Individual Parts of Reward System - Report Example

REWARD SYSTEM Executive summary This report discusses rewards and reward systems. Rewards vary with the nature and scope of an organization; it alsodepends upon employee performance and employee value in an organization. Reward includes all monetary, non-monetary, and psychological incentives that an employee gets for his/her efforts and time. A reward system is supposed to gratify both financial and psychological needs of an employee; therefore, it is one of the central systems of an organization and needs to be carefully operated. There are two types of rewards extrinsic rewards and intrinsic rewards, for which an employee desires. Extrinsic rewards are financial rewards whereas intrinsic rewards are psychological awards, such as employee’s satisfaction and social interaction. Reward systems have three major goals which are the following: to increase the intake of potential employees by attracting them, to extract good work performance from current workforce, and to preserve employees’ loyalty towards the organization. An efficient system should be capable enough to identify and reward employees’ two important types of activities, which are behavior and performance. Rewarding performance is comparatively very easy, whereas rewarding behaviors is quite challenging for the organization. While designing the reward program, a manager should integrate organization’s goals with individuals’ goals of self-growth, recognize desired employee performance and attitude, determine assessment criteria of employees’ performance and attitudes based on their previous performances, determine suitable appraisals and rewards, and communicate reward program to employees. Rewards systems plays a vital role in determining employees’ behavior and work pattern which are the ultimate drivers of an organization’s profit therefore these systems should be very efficient and updated any flaw in the system can badly affect organization’s goodwill and market position. Introduction Employees need a pay back for their efforts made in an organization, they don’t work for free. Organizations have to compensate them for their time and energy in some way; people used to call it pay, than remuneration, in today’s world it is often known as rewards. Reward is a quite broad term; it includes all monetary, non-monetary, and psychological compensations that an employee gets for his efforts and time. It seems to be difficult for an organization to satisfy employees in all these three aspects but in actual it is not a rocket science, it just need a little effort by an organization to think on it and deliver desirable and deserving reward (Bratton & Gold, 2007). Rewards vary with the nature and scope of an organization; it also depends upon employee performance and employee worth, its simple employees get more appraisals if they achieve their required targets and sum of rewards increases with promotions. A reward system supposed to cater both financial and psychological needs of an employee; therefore it is one of the important systems of an organization and needs a lot of attention to be carefully operated as an ignored and deserving pay back value may result in lack of motivation for an employee to perform well (Torrington, Hall, & Taylor, 2005). Types of Rewards Money is a basic need for every individual but not everything for which employees work, there are many other needs which need to be identified for brining in new workers and sustaining the existing ones. Reward is an achievement for an employee that he evaluates against his performance, therefore timely and sufficient rewards are very important not only for sustaining employee and his performance but also for organizational growth (Bhattacharrya, 2009). There are two types of rewards extrinsic rewards and intrinsic rewards, for which an employee desires. Extrinsic rewards are monetary rewards which fulfill the basic needs to survive, it is often known as financial rewards. These types of rewards allow an employee to carry out his expenses like bills, rent etc; and provide him job security and recognition. Basically, through extrinsic rewards employees get income to survive, a feel of stability, and a motivation that workplace values their efforts. Whereas intrinsic rewards are those rewards which includes job satisfaction, gratification, a sense of carrying out tasks proficiently, and social interaction which is a gift from work place. These are the most important types of rewards in terms of measuring self-efficacy. These types of rewards are also known as psychological rewards (Wiley, 1997). Objectives of Rewards Reward systems usually have three objectives which are to increase the intake of employees by attracting them, to extract good work performance from existing employees, and to preserve loyalty towards the organization. A reward system is planned to attract new skillful employees; to stay competitive, to generate more ideas to become more efficient whereas it is also intended to sustain existing worthy employees who are currents assets of an organization and ultimate profit-generators. Reward systems are also intended to maintain and increase performance of existing employees. It serves the purpose of motivation to employees; motivation positively changes the work pattern and