Positive and Negative Aspects of the State of Georgia's Reward System - Case Study Example

TABLE OF CONTENTS TABLE OF CONTENTS 1 Executive Summary 2 Introduction 3 Aim of the Report 9 Scope of the Report 9 State of Georgia Team Based-Reward System 9 Positive Aspects of the State of Georgia’s Reward System 10 Negative Aspects of the State of Georgia’s Reward Systems 12 Conclusion 13 Recommendations 14 Executive Summary This report discusses the significance of reward systems, its purpose and the features of a good reward system. It also discusses team and individual reward strategies and how these can be used to add value to organizational change and success. Reward system is discussed and important components of good reward systems are listed and discussed. Team based rewards is defined and discussed in several areas such as; the reasons for adopting team based rewards, the five factors need to be considered in establishing team-based rewards: the phase of a team life cycle, compensation and acknowledgment categories, the type of teams, type of the company and the culture of the team and organization. A review of the background, aim and scope of the report are first discussed so that team-based rewards are understood as important motivators to accomplishing organizational objectives. The report then discusses about the case study performance management system. It indicates the positive and the negative aspects of the performance management system of the organization. The conclusion and recommendations are also discussed in the report. Introduction According to Cardy (2004, pg. 3), performance management is a serious and necessary part for individual and organizations effectiveness. Performance management is a practice needed for improvement to happen in an organization. Armstrong, (2000 pg. 3) notes that performance management can improve team building. It can also get individuals to be acquainted with the importance of working well with their coworkers Armstrong (2002 pg. 3) notes that employee reward is about how employees are rewarded in concurrence with their value to a company. It is concerned with both monetary and not monetary rewards and embraces the values, plans, policies and processes used by company to expand and preserve reward systems. A reward system has monetary rewards (fixed and variable pay) and employee benefits, which together include total payment. The system also includes non- monetary rewards (recognition, praise, achievement, responsibility and personal growth) and, in many cases, performance management processes. The mixture of financial rewards, employee benefits and non financial compesation comprises the total reward system. (Armstrong, 2002, p.4). Kerr & Slocum, (1987, p. 99) cited that reward systems are concerned with two major issues which are; performances and rewards. Performance includes defining and evaluating performance and providing employees with feedback. Rewards include bonus, salary increases, promotion, stock awards and perquisites. Barton and Locke (2000) cited in (Bartol and Srivastava, 2002, pg. 3) recognized several important features of organizational reward systems that are useful for motivating persons and teams to carry out the targeted behaviors. These factors include, but not limited to, perceived fairness of rewards, employee setting challenging goals in order to achieve the appealing rewards, and practices that insure that employees have elevated self efficacy for performing the tasks. For the reward systems to ne effective and meet these criteria, two key fundamentals are that it should be possible for the reward provider to monitor or record the target behavior and assess its value. Team Based Rewards Armstrong (2000, pg. 23) defines team based rewards as financial or non-financial payments or rewards or both offered to members of an officially established team or group, which are connected to the performance of that team. According to Mathia & Jackson (2008, pg.402), group or team reward systems use different methods of compensating individuals. This includes wages and salaries in addition to the other rewards. Most organizations that use group /team incentives continue to pay individuals based either on the job performed or the individual’s competences and capabilities. Reasons for Adopting Team Based Rewards Dematteo, Ebby, & Sundstorm, (1998, p. 143) notes that, several factors have contributed to the growing popularity of team rewards. One of the reason is growing interdependence between jobs, change in the way work is organized, the flattening of organizations and changing technology have created interdependencies between jobs and tasks which often make it difficult to separate the contribution and performance of individual workers. On the other hand, Dematteo, Ebby, & Sundstorm, (1998, pg. 144), in referring to Gomez-Mejia & Balkin, (1992) notes that, other researchers have also demonstrated that it is extremely difficult for a supervisor to evaluate a employees performance without being influenced by other employees within the group. When task are interdependent, performance may be more accurately and reliably measured at the group rather than individual levels. According to Bartol and Srivastava, (2002, pg. 4), organizations have moved towards team based rewards to avoid some of the limitations of large group level rewards such as gain sharing. Small group incentives offer a more direct “line of sight” between performance and rewards than large groups plan, and therefore may be more powerful motivators as stated by Dematteo, Ebby, & Sundstorm, (1998, pg. 144), in