Reward Strategy for HR Managers - Essay Example

Reward Strategy for HR managers Some HR managers assume that money is the most effective reward strategy for increasing the motivation and productivity of all their employees. To what extent do you agree or disagree with this statement? Introduction In the modern world, every business organization is looking to maximize their gains through extending their sphere of activities. Employees are the core to any organization and they are inherent to their success. Therefore, they must be rewarded in order to make the company grow. The rewarding system of an organization is a vital cog in its success as good reward motivates the employees to work hard. The companies must be offering their employees a positive reward experience and include them in the growth process of the company to be in a win-win situation. The reward structures may be monetary or may be intrinsic. The monetary rewards are one of the most important parts of the reward structure. Assigning values to each employee is one of the most significant jobs of the HR department. The company determines an employee’s value primarily by three ways- according to the skills, performance and their relative value in the job market. The companies have to fix the basic pay of labor and assign the suitable person for the profession. The base pay should compensate the individual with the ongoing value and incentives may be offered as rewards for their performance. (Zingheim & Schuster, March, 2000; Optimizing reward spend, n.d.). In addition to the monetary benefits, the employees look for other benefits from the company. The benefits may range from training & development of employees to offering good working conditions. These benefits have acquired importance in the modern business parlance with more and more individuals looking for other benefits than just the payment rewards. The reward structure of a company to a large extent depends upon the corporate goals of the companies. (Reward Strategy, n.d.) The paper presents a debate upon the type of reward strategies of the companies to motivate their employees and concludes upon the most effective one. In this modern era, money alone is not the motivating factor and non-monetary benefits are equally important. In fact, it can be said that non-monetary benefits is the most important strategy followed by companies to motivate their employees. The most effective strategy Giving rewards to the employees has assumed great importance because companies all over the world have understood that the employees are the reason for their existence. The reward structure of the company is primarily dominated by the monetary benefits. As a result, the non-monetary benefits acquire a status of secondary importance. Every individual’s needs are different and these are not engulfed only in the sphere of monetary benefits. Companies all over the world are trying to place emphasis on the non-monetary factors. For example, Halifax plc changed its reward criteria from measuring the job to recognizing the person and his needs. The needs of the employees are recognized and they are provided with good working conditions. (Armstrong, 2002, p.93) Researches made while conducting management audit of companies have revealed that most of the grievances rise from the monetary issues. However, the truth is something different. The real discontent, it seems, is the non-monetary factor and these are often shadowed with the factor of monetary discontent. The major source of the business in the organizations is its employees and the productivity of the employees is increased if they are provided with conditions, which satisfy them. The satisfaction criteria is dependent on the monetary factor but to a small extent. The non-monetary factors influence the mental satisfaction of the employees. Participants in the job market look for non-monetary benefits as the most important criteria in the selection of a job. Therefore, it is not a generalized concept and depends on appropriateness of the available conditions. The non-monetary benefit is a very complicated topic and is often referred to as “psychic income.” The employees get benefits through some psychological methods, which is variable from subject to subject. It is not related to the monetary compensation and other monetary benefits. The non-monetary benefit a company provides depends upon the issues, which are given below: (Kenworthy, n.d.; Smith, 26th September, 2005). Office culture- Good office culture helps in driving satisfaction in the minds of the employees. Characteristics of project- If the project matches the expertness of the employee, he is motivated to contribute more towards the work. Nature of work- The nature of the work should match the job specification of the employee and he should be satisfied with the type of job. Working Conditions- The working conditions must encourage good work with a clean environment. Equity- The organization must treat all employees as equal. Self-fulfillment- The employee should grow with the work and develop an expertness associated with the work. This can only be possible when he is satisfied with the job. Location- The location of the workplace should not be far off from home, which will not allow the employees to spend time with the families. The above points give us a clear indication about the importance