Types of Reward Systems Available to the Organization - of Toyota Company - Case Study Example

Toyota Company Reward Systems Toyota Motor Corporation started business in 1933. At the time, it was part of the Toyoda Automatic Loom Works Ltd. The company produced its first car in 1936. The company grew significantly into the 21st Century and along the way many innovations were made such as Lexus and the Prius (Borowski, 2010, p. 65). The company has continuously grown into new markets in which it targets younger buyers with its 2003 Scion brand release as well as the first luxury hybrid vehicle known as Lexus RX, released in 2005. The company went through difficult challenges such as a drop in sales because of the global financial crisis and the recall of 8 million of its vehicles in 2010 which made the company to shortly stop the production of many of its leading models. Currently, Toyota runs assembly plants and distributors in several countries. Toyota has several employees in these countries (Magee, 2008, p. 78). The company uses various methods of rewarding employees in order to motivate and retain them. Its reward management systems include the seniority based system, giving bonuses according to the performance of the team and total health management. This essay will analyze Toyota Company’s reward systems, their suitability for the company and how they fit in with the company’s strategic objectives. It will analyze the types of reward systems available to the company, the types of reward systems suitable for the organization, the reward management systems most appropriate for paid staff, the capacity of the organisation to provide various types of rewards to staff, the most valuable rewards to the staff and how the reward management system links to the organization’s business strategy. Types of reward systems available to the organization Currently, Toyota’s reward system has three clusters which include the team reward system, seniority based system and total health management (Kato & ‎Smalley, 2013, p. 123). However, there are other types of reward programs available to the company for boosting both team and individual performance. They include variable pay, profit sharing, appreciation, benefits, recognition, job swaps, side projects, training and stock options among others. Below is a discussion on a few of these. Variable pay is a compensation program whereby part of the pay of an employee is at risk. Variable pay can go with the accomplishments of an individual, the performance of the company or a combination of the two. Variable pay can be in form of one time awards, stock options and bonus programs for significant outcomes. Bonuses reward accomplishments by individuals but they can also reward group accomplishments. Bonuses motivate employees for short time periods (Liker, 2003, p. 321). By profit sharing, the company can create a ‘money pool’ for giving to employees based on the agreed upon company profit percentage. The employee gets a percentage of his salary and is distributed after the company has closed its books after a year’s work. Profit sharing is meant to reward employees for helping the company achieve its profit goal. It is a reward targeting employees who choose to stay with the company (Thorpe & ‎Homan, 2000, p. 78). If profit sharing is not managed well, individuals may fail to get properly motivated. This can be countered by team spirit from the employees themselves. Stock options are a popularly used for rewarding middle managers and other employees. Through this program, employees can purchase company shares in specified amounts for about ten years and for a fixed price. Stock options are also used for rewarding employees who choose to stick with the company (Armstrong, 2007, p. 14). Toyota Company can either reward employees as individuals or as teams. Group-based reward systems depend on the performance of the team while individual performance is based on the performance of the individual. These systems motivate individual employees towards the common goals of the company. However, they also target under-performing employees as well as average and above average workers. If a reward program recognizes the efforts of both the team and the individual, they employees are bound to find extra incentive in it (Karami, Dolatabadi & Rajaeepour, 2013, p. 17). Types of reward systems suitable for the organisation The organisation needs reward systems that will motivate its employees to work harder in an innovative manner and also remain with the company for longer. The reward systems should serve as a motivation for employees to raise their performance to the highest level. Rewards that guarantee job security and provide employees with opportunities to advance can encourage them be proud of their work and the company they work for (Armstrong, Brown & Reilly, 2009, p. 111). The reward systems must also help the company to achieve its strategic objectives. Toyota company is keen on developing new technologies and quality products for its market around the world. One of the best reward systems is to give employees more money to pay their bills and meet their other needs. This can be done in the form of bonuses and increased pay. Everybody needs money. The company should also create a reward and recognition program which can help raise the morale of the employees and make them feel rewarded for what they do. Effective and reward and recognition will help the company to create a positive environment in which employees can be motivated and encouraged to thrive and at the same time improve turnover rates. The positive work environment also helps the company achieve its most important goal which is the satisfaction of its customers (Allen & Kilmann, 2001, 125). The company needs to involve people and use their unique talents. Every employee has unique skills which should not be overlooked. They should be developed to be used to benefit the organization. Employees should be acknowledged for creativity, increased profits and outstanding services provided among other things. The company can do this by giving employees time off, trips and meal gift certificates (Boyd, & Salamin, 2001, p. 786). The rewards should be tied to either qualitative or quantitative performance. Educational reimbursement and advancement at the job are suitable reward programs. These can motivate employees to advance more in learning an din the