referring to Lawler, (1981); Vroom (1964); and Wilson (1990). Berger, & Berge (2008, pg. 264) Says that, rewards based on team performance will always affect the organization ability to attract, retain and motivate employees and will mold the corporations culture. Team compensation plans should be chosen when they are consistent with both the nature of organization and the team. Factors Influencing the Effectiveness of Team-Based Rewards Dematteo, Ebby, & Sundstorm, (1998, pg. 154), suggests that the effectiveness of team-based rewards depends on the following factors; Reward characteristics – The key features of team reward systems include size of reward, frequency of payout and rewards allocation procedures. Dematteo, Ebby, & Sundstorm, (1998) states that regardless of differential contribution among the members and the equity norm where the team rewards are distributed proportional to the contribution of the individual (Dematteo, Ebby, & Sundstorm, 1998 pg. 155). Reward size is associated with pay and satisfaction and motivation. It is resoanable to expect that reward size and the amount of pay subject on group perfomance will be related with higher motivation and group performance. With big amount of pay contingent on group performance, it is in the groups interest ot work willingly together to achieve higher additional benefits. Frequency of payout is the rate which the rewards are distributed. The stronger and more reliable the connection between pay and performance, the more motivational the rewards will be to the teams. Reward allocation procedure is the allocation rule used to allocate the rewards to the groups. There two allocation rules that may be used to allocate rewards are the; the equality norm whereby the rewards are divided equally regardless of differential contribution among the members and the equity norm where the team’s rewards are divided proportional to the contributions of the individuals. The choice of preferred allocation plan is often dictated by situational factors. Team characteristics – the key feature here are; task interdependence, between team interdependence, team size, stage of group development, type of team and team composition. (Dematteo, Ebby, & Sundstorm, 1998 pg. 160). Task interdependence refers to the level of task-driven communication among group members. Understanding this is important when considering group rewards because of its influence of task interdependence on the suitability of alternative rewards strategies. As independence among team members rises, contributions of individuals become more entangled, making it difficult to separate achievement of individual team members. Therefore the use of team based motivation may be more appropriate than individual incentive. Between team interdependence is the extent to which team performance is contingent on the performance of other teams in the organization or the level of integration across teams. Team based rewards are mostly successful when the work of the team is relatively independent of other teams. Team size is also an important variable in understanding the effectiveness of reactions to team-based plans primarily because of the influence of group size on the plans ability to motivate team member. As group size enlarges, individual performance further removed from the amount of reward, losing ground the line of sight between pay and performance. Stage of group development - The successfulness of a team reward system may differ with the developmental progress of the group, and best possible incentive characteristics may depend on these developmental factors. Team type – the effectiveness of team based rewards will be increased when the pay and reward systems used are aligned with the team type. Team motivations are more likely to be successful for teams with clear, measurable output or objective such as project or self managing teams. Team composition – the composition or mix of members’ personality, ability and others characteristics has figured important in research on small groups. Team heterogeneity is important to the effectiveness of team rewards because of its possible connection with supposed inequality in teams. Organizational characteristics - According to Dematteo, Ebby, & Sundstorm (1998, pg 157) Organizational characteristics include, organizational culture, congruence among rewards, strategy and subsystems and structural characteristics. Organizational culture – This is a consensus regarding how to conduct business, embodied in the organization norms and values (Kotter & Heskett, 1992). This may play a serious role in the success of team-based reward program. Certain cultural values tend to support the use of team rewards therefore the degree to which the culture of an organization is collectivistic against individualistic is likely to decide how receptive employees are to reward practices based on team rather than individual performance. Congruence among rewards, strategy and subsystems – Effectiveness of a pay system and its contribution to an organization’s performance may depend on its fit or similarity with organizational and performance management strategies. Structural characteristics – the success of team reward system may also depend in part on structural characteristics of organization that exist at the time of introduction. It may also depend on other organizational interventions introduced parallel with team rewards. Individual differences – According to Dematteo, Ebby, & Sundstorm (1998, pg 157) ability and need for achievement. Ability – Group members perceptions of their ability and contribution to the