encourages employees to work efficiently and help them to be more competent in their way of performing challenges (DeCenzo & Robbins, 2005). Rewards system also intends to sustain and strengthen the loyalty and psychological contract of employees with the organization. It refers to the behavior of employees an organization wanted to see in its employees. Winning Reward Systems Every organization needs to provide rewards to its employees for their input, for that organizations need a strategic reward system to address compensation, benefits, recognition and appreciation linked to employees’ performances. An efficient system should be capable enough to identify and reward employees’ two important type of activities which are behavior and performance. These two types of activities determine organizational performance as a whole (Newman & Hodgetts, 1998). Performance based activities are usually easy to identify and reward because of the direct relationship between the targets an organization initially sets for its employees and the ultimate outcome they provide. Measuring results against goals is the easiest and popular way to evaluate employees’ performance; therefore rewarding performance is generally very easy. Rewards based on performance act as a motivational factor to perform well. Whereas rewarding behaviors is quite challenging for an organization, but it can overcome the hurdles by identifying desirable behaviors an organization wanted to see in its employees, which need to be followed up by setting behavioral rules and targets so one can work accordingly; if an employee meets behavioral targets than he supposed to be rewarded by the organization and if he doesn’t meet the targets, he is supposed to compensate for it. In this way organizations can reward the right person at right place (Bhattacharrya, 2009). Major Considerations in Designing a Reward Program While designing a reward program a manager should be very careful, he should consider all key points that need to be identified and incorporated in the design of reward program. A manager should consider following points while designing a reward program (Bhattacharrya, 2009): Integration of organization’s goals with individuals’ goal of self-growth that a rewards system will support. Recognition of desired employee performance and attitude that will strengthen strives to achieve organizational objectives and reinforce the goals. Determination of assessment criteria of employees’ performance and attitudes based on their last individual or team achievements. Determination of suitable appraisals and rewards. Communication of reward program to entire work force. Personal Opinions Every individual seeks for return in their lives, whether it is in casual life or professional life rewards play a very important role in shaping up the behavior and work tone therefore appropriate rewards should be given on time. Timely recognition is very important otherwise it may result in losing hope, low performance and commitment. In an organization rewards are the right of employees; it is the return of their efforts and time by the organization, therefore, every employee should question about timely and appropriate rewards. Rewards systems are the most important systems of an organization as it determine employees’ behavior and work pattern which are the ultimate drivers of an organization’s profit therefore these systems supposed to be very efficient and updated, any flaw in the system can badly effect company’s image and position in the market. Organizations need to set long-term incentives and rewards for its key employees to increase their commitment towards the organization and to sustain the organizational profit for long-term. Conclusion To conclude, rewards play a role of motivational factor for employees whereas for organizations it helps to retain potential employees and to increase the performance of existing employees. Reward systems identify the need of rewarding; therefore, these systems should be extremely efficient and planned in a systematic way. Why I chose this topic? This topic serves as a motivational factor for readers, as rewards are the basic outcome an individual looks for his efforts. Reward systems encouraged an employee to give his best to the organization; if a worker is not rewarded for his efforts, he loses his motivation to show hard work and perform well. Reward system is a quite interesting topic for majority, who take rewards as a driver to recognition, growth, and achievement. Being the part of majority, it sounds interesting and motivating to me as well, therefore, I have chosen this topic to develop a term report on it. References Bhattacharrya, D. (2009). Compensation Management. India: Oxford University Press. Bratton, J., & Gold, J. (2007). Human resource management: Theory and practice. Basingstoke, Hampshire, UK: Palgrave Macmillan. Wiley, C. (1997). What motivates employees according to over 40 years of motivation surveys. International Journal of Manpower, 18(3): 263 – 280. DeCenzo, D., & Robbins, S. (2005). Fundamentals of human resource management. UK: Wiley Inc. Newman, N., & Hodgetts, R. (1998). Human resource management. USA: R.R. Donnelley & Sons Co. Torrington, D., Hall, L., & Taylor, S. (2005). Human resource management. Harlow, Essex, UK: Prentice-Hall. Read More