Assessing the Reward System of Adidas - Case Study Example

? ADIDAS REWARD MANAGEMENT Executive Summary This report aims at assessing the reward system of Adidas by evaluating on the company reward practices with those of the market. A detailed analysis of the theories of rewards and the need to reward employees has also been elaborately covered. The reward practices of Adidas together with the company’s employee performance are further analyzed. The report concludes by recommending that Adidas should pursue in their bid to have a motivated workforce and in increasing the company’s general performance. Introduction Adidas is a manufacturer of sports apparel and is consists of a Reebok company. Adidas was founded by Adi Dassler’s Whose aim was to ensure that every athlete with the necessary equipment (Adidas Group, 2010). The company was started in 1920 when Adi Dassler’s made the first shoe for sporting activity. Adidas has realized tremendous growth and has expanded because of their products that are preferred because of their quality and design .Adidas produces products like watches, shirts, bags and other sports related clothes (Adidas Group, 2010). The company has its products distributed across the globe and their brand is one of the most preferred by sport fans and players. In terms of employees, the company has a total of 42541 according to 2010 results and about 14250 working in Adidas headquarters (Adidas Group, 2010). The largest number of employees are the retailers. The FIFA games are a major source of success to the company. During such admired and renowned sports, the company realizes a high turnover in their products hence more profits. The different products of the company have also been very instrumental in the reduction in fluctuations in return. As a sportswear manufacturer, Adidas main customer segments are the sports fan and other teams that prefer their clothes and other playing instruments (Adidas Group, 2010). Literature Review Employee’s efforts and input in achievement of organizations goals and objectives must be rewarded. The rewards and emoluments that are given to an employee should be commensurate to the value created by the employee (Hume, 1995). The rewards should be fair, justified, and equitable. Reward the employees who are most valuable to the organization. The organization workers remuneration should reflect their value to the company. Reward management is therefore concerned with formulating, implementing, and reviewing of the employee reward system to ensure that the employees efforts are recognized in the attainment of the organizations goals (Redfern, 2009). Employees reward system should motivate the employees in offering their services to the organization. It is therefore an indispensable segment of management that must be closely monitored by the organization in their effort to ensure organizations success (Geoff & Druker, 2005). Human resource academicians have therefore developed an interest in the study of reward systems and have developed theories to explain the need why organizations should develop effective reward systems. One such reason why employees should be rewarded is to motivate employees and involve them in the distribution of the returns of the organization (Blyton & Turnbull, 1992). Purpose of a Reward System Organizations reward their employees in order to attract the right employees for the right jobs at the right time (Heneman, 2002). Reward system is also maintained for the purpose of retaining the employees of the organizations by recognizing their efforts and contribution in the work place. Finally, employees will also be rewarded for the purpose of motivating the employees in order for them to do their maximum in the attainment of organizational objectives (Grant, 1990). These three are the primary reasons as to why employers will reward their workers. According to Shields (2007) other reasons why employees are rewarded and that form the essential characteristics of a good reward system include: Need fulfillment i.e. the employees reward should be enough in satisfying the employees’ primary needs i.e. food, clothing, and shelter. Secondly, the reward system should meet the legal requirements i.e. by ensuring that the employees’ compensation is in line with the government minimum wage requirement or risk factors incorporated in the design of the pay structure. The third characteristics that should be accomplished by a reward system is fair. By becoming fair, the employees’ efforts and rewards must be commensurate (Bratton & Gold, 2001). Employees should not be underpaid or discriminated in at the work place. Moreover, the reward system must be affordable (Lloyd, 2008). The organization should ensure that they are capable of paying the employees at the set rate and that the rewards should not make the business run at a loss (Lloyd, 2008).The reward management should be strategically aligned (Heneman, 2002). This means that the reward system should support the long-term goals and objectives of the organization and should support the attainment of the organization strategic goals. It is therefore clear that the reward management characteristics are conflicting in certain elements (Stajkovic & Luthans, 2001). For instance, the need to be cost effective or affordable may be conflicting with the objective of becoming fair in the reward system. An organization that limits or under pays their employees in order to cut on cost or reduce expenses will therefore risk the dissatisfaction of employees that may lead to turnover and loss of morale. Also, the need to be fair could result in the increase in the cost of remunerating employees hence a trade off must be established to ensure that the reward system becomes the most effective for the business. Motivational theories There are different theories that explains the reasons why employees can be motivated. Some of these theories share the same explanations while others differ slightly from others. Motivation theories include