Handbook of Reward Management Practice - Research Paper Example

Abstract In this study, we would concentrate on the reward system that is employed in Tesco to motivate their employees. In order to attain a better understanding of the motivation and reward system of the present day organizations, we would initially accentuate on the various theories of motivation and the different types of applicable reward systems. Corporate entities utilize the reward system to motivate their workforces by fulfilling the needs of their employees. The lack of understanding amongst the employers regarding how to induce all their employees, results in the inefficiency of their organizational reward system. Some of the popular theories related to motivation such as Maslow’s Hierarchy of Needs, Herzberg’s Motivation-Hygiene Theory, Fifty-Fifty theory and Expectancy theory have been discussed. The assessment of these theories gave a better understanding as to what motivates an individual at work. Tesco, being a giant retailer operating across the world, employs both monetary as well as non-monetary factors to enhance the motivation level of their employees. The study revealed that the reward system employed by Tesco has been very efficient and the company has been able to optimise the performance level of its workforces across their business operation. Introduction The depressed financial scenario and economic instability prevailing across the globe had made the reward structure following by corporate organizations an extremely contentious issue in the media. In context of the reward system, the criticism is mainly against the elevated level of bonuses and remuneration that the senior managers are being provided, in spite of the tough financial times resulting in the layoff of many employees. Nevertheless, reward system is an integral part of every corporate entity, as these are often utilized as a management device for accomplishing desirable goals and objectives. One of the major reasons for the employment of reward system is to encourage the employees to enhance their performance. Reward system comprise of both monetary as well as non-monetary benefits. Most common forms of monetary benefits include annual performance bonuses, entitlement to options or shares, and salary increments. Non-monetary benefits awarded to employees can be in the form of promotion, leaves, or augmented development possibilities. Every human being is unique, and each one of them has different needs, expectations and outlooks. As a result, no two employees might want and be motivated by the same things, and it is imperative for employers to know what encourages each employees. The motivational factors in context of employees depend mainly on where they are in terms of development. For instance, a young employee would most probably be inclined towards development prospects, whereas an experienced and older employee would be more concerned about utilizing his experience and his security. In the present day competitive world, people are becoming increasingly demanding about their lives. Consequently, employers can utilize the reward system to motivate their workforces by fulfilling these demands. Nevertheless, in general there is a dearth of understanding amongst the employers regarding how to induce all their employees. As a result, majority of the prevalent reward systems are not optimally used (Pride, Hughes, and Kapoor, 2011). Literature Review Theories of Motivation Armstrong (2010), defines motivation as the power that energies, propels and sustains performance. The theory of motivation elucidates the workings of motivation and the issues that determine its potency. Motivation theory deals with how monetary and other forms of rewards persuade an individual to behave in a certain manner. It has been widely discussed in the past that all human behaviours are motivated by unfulfilled needs. Consequently, it is crucial for organizations to understand what needs should be fulfilled by their reward scheme if they have to motivate their employees (Armstrong, 2010, pp. 20-24) In terms of managerial perspective, it is important to note that employers cannot motivate their employees; they can just influence what the employees are stimulated to do. To put it in other words, individuals perform activities because they believe that it will accomplish some present or upcoming objectives or desires one has. It is consequently, vital for corporate entities to recognise what stimulates their human resources and then attempt to append their individual goals with the ones of the organization (Bruce and Pepitone, 1998, p. 167). There are various theories of motivation that elucidate why individuals do certain things instead of others and why they act in a particular manner. Some of the popular theories related to motivation are Maslow’s Hierarchy of Needs, Herzberg’s Motivation-Hygiene Theory, Fifty-Fifty theory and Expectancy theory among others (Pride, Hughes and Kapoor, 2011). Maslow’s Hierarchy of Needs Abraham Maslow had described the motivation development in context of the needs theory, which declares that behaviour of individuals is motivated or influenced by their unfulfilled