defined and explained the concept of reward management and how any
business organisation manages a variety of rewards by making right decision and implementing
policies and practices of reward. By finding and explain the importance of reward management
system for business organisations, a variety of benefits advantages have been found, including
increased employee motivation, morale improvement, loyalty enhancement, teamwork
improvement and reduction in absenteeism and turnover rates. This report also explored some
commonly used types of reward. A case study of my own company was also presented in which
it is presented how the company was forced to reward staff members with much responsibility
and how it had a wonderful positive outcome for the business.

It has been found that the main aim and purpose of a fair reward management system are to
retain existing employees while appealing potential talent pool, encourage employees to work
hard, contribute to workforce and strategic business plans as well. There is also the direct impact
 Page | 11

of a reward system on not only employees but also on the entire organisation, such as influence
on business performance and organisation’s culture.

By reviewing a case study and literature review, some important characteristics as features of a
fair reward system have been found to make a system more successful. This is very crucial for an
organisation’s management when they come to decide the reward system for employees. The
management has the responsibility to thoroughly assess their existing reward management
programme while ensuring its right features.
 Page | 12

References

Armstrong, M. (2007). A handbook of employee reward management and practice. London:

Kogan Page.

Bartol, K. and Srivastava, A. (2002). Encouraging Knowledge Sharing: The Role of

Organizational Reward Systems. Journal of Leadership & Organizational Studies, 9(1),
pp.64-76.

Benson, S. and Dundis, S. (2003). Understanding and motivating health care employees:
integrating Maslow's hierarchy of needs, training and technology. Journal of Nursing
Management, 11(5), pp.315-320.

Cerasoli, C., Nicklin, J. and Ford, M. (2014). Intrinsic motivation and extrinsic incentives jointly
predict performance: A 40-year meta-analysis. Psychological Bulletin, 140(4), pp.980-1008.

Chiang, F. (2005). A critical examination of Hofstede's thesis and its application to international
reward management. The International Journal of Human Resource Management, 16(9),
pp.1545-1563.

Chiang, F. (2005). A critical examination of Hofstede's thesis and its application to international
reward management. The International Journal of Human Resource Management, 16(9),
pp.1545-1563.

Cho, Y. and Perry, J. (2012). Intrinsic motivation and employee attitudes: Role of managerial
trustworthiness, goal directedness, and extrinsic reward expectancy. Review of Public
Personnel Administration, 32(4), pp.382-406.

Gallo, M. and Rinaldo, V. (2011). Intrinsic versus extrinsic motivation: A study of undergraduate
student motivation in science. Teaching and Learning, 6(1).

Güngör, P. (2011). The Relationship between Reward Management System and Employee
Performance with the Mediating Role of Motivation: A Quantitative Study on Global
Banks. Procedia - Social and Behavioral Sciences, 24, pp.1510-1520.

Lawler, E. (2000). Rewarding excellence: Pay strategies for the new economy. San Francisco:
Jossey-Bass.
 Page | 13

Rebitzer, J. and Taylor, L. (2011). Extrinsic Rewards and Intrinsic Motives: Standard and
Behavioral Approaches to Agency and Labor Markets. SSRN Electronic Journal.

Tharenou, P., Saks, A. and Moore, C. (2007). A review and critique of research on training and
organizational-level outcomes. Human Resource Management Review, 17(3), pp.251-273.

Turkyilmaz, A., Akman, G., Ozkan, C. and Pastuszak, Z. (2011). Empirical study of public
sector employee loyalty and satisfaction. Industrial Management & Data Systems, 111(5),
pp.675-696.