Effect of Reward Management on Employee's Turnover Intention - Essay Example

Effect of Reward Management on Employee's Turnover Intention 1. Introduction The purpose of this study is to develop an in depth understanding of the effect of reward management on employee turnover intentions and their performance. The researcher wishes to analyze the aspects of reward management system employed by companies in order to enhance the job satisfaction level of their employees in order to not only boost their performance but also to reduce employee turnover. The researcher will endeavour to conduct this research with the help of both primary and secondary data that will involve an in-depth comparative analysis between primary data collected from questionnaire survey conducted with middle and lower level employees from a retail organization and a robust theoretical foundation formed through an extensive literature review. The outcomes will be interpreted and analyzed with the help of statistical software tools. 1.1. Rationale of this research Reward management schemes are rigorously implemented by organizations all over the world in order to enhance employee job satisfaction with the underlying aim of reducing employee turnover rate as well as improving the overall organizational performance (Albrecht, 2010). Empirical researches have pointed out that there is a significantly positive correlation between reward management and performance delivered by the employees. The retail organization that is being researched in this study employs reward management in the form of distribution of financial rewards to employees (Bakker and Demerouti, 2008). They constantly endeavour to enhance the quality of their performance. However, this does not guarantee that the employees will stay loyal to the organization. Moreover, empirical researches provide very scant evidence on the impact of such financial rewards on the turnover rate of employees as well as their performance. Therefore, the underlying reason behind this research is to study the impact of reward management on the employee turnover intention and the performance delivered by them. 1.2. Background of this research Reward management schemes are considered extremely important in the contemporary business environment as they are one of the fundamental determinants of the actions adopted by employees. They enforce positive contributions from employees which in turn enables the individuals to attain all round development alongside the growth achieved by the organization (Baumruk and Gorman, 2009). It is with regards to this fact that the researcher is endeavouring to study the extent to which reward management schemes affect employee decision to stay committed to their organization as well as improve their performance consistently. 1.3. Research aims and objectives To analyze the effect of reward management on employee turnover intentions. To analyze the effect of reward management on employee performance. 2. Literature Review 2.1. Reward Management Reward management strategies are implemented by organizational managers throughout the world in an effort to grab the attention of employees for the purpose of recruitment and subsequently retain the best of the employees thereby enhancing their job satisfaction level and enabling them to improve their performance consistently. The requirement for ensuring consistent performance influences HR managers to design rewards in such a way that they motivate employees to give their optimum effort in order to achieve both organizational as well as their personal objectives (Baumruk, 2009). 2.2. Financial Rewards Financial rewards are monetary benefit or incentives that are provided by organizations to their employees in addition to their regular compensation as a means to motivate the individuals to improve their performance and hence make a positive contribution towards the overall productivity of the organization. These rewards are generally distributed on the basis of performance delivered by an individual and are extrinsic in nature. Financial rewards includes payment hikes, annual or half yearly bonuses of increased paid holidays that come under an organization’s reward management scheme designed in order to enhance the engagement level of employees to towards the organization (Armstrong, 2010). 2.3. Material Rewards or Benefits Material compensations are incentives that are distributed by employers with the underlying aim of securing or improving the financial status of the employees as well as enhancing the financial benefits that employees enjoy at their workplace. Materials rewards can be classified into two types: direct material gains and indirect material gains. While direct material gains are extrinsic in nature such as salary, monetary incentives and bonuses, indirect material gains are more intangible in nature such as scholarship, training, paid holidays, office car transport and several other benefits (Omazić, Vlahov and Klindžić, 2010). These rewards do not come in the form of money or wages but contribute to the development of both the organization as well as the employee (George and Clive, 2007). 