teams output may be a critical variable in understanding differential reactions to team based rewards. Need for achievement – This reflects both a motive outline and value or preference for certain categories of tasks. As a motive pattern, need for achievement arouses individuals to look out for situations where he or she can add a sense of achievement through individual effort. Aim of the Report This report is aimed at assisting the Georgia’s Department of Human Resource at being able to update its performance management system to a better level whereby they can be able to evaluate its employees better and have an effective and efficient reward system. Scope of the Report This report covers the reward systems, it purpose and components of good reward systems. It also discusses about team based rewards and some of the reasons why organizations adopt team based rewards. The report discusses the positive and negative aspects of the Georgia reward systems. State of Georgia Team Based-Reward System The state of Georgia’s department of Human Resource reward system should have the following components for it to be effective and efficient. Armstrong (2002, pg. 4) indicates the following as the main components of a good reward system; Procedures for maintaining the system and for making sure that it function efficiently and flexibly and provide value for money. Processes for computing the value of jobs, the contribution of individuals in the jobs, and the assortment and level of employee benefits to be provided; these process includes; job evaluation, market rate analyses and performance management. Structures for relating pay and benefit level to the value of position in the organization and for providing range for rewarding people according to their performance, ability, skills and or experience. Practices for inspiring people by the use of monetary and non- monetary rewards; the monetary rewards consist of base and variable pay and employee benefits and stipend and non- monetary rewards consist of; effective management and leadership, the job itself and the opportunities given to employees to build up their skills and careers Schemes for providing financial rewards and incentives to people according to individual groups or organizational performance Positive Aspects of the State of Georgia’s Reward System Manager training – By training the managers, the state of Georgia HRM department improves the accuracy in using the updated performance management system. The managers become more efficient and effective in performing the performance valuation of the employees. According to Marx (1963, pg. 433) corporations spend a great deal of time and money on management development training. Programs ranging from leadership training to communication skills are conducted in the hope of enhancing the effectiveness of managerial behavior and skills. The state of Georgia department of human resources by training its managers in using the system, It will have made the work of the managers easier in performing the employees evaluations. This will enable the managers to attend to their other duties without putting too much time on the evaluation only. Performance coaching – Wilson (2007 pg. 7) defines performance coaching as a process which enables people to find and act on the solution which are the most congruent and appropriate for them personally. This is achieved through dialogue between the managers and employees. By including this process in the performance management system of State of Georgia HRM department the managers are able to document the observed performance of the employees, they are also able to provide regular feedback based on the information gathered from their personal observation, team work input and input from the employee. By documentation this information the HRM department of state of Georgia will be able to effectively and efficient reward its employees with less difficulty. Performance planning – Grote (2002, pg. 21) defines performance planning as a conversation. It is the first step of a successful performance management process. Performance planning naturally involved a meeting between a manager and the employee whereby they discuss about the employee’s job duties, goals and objectives that need to be attained, suitable individual development plan and identifying important competencies that the employee must demonstrate in doing the job. Giving employees opportunities to contribute in assessments of their performance allows them to have a say in the direction of their development (Grote, 2002, p.23). The State of Georgia HRM department performance management system has this process in their system therefore performance evaluations will be more efficient and effective. Salary Increase – salary raise can be expected to have a positive incentive impact on performance if it is viewed as significant by the employee and its receipt is seen as dependent on successful performance (Dyer, Schwab & Theriault; 1976, pg. 233). By including salary increase in the performance management system of State of Georgia DHR, the organization is able to monitor employee’s eligibility to salary increments. According to the case study, for an employee to be eligible for salary increase he or she should have received an overall rating; for job and individual responsibilities of at least met expectations and terms and conditions of employment of at least needs of improvement. By including the salary increase in the reward system, the organizations will be able to compensate / reward their employees by the level of performance which will be indicated in