process develop the human resource which is very crucial to the company. To be the brand of employers in a world where there is a lot of competition, the company should have reward programs that fit its goals and objectives. Such programs should also be able to bring profits to the organization. They should also be associated with organizational size, unionization degree, and exposure to global competitive forces (Akbar, Ramzan & Mehmood, 2013, 34). Reward management system(s) most appropriate for paid staff Paid employees at the company should be given compensation, benefits, recognition, and appreciation. In compensation, the employee’s needs are satisfied using salary and wages. Part of the reward management system for the company should consider the salary structure for employees (Ong & Teh, 2012, p. 1013). Each employee should meet the set measurable objectives. Periodically, the employees should be evaluated to see if they are meeting the set objectives. Those that meet the objectives should receive a pay rise. A pay rise can motivate the employees to work harder in order to attract another pay rise in future. For those who don’t meet the objectives the denial of a pay rise can motivate them to work harder so that they can earn it (Niki, Nili, & Lipour, 2012, p. 56). Another appropriate reward for paid employees is the benefits. Compensation can cover merit pay, overtime, commissions, salary, bonuses and profit sharing but benefits are not as direct. Benefits include items such as retirement plans, using company cars, health insurance, entertainment allowance, using mobile phones and expense accounts for meals and travel. Other benefits could be subsidized housing, flexible working schedules and moving expenses. A good benefits package can be a motivating factor to employees to step up their performance and to encourage them to stick with the company (Allison, 2008). Recognition is a psychological reward where the accomplishments of an employee are recognized in the presence of fellow employees. This reward type could involve creating a “wall of fame” for those employees that meet the set goals. Another suitable example is the employee of the month reward (Lawler III, Benson & McDermott, 2012, 67). The goals created for recognition may be short term or long term and these two combined. The reward could be physical or intangible such as a paid off-day. The reward system should be fair to every employee (Allen & Kilmann, 2001, p. 98). Employees can also get appreciation from the company. This is an intrinsic reward for employees. Employees can be given hand written thank you notes or a verbal thank-you. An indication that the employee is being appreciated for the work he is doing is an important motivation for the employee to carry on with the work (Thorpe & ‎Homan, 2000, p. 56). The capacity of the organisation to provide various types of rewards to staff Toyota as a company is a multinational with operations in many countries. It is well resourced and has the capacity to provide its staff with different types of rewards. The company became the largest automobile manufacturer in 2008 (Borowski, 2010, p. 90). Many of its subsidiaries which number about 600 produce automobiles, industrial, commercial vehicles and vehicle parts. It has its headquarters in Toyota City. Toyota Motor Corporation has 5 brands of vehicle being produced. These include the Toyota brand, Ranz, Hino, Lexus and Scion. It also has a 51.2% share in Daihatsu, a 5.9% stake in Isuzu, a 16.66 % stake in Fuji heavy industries, and a 0.27% share in Tesla (Borowski, 2010, p. 99). It also has joint venture with two companies in China, one in India and another one in the Czech Republic. It also runs many non automobile companies. Toyota Motor Corporation is part of the Toyota Group. It is among the biggest conglomerates in the world (Borowski, 2010, p. 123). Toyota is actually the largest automaker of automobiles in the world. It also makes buses, robots, trucks and also provides financial services. In terms of financial resources the company is the largest and the automobile manufacturer with the highest profits world over. For example, in 2010, it reported sales of $202 billion for the year and a net profit of $ 2.4 billion. It has a cash equivalent of $43.3 billion (Borowski, 2010, 240). Its huge balance sheet and liquidity makes it possible for the company to easily employ cash and generate more funds from outside. The company also boasts of huge organizational resource base. It has created a powerful “dynamic capability’ through the ‘Rules of use’ that are used consistently within the company for adaptation, organizational design and improvement. The company overcomes the difficulty of mixing functional knowledge with in to the development of new products by creating cross-functional product development teams for the development of new products (Liker, 2003, p. 103). This helps the company to direct its focus on all aspects on launching products simultaneously instead of doing it sequentially and this shortens the time used to reach the market. The company runs factories all over the world which help in meeting the demand of the local market. They are also useful for exploiting low cost manufacturing in different places (Kato, & ‎Smalley, 2013, p. 80). Because it has plants all around the world, Toyota can synergize overall demand it faces and the low costs. Toyota Company is a leader in flexible manufacturing systems and through this it produces many models at one facility at a lower cost. The company also boasts of massive technological and human resources which also increase its capacity to give rewards (Borowski, 2010, p. 89). Given these massive resources, Toyota Company can afford to reward its employees in whatever way it deems fit. It is possible for the company to use its resources to achieve its strategic goals and gain a bigger market share through employee motivation (Magee, 2008, p. 45). Most valuable rewards to the staff The most valuable rewards to staff are those that boost their motivation and also bring gain to the company (Boyd, & Salamin, 2001, 78). They should be aligned with the strategic goals and objectives of the company. The rewards should give both the company and its employees’ maximum gain. The reward systems should address the need for benefits, compensation, appreciation and recognition (Armstrong, 2007 p. 210). Staff should be given