needs. Maslow had developed the renowned hierarchy of needs, according to which the needs of an individual can be segregated into five categories. These five categories are physiological, safety, social, esteem and self actualization (Pride, Hughes and Kapoor, 2011). Figure: 1 (Source: Pride, Hughes and Kapoor, 2011) The physiological needs comprises of the primary needs of an individual, for instance, water, food and sleep. The safety needs include needs like security of family, health and job etc, while the social needs comprises of family, friends and love among others. The esteem needs of an individual comprise of his sense of worth, confidence, accomplishment, respect from others and respect to others. The self-actualization needs arise from the motivation to attain one’s optimum potential, self-accomplishment and to achieve what one is capable of. According to Maslow, these needs are hierarchical in nature and an individual concentrates on the next level of needs only when his first level of need is fulfilled. Thus, when the preliminary level of needs is considerably well fulfilled, fresh needs emerge as the lead focus of motivation (Pride, Hughes and Kapoor, 2011). Herzberg-Motivation-Hygiene Theory The Motivation-Hygiene theory developed by Frederick Herzberg is also known as the two factor theory. He stated that the performances of employees are impacted by two factors, namely motivator factors and the hygiene factors. He also stated that the motivational factors result in satisfaction when they are realized, while on the other hand the hygiene factors result in dissatisfactory when they are not realised. In this context, motivator factors comprise of recognition, accomplishment, and sense of involvement, success and independence among others. On the contrary, the major hygiene factors include reimbursement, working scenario, organizational human resources policies and favourable management. It should be noted that the aforementioned hygiene factors do not result in elevated motivation level, nevertheless, the lack of these factors could result in dissatisfaction amongst the employees (Hackman & Lawler, 1971). Other Theories of Motivation John Adair formulated the ‘Fifty-Fifty Rule’ that states that half of the motivation comes from within an individual and the remaining half comes from external factors. One of the major external factors, in this context, is the employer or the higher level managers who can influence the motivation levels of their employees. However, their influence is limited, as fifty percent of the performance depends on the employee himself (Reyes, 2011). Victor Vroom came up with the ‘Expectancy theory’ which states that the level of motivation would be high if the employees can anticipate that their endeavour will lead to consequential rewards (Reyes, 2011). This implies that the motivation level would be high when there is an apparent association amid performance and the resulting reward. Motivation at Work Corporate organizations can influence the motivation levels of their employees in two ways. First, the employees can stimulate themselves on their own by carrying out activities that fulfil their individual needs. The other way of creating motivation at work is when the employer provides monetary or nom-monetary incentives or benefits to the employees. Organizations usually employ two approaches to motivate their employees. They either provide their employees with incentives or else provide them opportunities of personal development. Focussing on personal growth of their employees, the employer can alter the way the individuals look at their job. This would make the employees more capable and provide them with relevant purpose and motivation to perform their work in a better way. Thus, it can be observed that both intrinsic as well as extrinsic motivators are necessary for better performance at work. This is because only self motivated employees can be motivated further by others (Reyes, 2011). Reward System and its impact on Motivation Management theories on motivation differentiate two types of rewards, one extrinsic and the other intrinsic. Extrinsic rewards comprise of external factors such as money or verbal encouragement, while intrinsic rewards are originated within the individual. An individual is considered to be intrinsically stimulated to carry out an activity when there is no visible reward other than the activity itself or the feelings that would be generated on fulfilling the activity (Hackman & Lawler, 1971). In order to attract employees and keep them working, it is imperative for the employers to fulfil their needs such as salary and other comforts. Nevertheless, the fulfilment of these needs of the employees would not ensure that they are motivated to carry out their responsibilities in an efficient manner. For money or salary to act as a performance motivator, the employees would have to see the performance as being influential in their receiving the salary. This is normally accomplished by the corporate organizations making increments and perks conditional upon performance. Hence, it is not the monetary benefits that motivate or influence performance but instead it is the manner in