Total Reward, Value Systems, and Culture Inherent - Essay Example

Total Reward         Introduction: Today, in this dynamic world we find that the perceptions and views of people are changing because of the changes in the external environment. It has been found that workforce management is the key towards competitive advantage than technology or patents. (Pfeffer, 1994). The changing external environment is also having an impact on the working environment. The expectations and the demand of the work force have changed with time. The quality of workforce today has improved significantly, which has lead to increased expectations in terms of salary, growth opportunities, and good working environment. Moreover, employees are expecting limited working hours so that their personal lives are given equal attention. Organizations need to react to the growing expectations of the young work force. (Burke & Cooper, 2006) We find that there are three main drivers which bring about change in the workforce – Demographic changes, technological changes, and globalization. (Foot & Stoffman, 1998) The labor pool has shrunk because of the lower birth rates and aging workforce. The kind of workforce we have today would be different ten years hence. Their values, demands and characteristics would differ considerably. Hence, there is a need for change in policies concerning retirement. The second driver is technology. It is vital for organizations to be in par with ever growing technology, which would require workers to keep up with the advanced technology. Third factor, globalization, has brought new opportunities for both organizations as well as workforce. Now organizations can utilize the untapped potential of global workforce to match the increase in competition. Multinationals expanding globally has difficulty managing their subsidiaries. (Edwards & Rees, 2006) Hence, there is a need for greater commitment from the existing staff and to attract quality staff into the organization. Companies wants to hire the most talented and skilled workforce across the globe to stay one step ahead in the competitive world. Total reward system can help us address the above issues and help companies to grow. Total Reward Total reward includes all possible types of rewards. It may be direct or indirect, intrinsic or extrinsic or both. They can be monetary as well as non-monetary as compensation to the employees for their services. Employees are rewarded so as to attract them into joining the organization, to motivate them for achievement of the organizational goals or to retain or employees. One needs to ensure that there is a balance between the needs and expectations of the employees on one hand with that of the interests and costs of employers. This is because generally, the total rewards paid constitute a major amount of the operating costs. Sometimes it is difficult to evaluate the value contributed by the individual employee towards the organization in monetary terms. It is essential to match the reward system with that of the employees’ skills, performance, knowledge and abilities. (Fuehrer & Vicki, 1994) Financial rewards include benefits such as pay perks, paid holidays etc, while non financial rewards include growth opportunities, good quality of working life, having a say in the management, etc. Firstly we need to understand, what motivates an employee to leave or sustain a job. Studies have shown that employees mainly leave jobs to seek better opportunities that would help them grow and enhance their skills. Employees also like to be in an environment where their skills are appreciated. Hence, it can be concluded that the main reason for employee turnover is not pay scale. Equal importance should be given to non financial benefits while rewarding the employees in an organization. (Burke & Ng, 2006) While formulating a trans-national reward strategy, one needs to consider multiple geographical boundaries which constitute headquarters of the parent company as well as the headquarters of the subsidiary, which may be located in several countries. Other countries also have to be taken into account which may be a centre for other operations such as research and development, intermediaries etc. Therefore, one has to take into account the cultural differences which would influence the nature of the reward. Political and legal constitutions affect the nature and value of rewards. The implementation and the way a reward is perceived are also affected. The main purpose behind international reward and recognition strategy synchronize the vision, values and other practices both vertically as well as horizontally across all multinational enterprises. This strategy has to be recognized as fair and meaningful across the globe. Secondly, reward strategy should be practical and not too farfetched and should motivate workforce to add more value towards achievement of organizational goals. . (Hai-Ming & Yi-Hua, 2006). Total reward may include growth opportunities, freedom at work, flexible working hours, challenging work, recognition, desired work space, involvement, flexible benefits, career and professional development, a say in decision making process in matters concerning the working life, secretarial support etc. (Perkins & White, 2008) So, the three important factors which have to be taken into consideration while designing international reward and recognition strategy are: The strategy should be in tandem with the corporate strategies and a fair and justified reward should be put into force. It should facilitate transfer of knowledge across the corporate networks as well as enhance career development. It can be in the form of mobilization of employees geographically. It should maintain reward level that is competitive in related marketplace internationally so as to attract new talent as well as retain the old. (Manas & Graham, 2003) The benefits of total reward scheme are: (Thompson, 2002) Easier availability of good quality staff: The total reward scheme can help organizations tap high quality workforce. Reduced staff turnover: This scheme would enable the enterprises to retain their old staff. This would help them reduce wastage of training new staff. Improved performance of business: The reduction in turnover and the inducement of skilled staff would lead to better efficiency and productivity of the company. The workforce would be satisfied with their compensation and this would reflect in their performance. Addition