rewards that bring lasting benefits to their careers. Training is one of these rewards. Training and development programs serve as a very valuable incentive for employees who want to grow in their careers. Employees can be allowed to attend paid for personal development or industry events after a specified period or yearly (Ong & Teh, 2012, 66). Employees can also be allowed to work on side projects. Some employees find it motivating to work on projects that are outside their official job descriptions but can serve as a hobby or special interest. Giving employees the opportunity to carry on with their current responsibilities but also take something extra on the side or in different departments in the company can serve as a great incentive. They perform their normal roles but they also provide more value when they assist in other areas whenever they are free (Lawler III, Benson & McDermott, 2012, p. 4). The best system should be able to reward behavior and performance. It is easier to address performance than behavior. The company must identify and reward those behaviors that are important for performance. Such rewards could be about enhancing relationships with customers, helping employing grow their managerial skills and fine tuning significant processes (Niki, Nili & Lipour 2012, p. 125). Longer term rewards for crucial people in the organization. This could take the form of equity ownership. The company should seek to attract and retrain its employees by providing handsome benefits that surpass those of the competitors (Akbar, Ramzan & Mehmood, 2013, p. 156). How the reward management system links to the organization’s business strategy The Toyota Company uses the ‘Kaizen strategy’ as its business strategy. This requires continuous improvement and high quality products. All staff is required to support productivity, quality and competitiveness. Toyota’s product strategy is based on the development of new innovative technologies, quality, hard work, creativity and further research (Armstrong, Brown, & Reilly, 2009, p. 76). The company uses the slogan “think global”, “act local” as a way of achieving its strategy. The reward management systems recommended above are suitable for Toyota Corporation because they connect with the strategy of the company. Employees are motivated differently by benefits, appreciation and recognition to work harder, be innovative and produce quality. For example, allowing employees to train or acquire extra knowledge and experience through side project helps in the innovation part of the strategy (Akbar, Ramzan & Mehmood, 2013, p. 117). Through further training, employees can get opportunities to expand their research knowledge and therefore come up with new innovations of quality products. Compensation such as a pay rise motivates employees to work harder. This could be an incentive to make an employee come earlier at work and leave late just trying to ensure that there is productivity (Thorpe & ‎Homan, 2000, p. 210). The company strategy also features new ideas and quality work. This can be enhanced by motivating employees through reward for performance benefits. Benefits may include overtimes, profit sharing, bonuses and commissions among other things. These can motivate employees because they are awarded on performance. Such rewards can cause an employee to endeavor to produce quality because it is through that that they can qualify for a reward. Quality products are the ones that can make the company competitive in the market. Competitiveness is an element of the strategy of the company (Karami, Dolatabadi & Rajaeepour, 2013, p. 19). Recognition rewards can also help to achieve the strategic goals of the company. Through recognition, employees get the motivation to perform better in whatever areas they are allocated. Better performance can still be interpreted in terms of quality production, increased production, new technologies and competitive products (Akbar, Ramzan & Mehmood, 2013, p. 23). Recognition can be in the form of announcing best performers before the rest of the employees. This would earn respect for the best performers and boost their motivation to work harder so that they can earn more recognition. Conclusion In conclusion, this paper has discussed the Toyota Motor Corporation and its reward management systems. Currently, Toyota’s reward system has three clusters which include the team reward system, seniority based system and total health management. However, there are other types of reward programs available to the company for boosting both team and individual performance. They include variable pay, profit sharing, appreciation, benefits, recognition, job swaps, side projects, training and stock options among others. Paid employees at the company should be given compensation, benefits, recognition, and appreciation. Toyota is actually the largest automaker of automobiles in the world. It also makes buses, robots, trucks and also provides financial services. In terms of financial resources the company is the largest and the automobile manufacturer with the highest profits world over. It is therefore well endowed in terms of resource capacity to be able to give different types of rewards to its employees. The most valuable rewards to staff are those that boost their motivation and also bring gain to the company. They should be aligned with the strategic goals and objectives of the company. The rewards should give both the company and its employees’ maximum gain. The reward systems should address the need for benefits, compensation, appreciation and recognition. The best system should be able to reward behavior and performance. Toyota’s product strategy is based on the development of new innovative technologies, quality, hard work, creativity and further research. Employees are motivated differently by benefits, appreciation and recognition to work harder, be innovative and produce quality. These reward types all have the effect of motivating employees to achieve the set strategic objectives of Toyota as a company. Bibliography Akbar M.T., Ramzan M. & Mehmood, S. 2013. Managing Performance through Reward System. Journal of Education & Research for Sustainable Development (JERSD) (An Online Quarterly International Peer-Reviewed Interdisciplinary Journal of Seven Petals Foundation) Volume-1, Online Issue-1. Allen, R.S., & Kilmann, R.H. 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