the organization management system. Negative Aspects of the State of Georgia’s Reward Systems Performance Evaluation - Regardless of how performance assessments are governed, the procedure can set up an unintended rivalry between supervisor and workers and amongst employees, especially when trust is lacking. These can adversely affect the working environment and team building. Since the performance evaluations in the State of Georgia is done from top down, employees can feel "blamed" for situations beyond their control this can make employees not to look ahead to performance evaluation, feeling they are going to be poorly evaluated. In the State of Georgia DHR the performance coaching involves ongoing communication both formal and informal. Manager and employee may develop a personal friendship outside of work. If both parties can't differentiate their manager-employee position from their friend-friend association this can lead to biased performance evaluation of the employee. To administer the performance coaching in the state for Georgia, managers evaluate team input. This makes employees see themselves as part of a group. Group members are supposed to hold one another, be supportive in good and bad periods. But when the manager has to present negative feedback or discipline the employee, these actions are viewed as conflict-ridden. Annual salary increase is based on performance evaluation. In the state of Georgia, performance evaluations are provided frequently. Annual (or even less periodic) appraisal can be based on most current performance, not performance over the course of the year. The result goes both ways. Employees who put on unsurpassed behavior around assessment time get good evaluations and the employee who has a bad couple of weeks gets penalize. According to the state of Georgia salary increase system, where a department has exceeded its allocated funds, salary increase amount also reduced. This ordinarily reduces the percentage on salary increase. This can be a de-motivation of highly performing employees within the department Conclusion Human beings are assumed to be political in nature. They work for their own significance. It is therefore significant for an organization to have a high-quality reward system in place so as to motivate its employees. State of Georgia in its earnest to achieve this has based their reward system on performance evaluation. Performance evaluation involves rating employees as per their performance to ensure they met or exceed the organizations stipulated expectations. State of Georgia rewards their employees’ performance by increasing their salaries annually. This can lead to motivation or de-motivation of the employees based on how it is administered. It is therefore important for management to develop a good performance management process that will ensure employees exceed company expectations. Recommendations If Performance evaluation is well administered it can create a sincere give-and-take regarding opportunity and performance can help an organization grow and move forward. Since in state of Georgia performance is administered from top down, employees should be allocated the mandated authority so as to successfully carry out their responsibility. Therefore management can assess by looking at the employee's performance based on specific goals, making measurement easier. According to the state of Georgia salary increase system, where a department has exceeded its allocated funds, salary increase amount also reduced. This ordinarily reduces the percentage on salary increase. This can be a de-motivation of highly performing employees within the department. Therefore manager should be charged with the responsibility of administering departmental funds. Any deficit thereon should be held responsible. The state of Georgia should give time lines within which performance evaluations should be undertaken. Employees below a certain pay grade should be evaluated within three months and others above pay grade should be evaluated within six month. Based on these timely performance evaluations annual salary increments can then be allocated as per the company policy. Bibliographies Armstrong, M. 2002, Employee Rewards. London : CIPD House. Armstrong, M. 2000, Rewarding Teams. Bristol. Armstrong, M., Murlis, H., & Group, H. 2004, Reward Management: A handbook of remuneration strategiy & practice. Philadelphia: Kogan Page. Bartol, K. M., & Srivastava, A. 2002, Journal of Leadership & Organization studies. Encouraging knowledge sharing: The role of organizational reward systems , 3. Berger, L. A., & Berger, D. R. 2008, A state od the art guide to compesation strategy and design. USA: McGraw Hill. Cardy, R. L. 2004, Performance Management: concepts skills and exercises. New York: M.E Sharpe Inc. Dematteo, J. S., Ebby, L. T., & Sundstorm, E. 1998, Team Based Rewards. Burrent empirical evidence and direction forfuture research , 143-146. Dyer, L., Schwab, D. P., & Theriault, R. D. 1976, Managerial Perceptions regardinf salary increase criteria, 233. Grote, R. C. 2002, The perfromance appraisal question and answr book: a survival guide for manager. New York: AMACOM. Kerr, J., & Slocum, J. W. 1987, Managing Corporate culture through reward systems. Academic of managment executive , 99-108. Marx, R. D. 1962, Relapse Prevention for Managerial Training: A Model for Maintenance of Behaviour Change. Academy of Management Review , 433. Mathis, R. L., & Jackson, J. H. 2008, Human Resource Management. USA: Thomason south-western. Walden, M., & Thoms, P. 2007, Battleground:Business. Connecticut: Greenwood. Read More