RUNNINGHEAD: REWARD MANAGEMENT

Reward Management

[Name of Student]

[Name of Institution]
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Reward Management

Business Context of Reward and the Use of Reward Intelligence

Each business is affected by number of factors that result in its growth, prosperity, and success.

Globalization, improved communication, and increasing competition across countries have led

businesses to focus on different perspectives that were once the least priority for them (Bach,

2005). Not only internal forces drive businesses to experience profitability and prosperity but

also external forces and vast number of strategic issues require same kind of attention. Having

simple effective processes to run business with main target on financial issues are no more

relevant now specifically in growing markets that keep having their consumers’ demands

changing. High tech products and services with short life cycles want businesses to move

towards adopting practices that maximize their efficiency, effectiveness, good image in market

etc.

Consequently, these forces have affected trends in labor market, pay scales, and reward systems

that are completely related to employees in any business. Many businesses have realized that the

only factor that can bring them to the desired position is employees (Perkins and White, 2010,

pp. 244–257). Same situation is with London and Provincial bank that operates under many

challenges of dynamic environment. Consumers are well aware of advancements and have wide

options to choose according to their suit. In this situation, it is important for London and

Provincial Bank to be adaptive and responsive so that it can ensure itself of becoming the highest

priority among consumers. In order to beat competition employees should be given desired

importance so that they are able to increase their productivity and align the goals and objectives
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of business with that of their own. The best thing that can lead to such results is the effective

reward system that can be adopted using various models.

Importance of Reward system

Strategic and operational decision making also require intense consideration along with many

other major issues, of how to enhance the performance of employees and reward them

(Perkinsand Hendry, 2005, pp. 1443–1468). Motivated employees who are rewarded according

to their performances are able to judge their performances and bring great commitment to their

work using higher standards. The adoption of reward system is a need at London and Provincial

Bank that will make employees become flexible and more responsive to fulfill the challenges of

organizational environment. In a current situation in which Bank works it is utmost priority to

keep costs low, maximize the quality of services and products, remain consistent, utilize

advanced technology, and adopt effective processes and functions throughout all branches of

Banks. If people at Bank are aware of the fact that their performances are being measured then it

will affect their standards of performance. Through getting rewards according to their certain

level of performance, they will get an encouragement to mould their behaviors consistent with

the objectives of the organization.

Total Rewards system will have certain performance measures that will reward behavior of

employees and help to enhance corporate image and good (Corby et.al, 2005, pp. 4–24). The

most important thing in effective system would be to allow goal congruence, which is difficult

but possible to achieve. Each individual has different financial and non-financial goals that relate

to remuneration, perspectives of promotion, job satisfaction, job security, and job esteem. In

order to achieve these goals individuals will put all efforts that will take out their potential,

resulting in creativity and innovation with great productivity. Effective Total reward system will
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give employees many incentives to achieve good performance levels through which they will not

solely enjoy extrinsic rewards but also intrinsic rewards. At present London and Provincial Bank

just focuses on financial factors and extrinsic rewards that undoubtedly satisfy the basic needs of

employees and enhance their life and working styles but do not fill up the place of intrinsic

rewards that are undervalued at Bank. Intrinsic rewards include satisfaction that an employee

gets through working on his job and then getting an experience or the opportunities that job

provides to grow and develop. Intrinsic rewards lead to the intrinsic motivation that should be

parallel with extrinsic motivation.

Reward system and strategies

It is never easy to motivate employees at work. As a result, business should incorporate

employees’ performance management and rewarding to their decision making to experience

positive results of enhanced productivity and the fulfillment of challenges presented by dynamic

environment (Tregaskis et.al, 2012). London and Provincial Bank will have to adopt

performance culture that will involve employees’ participation in setting their targets. Once they

start to achieve them their actual targets their performances will be evaluated through targets and

then accordingly they will be rewarded. At present Bank does offer excellent pay packages with

many other benefits, learning and development programs but they still lack various intrinsic

rewards (Arrowsmith and Marginson, 2011, pp. 54–79). However, there are other gains that are

not economical. The remuneration is the tangible part of the reward. There is what cannot be

translated into economic values, which is not objective, it is more difficult to compare, but it also

influences a professional to go work for a company, to keep working on it and do their job well.

The intangible reward will necessarily pleasure, the feeling of belonging, trust and pride of
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working at a particular company. Aspects such, subjective, not as concrete as the remuneration

and that are more complex to identify, distinguish or measure. But they can make a difference for

those who want to work at the company for those who are already and want to continue to feel

motivated to produce more and better, to have a company with a positive, ethical behavior and

good will.

