Blog Fourteen - Reward

Blog 14 – Reward

Rewards are all forms of financial returns and tangible services and benefits that employees receive as part of the employment relationship (Bratton and Gold, 2007). Rewards can be attained in different forms within an organisation and rewards fall into two different types; financial and non-financial. Financial rewards are tangible and therefore can be measured; examples of financial rewards may be pay rates, incentives and bonuses. Whereas non- financial rewards are intangible, for example; flexible working time, recognition and career opportunities. All rewards are favoured by employees motivating them to develop within the organisation as individuals and eventually move up the career ladder.

By using a reward system, employers can retain a psychological contract with employees and motivate employees to improve their achievement levels. Also a company can retain skilled workers by offering those incentives adapting their workforce and improving productivity. Reward systems also support their corporate strategy as employees can work to improve their productivity and incentives are offered in return to show recognition to employees.

However reward systems can have a negative impact on the business and their public image. Employees may feel they might be treated unfairly if other employees are receiving more or better incentives than them. Also it is difficult for employees to measure the amount of reward entitled to each employee for the degree of work achieved. ‘The two key questions for pay strategy are ‘How should monetary payments be paid?’ and ‘how much should be paid?’ (Bratton and Gold, 2007). For example, employees may receive a company car as an incentive however other employees may only receive verbal recognition which may be seen as unfair. For the employer, reward systems are costly to the departments within an organisation and reward systems may lack control if organisations are using these incentives as a way of being competitive with rivals. Other issues to organisations may be dealing with reward systems when facing an economic downturn as money may be scarce and therefore financial rewards must be reduced decreasing employee motivation.

When looking at organisations and reward systems which have been put in place, a lettings agent in which offers rewards follows a performance related pay system. This illustrates that employees are paid financial rewards according to the amount of work completed and to what standard. Therefore all employees within the organisation working on the same job status for example property manager attain the same basic pay salary per annum. However bonuses can be received each month and at the end of the year an annual review is given where an employee may receive a bonus according to their yearly performance. The end of year bonus varies between 1-3% of their yearly salary depending on their performance quality. For example this may be according to the amount of contribution given within the team and taking on training and coaching courses to enhance performance. Equity is being ensured within the organisation as all employees with the same job title receive the same basis pay and therefore reward is based on an individual’s strengths, performance and effort in which they choose to put into the work that will incur themselves a reward based on this. Therefore all employees are treated fairly and with equal opportunity and it is their choice as to how much effort they wish to give to improve their productivity at work and gain the rewards accordingly.

There has been recent controversy as to how much a chief executive and other employees taking a high status in the hierarchy should be paid within an organisation. This includes banker’s bonuses and other financial rewards given to employees through reward systems. Cable became the first cabinet minister to urge other bankers to show the same restraint as Hester, who bowed to pressure from the Labour party and public opinion by waiving his £1m bonus (Wintour, 2012). These rewards should not be given to a chief executive of a company which has underperformed throughout the year of operation as workers should not be rewarded for underachieving. Job analysis will be carried out within an organisation which is a systematic process of collecting and evaluating information about the tasks, responsibilities and the context of a specific job (Bratton and Gold, 2007).Therefore it is evident that a chief executive will receive a higher paid salary due to increased job responsibilities further up the hierarchy however in terms of bonus payments, chief executives of companies should not receive these extra rewards if organisations are underperforming as they are not achieving their aim of being highly profitable within the market sector. Some may argue that due to the high responsibility and high risk level of taking on a high status job such as a chief executive position that they should receive a high bonus as recognition of this responsibility. Also some may also feel this job title entails a highly stressful work load and coping with both risky and strategic decision making should incur large bonuses. However some may argue against this, explaining that many of the chief executives subordinates undertake high amounts of pressured work which itself takes large amounts of responsibility and that it may be perceived as unfair for a chief executive to take all the reward for work which incurs a team effort. When comparing this with Adam’s Equity theory (1963) the theory states that an increased perception of equality and fairness in an organisation between employees will in turn improve motivation levels (Anon., 2012). Therefore if employees believe they are receiving the same reward as other staff including bonuses, they will be more motivated to perform well. Vroom’s Expectancy theory (1964) can illustrate how employees higher up the hierarchy should be rewarded as this theory states that if employees carry out certain tasks given to a high standard then they will expect to be rewarded for this (Anon., 2012) .Therefore if an organisation underperforms, the chief executive and all employees within the company should not expect to receive any reward for their work performance. Overall, only work which is carried out to a high standard should be rewarded otherwise little reward should be given to employees within an organisation.

To conclude, there are many different rewards available within an organisation for employers to offer their staff according to performance. A reward system is also put in place to benefit staff equally and effectively offering incentives to ensure a strong workforce through the work life of a business. Rewards are beneficial to both the business and employee and should be given as recognition of productive and effective work. However rewards should not be overused as staff may expect more reward in time for less work completed. Overall if used correctly, reward systems can make a positive impact on staff performance and create better task performance in future. If employees become more motivated by rewards, rewards will have a positive impact on the productivity of a business and its individual employees in the long run.

References

Anon. (2012) Equity theory of motivation [online]. Management study guide. Available from: http://www.managementstudyguide.com/equity-theory-motivation.htm [Accessed: 6 May 2012].

Anon. (2012) Expectancy theory of motivation [online]. Management study guide. Available from: http://www.managementstudyguide.com/expectancy-theory-motivation.htm [Accessed: 6 May 2012].

Bratton, J. and Gold, J. (2007) Human resource management. 4th ed. China: Palgrave Macmillan.

Wintour, P. (2012) Business [online]. The Guardian. Available from: http://www.guardian.co.uk/business/2012/jan/30/rbs-bonus-row-vince-cable-stephen-hester [Accessed: 6 May 2012].