Reward Strategy and Management Development - Report Example

Reward Strategy and Management Development Table of Contents Introduction 2. Part The role of reward strategy in organisations 2 Introduction 2.2 The Individual Roles of Parties in Employment Relationship 2.3 The Expectations of All Parties in the Context of the Employment Relationship 2.4 Conclusions 3. Part 2: The management of the development and potential of individuals within organisations 3.1 Introduction 3.2 Employee Relations Models – Collectivism and Individualism and their Impact on Employee Relationships 3.3 Conclusions 4. Conclusions List of Figures Fig 1: Extrinsic and Intrinsic Rewards Based on Motivating factors Fig 2: Concept of Managerial Development (source: ) 5. References Reward Strategy and Management Development 1. Introduction Employee motivation has been a key factor of concern for organizations that want to improve their productivity, enhance employee loyalty and retention and encourage the employees to give in their best at work. There are several theories of motivation and these have been incorporated within the HRM policies of organizations. There are basically two approaches to motivating the employees and these are based on very different concepts of what motivates an individual. One set of theories is based on the premise that people have certain drives and needs that they want to reduce or fulfil and the actions that they take are motivated by the intensity of these drives and needs. Maslow’s theory of Hierarchy of Need (Ozbilgin, 2005), Alderfer’s ERG theory (Weightman, 2008), Herzbergs two-factor theory (Herzberg,1966) among others. The other set of theories falls under the umbrella term of incentive theories and is based on the premise that human beings are motivated to act or perform certain tasks when they hope to get some incentives or rewards in return. These theories further differentiate between intrinsic rewards or the rewards like self-satisfaction or happiness that result with achievement (Murphy, 2009) and the extrinsic rewards like external benefits, money and perks etc. Management development is a process by which the managers learn skills that help them lead and guide their employees better. It includes formal training as well as on job learnings through mentorship and caching programs at the work place. Organizations spend millions on training and developing their personnel in the expectation that this will lead to better productivity and bring on better motivation among the employees (Cecil and Rothwell, 2007). The first part of this paper explores the use of intrinsic and extrinsic rewards in the organizational context and evaluates their respective effectiveness. It also assesses the factors that influence the reward strategy of an organization. Next, the paper delves into the concept of management development and evaluates its benefits for the organization and the employees. 2. Part 1: The Role of Reward Strategy in Organisations 2.1 Introduction Rewards are incentives – tangible or intangible, that are cherished by the individual and that are of such importance to them that they are ready to modify behaviour or indulge in activities that lead them to the rewards (Robbins and Judge, 2007). Organizations are therefore involved in developing a reward strategy that is best suited to motivate its workforce. This section discusses the purpose of the intrinsic and extrinsic rewards in the organization and also evaluates the factors that influence the development of the reward strategy. 2.2 The Purpose of Both Intrinsic and Extrinsic Reward Within Organisations Extrinsic rewards include the pay, salary package, bonus, cash rewards, and other external rewards while the Intrinsic rewards include verbal praise, learning and training opportunities, flexible working options, work-life balance, increased autonomy and more time spent with manager (see fig 1 below). Fig 1: Extrinsic and Intrinsic Rewards Based on Motivating factors (Boudreau and Lakhani, 2009) Research has found that both the extrinsic and the intrinsic rewards are desirable, but employees place more importance on intrinsic rewards (Reynolds, 2005). Organizations are however better-off if they develop a reward strategy that includes both the intrinsic and the extrinsic rewards (White, 2005). This because based on their orientations, background and personality, employees tend to desire different things from the organization. However, an important aspect of a reward strategy is that it should be equitable (meaning that its distribution between the employees be viewed as fair by the employees) and that it should also be considered as an adequate compensation for the efforts. Employees tend to make an effort only when they think that the reward is desirable and when they know that the road to achievement of that rewards is equal for all the individuals (Vroom, 1994). 2.3 Influences upon Reward Strategies From Both an Internal and External Perspective Rewards strategies are formulated on the basis of the understanding of what motivates employees and within the constraints of what the organization can deliver. This is because, the rewards that are desirable by the employees are dependent on various factors including their lifecycle stage, educational and skill level and their personality. Employees who have newly entered into the workforce and who may also be starting on their independent lives may desire extrinsic rewards like bonuses and cash. Similarly, employees who have growing-up children may like rewards like more benefits, child plans and perks that include family healthcare. On the other hand, female employees, may like to be rewarded with more flexi-timing, daycare benefits or other incentives that help them to manage their work and house better. Older employees may be more concerned with rewards that enhance their status or autonomy and authority. As such, the reward strategy that the organization should adopt is largely influenced by the lifecycle stage and needs of the employees. The reward strategy is also influenced by the overall budget available to the organization and the orientation of the management. The budget restrains the cash and perks related incentives while the management’s orientation dictates how much autonomy, flexi-timing or other intrinsic benefits can be awarded to the employees. 