which it is managed. Thus, monetary benefits can act as efficient extrinsic motivators of performance, only when they are provided contingently. Nevertheless, this approach would lessen the intrinsic motivation of individuals to perform (Hackman & Lawler, 1971). Another common approach to motivate employees’ performance is the participative approach where participation and responsibility augmentation is utilised to stimulate the intrinsic motivation of employees. Such an approach tends to motivate efficient employee performance and simultaneously fulfils the needs of the organization on the whole (Hackman & Lawler, 1971). The optimal form of reward system is one that provides monetary rewards to employees without decreasing their intrinsic motivation level. Thus, it is favourable that organizations focus on structuring responsibilities and situations to stimulate intrinsic motivation instead of structuring contingent payment structures. This would ensure that the employees are intrinsically motivated and they would try to fulfil their higher-order needs by means if efficient performance. Simultaneously, the non-contingent nature of monetary payments would fulfil their basic needs and keep them in the organization. Concurrently, the monetary benefits would assist in keeping the higher-order needs prominent as well as relevant by fulfilling the subordinate ones (Alderfer, 1971; Deci, 1972). Analysis Motivation and Reward System in TESCO Since its inception, TESCO has expanded dramatically across the world. Presently having more than 2200 numbers of stores at different locations including hypermarkets and express outlets the company caters to the different needs and requirements of customers. Known for its continuous efforts towards meeting the changing preferences and needs of customers, TESCO acts as a conglomerate offering alternative goods and services also, including insurances, online and banking services. Merging as one of the largest British retailers, TESCO accounts for making net profits of more than £3.4 billion. Spread across three different continents the company presently employs a workforce of over 468,000 numbers of employees (TESCO, 2010, p.105-106). The huge workforce of the company has considerably worked towards its growth, success and prosperity. It also reflects the high motivation kevel and potential of staffs in the organization. TESCO is an organization which makes substantial investments in keeping its staffs and employees motivated in order to attain their greatest participation and support towards the growth of the company. The organization functions on the belief that its business depends completely on its staffs. It appreciates the fact that its staffs are unique and possess diverse lifestyles outside their works. That is why it tries to provide as much support towards staffs helping them maintain work life balance and also provides them with adequate rewards for their contributions (TESCO, 2010, p.105-106). Some of the basic aspects which TESCO offers rewards to employees are, Flexible work timings Health benefits free of cost or at reduced rates Gym membership with discount Competitive salaries, Discounts for staffs, and Company share options (TESCO, 2010, p.105-106). TESCO tries to devise human resource strategies considering the motivational aspects of workers. Motivation can either originate from personal interest or can even stem from external factors such as rewards and pays. Researchers have suggested different theories for motivating employees. According to them pay is considered to be one of the primary motivators in organizations. Some of the other motivating factors include, Recognition and appreciation for hard work, Responsibility and achievement; Sense of achievement; Opportunities of growth and advancement; and Challenge and enjoyment (TESCO, 2010, p.105-106). The idea behind devising HR strategies catering to the above requirements of the workforce is based on the ground that a motivated workforce works harder and tries to achieve greater output within less time, which subsequently results in reduced costs of labor. A motivated worker also requires less supervision and takes pride in his work. This makes a greater and improved impact on the customers of the business. Having higher concentration levels in their work, a workforce which is motivated makes lesser mistakes. He is also not likely to be involved in organizational conflicts and rather focuses on his work activities more in the organization. This reflects through the quality of his work and the efficiency with which he carries out his work activities in the organization (TESCO, 2010, p.105-106). Motivational Theories and practical applications in TESCO According to Taylor’s motivational theory, which accounted for one of the oldest theories of motivation, workers were paid according to the units of work produced. It was assumed that the sole reason people worked for was money. That is why workers were paid according to the piece rate system, i.e., he was paid according to the number of items he produced. However, it was soon found that though this strategy was able to yield short term improvement of productivity and profitability