Employee Reward and Employee Engagement - Research Paper Example

Employee Reward and Employee Engagement Introduction Employee engagement is a critical issue to the overall organizational performance. The relationship between employee productivity and engagement has been empirically evidenced in a number of studies that attempt to evaluate the contribution of an engaged workforce to the competitiveness of firms (Stairs, 2005). Researchers and practitioners have committed to exploring ways in which engagement of employees can be fostered and enhanced and have eventually concluded that one of the most important and vital organizational practices is that of employee reward (Armstrong, 2004). In an attempt to conceptualize a holistic HR approach to the organizational performance and effectiveness, various academics and practitioners have been focusing on the reward systems applied and the degree in which these can promote improved performance and increased productivity through increasing employee engagement and motivation (Johnson, 2004; Stairs, 2005; Thompson, 2004). This paper will deal with the concepts of employee engagement and employee reward in an integrated fashion in order to evaluate the underpinning effect of appraisal and recognition to the motivation and commitment of employees. Employee Reward and Employee Engagement: Critical to the Organizations’ Performance As Armstrong (2004) describes, reward management is a set of particular practices and policies undertaken by organizations in their attempt to formulate and implement strategies that aim at rewarding employees and workers in a just, fair and consistent manner; in other words, reward management is the systematic use of specific organizationally developed ‘processes’ that are targeted towards recognizing and appraising the contribution of the human aspect to the overall corporate performance. In the same respect, Macey and Schneider (2008) and Saks (2006) agree that reward management is an important construct of the performance management discipline, which includes amongst other, the planning of tasks, the managing of the completion of tasks, the monitoring of performance against the objectives of tasks and finally the appraising or rewarding the performance on the basis of a number of measures that are predetermined or set. According to Armstrong and Stephens (2005) reward management is associated with providing the basis for employee motivation and engagement through setting the grounds for improved performance on three levels: the organizational level, the individual level and the team level. Employees are indeed valuable assets to a corporation. Direct relation of employee motivation and engagement to performance, productivity, growth and efficiency only proves the vitality of the role of people to an organization (Seijts and Crim, 2006). The more motivated and engaged an employee is the more s/he is willing to offer to the whole company. Employee engagement, as broadly defined is people’s commitment, dedication and concern for both their work assigned and the company as a whole, stemming from the drive and need of individuals to increase their efforts towards objected ends (Macey and Schneider, 2008). Nonetheless, this simple general perception is far more important and complex. It is rather a state or an initiative that underlines and eventually promotes the entire organizational mechanisms towards the vision. In other words, employee engagement implies the willing participation of individuals to add value to their own performance and at the same time optimize corporate performance (McBain, 2007). To understand clearly the significance of employee engagement, there should be an analysis on the individual level with respect to that issue; on the employee level. As the word itself implies, “engaged” simply means a person fully integrated to the culture, the vision, the mission, the goals and the objectives of an organization to the extend of being an actual “mobility” part of the process (Johnson, 2004). Little and Little (2006) add that engagement implies that employees are bound to the organization as a whole and the organizational objectives as sub – units. This extends to the customers of the firms as well; engaged employees are focused on the customer base of the companies. Moreover, an engaged employee is enthused, passionate and eager to contribute to the corporation in account. Consistently bound to the overall organization, the employee is more than just a satisfied worker. In more details, satisfaction is rather an external driven feeling; a well paid or a promoted employee can be satisfied, however, engagement is a combination of inputs that lies both to internal and organizational drivers (Armstrong 2004; Armstrong and Brown, 2006). This means that it obviously depends on two factors: the psychological state of the employee him/herself and the environment provided by the company. Employee engagement pertains to the behaviour of the workforce that is underpinned by involvement, participation and motivation. Armstrong (2004) indicates that these positive attitudes