2.4. Psychological Rewards Psychological rewards are intangible reward schemes introduced by organizational managers in order to meet the psychological needs of organizations. Rewards such as job promotions, employee of the month/year recognitions motivates employees significantly as their effort is appreciated by the company. Positive feedback received by employees serves as a huge encouragement which in turn persuades them to give their optimal effort in order to deliver superior performance (Eunmi, 2009). 2.5. Turnover Intention Turnover intention is a quantifier that depicts the likelihood of an employee to leave an organization (voluntary turnover) or the likelihood of an employer planning to remove employees from their existing positions (involuntary turnover). Analysis of this measure enables employees to develop strategies that are directed towards reducing the overall employee turnover (De Gieter and Hofmans, 2015). 2.6. Employee Performance The performance delivered by an employee is determined by the quality of output and the overall productivity of the organization. Employee performance has always been the most fundamental determinant of organizational success. This is primarily the reason why the organizational managers have always focused on designing effective and lucrative reward management schemes that not only enhances the job satisfaction level of employees but also contribute towards the improvement of their performance (Njanja, et al., 2013). 2.7. Relationship between Reward Management and employee turnover intention Reward management schemes have a significant impact on the turnover intentions of the employees. Given the fact that lucrative financial, material and psychological rewards enhances the job satisfaction level of employees, it is extremely important for managers to constantly maintain the efficacy of such reward schemes in order to reduce employee turnover intention. This is primarily because an ineffective reward management scheme will deteriorate the engagement level of employees thereby compelling them to think about voluntary turnover. On the other hand appropriate recognition of performance with the help of financial and material rewards is sure to boost the morale of the employee base and therefore enhance their commitment level towards the organization as a whole (Hasan and Subhani, 2011). 2.8. Relationship between Reward Management and Employee Performance Effective reward management schemes boost the morale of their employees thereby helping them to find ways that enable them to attain all round development. Such schemes encourage employees to give their best effort that can be directed towards not only fulfilling their individual goals but also towards achieving the organizational objectives. Performance based rewards influences employees to formulate efficient ways of delivering target based performance which in turn enhances the productivity of the organization alongside enabling individuals to gain recognition and appreciation for their effort. Such recognition persuades employees to perform even better and outperform their previously set benchmark (Birdir, 2002). 3. Methodology 3.1. Research data Given the fact that the research involves a rigorous study of the effect of reward management on employee turnover intention and their performance, the researcher will be mainly resorting to primary research with the help of primary data. The fundamental benefits of using primary data are that it helps the researcher to stay on point and direct the study towards the specific target that needs to be achieved. Moreover, studies that involve primary data tend to be more logical and interpretive in nature thereby helping the researcher to make a better interpretation of the research outcomes. Additionally researchers are able to exert greater control primary data compared to secondary data which in turn will help the individual to set the size, location and an appropriate time frame for the project with relative ease (Cooper and Schindler, 2010). 3.2. Research Method In order to conduct this research in an appropriate manner, the researcher has considered quantitative research to be the best fit. This is primarily because, this form of research will help the researcher to test and validate the outcomes proposed in existing body of literatures thereby allowing the researcher to explain the reasons behind the occurrence of particular phenomena (Hesse-Biber, 2010). Moreover, data collection for quantitative researches is fairly easy and less time taking. In addition to that quantitative researches give more target specific output which is generated with the help of statistical software packages. 3.3. Data collection As far as the data collection instruments is concerned, close ended questionnaire survey will be used for the purpose of this study. The main advantages of adopting a questionnaire survey as the data collection instrument is that it helps a researcher to collect structured data from a large sample within a short duration of time (Saunders, Lewis and Thornhill, 2009). The data set can be managed very easily and can be used in statistical software packages which pave way for enhanced interpretation and analysis. 