of the non-monetary benefits in the motivational aspect of the jobs. The theories of motivation by eminent scholars support the view that the non- monetary benefits are the more important than the monetary benefits. One of the most important theories in this regard is Maslow’s Hierarchy of Needs Theory. The needs of individuals differ but some of them can be generalized and can be grouped under some heads. Maslow was the first one to formulate this and he devised a theory, which has remained useful till date. Maslow’s theory formed a structure of needs very much like a pyramid. The pyramid divides the level of needs from the basic to top level. All the needs require a substantial amount of money to be fulfilled. However, the topmost level of need – the self-actualization stage is devoid of any need for money. It is the stage where the man attains self-fulfillment. The man wants to be in peace fulfilling his inner desire to seek enlightenment. He wants to be connected with God and attain Nirvana. Obviously, this need needs something else than the money. The individual has to be satisfied with himself to fulfill this type of need. The Self-esteem needs demand status and respect in the society, which cannot be attained by money only. Here also, the organization has to support with a host of other non-monetary benefits to the individual. (Maslow’s Hierarchy of needs, n.d.; Warilow, 2nd February, 2010). The majority of the needs in Maslow’s theory laid emphasis on the non-monetary aspect. It is true that money is the basic part of satisfying the needs be it physiological, safety or social needs. However, it requires a substantial amount of support from the organization to fulfill these needs. The Maslow’s hierarchy tells that monetary aspects fulfill the lower level of needs of the individuals but the non-monetary aspects are needed in fulfilling the higher level needs. Therefore, the non-monetary aspects are more important than the monetary aspects in the reward structure of an organization. Monetary aspects are important because money is the main source, which satisfies the physiological needs like food, cloth and shelter. However, the life of an individual does not only comprise of the physiological needs. The psychological needs like love, belongingness to society etc. have to be fulfilled. The situation is the same in the case of the organizations. The employees also have two aspects of need- physiological and psychological. A theory, which is important in the discussion in this regard, is the Herzberg’s Two-Factor theory. Herzberg in his theory clearly demonstrates that there are two types of human needs-physiological and psychological. The physiological needs can only be satisfied with the help of money. The Second category- the psychological needs generally inspire an individual to achieve and to grow. This aspect lies in the mind of the individual and can only be satisfied by the organization by providing non-monetary benefits. The psychological needs have assumed more significance nowadays thus making the non-monetary aspects of the reward structure more important.(Herzberg’s motivation-hygiene theory, n.d.) A typical phenomenon of the motivational aspect is found in the study of Adam’s Equity Theory. The theory tells that the satisfaction level of an employee depends upon the peers and friends of the individual. Adams suggested that the effort workers give in at workplace is the input and what they earn in terms of money and non-monetary benefits is the output. The input and output ratio is formed and then it is compared with that of the peer’s and friends’. After the comparison if there is a feeling that the ratio is at a less advantageous position to that of his peer’s then he will be demotivated. Therefore, the motivational aspect of the employees is relative to that of the peers’. The money is used as a measuring tool here and the non-monetary aspects are more important in this theory. (Adam’s equity theory, December, 2007) Individuals are not motivated by money alone. They derive more pleasure in completing a goal, which is set in front of them. Organizations all over the world are motivating their employees by setting goals in front of them. A theory, which is important in this regard, is the Goal setting theory by Latham & Locke. They devised that employees are motivated if goals are set in front of them. They work hard in the pursuance of these goals and are motivated by the rewards given to them. (Locke’s goal setting theory, n.d.). Therefore, money is not the distinctive criterion, which makes the people motivated in the working conditions. There are much more factors than that of the money which shapes the motivational level of an individual. If the employees are involved into the decision-making process they feel motivated as part of the organization. This has been illustrated by the experiment done by McGregor where he specified Theory X and Theory Y. He concluded human beings could be given responsibilities at workplace and they are motivated when called upon to make decisions. However, giving responsibility in workplace is not a simple thing. It is regulated by other conditions as well like the conditions at work, individual perspectives etc. (Staw, 2006, pp41-44; Human relations contributors, n.d.). The combination of these theories gave rise to the term “Job Enrichment” where the scope and the quality of the job increase. IBM started the process and it soon spread to other companies. Surprisingly, it was seen that the employees were more motivated by the process and worked harder towards company goals. This only strengthens the fact that the non-monetary aspect is far more important reward strategy than that of the monetary aspects.