are products of interactive forces on both the employee and the organizational levels (employee attributes and characteristics which reflect the internal features as well as work environment and reward systems or appraisal systems which reflect the organization’s environment). For this reason it is essential to clarify that engagement refers to how strongly emotional and personal values are set in the work place (Thompson, 2004). Moreover, another aspect attributed to an engaged employee is the willingness to promote and drive the business forward. Sharing the values and the beliefs of managers, employees do actually want to achieve success on both personal and organizational level, as most of the times they do not distinguish those two; personal growth leads to organizational and vise versa (Stairs, 2005). Engaged employees are intellectually and emotionally attached to the organizations in which they are employed and feel passionately about the goals, the values and the culture; in this respect motivated employees go beyond the basic task requirements, rather they add value to their efforts and performance (Macey and Schneider, 2008; Little and Little, 2006) The Role of Employee Reward in Employee Engagement According to Armstrong and Stephens (2005) the specific aims and objectives targeted by the Reward Management practices are highlighted in the following: the development and establishment of total reward structures and procedures the appraisal of employee performance on the basis of added value to the organizational outcomes the alignment of the reward systems and strategies with the organizational strategies the recognition, reward and appraisal of the employees in a consistent mode; employees need to understand and realize that improved performance is valued by the firm the promotion of employee engagement, motivation, commitment, participation and involvement the development of high performance corporate culture the establishment (or improvement) of positive relationship and interactivity between employees and the work environment From a broader perspective reward management, as an integral aspect of the HR management aims at enabling a well performing organizational culture that triggers employees’ efforts and willingness to improve or increase their productivity through receiving incentives (either tangible or intangible) within the work environment (Brown, 2008; Thompson, 2004). For this reason, much literature focuses on analyzing and exploring the merits of the reward management and the general reward systems deployed by corporations throughout the world in their effort to construe a ‘productive’ relationship with their workforce. Consistency of Reward Strategies with the Overall Corporate Strategy Reward strategy is the combination of the organizational processes and activities towards the implementation of a reward and appraisal system which sets to complement the HR and corporate strategy, and simultaneously fosters recognition and appraisal of improved employee performance (Armstrong, 2004; Armstrong and Brown, 2006; Armstrong and Stephens, 2005). Academics and theorists have been extensively focusing on the proper alignment of the reward and performance strategies with the overall organizational strategy; they have concluded that only if there is a degree of consistency and integration will management accomplish its goals and consequently will provide a work environment and culture that will motivate and engage employees. To this extend, Thompson (2004) argues that reward strategies need to be derived from the HR strategies, which in turn need to originate in the corporate strategies. This evidently means that both performance management and reward management should be in full compliance with the culture and structure of firms, and simultaneously with the objectives and the goals of firms as well. Higgs (2006) stresses that traditionally reward systems and strategies were developed individually and separately from the organizational mission and values; the systems held responsible the financial departments mainly and had no involvement with the HR management and practices. They continue that as organizations become more complex social environments, the issue of ‘rewards’ goes beyond the ‘traditional’ compensation management. Brown (2008) and Johnson (2004) agree that despite the fact that compensation management actually forms the basis for reward management, it is highlighted by a general shift towards the ‘employee’ perspective; this means that the entire concept of reward and pay have been – during the last decade – more associated with the HR environment in that they pertain to the attempt of firms to develop long term and effective relationships with their personnel and offer working conditions that can ultimately affect the employee performance. In the same manner, Armstrong and Brown (2006) underline that the absence of a consistent reward strategy (consistent with the corporate culture and mission) not only does not add to the support or development of a motivation and engagement climate within the organization, but