Strategies will be adopted through the help of Towers Perrin Total Reward Model. Moreover,

Total Reward system will lead to formal and informal review of employees through which they

will be informed about their performances and likely future responses and expectations with

further improvements. The construction of the aspects of reward system will have positive

impact on the feeling and will necessarily raise the possibility and realization of personal and

professional growth, making maximum use of the capabilities of individuals recognized.

Development opportunities, situations and challenges that enable meaningful learning and that

are targeted to the characteristics and aspirations of individuals, help in the construction of

pleasure at work (Perkins & Vartiainen, 2010, pp. 175-187).

Positive and objective feedback to employees makes them understand the importance of Bank’s

objectives. Strategies at London and Provincial Bank should be directed towards attracting and

retaining employees to achieve high quality work, customer satisfaction. They will involve

attractive pay and benefits packages that will be distinctive from other service providers. They

will also focus on the facts that skills, efforts, and outcomes of employees are only dependent

upon how they are treated through supportive culture and good management style. The image

and reputation built on a set future vision that captures people's aspirations generate pride that

strengthens and gratifies people.

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Development of Performance Culture

According to the Director of Reward of London and Provincial Bank, they have been focusing

too much on giving their employees financial rewards. However, in the modern day business

environment where level of competition in every field has intensified to an extent, financial

rewards can never solely satisfy an employee’s need. Retaining critically valuable employees in

an organization is becoming like a challenge. The employee in the current era needs a lot more

than financial incentives to increase his worth. Financial incentives can keep an employee

motivated, because they allow direct or indirect needs satisfaction. According to Maslow’s

hierarchy of needs, the basic need is for survival and security, which is satisfied when a person

receives a suitable pay in his organization. Next to that is the need for self-esteem where again

monetary benefits play a key role to satisfy a person as it enhances a person’s status (allow you

to go to a higher level of social hierarchy and buy things for that which cannot afford the

environment). However, as the ladder moves upwards value of monetary incentives become a

secondary option. It does not mean that importance of money vanishes

While opting for a job pay is often the most important criterion for choosing an employer and

has a strong influence on the decision to stay in business or leaving it. The increase can improve

their well-being, because it is not only the additional income, but also the assurance that they are

appreciated (Jolayemi, 2012, pp. 29-52). However, a feeling of euphoria passes quickly. You

cannot assume that money motivates everyone in the same manner and to the same extent. For

some, there are other factors, which are above on the preference list. Monetary rewards, to which

London and Provincial Bank was focusing to enhance the performance level of its employees

previously can be a factor of motivating the workforce, but management cannot solely look for
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such kind of a reward system that focuses too much on only financial benefits to its employees.

This was one of the major problems, which Director of Reward at London and Provincial Bank

had to counter at least for all the employees working in United Kingdom initially. After going

through various models, he found Towers Perrin Model of Total Reward to be the most

beneficial. However, one factor to consider here is that this model cannot be applied completely

in every organization. Towers Perrin Model for total reward is suggested approach from which a

combination can be derived to develop a reward strategy for London and Provincial Bank.

Towers Perrin Model

Towers Perrin Model of Total Reward is a matrix with four quadrants (Armstrong, 2010). The

two quadrants on the upper side in this matrix are pay and benefits and they are a part of

transactional and tangible rewards. These rewards are the financial rewards and cannot provide a

competitive advantage as competitors can copy them as well. However, these rewards help

attract an employee initially. For instance while opting for a job; the initial consideration that a

person desires for is a lucrative salary that can satisfy his needs. On the other side or in the

bottom of the matrix lie relational or intangible rewards. Competitors usually find hard to copy

these rewards. Furthermore, they serve as a tool to enhance the upper two quadrants of the

matrix. Intangible or relational reward includes the learning and development and an adequate

work environment (Armstrong, 2007). According to this model, the elements that are present in

the pay quadrant include base pay, contingent pay, bonus pay, long-term incentives, profit

sharing etc. Whereas the benefit quadrant includes, pensions, holidays, healthcare and flexibility.

All these ingredients are visible and considered essential to convince an employ to work with a

company. As compared to that the lower quadrant learning and development includes, work
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place learning and development, trainings, performance management, and career development.

These ingredients push an employee’s desire to stay with a company for a long time ahead in a

particular organization. The other quadrant on the lower side of the matrix is the work

environment and includes organizations’ core values, leadership, employees’ voice, recognition,

role development, job design, and appreciation quality to working life, work life balance, and

talent management. These ingredients help an employee in developing his career in his chosen

organization. Work environment has become an important part while deciding for a reward

system in an organization. If a company has to derive the maximum from an employee, it is very

important for them to develop a reward system, which utilizes a balance between all four

quadrants (Armstrong, 2010).