(Miner,2007,pp 41-47) In the above paragraphs, it has been illustrated the importance of non-monetary issues in motivating a person to work hard. However, in the midst of all this discussion it has to be said that the basic essence of all the needs of humankind is money. If we take the instance of Maslow’s Hierarchy of needs, Can self-esteem be possible without attaining a high degree of social status? The social status of a person can be achieved only after attaining a position at the organization and earning loads of money. This is only one of the many examples in this regard. Individuals differ from one another in one aspect or the other. They work for different purposes. Some of them work for passion, some of them do it for love and some do it for living. But the basic underlining factor is that they do it all for money. Money is the most important commodity of this world and this is needed to lead a life. Therefore, it is quite natural that money will be the biggest motivating factor for all employees. (Heathfield,n.d.). Companies like Huawei in China operate by paying more than the normal labor rate there. They also provide long-term incentives and offer good amount of payment according to the performances. By offering high pay packages, Huawei can attract and retain talent, as money is still the most determining factor of selecting a job. (Liu, February,2010). Another example in this regard can be given in the case of BOC Gases. The company attached incentive schemes in their reward strategy. This was done to increase the profitability of the company and the total pay structure of the company had a change. (Armstrong, 2002, p.93) It is a well-conceived fact that money motivates people. It is true that the employees are motivated by two factors of motivation- intrinsic and extrinsic. The intrinsic motivation deals in experiencing the activity through its performance. The extrinsic level of motivation is where the activity is the result and the incentives are provided based on it. This is the monetary compensation and the employees remain at the jobs if they are paid well. A recent survey showed that to get a desired employee a company has to dish out more than that of its competitors. (Kohn, March/April 1998). Money forms the basis of all the reward strategies of the world. Therefore, it can be said that there is no definite criteria for a good reward strategy globally. The wellness of a reward strategy depends upon the situation of the employees. However, it can be said that the non-monetary benefits in the reward strategy is much more important than the monetary aspects. Conclusion The reward structures can be broadly divided into two parts- monetary and non-monetary. The monetary reward system includes everything from basic pay to incentives. It is quite evident that money is very important for existence. However, though it is agreed upon of its usefulness one cannot deny that assigning money to motivate people puts a major roadblock in their development. Providing incentives for high volume of work disrupts the quality of work and the individuals are deprived of quality time in the pursuit of money. This type of reward structure is a bad motivational tool as it can affect the business badly and hinder its reputation. However, the other structure- the non-monetary reward system helps to motivate the employees the other way round. The employees are motivated by the working conditions existing in the organization. The satisfaction level attained by the employees makes them to work more freely and thus they can contribute to the success of the organizations in a more effective way. This growth of the company is not a result of quick work but from hard work. The motivation generated by monetary reward can be quick but is equally short lived. However, the non-monetary rewards are more feasible and are a method for the future. (Houran & Kefgan, n.d. p.4) The organizations, today, have developed a concept of total reward structure, which comprises of recruiting right individuals, training and motivating them and take all measures to retain them. Companies following this structure will be benefitted by substantial growth as the employees would be provoked enough to work hard. The total reward is something, which the employer initiates to attract the employees, and is helpful in sustaining a long relationship. Money is one of the most important constituents of the total reward structure but it also includes other non-monetary benefits. (Total reward strategy, n.d.; What is total rewards, n.d.) Thus, it can be said that money is not the most effective reward strategy an organization can follow to motivate its employees. A more suitable reward structure would be the combination of both monetary and the non-monetary reward structures with more importance on the non-monetary aspect. References: Zingheim, P & Schuster, J.(March,2000). Pay people right! Breakthrough reward strategies to create great companies. 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