to the goodwill of the organization: The goodwill of the organization which implements the total reward scheme would improve as it would be recognized as an employer of choice. One cannot ignore the importance of human resource in the business environment. Growth and survival of an enterprise is dependent on its workforce. Approximately two thirds of a firm’s value is attributed to its intellectual capital base and half of its intellectual capital value is attributable to its work force. (Donnell, Reagan, Kennedy & Berkery, 2003) Understaffing, unskilled workers, unsatisfactory work environment would only lead to downfall of the business. The need of the hour would be strategic total reward programs. (Steven & Helen, 2004)A reward strategy should reflect the organization’s unique work force demands. It should be holistic that is it should address the needs of entire population, integrated, aligned, measurable, and practical to implement. The impact on the organizations productivity should also be taken into consideration. Let us now analyze the difficulties and shortcomings of implementing total reward scheme. Research has found only few companies in UK have been successfully put into operation the flexible benefit scheme. (Chen & Hsien, 2006). This is because the designing of as appropriate scheme to accommodate the needs of all the employees is complex and fraught with risks. Another question which remains unanswered is the how much benefits should be of personal nature and how much of business nature. There has not been any distinction made in this regard. Moreover, the employers would not always be in a position to oblige all the demands of the employees. There may be a situation where one need is to be sacrificed to enjoy the other. Hence, a trade-off is necessary to accommodate ones needs. Cross border business leads to interactions with different socio-economic, political cultures. (Porter, 1990). Culture is one of the most important factors which influence global operations. (Bond, 1999). Hofstede had proposed one of the most accepted cultural typologies (Chiang, 2005). Hefstede stated that culturally biased attributes of a country exists which would in turn help us to understand the behavior and values of workforce in different countries. His study has helped us to understand how people behave and why do they behave in certain fashion. He had studied responses from sixty six countries for his study. He had made four distinct dimensions for the purpose of distinction- Power-Distance Individualism – Collectivism Masculinity – Feminity Uncertainty – Avoidance Conceptualization of national culture supply global managers with a checklist so as to entail them to understand each unique business problem. (Robock & Simmonds, 1989). International differences in managerial behavior exist within large enterprises. This is because there is a wide gap in the national patterns of reward for company executives. (David, 2001) Analysis showed that the differences in the reward structure were neither attributed to the economic system nor to the level of development in the countries. Reward practices which were effective in one country were found unsuccessful in other countries. This was mainly because individuals prefer different rewards based on their individual needs and wants. Their values and expectations also play a significant role in determining their reward preference. Hence, one needs to integrate the theories of motivation with that of culture. (Chiang & Birtch, 2005). A vital challenge faced by managers today is identification of rewards which would lead to better employee performance. (Kossek & Lobel, 1996). Even though the performance of an employee is influenced by a variety of factors other than motivation such as skill, ability, competence, etc. the productivity of capable employees will be hampered if they are not provided with suitable rewards. (Lawler, 2000). Hence it is essential to upgrade suitable reward, so that employees are motivated to work efficiently. Firms who are engaged in multi-national activity should be aware of the significant influence that culture have on reward preference. This compels us to re - examine the principles of motivation, which are essential in designing and implementation of the reward pattern. The cross- cultural effects on the reward preferences has to be analyzed. A study by analyzed the relationship between culture and reward practices, however, it focused only on the financial rewards, totally ignoring the non financial criteria of compensation. This study aims to grow our knowledge of reward preference in a cross-cultural and trans - national context. (Schuler and Rogovsky, 1998) A Taxonomy of reward preference Chiang & Birtch (2005:15). Taxonomies help us to understand, predict, and provide a clear picture. Fleishman et al., (1984:6). Taxonomy assists in identifying the dissimilarities among complex collection of reward dimensions. Analyzing each of these reward dimensions separately helps us to categorize exactly where the differences in the preference lie. This subsequently provides further understanding into the motivational aspect of rewards (Greenburg & Barron, 1995). The above figure describes the reward taxonomy and its correlation with culture and motivation. Culture is not the only element which influences reward preference. In a trans-national business environment, a number of other factors also affect reward expectations and preferences. Conclusion From the above, it can be concluded that reward type preference is significantly based on the value systems and culture inherent in various countries. However, we find that the reward system and criterion preferences are interdependent. And importance should be laid on both monetary as well as non monetary compensation. Human resource management also plays a significant role in identifying the issues and challenges faced by an organization. Though globalization has changed the employer-employee relationship today in many developed countries, it has increased the demand for more sophisticated and advanced skills to manage the business of a multinational corporation globally. Hence, there is a need for advanced skilled management to address the growing issue. References: Bond, J. R. (1999) ‘A view of business values and culture from Newcastle to New Delhi, Speech by group Chairman HSBC Holdings plc. 1-5 Burke R.J., Ng E. 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