Reward Systems Available to Schweppes Australia Inc - Case Study Example

1.0 Introduction Reward management can be defined as formulating and implementing strategies as well as policies with the aim of rewarding employees equitably, fairly as well as consistently in line with the value of an organization. This process comprise of analysis and control of remuneration of employees as well as their benefits. Reward management aims at developing an efficient reward system for an organization. In the present competitive business environment, organizations are doing their best to improve the quality of their products while trying to reduce the cost of production. Meanwhile, the job market is becoming competitive and as much as the business is trying to get the most from their employees, the employees are looking for more from their employers (Armstrong, 2012). Human resource is becoming a core competence for every organization and as such, organizations are trying their best to maintain their human resource. Reward management systems are one of the best methods of maintaining employees and motivating them to change their work habit for the benefit of the organization. This report will discuss the types of reward systems available to Schweppes Australia Inc, the suitable reward system for the organization, the reward managements systems most suitable for working staff, the most valuable rewards for the staff and how the recommended management system is linked to the organization business strategy (Fyffe, 2007) ". 2.0 Company profile Schweppes Australia is a wholly-owned subsidiary of Asahi Group Holdigs. It creates manufacturers, distributes, sells and markets a wide variety of non-alcoholic ready to drink cordials and beverages aimed at meet all customers thirst-quenching and refreshments needs. the main functional departments includes Finance, IT, marketing and sales, distribution and procurement, manufacturing, Science and Technology, Legal, Tax, Treasury and risks, human resource and corporate affairs. The company’s customers include corner milk bars, large retail shops, hotels, restaurants, petrol stations, cafes, hotels, restaurants, news agents and takeaway outlets. The organization has over 1500 employee across the country and although their roles vary greatly, they all share a great passion for their brand, initiative, courage, accountability and the drive to succeed. So as to protect their reputation, they expect that all their employees to operate with high degree of integrity (Schweppes Australia,2014). 3.0 Types of rewards available to Schweppes Australia According to Bolton (2013), A reward can be defined as anything tangible (extrinsic) or intangible (intrinsic) that a firm extends to its employees either intentionally or otherwise in exchange for their employee’s contribution of their skills and ability to the workplace. Rewards have several purposes in an organization including retaining good employees, being a better employer than your competitors, competitive strategy and to reduce employee turnover. However the main purpose of rewarding employees to increase their willingness to work in an organization as well as increase their productivity. Rewards available to Schweppes Australia can be divide into two major categories: Extrinsic Rewards and Intrinsic Rewards. 3.1 Extrinsic Rewards Extrinsic rewards are tangible awards which are given to the employees by their employers. They known as extrinsic since they are external to the work itself and it is other people who have control over their size. They are of three main types: developmental regards, social rewards and financial rewards. Developmental rewards refer to those rewards associated with career growth, personal learning and development. Examples of developmental awards available to Schweppes Australia include leadership and performance coaching and training to upgrade employees’ skills. Social rewards on the other hand refers to indirect non-cash benefits which are associated with the business climate, quality of supervision, performance support and workgroup affinity. Examples of social rewards available to Schweppes include flexible work schedules, fitness and wellness programs and staff sabbaticals. Financial rewards are defined as monetary incentives given to an employee as a result of good performance. These rewards are in line with the goals of an organization. A reward follows when a worker assist the organization to achieve its goals. These financial rewards include base pay, direct benefits and performance pay (Knouse, 2004). A base pay refers to a constant amount of money that is paid to a worker by their employee in return for the services offered. A base pay does not include bonuses, benefits or other potential compensation from an employer. Base pay is paid regularly to a paid employee. An employee who is paid a base salary is expected to complete all the outlined tasks in return for the basic salary (Paolo &Vito, 2011). Direct benefits refer to compensation paid to employees by their employers which are over and above the amount specified in the base pay or the hourly rate. Usually, benefits are part of the remuneration benefit for employee. Some of the benefits available to Schweppes Australia include: paid time off, sick days, and vacation days, life insurance health insurance dental insurance paid prescriptions vision insurance retirement benefits long term disability insurance flexible spending accounts, short term disability insurance. In addition to the basic benefits, organizations may offer child care benefits, employee discounts, legal assistance as well as relocation assistance(Isakovic &Mansoori ,2012).. Performance based pay on the other hand is put in place to motivate employees by outlining their task and attaching incentive to level of performance employees. Performance-based plans and annual bonus compensation are very common in many organizations especially for the middle level manager who receive bonus as a percentage of their annual salaries. For the operational employees like those who work in the factory, Schweppes can adopt commissions, output bonuses, spot bonuses, and suggestion incentive programs (Isakovic &Mansoori ,2012). 