2.4 Conclusions It is seen from the above discussion that reward strategy needs to be based on an acute understanding of what is desirable for the employees and it should also take into consideration the total financial constraints and managerial orientation. 3. Part 2: The management of the development and potential of individuals within organisations 3.1 Introduction Management of development and potential of individuals in the organization is of significance to both the employees and the organizations. The organizations need to develop the potential of the employees so that they have sufficient skill levels to take on current jobs as well as so that succession planning can be undertaken. 3.2 An analysis of the concept of ‘management development’ Fig 2: Concept of Managerial Development (source: Allied Consultants Europe, 2008) Management development is a concept that is applied to both the formal and the informal training and development opportunities, on job and additional learning initiatives that are introduced for preparing the managers to become effective in their own work and to lead others better. Management development is therefore enacted using a set of methods and tools like action learning, experiential learning, coaching and mentoring, job rotation and formal leadership and skill development trainings and certification. Management development is however not restricted to the methods to enhance skills and aptitude, but also include a cultural shift and attitude change for the trainees (Tobin and Pettingell, 2008). It also includes the emotional development so that the managers are better able to handle inter-relationships. As such, management development is a broad concept that encompasses the change in culture and attitude as well as in practice of skills and competence using specific methodologies. 3.3 An evaluation of the benefits of training & development from the perspectives of the individual and the organisation The organizations indulge in activities related to management development so as to fill in the skill gaps and to ensure that appropriate candidates are available who can succeed to higher positions and acquire leadership roles. The development programs are compared in terms of their costs with the costs of hiring and recruiting the external managers to kale on leadership positions and are mostly found to be more cost effective (Cecil and Rothwell, 2006). The organizations are able to retain their talented employees by training and developing them, and also motivate them to perform better. This is because, employees are likely to remain loyal to an organization where they see their career progressing and chances of growth. In the case of the employees, training and development opportunities act as maintenance factors as well as motivational factors, depending upon the type of training that is available. For example, when the employees need the training to adopt skills that are needed to perform their current jobs, the availability of such trainings is a maintenance factor taking into consideration the Hertzberg’s two factor theory (Herzberg, 1966). If these basic trainings are not available then the employees will feel dissatisfied and frustrated with their organization. On the other hand, if the trainings are related to enhancing the chances to promotion and growth, then the opportunity to participate in the training acts as a motivating factor for the employees. 3.4 Conclusions The above discussion has shown that management development is an essential requirement from both the organization’s perspective and from the employees point of view. Management development requires that the organization uses diverse techniques and methods to train and develop the employees and also to bring about a change in the cultural and attitudinal orientation towards work and colleagues. 4. Conclusions This paper presented a critical discussion on the reward strategy and the role of extrinsic and intrinsic rewards in the organizational context. It was seen that employees place importance on different types of rewards based on their own inherent needs which are in turn dictated by their background, personality, lifecycle stage and gender. It is therefore advisable that organizations be aware of these different needs and then formulate their reward strategy involving total rewards that are appealing to the employees and also deliver the rewards in a manner that is perceived as equitable by the employees. Next, the paper evaluated the concept of management development and reiterated that management development involves not only skill and competence development but also emotional and attitude development. Management development is essential for the organization as it leads to better management and leadership and it also acts as a motivational and satisfaction factor for the employees. References Allied Consultants Europe. (2008). Retrieved on November, 11 2010 from: http://www.ace- alliedconsultants.com/competencies/organisation-leadership-and-hr/management-development Boudreau, K. J. and Lakhani, K. R. (2009). How to Manage Outside Innovation. MIT Sloan Management Review. Retrieved on November 18, 2010 from: http://sloanreview.mit.edu/the-magazine/articles/2009/summer/50413/how-to-manage-outside-innovation/ Cecil , R. D. and Rothwell, W. J. (2006).Next Generation Management Development: The Complete Guide and Resource (Pfeiffer Essential Resources for Training and HR Professionals). CA: Pfeiffer. Cecil, R.D. and Rothwell, W.J. (2007). Next generation management development: the complete guide and resource. San Francisco, CA: Pfeiffer. Herzberg, F.(1966). Work and the nature of man.Cleveland: World Murphy, J. (2009). Inner Excellence. NY: McGraw-Hill Ozbilgin, M. (2005). International Human Resource Management: Theory and Practice Basingstoke: Palgrave. Patricia, K. Z., & Jay R. S. (2000b). 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