3.4. Sampling The questionnaire will be distributed to all middle and lower level employees of a large retail organization (the name of the company will not be disclosed due to ethical considerations). As far as the sampling strategy is concerned, the researcher will be adopting the simple random sampling strategy as a part of probabilistic sampling strategy. Adoption of this sampling strategy will allow the researcher to eliminate any form of bias from the questionnaire survey feedback (Bergh and Ketchen, 2009). Moreover, the researcher will also be able to obtain a wider representation of overall sample population that is being studied. 3.5. Data analysis The research data will be fed in through statistical software package SPSS and the same will be interpreted and subsequently analyzed with the help of pie charts, tables and bar charts. This will help the researcher to observe any pattern in the feedback and thereafter derive appropriate conclusions. 3.6. Ethic Consideration The identity of the research participants will be kept entirely anonymous and under no circumstances will be revealed to any interested third party. The objective of the questionnaire survey and the nature of the research will be explained in details to the research participants so that they can take informed decision regarding their participation in the questionnaire survey. The questionnaire survey will be conducted with prior consent from the research participants. The survey feedbacks will be stored safely and will not be passed on to any interested third parties. The participants will have the right to leave the survey at any point as and when they see fit. The questions will be formulated in such a manner that it does not pose any mental of physical harm to the research participants. The respondents will be informed about any cost that they need to bear for participating in the survey. 4. Limitation One of the major limitations of this study is the research process itself. Given the limitation of time and resources, the researcher is only being able to conduct questionnaire survey with the middle and lower level employees. A questionnaire survey coupled with a semi structured interview with the top level managers would have yielded a much better result. In addition to that, obtaining an ideal sample size is another major limitation of this study. Usually a larger sample is considered a good fit as it enables a researcher to eliminate bias. However, given a limited sample size, the researcher might find traces of biasness within the primary data. Reference List Albrecht, S. L., 2010. Handbook of Employee Engagement: Perspectives, Issues, Research and Practice. 4th ed. Northampton: Edward Elgar Publishing. Armstrong, M., 2010. Handbook of Reward Management and Practice: Improving Performance Through Reward. 3rd ed. London: Kogan-Page Bakker, A. B. and Demerouti, E., 2008. Towards a model of work engagement. Career Development International, 13, pp. 209−223. Baumruk R. and Gorman B., 2009. Why managers are crucial to increasing engagement. 4th ed. London: Melcrum Publishing. Baumruk, R., 2009. The missing link: The role of employee engagement in business success. Workspan, 47, pp. 48−52. Bergh, D. and Ketchen, D. J., 2009. Research methodology in Strategy and Management. 1st ed. Bingley: Emerald Group Publishing Ltd Birdir, K., 2002. General manager turnover and root causes. International Journal of Contemporary Hospitality Management, 14(1), pp. 43-47 Cooper, D. and Schindler, P. S., 2010. Business Research Methods. 11th ed. London: McGra-Hill. De Gieter, S. and Hofmans, J., 2015. How reward satisfaction affects employees’ turnover intentions and performance: an individual differences approach. Human Resource Management Journal, 25(2), pp. 200-216. Eunmi, C., 2009. Composite effect of extrinsic motivation on work effort: Case of Korean studies. Journal of World Business, 38, pp. 70-79. George, K. and Clive, R. E., 2007. The expectancy–valence theory revisited: Developing an extended model of managerial motivation. Management Accounting Research, 18, pp. 49–75. Hasan, S. A and Subhani, M.I., 2011. Managerial social wisdom: A major facet for employee turnover intentions, work commitments and manager-subordinate relationships. European Journal of Economics, Finance and Administrative Sciences, 40, pp.132-141. Hesse-Biber, S. N., 2010. Mixed Methods Research: Merging Theory With Practice. 3ed ed. New York: Guilford Publications Njanja, L. W., Maina, R. N., Kibet, L. K. and Njagi, K., 2013. Effect of Reward on Employee Performance: A Case of Kenya Power and Lighting Company Ltd., Nakuru, Kenya. International Journal of Business and Management, 8(21), pp. 41-49. Omazić, M. A., Vlahov, R. D. and Klindžić, M., 2010. The Role Of Material And Non-Material Rewards In Reducing Barriers To Change Acceptance. [pdf] ICEBM. Available at: [Accessed 24 August 2015]. Saunders, M. N., Lewis, P. and Thornhill, A., 2009. Research methods for business students. 5th ed. Harlow: Prentice Hall Read More