Reward and Incentive System - Coursework Example

Reward and Incentive System Introduction Reward systems is vital system of an organization since they are essential in promoting morale or demoralizing the employees due to the feeling they will draw from the mechanism employed in rewarding different employees. However, designing a reward system that is favorable and effective for an organization faces critical challenges that might hinder or derail implementation of the reward system of Tesco Company for it executives. The challenges that Tesco is likely to face in establishing the compensation challenges have been demonstrated in the paper. Furthermore, the various practices that Tesco Company can utilize have been recommended. Reward System Challenges One of the challenges that might be faced in establishing an effective compensation system for the Tesco Company executives is biased attitude (Hill & Jones, 2010). The compensation system has the potential of creating biasness to the lower cadre employees in compensating the top executives. The lower employees who are responsible of implementing the policies and strategies developed by the executive of Tesco Company will be demoralized due to the insignificant feeling. This will hinder the realization of commercial interest of the company that will make the compensation strategy adopted impossible due to lack of adequate funds. The perception of the compensation been unfair compared to the external equity is another challenge that Tesco will face is establishing the incentive system for it executive employees (Hill & Jones, 2010). The modern market is facing intense competition that has seen companies rewarding their top management heavily to attract the most effective and efficient strategic team to compete effectively in the market. Thus, the reward system that Tesco will develop will be judged by the executive team on it coherence with the market reality. This has the potential of drawing negative reaction from the executives if they perceive the system to be unfair to the market competitiveness or equity. The top management of Tesco Company will shift to the competitors who are offering better incentive and reward compensation strategy. The two challenges will heavily impact on the establishment of the incentive and reward system that Tesco Company will employ in compensating its executive to ensure it is balanced towards the perception of the internal employees at lower level and perception of the executive towards the market equity. Constructive Recommendation Owing to the challenges faced in designing the optimal reward and incentive system that should be employed an organization, a number of management approaches have been developed in guiding modern organization in establishing a reward and incentive system. There three approaches that Tesco Company can employ in rewarding its executive employees. One of the practices is known as management by objective (MBO). Under the management by objective system of rewarding employees, specific actions and skills are used in determining the reward and incentives executives should receive (Hill & Jones, 2010). The executive of Tesco will be compensated depending on their specific skills and actions they undertake in running the organization profitably. The advantage of employing this reward system is that it allows the management to engage the employees in the evaluation process to ensure they understand and learn how the compensation is determined. The system is able to capture the three reward objectives of being aligned to pay for contribution and performance, external competitiveness to recruit and retain and business strategy. This because the reward will be determined by the actions of the individual executives in enabling the firm to achieve it commercial interest captured by the business strategies employed in running the firm. In addition, the firm will be able to attract and retain top effective and efficient management personnel in the market when they feel the company recognizes their contribution and performance in determining their compensation. The second practice Tesco Company can employ in establishing the reward and incentive system is behavioral oriented rating system (Hill & Jones, 2010). Under the behavioral oriented rating system, a ranking scale system is employed in rating the performance of the executives to determine the reward and incentive they should receive. Thus, the executives’ performance will be evaluated using specific defined variables in determining the reward and incentive that should be awarded to each of the executive. The practice is advantageous since specific behaviors and areas are chosen in helping the executives in meeting the business agenda of the company to attract high compensation consideration. This implies that the practice is able to ensure the pay system is fair internally and externally since the executives payment is based on known variables. In addition, the variables employed in determining the payment are communicated effectively to the executives regularly. The third reward system that Tesco Company can employ is multi-rater assessment that employs supervisors, fellow employees and customers in rating the performance of the manager in determining the reward and incentives of the executives. A questionnaire is employed in rating the performance of the specific executives using diverse aspects (Hill & Jones, 2010). This approach is essential since it will allow the organization to capture all the relevant aspects of the executive behavior in ensuring the business strategy is implemented to promote the commercial interest in future. In addition, it will ensure the payment is fair since the executives reward will be based on the views of independent and homogenous contributors. Conclusion and Recommendation Establishing an optimal reward and incentive system for executives of Tesco Company is essential since it will help in motivating the diverse managers. However, the realization of the optimal reward and incentive system will be faced with unfair perception from the lower ranking employees and the executives. This has the potential of hindering the organization from realizing the benefit of a reward and incentive system in boosting employee morale to achieve optimal organizational performance. However, a number of modern practices in designing the reward and incentive system are capable of helping the organization in realizing a compensation approach that is capable of eliminating bias perception in the organization. The optimal reward and incentive system that Tesco should employ is management by objective (MBO). This is because the incentive and reward that will be given to the executives will be based on measurable contribution of the specific executives (Hill & Jones, 2010). The executives will be motivated in undertaking actions that will enhance profitability of the organization and welfare of the employees. This will ensure the organization is able to attract and retain the best employees in the market to implement its business strategy optimally. Reference Hill, C. W., & Jones, G. R. (2010). Strategic management theory: An integrated approach. Boston, MA: Houghton Mifflin. Read More