Herzberg 2 factor theories, McGregor theory X and Y, and Elton Mayo’s (Pierce, 2007) To begin with, Herzberg theory asserts than there are factors that leads to employee satisfaction and those that lead to employees dissatisfaction in the work place (Lussier, 2011). The satisfier’s makes employees get motivated while dissatisfies results in demotivation of employees. The McGregor theory X and Y argues that there are two kinds of managers. Theory X managers are those that believe that employees view work as a punishment and must be compelled in order to execute their mandate (Bratton & Gold, 2001). They therefore use force and threats to ensure that the organizational goals are attained. Theory Y managers on the other hand are those managers who are optimistic and view employees as people who are self motivated and have a passion of working (Shields, 2007). The employees in this case view work as a fair mental play and will be interested in putting efforts in the realization of the organizations goals The theory that gives a clear nexus of reward management and motivation is the Vroom’s valence ? expectation theory (Blyton & Turnbull, 1992). This theory asserts that the actions of an employee depend on the reward expectation of the employee. An employee who expects to receive a good reward for his work efforts will act with the same equal measure (Geoff & Druker, 2005). The theory further argues that employees who are certain that their efforts will be rewarded for better performance will make improved performance and increase his output (Pierce, 2007).according to vroom motivation= valence ? expectancy. In a summary, the theory argues that employees’ better performance must be accompanied by increased rewards. The rewards should also be satisfactory top the employee i.e. in terms of salary rise or hike in employee’s allowance and that the employee for the re to be motivation in the organization must value the rewards. The managers must therefore ensure that these conditions are in existence and that the employees’ rewards are made commensurate to their efforts. Failure to assure employees of better rewards will make the employees reluctant in working diligently towards the attainment of organizations objectives (Stajkovic & Luthans, 2001). The other cardinal issue in these theories is the form of reward that the employee will get. In as much as the employees are rewarded by the organization. The form of reward that the employee should expect should be valuable to them (Boone & Kurtz, 2009). For example, an employee may value job status than increment in salaries. It is the work of the management therefore to determine which form of reward will best suit the employee. The three variables of these theories are valence, instrumentality, and expectancy (Lloyd, 2008). The first variables determines the strength of the employee in making choices i.e. it determines which factor will be of more interest to the employee that the other. Positive valence will mean the choice is preferred whereas negative valence implies low affinity for a particular outcome. Instrumentality variable, the first level outcome will determine the attainment of the second level desires. For instance, the attainment of the organizations goals will result in promotion of the employee. Finally, expectancy implies that a particular action will result in the attainment of the first level outcome (Henamam , 1997). It is what determines the achievement of the first level outcome. Reward Management Methods The strategies formulated in ensuring that the employees’ expectation is realized must be effective. The reward may be monetary or non-monetary depending on the determination on what factors will influence much on the organization. Management reward strategies should be those that lead to maximum input to the organizations objective (Gellman, 2009). Monetary methods include hike in pay, increase in allowances or retirement benefits. Non-monetary methods include promotion or recognition at the job place. Challenges in Reward Management In as much as managers have develops strategies that are aimed at acknowledging the effort of their employees, most of these strategies have failed to achieve their intended objectives of ensuring motivation and performance is realized. The first challenge that faces the reward management is overemphasis on pay as a core-motivating factor (Grant, 1990). Most employers think that better pay is the only successful way of achieving employees’ motivation whereas there are several factors that motivate workers like recognition and consultation. These other factors should be incorporated in the strategies in enhancing employee performance through motivation. The second reason for the failure to attain better performance through a reward system is the use of tactics rather than strategies in designing the reward system. The rewards should be those that are long term and aims at achieving the long-term objectives of the organization (Bratton & Gold, 2001). The short-term tactics that is normally applied in attaining the short-term loyalty of the employees is suicidal. Human factors should as well be incorporated in the formulation of the reward system. There should be direct channels for communication that allows free interaction with employees or that boosts the confidence of the employee in their work. Viewing employees as machines must be disregarded for better reward management system (Redfern, 2009). Findings A visit made to the human resource department of Adidas revealed the company rewards management and system. Adidas has come up with a reward management structure whereby the employee compensation competitive and is driven by the results of the company. Their pay is competitive and is matched with those of the market in order to attract and retain the employees who are of value to the organization. Apart from the basic salary that is awarded to the employees, Adidas also has some bonus scheme to their employee who meets their targeted