also creates ‘confusion’ and ‘dissatisfaction’ on the part of employees as there is no continuum to the processes and procedures. Employee reward policies, practices and strategies need to be fully aligned with the business strategy in modern organizations that seek to achieve employee engagement. Alignment provides credibility, which in turn fosters trust on the part of the employees. As Armstrong (2004) notes trust is a vital component of the engaged employee as it denotes the willingness to ‘connect’ with the organization. According to Stairs (2005) the consistency between reward systems/ strategies and organizational strategies is essential and vital in the organizational value. The author further proposes that the rewards strategies and the reward management should complement and support both the HR strategy and the organizational strategy so as to set the grounds for successful performance and corporate effectiveness. Thompson (2004) stresses that nowadays both employees and employers have come to realize the increasing significance and the critical role of rewards programs and systems in the overall attainment of business goals and objectives. Moreover, the have come to understand that rewards allocated to the right employees, in the right time and for the proper reasons can indeed optimize the potentials for employee engagement and subsequently for employee productivity. The author concludes that organizations, instead of replicating reward practices and strategies existing in literature or deployed by relevant corporations, need to deliberately develop and support their own strategy that will fit both the culture and the disposition of the human input. Intrinsic and Extrinsic Reward Practices Armstrong (2004) and Thompson (2004) agree that monetary (money) pay does not actually reflect the ‘modern’ approach to the reward system. According to Thompson (2004) pay and performance can be linked but this pertains to an external reward and thus does not cater for the intrinsic needs of employees. This implies that the today’s business environment requires more than just the structural pay and salaries that represent the reward on the part of organizations. Brown (2008) claims that although the traditional compensation management perspective underlines the importance of money as a performance reward mode, current practices pose significant limitations and debates in both practical and theoretical frameworks. Compensation in the form of money pay is seen by employees as a return in exchange of their efforts and commitment to organizations, while at the same time increases in the money pay are perceived as rewards for distinct behaviour (Armstrong and Brown, 2006). However, as Johnson (2004) states, employees need to receive rewards that apply to their personal satisfaction and can foster engagement that is linked to more intrinsic rewards (appeal to the psychological needs). Thompson (2004) has conceptualized a framework for extrinsic and intrinsic reward practices on the basis of categorizing rewards into monetary and non - monetary compensation benefits. The intrinsic rewards refer to non –money related recognition and appraisal of employees’ productivity, expressions of appreciations by the leadership or management, celebrations that acknowledge self improvement as well as professional improvement, quality based assessments and promotions, performance appraisals. These enable the organizations to allocate resources in dynamic environments, motivate and engage employees, provide feedback on the work and tasks implementation, maintain fair relationships with employees and foster further growth and development. On the other hand, the extrinsic rewards refer to the monetary (or physically evidenced) benefits such as profit sharing, security of job, quantifiable appraisals (on the basis of quantifiable objectives), pay increases and other substantial benefits that do not relate directly to the internal work environment. It is suggested that the both intrinsic and extrinsic rewards are critical to the overall satisfaction of employees and to the degree that they feel motivated and engaged to their jobs and the organizations (Brown, 2008). Nevertheless, as Thompson (2004) states qualitative approach (intrinsic rewards) is the critical contributor of the general positive influence on the perception of individuals with regards to the organizational effectiveness. Armstrong and Brown (2006) suggest that a Total Rewards strategy needs to be implemented by organizations so as to enhance engagement and overall improvement in employees’ productivity. To this respect, Total Rewards Strategy is defined as a concept that fairly encompasses several reward systems in an integrated and coherent fashion. According to Thompson (2004) Total Rewards is oriented towards a more holistic approach in managing to enhance productivity through increasing motivation, engagement, commitment and employee participation. Total Reward does not neglect the ‘monetary pay’ of employees; rather it combines effectively this aspect with other factors are sought to improve the