in business, it worked little in the long run. Workers were not able to apply their creative skills and found no encouragement or opportunity for applying their skills at all. This led to deterioration of motivation level in the organization, and frustrations at the workplace. Soon this was changed and TESCO devised a pay structure which was not only motivating for employees but was much more than that suggested by Taylor. Pay structures were established at competitive standards in the industry (TESCO, 2010, p.108). Tesco’s rewards and benefits schemes can be explained using the motivational theory of Maslow. According to Maslow, the lowest order need for individuals are basic and physical needs. TESCO seeks to fulfill the basic needs of employees by providing them with regular monthly pay on time and providing them with their basic amenities at the workplace. This includes such essential facilities such as restaurants, lockers and also personal belongings. The second order need of individuals as proposed by Maslow is security needs. This is provided by TESCO through the formal contracts of employment while recruiting employees. Apart from the fixed monthly pay, TESCO provides sickness and pension schemes. They are also allowed to join the workers union if they will to do so. This is not only effective in creating a sense of belongingness of employees at the workplace but also ensure their safety and wealth at the workplace (TESCO, 2010, p.108). The next order need up the hierarchy proposed by Maslow is the social needs of individuals. The social needs of employees are satisfied by the company by encouraging team work and group activities at various levels of the organization. The “steering wheel” of the company assesses and evaluates group work and also allows members belong to different nations to work in groups in the form of virtual teams. Working conditions also account for the social needs of employees. This is achieved by providing safe and sound working conditions where employees are able to work comfortably without hurdles and blockages. Two of the highest order needs proposed by Maslow are self esteem needs and self fulfillment needs. The company tries to boost up the self esteem and self worth of people by emphasizing on respect using team work and group activity. Such activities encourage respect for others and generate conditions where others’ works can be praised and appreciated. The company incorporates and establishes the 360 degree feedback and appraisal system, self assessment system in order to recognize the contributions and work of employees and celebrate their achievements (TESCO, 2010, p.108). By doing this, it not only helps to encourage people to work even better and attain superior quality of services but also enjoys and celebrates their positive contributions towards the organizations. A boost to the self esteem and self worth of individuals in nothing but a boost to the motivation level of employees. A higher level of motivation of employees only ends up in higher and improved level of performance and productivity in the organization (TESCO, 2010, p.108). The final and the highest order need in Maslow’s hierarchy is self fulfillment. Such needs of individuals in the organization are attained by Personality Development Plans, in which the company takes the initiative to recognize the talents and skills of employees, provides them with opportunities and scope of advancement in their careers and career progression in the organization. Discussions about careers and career advancement opportunities of employees are done in the talent planning meetings devised by TESCO (TESCO, 2010, p.108). In this context, it must be mentioned that the fast track management program was devised by TESCO to allow and provide a route to the capable and qualified staffs of the company to attain higher levels in the organization. This program was essentially motivating for employees who deliver high level of performance in the organization. This is the highest order need in the hierarchy and is very vital for the highly qualified and crucial talents in the company. Retaining such critical talents is difficult as they are rare and in highly demand in organizations. It is vital to retain such talents as they account for critical success factors in the organization and also competitive positions of the organizations in the markets. It is important to keep this rare group of talent motivated and participative in the organization. Thus, the above strategies play a vital role in appreciating the contribution of this group of people and encouraging them to sustain their positive performance at the workplace on a constant basis (TESCO, 2010, p.108). Apart from the motivational factors which directly enhance the productivity and performance of employees, TESCO also makes investments on employee privilege cards using which aims to appreciate employees’ loyalty towards the organization. The main reason behind this is to retain potential and crucial talents in the organization. Using this card, employees can avail 10% discounts on all products produced by TESCO (TESCO-a, 2009). The company also arranges for other discounts and special offers