objectives. The performance driven reward system is aimed at making the employees work towards achieving the organizations strategies as well as rewarding employee performance. The aim 2 score bonus program makes employees participate in the sharing organizations success (Adidas Group, 2010). Employees who achieve their targets together with the departments and brands, which meet their set targets, are rewarded for their hard work. Again, there is a profit sharing scheme for employees in the headquarters who do not participate in the bonus program and other employees in Germany who are not part of the bonus scheme. Moreover, Adidas has introduces a long-term incentive program where the executive managers together with the senior managers participate (Adidas Group, 2010). Employees also participate in the pension scheme where the employees in USA and Germany are given retirement benefit. Employees are also rewarded depending on the conditions prevailing in the local areas. Notwithstanding, the working condition in Adidas is one that allows for a work-life balance. Employees have flexible work time and their family needs are integrated in the family condition of work condition. The company also organizes sporting activities for their employees including ski tours, mountain biking among others that are free for employees’ participation. All this are meant at strengthening the employee relations and interaction with senior managers. Analysis The reward practices by Adidas is commendable and is one that is geared towards promoting the welfare of the employees. The employees feel incorporated and values and such practices should be continued in attainment of goals. The bonus scheme and employee basic pay that is enough to cater for employees’ basic needs is in line with the good reward system. The sporting activity of Adidas portrays the organization as one that does not only recognize the monetary reward system but also considers the employees social and societal needs. In as much as Adidas reward scheme is good, there is still more room at making improvement. Adidas should avoid reward schemes that are discriminatory or that fails to cover a portion of their employees. All employees should be rewarded appropriately regardless of their location. The company should further improve their communication channels that allow for a transparent promotion system that wins the confidence of their staff. Conclusion Reward management remains an important aspect in management as it impacts significantly on the performance of the organization. In fact, employers must come up with effective ways of determining the reward systems that will ensure that the company’s long-term objectives are met. Employees’ efforts are indispensable in the success of organization and any slight omission or factor that may cause employees dissatisfaction should be avoided. Reward management systems of a company should be bench marked against those of the industry and should reflect the changing nature of employees need requirements. Recommendations It is therefore recommend the company to engage in continuous review of their reward system to ensure that they remain pertinent in the creation of a conducive atmosphere for work. The employees should also be incorporated in management as a way of creating non-monetary satisfaction that leads to employee motivation. In addition, Adidas group should engage in employee rotation strategy whereby the employees change their work location to gain experience on operating in different regions across the globe. Moreover, the employees of Adidas should be made aware of the premises considered when conducting appraisal to ensure that they get satisfied with the results of the process. This would make them have confidence on the results and loyalty to the company. It is also worth noting that Adidas should continue to implement their bonus schemes as a way of sharing the returns with their employees. List of References Adidas Group. (2010). "At a Glance" The story of the adidas Group. Adidas Group. (2010). Challenges in human resources management. Retrieved from www.adidas.com. Adidas Group. (2010). Rewarding Employees. retrived from http://www.reportalert.info Blyton, P., & Turnbull, P. J. (1992). Reassessing human resource management. London: Sage. Boone, L. E., & Kurtz, D. L. (2009). Contemporary Business 2010 Update. John Wiley and Sons. Bratton, J., & Gold, J. (2001). Human resource management: theory and practice. New Jersey: Routledge. David, H. (1995). Reward Management: Employee Performance, Motivation and Pay. Lavoisier , 15-18. Gellman, T. (2009). Reward Management: A Guide for Remuneration and Compensation Strategy. New York: Free Press. Geoff, F., & Druker, T. (2005). A Critical Outlook on Reward Management. New York: Routledge Books. Grant, P. C. (1990). THE EFFORT-NET RETURN MODEL OF EMPLOYEE MOTIVATION. New York Westport , 23-25. Heneman, R. L. (2002). Strategic reward management: design, implementation, and evaluation. IAP. HYPERLINK "http://www.adidas-group.com/en/ser2010/employees/Default.aspx" http://www.adidas-group.com/en/ser2010/employees/Default.aspx Lloyd, P. (2008). Strategic Management: Reward Management. Long Beach: Adeloitte & Adeloitte. Lussier, R. N. (2011). Management Fundamentals:Concepts, Applications, Skill Development. South-Western: Cengage Learning. Pierce, Q. W. (2007). Motivation Theories in Business Management. Vermont: Cengen Books. Redfern, S. (2009). Rewards Management in the 21st Century. New Jersey: Prentice-Hall. RL, H. (1997). Worker perfomance and group incentives: a case study. industrial and Labour Review , 37-49. Scott, D., McMullen, T., & Sperling, R. (2006). Evaluating pay program effectiveness. Worldatwork , 50-59. Shields, J. (2007). Managing employee performance and reward: concepts, practices, strategies. Cambridge University Press. Stajkovic, A., & Luthans, F. (2001). Differential effects of incentives motivators on work perfomance. Academy of Management Journal , 580-90. Read More