3.2 Intrinsic rewards Division of rewards into extrinsic and intrinsic was in relation to Herzberg’s Two-Factors Theory which states that one set of factors causes employees to be satisfied while another set of factors causes employees to be satisfied. Herzberg named the factors that cause employee satisfaction therefore drive them to put more effort are called motivators while the reasons that put the employee away from the dissatisfaction phase and leaving the organization are known as hygiene factors. This means that what motivate employees are motivators and not hygiene factors. Motivators are those factors that relate directly to the job and the job content. And therefore are called intrinsic factors. Hygiene factors on the other hand are factors that are directly related to the job and job content but are relates to the work environment in which the employee is working and the people they are in interacting with (Isakovic &Mansoori ,2012). In other words, hygiene factors are related to the job context and are therefore known extrinsic factors. Intrinsic rewards satisfy an employee’s intrinsic factors. Intrinsic rewards therefore arise from the job itself including the interest it provides, the challenge it provides, the degree of feedback, the task variety and autonomy and the significance attributed to the job. This means that the determinants of intrinsic rewards depend on how the job itself is designed. Some of the intrinsic rewards available to Schweppes Australia include: involving employees in decision making, giving challenging tasks to employees and giving employees a higher rank (Bondarouk , Looise & Lempsink , 2009). 4.0 Types of rewards suitable to Schweppes Australia Schweppes Australia works in a very competitive environment and for this reason, it had o develop a reward management system that is very competitive. For them to achieve this goal, they must develop a system that addresses four important areas: benefits, compensation, appreciation and recognition. The problem with the system that Schweppes have right now is that it is two-fold it has compensation and benefits but it is missing recognition and appreciation. And even the two elements it has have not been well addressed. In order to get a winning system, Schweppes should recognize both performance and behavior of the employees. Performance is the easiest to recognize and address as it is linked directly to the goals that the employers set for their employees and the final results of the tasks. For example, Schweppes Australia should implement an incentive plan that will recognize the best sales persons for achieving the periodic sales goal. Rewarding behavior on the other hand is challenging and different from rewarding performance. However, Schweppes can overcome this challenge by asking questions like what the behaviours they want to reward are and what they are compensating their employees for. For example, Schweppes can reward their employees for coming earlier than expected and staying late or for developing new ideas to complete their tasks more effectively and efficiently (Osayawe & Akpan ,2004). In order to develop the best reward management system, the first step that Schweppes Australia is going to take is to identify those activities in employees that are beneficial to the company. Such activities may include enhancing customer service, expanding employees’ managerial skills and streamlining critical processes. For many organizations, when they think of developing a good reward system, they think of good compensation for their employee. However, the best reward management system is the one that consist of an incentive compensation plan which is linked directly to goals of the company. Schweppes Australia for the key employees in the company, consider including long-term rewards which can take the form of share-ownership. This will make them have a sense of ownership. The other type of reward that Schweppes should include in their Reward management system is benefits as employees will take note of the benefit that the company provides before they take the job or before they accept a job from your competitors. If the company does not match or even exceed the benefits offered by their competitors, Schweppes will have a difficulty retaining their employees (Armstrong, 2012). Schweppes cannot undermine the importance of recognition and appreciation in their reward management system. These two elements have not received as much attention from the company as they deserve but these two elements are the most beneficial as they require low cost to implement but give high returns. All employees like to be told that their work is good, bad or average. Recognition can be defined as acknowledging someone before their peers once they make specific achievements or once they take some actions or once they exhibit exemplified work. Appreciation on the other hand is expressing once gratitude for their actions. Simple expression and statements is all that is needed to show appreciation and acknowledgement to those employees who have excellent performance and the kind of behavior the organization wish to encourage. For example, sending a personal note to the employees or stopping by their desk to show your appreciation is a good way. The manager can also combine appreciation and recognition by giving a public statement of thanks to the employee in front of his/her co workers giving specifics of what he/she has done and how it has impacted on the organization in a positive way(Armstrong, 2012). 4.0 Best reward management system for Schweppes Australia paid staff As discussed in the other section, the best reward system is the one that is able to have all the elements of a reward system. In other words, a total reward system which basically refers to a system implemented by an organization to provide beneficial, monetary as well as developmental rewards to all its employees. This strategy combines benefits as well as compensation with personal growth opportunity in motivated work place. Designing and implementing such a system requires a comprehensive approach that often drives organization change. In order to achieve a total reward management, it is necessary the top management is involved. The approach must be well rounded and all inclusive and for this reason, the project team should comprise of frontline employees and decision makers. The company must also consider the trade Union environment as it will obviously affect the implementation of the strategy. In order to develop a new reward management system for Schweppes, the following steps must be followed. 