only for the employees of the organization. Discounts are available on theme parks, gym membership, holidays throughout the year for all employees. Additionally the company tries to bring about work life balance for employees by introducing a range of policies for them. This includes money saving schemes with childcare vouchers in which employees can take time off from their work activities and take a break in their careers. Such options are made available to employees to support their lifestyles (TESCO-b, 2009). The company implements particular training and development opportunities for employees catering to their individual needs and requirements. These programs vary according to the training needs of employees. This is particularly because of the fact that employees at different levels require different training requirements. The right kind of training at the right time helps them to move forth in their careers and keeps them motivated in their present positions. It is the success of the training programs which get reflected through the fact that 80% of the management roles on TESCO gets filled up by existing members of the organization (TESCO-c, 2009). The above strategies taken by TESCO can also be compared with the hygiene factors and satisfiers of Frederick Herzberg’s motivational theory (TESCO, 2010, p.108). While employee empowerment, training and development, communication and delegation of work responsibility toward staffs account for major satisfiers; aspects like benefits and pays, administration and company policies, relationship between employees, working conditions, security at the workplace account for the major hygiene factors for them. It shows the initiatives and efforts made by TESCO to reward its employees and subsequently attain their confidence, trust and contributions towards the organization (TESCO, 2010, p.108). Conclusion It is seen that employee motivation accounts for one of the major responsibilities of managers in the organization. There has been a dramatic change in the earlier concepts about motivation which assumed only pays motivated workers to perform better. However, this concept has gradually transformed and reflects through the motivational strategies undertaken in TESCO and its implications in the organizational performance and productivity. Apart from monetary benefits, TESCO provides a great deal of non monetary benefits in the form of incentives, rewards, bonuses etc. A great deal of importance is provided to enhance and improve work life balance of employees. TESCO’s motivational strategies are abided by Herzberg and Maslow’s motivational theories. A step by step advancement of individual needs and requirements is followed in TESCO beginning from meeting the basic needs of employees and ending in catering to their self fulfillment needs. This is done by providing regular and timely payment of salaries to employees who meets their lowest order needs to offering of self development plans which meets the highest order needs of employees to reach the highest level in their careers. Such schemes as healthcare benefits, pension plans, working conditions, safety and security at the workplace also account for meeting the middle order needs of employees such as social needs and security needs. The needs can also be compared as the hygiene factors and satisfiers proposed by Herzberg. The company provides opportunities for employees and managers to take greater interest in their own careers and career advancements. The study reveals that TESCO has attained success in motivating its employees through the above strategies and gaining their participation and contributions towards the organizations. Reference Alderfer, C. P. (1971). Human Needs in Organizational Settings, New York: Free Press. Armstrong, M. (2010). Armstrong's Handbook of Reward Management Practice: Improving Performance through Reward. USA: Kogan Page Publishers. Bruce, A., & Pepitone, J. S. (1998). Motivating Employees, USA: McGraw-Hill Professional. Deci, E. L., (1972). The Effects of Contingent and Non-contingent Rewards and Controls on Intrinsic Motivation. Organizational Behavior and Human Performance, Vol. 8, pp. 217-229. Hackman, J. R., & Lawler, E. E. (1971). Employee Reactions to Job Characteristics, Journal of Applied Psychology Monograph, Vol.55, 259-286. Pride,W. M., Hughes, R.J., and Kapoor, J. R. (2011). Business, USA: Cengage Learning. Reyes, M. (2011). Employee Motivation: Do Incentives And/or Threats Really Help to Motivate Employees? USA: GRIN Verlag. TESCO. (2010). Motivational Theory in Practice in TESCO. The Times 100. Retrieved on May 12, 2012 from http://download.businesscasestudies.co.uk/retrieve_tesco_15_dGVzY28vY2FzZS1zdHVkaWVzLzE1L2JyaWVmLnBkZnx8. TESCO-a. (2009). Staff Privilegecard. Retrieved on May 12, 2012 from http://www.tesco-careers.com/home/working/rewards-and-benefits/staff-priviledgecard. TESCO-b. (2009). Supporting your lifestyle. Retrieved on May 12, 2012 from http://www.tesco-careers.com/home/working/rewards-and-benefits/supporting-your-lifestyle. TESCO-c. (2009). Training & Development. Retrieved on May 12, 2012 from http://www.tesco-careers.com/home/working/training-and-development. Read More