Build a high-performance culture through understanding key reward

principles

According to the Towers Perrin Model, there should be a balance among all four quadrants to

enhance the performance level of employees to develop a competitive advantage within the

company. In service industry organizations, employees are the most important element of

business (Lovewell, 2011, pp. 39). It is important for businesses to enhance their motivation so

that they can add value to what an organization offers to their customers. In the current global

scenario where businesses are, competing to their maximum it is difficult for firms to gain a

competitive advantage (Perkinsand Hendry, 2005, pp. 1443–1468). Especially in the service

sector, differentiation can only be from the level of satisfaction customers receive from the

organizations. In order to develop a reward system, the basic need is to build a high performance
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culture keeping in mind the essential reward principles. For this management should underline

the key objectives to deal with their employees. These key objectives can be:

 Work for the Development of a Sustainable organization, which helps employees to grow

suitably

 Development of a high performance culture

 To have an innovative workforce that values the company’s customers greatly

 Make changes to the work place so as to make it the best place to work

In order to achieve these objectives Director of Reward of London and Provincial Bank can

adopt various strategies keeping in mind the reward principles. These principles are:

 Rewards should motivate a high performance culture

 Rewards should promote a close connection between the level of performance, reward

and recognition within the organization

 Management should reward significant performance contributions that enhance goals and

values of London and Provincial Bank

 A culture of timely recognition of individuals and team should be adopted

 Provide rewards to the employees that are valuable to them

 In practicing reward system, the company should be fair and consistent

 Company should clearly communicate the rewards to the employees

Following these principles London and Provincial Bank will be able to develop a high

performance culture that is in accordance to the objectives for their workforce. Timely

adaptability of a reward system will help in sustaining this culture for London and Provincial

Bank in the years to come. High-performance culture in the organization is undeniably positive

financial results. Organizations with high performance, with clearly defined base set incentives
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will fit into the organizational efforts and achieve the mission. Powerful incentives derived from

the platform based on creating a basic, unchanging purpose, which is constructed from a

dynamic vision, set of values and a sense of mission. Organizational culture is building a high-

performance return on investment.

Organizational culture of high performance is the opposite of the personality-based culture

dominated by strong, formal and informal leaders, create synergies by aligning the objectives of

the mission to the specific expectations regarding the performance of shared and espoused by

each person in a community organization (Jolayemi, 2012, pp. 29-52). Expectations then adapts

to individual and organizational competencies, talents and skills they build incentive awards

ranging from recognition and praise, for a premium, prizes, and have a positive impact on

earnings before deductions. Culture based on personality fit to the overall performance, giving a

return on investment, which is significant to the organization.

Matching expectations regarding the performance (expectations) to competence, talent and skills

(options) and options to give praise and awards (motivators) form the basis for the operating

model and management system for high-performance culture.

Towers Perrin Model and High Performance Culture

Reward Director of the London and Provincial Bank has pointed out at Towers Perrin model of

total reward, which will be helpful for the company to sustain a high performance culture in the

Bank. Giving employees a quality package will retain the employees. If they want to serve their

customers well then they will have to focus initially on serving their employees well. The list of

tangible rewards (if included) both from pay and benefits will lure the good talent to work in a

place that offers significantly the financial incentives with a good benefit plan. Financial benefits
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will give the employees individual satisfaction whereas non-financial benefits will raise their

social satisfaction.

Pay Structure

In addition to getting assistance from this model, Reward Director of London and Provincial

Bank had some issues with the implementation of this model, which were mentioned in the case.

In this, regard the pay should be in accordance to the market as the competition in the market is

already high and giving a low pay scale will not attract then talent towards joining London and

Provincial Bank. Giving slightly high pay scale and relative incentives will lure the talent in

joining the organization. Moreover, the company can opt for a flexible schedule of work and the

working hours can be divided in shifts. This will provide the employees with the flexibility to

work in their desired hours. However, total autonomy should not be given to the employees to

choose the timings. It can be done through keeping a limit on the maximum time an employee

can start his daily proceedings. Flexibility in accordance to the locality can also be opted. An

employee can be allowed to serve in an area close to his residence.

Non-Financial Rewards

As far as the non-financial rewards are concerned, almost every company offers pensions,

holidays and healthcare benefits (Perkins & Vartiainen, 2010, pp. 175-187). Every company

should keep these primary elements in accordance to the market. Apart from these incentives or

non-financial rewards, London and Provincial Bank can opt for giving employees private

transportation based upon performance and level of growth in the organization. They can also

give recognition and achievement certificates to the employees. They can even adopt for
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recognition lunch, shopping vouchers, etc. However, non-financial rewards will incur many costs

for the Bank initially on short term but once they are applied in practice along with financial

rewards then they will surely reflect consistent approach to motivation (Corby et.al, 2005, pp. 4–

24). This will turn the complete picture of Bank in the employees who will be highly satisfied,

showing that in their performances. Consequently, London and Provincial Bank will experience

growth, competitive advantage, giving quality services to its consumers.