1. Assessment of the current system According to SHRM (2012), the project team should assess the current compensation and benefit system and determine the effectiveness of those systems in helping the organization achieve its goals. So as to determine this, they need to conduct a research on the opinions and beliefs of their employees regarding the basic pay they get, their benefits, their opportunities for personal growth and career development as well as examine the current practices and policies. The aim of this stage is to develop an assessment report that will include recommendations for the new reward management system. The assessment report should address questions such as: Which types of rewards will work best? Which types of values or behaviours should be rewarded? Who should qualify for the rewards? How will the company fund this system? 2. Design the new Reward Management System Once the assessment report is delivered to the senior management team, the analyze the various types of rewards that were recommended and determine which of them will work best for the organization. It determines what performance, behaviours or values will be rewarded and what rewards will be given to those who achieve them. In designing the new reward system, Schweppes should not only determine pay rewards for achieving set goals but should also consider additional benefits including flexible work schedules and additional time off. It should also consider including personal growth opportunities such as promotions and training which employees will rewarded with upon meeting certain set objectives (SHRM, 2012). 3. Execution The Human resource department will then be mandated to implement the new reward management system. It will issue circulars and memos to communicate the new reward management system to the employees of the organization. Training should then commence so that the managers as well as decision makers are able to measure effectively the achievements off the employees and the employees are able to understand what they need to achieve so as to obtain those rewards (SHRM, 2012). 4. Evaluation The effectiveness of the new reward management system must be measured and the results must be communicated to the decision makers. Modifications can be proposed to the system and they must be made to ensure the system is working as planned (SHRM, 2012). It is recommended that Schweppes adopts Hay group Total Reward system which is an inclusive reward system and one that will yield maximum results for the company. Hay group’s Total reward system is as illustrated in the figure below. 5.0 How the recommended system is linked to Schweppes Long term Strategy The organization business strategy of Schweppes is to create a culture of accountability and performance. The company recognize that their key to success is to have a committed workforce and by providing a conducive and positive work environment. The recommended Reward management system will help the organization achieve this objective in the following ways: The system aligns the value of total reward management program to business performance, work culture and individual performance It will help the company o provide a differentiated and competitive total remuneration package one which reflects on both the internal and the external value of work(Bolton, 2013). It will help the company meet both motivational and retention needs of employees in a a cost effective manner (Bolton, 2013). Employee Retention-This system will help the organization retain its valuable employees which is its ultimate goal. With Hays Total Reward system, an employee can map out their career path and easily determine at which point they will get pay raise, paid sick time, bonuses. This plan will immediately create an incentive for employees to stay by giving them a series of long term goals and projections (Gish, 2013). Employee Performance-The recommended system gives employees a direct incentive for them to perform. The employees know what they expect to get on attaining certain set objectives. This system has aspects of training and performance management and professional development which enable employees to develop new skills through training and education thereby increasing their ability and willingness to perform their job (Gish, 2013). Controllable Expenses-With a reward management system plan, the company will to create estimate of how much they spend on each employee over a number of years (Gish, 2013). Conclusion From the above analysis, we can conclude that a good reward management system is must not only consider the financial rewards but must also consider the non-financial rewards as well. An effective reward management system can be used as a competitive strategy for a company as it will not only help the company retain its key employees but it will also help them on cost. It is recommended that Schweppes adopt the recommended reward management system as they stand to reap a lot of benefits. References Gish W. (2013) The Advantages of Having a Total Reward in Organizations. Retrieved on 12th February 2014 from http://smallbusiness.chron.com/advantages-having-total-reward-organizations-14161.html Bolton. D (2013). The Importance and Benefits of Employee Rewards and Recognition. Retrieved on 12th February 2014 from http://voices.yahoo.com/the-importance-benefits-employee-rewards-and-12150118.html Rachel Fyffe, (2007) "Communicating Total Reward at O2", Human Resource Management International Digest, Vol. 15 Iss: 3, pp.18 - 20 SHRM (2012) Total Rewards: What are total rewards strategies? Can you give me some idea on how to develop a total rewards strategy? Retrieved on 12th February 2014 from https://www.shrm.org/templatestools/hrqa/pages/totalrewardsstrategies.aspx Knouse. S, (2004) "reward systems in total quality management in the pacific basin", Competitiveness Review, Vol. 4 Iss: 1, pp.27 – 31 Osayawe E & Akpan , (2004) "Roles of perceived leadership styles and rewards in the practice of total quality management", Leadership & Organization Development Journal, Vol. 25 Iss: 1, pp.24 – 40 Paolo Brunori, Vito Peragine (2011), Chapter 1 Compensation, Reward, and the Measurement of Unfair Inequalities, in Juan Gabriel Rodríguez (ed.) Inequality of Opportunity: Theory and Measurement (Research on Economic Inequality, Volume 19), Emerald Group Publishing Limited, pp.1-21 Isakovic A, Mansoori F(2012), "Tips & Toes: a total reward strategy fuels growth", Emerald Emerald Emerging Markets Case Studies. Bondarouk T, Looise J, Lempsink B, (2009) "Framing the implementation of HRM innovation: HR professionals vs line managers in a construction company", Personnel Review, Vol. 38 Iss: 5, pp.472 – 491 Armstrong M (2012) Armstrong's Handbook of Reward Management Practice: Improving Performance . 4TH Edition.New Delhi:India Schweppes Australia (2014) what we do. Retrieved on 12 February 2014 from http://www.schweppesaustralia.com.au/Who-We-Are/What-We-Do.aspx Read More