Reward Management at IKEA - Literature review Example

?REWARD MANAGEMENT AT IKEA Armstrong and Murlis (2004, p. 4) define reward management as a function of human resource management concerned with formulation and implementation of policies and strategies aimed at rewarding employees consistently, fairly, and equitable according to their value in the company or organization. Various organizations use reward management for different objectives. Reward management is used to support the organizational strategy (Huczynski and Buchanan, 2010, p. 65). It is also used to help an organization to recruit and maintain the best employees. Most organizations use reward management to motivate employees and enhance their productivity thereby contributing to improvement of overall organizational performance. Reward management is further aimed at ensuring internal, as well as external equity. More importantly, it strengthens psychological contract and also for organization to comply with legislation that require organizations to have reward management system (Phil and Cole, 2011, p. 101). Furthermore, reward management provides an organization with a system that enables it to efficiently administer rewards among employees. There are basically two types of rewards: extrinsic rewards and intrinsic rewards. Extrinsic rewards satisfy basic human needs such as security and survival and include raise in pay, better working conditions, and bonuses among others (Wright, 2004, p. 17). Intrinsic rewards aim at satisfying higher human needs such as development and esteem. The vision of IKEA is creation of better everyday life for many people including its employees. Its human resource philosophy is that employees can be more productive and committed when the company is taking care of their needs. Like many Swedish companies, IKEA adopted a paternalistic stance towards the needs of employees and employees themselves that seeks to empower employees (IBS Center for Management Research, 2012). The application of its human resource philosophy is more or less standardized and reward policies are applied to all employees uniformly. Its human resource policies are aimed at making relationships between employees open and strong, and employees are encouraged to excel by taking care and supporting each other. In a nutshell, IKEA’s human resource policies seek to guarantee uniform and high quality standards in order to support its future developmental and business challenges (IBS Center for Management Research 2012). IKEA’s reward management system is designed to reward employees more or less equally and is informed by the need to make relationships between employees open and strong. Equity theory is relevant to IKEA’s reward management system. Armstrong and Stephens (2005, p. 92) note that this theory suggests that employees will be motivated to engage in actions that they perceive that the conditions of the situation are just and fair and which will ultimately benefit them. In addition, this theory holds that a person will be motivated towards organizational goals if they feel that the amount of effort being put forth commensurate the outcomes or the benefits being received (Byron and Khazanchi, 2010, p. 3). Considering that IKEA’s human resource policies are aimed at creating open and strong relationships among employees and empowering them, equity theory are more relevant to their reward management system. This is because it requires that this system regulates equity and help employees to maximize their outcomes as a whole. Looking into IKEA’s human resource policies also shows that the organization is keen to avoid distress among employees which might hamper its efforts towards attaining its goals. Equity theory will therefore be relevant to creating equal relationships among parties in the workplace thus avoiding distress. Equity theory recognizes commonly contributed inputs in organizations to include labor, personal investment, time, dedication, and skill (White and Druker, 2000, p. 81). Application of this theory by IKEA will therefore imply that it has to consider commonly received outcomes among employees. These outcomes include appreciation, recognition, security, and payment, as well as other tangible and intangible benefits (Perkins and White, 2011, p. 49). In order to create and maintain open and strong relationships among employees as IKEA aspires to, equity theory will help it design its rewards in such a way that no employee feels under or over-rewarded. If employees feel under or over-rewarded compared to their colleagues, they may experience anxiety and seek to either