Identification of Total Reward Package

Reward packages can be designed for different positions in the organizations. To inform the

employees about their total reward package, each designation can be given a code or name can

be given, for instance, in banks usually there are different levels and designations,

Officer/Executive/Assistant Manager etc. Reward packages can be designed in accordance to

these levels. An employee can have knowledge about his total package by viewing his

designation in the bank’s hierarchy.

Countering Entitlement Mentality

Entitlement mentality was a problem in London and Provincial Bank. This problem can be

addressed by announcing a policy of growth in accordance to the benchmark. Performance

criterions can be designed to counter this problem. Employees in the bank should be made aware

about their growth. The growth should be performance based rather than being experience based.
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Divisional Approach for Reward System

For each division there should be a separate reward system and should be in accordance the local

culture of different divisions. Currently the reward manager is assigned the task to formulate a

reward strategy for United Kingdom division only. For the UK division whatever strategy the

company will select can never be ignorant of the local culture, which helps in identifying the

needs of the people in the local culture. Similarly while designing a reward plan for other

division’s considerations regarding the local culture should be planned.

Responsibility of Line Managers

Line managers are the one who are directly linked to the resource of the company. If they

themselves are satisfied then they can make their resource satisfy. Line managers have an

important role to play in dealing with employees and managing them effectively. They are more

close to people as they manage them in day-to-day activities and have a responsibility to monitor

processes that employees do. As a result, line managers should be given some authority to take

certain decisions that prove to be beneficial for whole organization, their specific departments,

and employees who come under them. Having supervision responsibility enables them to explore

the needs and wants of employees more effectively and consequently, they should be involved in

designing. Authority should be delegated to the line managers, but should be monitored as well.

The line manager should be included in designing the reward policy of the company, as they are

the ones who are more familiar with the resource of the company and they can guide the

company well about employees needs. They can also suggest what sort of employees a company

need.
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Expectation of Line Managers and Employees for Reward Practice

Change in any organization is generally resisted from employees (Jolayemi, 2012, pp. 29-52).

However, in London and Provincial Bank’s case the employees and front line managers needed a

change as they were only receiving financial rewards. Other factors to motivate the employees

were ignored by the management.

Prioritization of Reward Practices and Available Resources

London and Provincial Bank was spending a significant amount of money on their employees

annually, however things were not in the right direction. You cannot only give employees

financial benefits to keep them, but an organization need to develop itself as a place where

employees can feel comfortable. The most important consideration in this regard for London and

Provincial Bank was to develop a comfortable environment for the employees to work. If the

employees are attracted by this change then the overall policy can be implemented.

Challenges and Ways to Tackle Them

Furthermore, challenges to the implementation of this plan can be countered by taking in

confidence the line managers. Role of line managers is very important, as they will be the

dealing with this change directly. If they are convinced regarding the change then they can

convince the resource as well. Appropriate communication from management is required to

convey the positive points of this change.

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Adaptability of Towers Perrin Model

Towers Perrin Model can be implemented completely. The company has adequate resources to

implement this model and bring it into a reality. All the elements in the model are interrelated to

each other. Financial benefits with other non-financial benefits are to be included if a company

want to develop a high performance culture.

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References

Armstrong, M. 2007, PART 01: The Fundamentals of Reward Management; Chapter 03: Total

reward, Kogan Page Ltd, London, United Kingdom, London.

Armstrong, M. 2010. Armstrong’s Handbook of Reward Management Practice (3rd Edition)

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Handbook-of-Reward-Management-Practice

Armstrong, M., Brown, D., and Reilly, P. 2011. "Increasing the effectiveness of reward

management: an evidence-based approach", Employee Relations, Vol. 33 Iss: 2, pp.106 –

120

Arrowsmith, J. and Marginson, P. 2011, Variable Pay and Collective Bargaining in British Retail

Banking. British Journal of Industrial Relations, 49: pp. 54–79

Bach, S. 2005 Managing human resources :personnel management in transition. 4th ed. / Oxford

:Blackwell

Corby, S., White, G. and Stanworth, C. 2005, No news is good news? Evaluating new pay

systems. Human Resource Management Journal, 15: pp. 4–24

Jensen, D, McMullen, T, & Stark, M 2006, 'CHAPTER 5: Getting Employee Commitment with

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Integer Programming Model and its Variants", Academy of Information and

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Lovewell, D. 2011, "Total Reward: A totally rewarding strategy", Corporate Adviser, , pp. 39
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