recognition, appraisal and feedback on individuals’ job performance. According to Johnson (2004) this strategy eventually comprises all the reward processes of employers’ value proposition to the workforce. In other words, it is a complete approach that addresses not only the issues of pay and nominal benefits, but mainly the ‘intrinsic’ rewards that are reported to be perceived as more significant by employees (Brown, 2008). The purpose of total rewards strategy is to align and integrate all reward practices and systems in a meaningful way that serves the purpose of organizational benefits and individual benefits. As Armstrong and Brown (2006) state Employee Total Rewards strategy eventually builds upon a relationship between employers and employees in which the first ones are providing a holistic and effective range of rewards and the second ones offer the time and the effort to improve their performance and productivity. Thompson (2004) adds that the benefits of such a strategy are numerous; first of all, the organization manages to achieve efficiency through properly allocating and providing rewards, secondly, the strategy becomes fully integrated with the corporate mission and vision and allow for a high performance culture to develop, thirdly, it generates maximum return on the reward investment on the part of organizations and finally, it is the most effective and successful way to appraise employee performance through appealing to all levels of motivational incentives. Conclusions Employee engagement is a significant construct in the entire organizational performance and productivity framework. Engaged employees are passionate, committed and attached to both the organizations and the organizational objectives and the rents from such relationships are beneficial for the firms as well as for the employees themselves (Macey and Schneider, 2008). Increasing employee engagement (or in some cases building employee engagement) is a critical process that involves the involvement of all organizational levels with regards to appraising, recognizing and valuing employees’ performance and productivity. One of the highly credited practices in the hands of organizations and management is the development and implementation of employee reward systems (Brown, 2008). Reward management is a systematic approach of the organizations to evaluate and appraise employee performance on the basis of various criteria and performance measures. Despite the fact that until recently, rewarding systems were directly associated with the financial pay and money compensation benefits), empirical evidence has proven that individuals place greater value on a more holistic approach that besides base pay or contingent pay, emphasizes intrinsic rewards such as recognition, working conditions/environment and responsibility or autonomy (Thompson, 2004). Total Rewards strategy is an integrated strategy with the overall business strategy that aligns and combines the different rewarding systems or procedures or policies deployed by organizations in a systematic application of appraisal. Total reward strategy offers a number of benefits to firms, varying from increasing efficiency to actualizing a consistent and coherent attempt to value the employees/the assets of the organizations. List of References Armstrong, M. (2004). Employee Reward: people and organizations. Third Edition. London: CIPD Armstrong, M. and Brown, D. (2006). Strategic Reward: making it happen. London: Kogan Page Limited Armstrong, M. and Stephens, T. (2005). Employee Reward Management and Practice. London: Kogan Page Limited Brown, D. (2008). Measuring the Effectiveness of Pay and Rewards: the Achilles’ heel of Contemporary Reward Professionals. Compensation and Benefits Review, 40(5), pp. 23-41 Higgs, M. (2006) The Emerging Significance of Total Reward Management as a Strategy for Building Employee Engagement. Working Paper: 2006 04 [Online]. Available at: http://www.henleymc.ac.uk/elibrary/hwpr02.nsf/b0c1d5d794a2a65080256da60047e9ab/a726b0494eba72148025721e0054e733/$FILE/HRN%202006%2004.pdf Johnson, M. (2004). The New Rules of Engagement: Life work balance and employee commitment. London: CIPD Little, B. and Little, P. (2006). Employee Engagement: Conceptual Issues. Journal of Organizational Culture, Communications and Conflict, 10(1), pp. 111-120 Macey, W.H. and Schneider, B. (2008). The Meaning of Employee Engagement. Industrial and Organizational Psychology, 1(1), pp. 3–30. McBain, R. (2007). The practice of Engagement: research into current employee engagement practice. Strategic HR Review, 6(6), pp. 16-19 Seijts, G.H. and Crim, D. (2006). What engages employees the most or, The Ten C’s of employee engagement. Ivey Business Journal, March/April, pp. 1-5 Saks, A.M. (2006). Antecedents and consequences of employee engagement. Journal of Managerial Psychology, 21(7), pp. 600-619 Stairs, M. (2005). Work happy: Developing employee engagement to deliver competitive advantage. Selection and Development Review, 21(5), pp. 7-11 Thompson, P. (2004). Total Reward. London: Chartered Institute of Personnel Development Read More