seek equity or quit from the organization (Shah et al 2011, p. 1205). Also, application of this theory in IKEA’s reward management system will help employees feel equitably treated and it will appear to them that their inputs are equal to their coworkers. Vroom’s expectancy theory is h other theory that is relevant to IKEA’ reward management system. It was proposed by Victor Vroom and unlike Maslow’s theory, he focuses and stresses on the outcomes (Corby et al, 2009, p.87). His theory states that the intensity of an employee tendency to perform in a specific way is highly dependent on the intensity of an expectation that his performance will be followed by outcome that is definite. It further states that the motivation of an employee is an outcome of how much a reward an individual wants or what he called valence (Md Zani et al, 2011, p. 329); and expectancy or the assessment that there is a likelihood that employee’s effort will result to expected performance; as well as instrumentality or the belief that the performance will result to specific reward (Stredwick 2005, p. 127). Vroom’s expectancy theory is relevant to IKEA’s reward management system in the sense that it would be in line with its human resource’s objectives of maintaining strong and open relationship among employees and empowering employees. By applying this theory, IKEA would ensure that employees are rewarded based on their competence and skills, a realization that employees would appreciate thus avoiding distress between employees (Stone, 2002, p. 111). Additionally, the reward offered y the organization to employees would be associated with what employees expect thus reducing anxiety among employees (Ian, 2009, p. 82). The aspect of instrumentality is fundamental in enhancing strong and open relationship between employees of IKEA. Employees will have shared belief that their individual performance based on their job description, skills, experience, and competency will result to a certain reward that may differ from that of the other employees (Armstrong, 2007, p. 59). Therefore, the relationship between employees in IKEA will not be strained as everyone will know what to expect. Integration of equity theory and Vroom’s expectancy theory in IKEA reward management system will be critical in ensuring a standardized reward management system that the organization is striving at, and which aims at making relationships between employees open and strong, and employees are encouraged to excel by taking care and supporting each other (White and Druker, 2000, p. 76). Bibliography Armstrong, M 2007, A handbook of employee reward management and practice, Philadelphia, Kogan Page. Armstrong, M and Murlis, H, 2004, Reward management: A handbook of remuneration strategy and practice (5th ed. Ed.). London, Kogan Page. Armstrong, M and Stephens T 2005, A Handbook of Employee Reward Management and Practice, Kogan Page Limited. Byron, K and Khazanchi, S 2010, 'When and How Rewards Increase Creative Performance: A Theoretically-Derived Meta-Analysis', Academy Of Management Annual Meeting Proceedings, Pp. 1-6, Corby, S et al, 2009, Rethinking Reward, Basingstoke [England], Palgrave Macmillan. Huczynski, A and Buchanan, D, 2010, Organizational Behaviour, Lombarda, Pearson Education Ltd. Ian, B, 2009, Organizational Behaviour, Essex England, Pearson Education Limited IBS Center for Management Research, 2012, IKEA's Innovative Human Resource Management Practices and Work Culture, Accessed: 3 December, 2012 (Available: http://www.icmrindia.org/casestudies/catalogue/Human%20Resource%20and%20Organization%20Behavior/HROB066.htm) Md Zani, R et al, 2011, 'COMPARING THE IMPACT OF FINANCIAL AND NON-FINANCIAL REWARDS TOWARDS ORGANIZATIONAL MOTIVATION', Interdisciplinary Journal Of Contemporary Research In Business, 3, 4, pp. 328-334 Perkins, S. J., & White, G, 2011, Reward management: alternatives, consequences and contexts, London, Chartered Institute of Personnel and Development. Phil, K and Cole, G, 2011, Management Theory and Practice, Hampshire, Cengage Learning EMEA. Shah, J et al, 2011, 'REWARD PRACTICES: A TECHNIQUE TOWARDS ENHANCED ORGANIZATIONAL PERFORMANCE', Interdisciplinary Journal of Contemporary Research in Business, 3, 2, pp. 1198-1210, Stone, F, 2002, Performance and reward management, Oxford, Capstone Pub. Stredwick, J, 2005, Introduction to Human Resource Management, Oxford, Elsevier Butterworth-Heinemann. White, G and Druker, J, 2000, Reward management a critical text. London, Routledge. Wright, A, 2004, Reward management in context, London, Chartered Institute of Personnel and Development. Read More