Reward Management, Challenges with Reward Strategies - Coursework Example

Reward Management Name Course Name and Code Instructor’s Name Date Introduction Due to increased pressures caused by globalization and advancement in technology and the increasingly competitive business and market environments that are characterized by shifting political, social, environmental, technological, legal financial and economical forces, modern organizations are hard pressed to ensure competitive sustainability and high performance. As a result, organizations are reliant on their most reliable and valuable resources which are the human resource as discussed by Salwan (2007). The human resource is the driving force for innovation and creativity, productivity and performance in organizations since the other organizational resources such as materials, technology, information, finance and capital, all requires handling by the human resource in order to be useful, efficient and effective as indicated by Heneman (2002). In order to ensure continuous high worker performance, increased worker productivity, low level of employee turnover and to ensure they retain the most valuable employees and obtain their loyalty and commitment to ensure attainment of set business goals and anticipated business outcomes, contemporary organizations develop and implement varied employee-centered strategies among them reward strategies. According to Cox, Brown and Reilly (2010), not all organizations are able to enjoy the promises and benefits of their implemented reward strategies. The authors attribute this to problems in the process of designing and execution of reward strategies which have inadequate focus on employee preferences for varied reward types and problems in the construction of models of reward strategy. This informs the report which seeks to critically evaluate conclusions made by Cox, Brown and Reilly (2010) and assess whether they challenge contemporary principles of reward management. Critical Analysis Development and implementation of effective and relevant reward strategies are crucial in enhancing an efficient and adequate reward management systems that are able to only meet the needs and expectations of the employee but also, motivate employees to be accountable and loyal to the organization and more importantly, inspire them to take ownership of the organization’s business goals, objectives, mission and vision (Brown & Perkins, 2007). Reward management constitutes the assessment of the extent and nature of rewards and effectual control of remunerations and benefits for employees as defined by Armstrong & Brown (2006). It is concerned with evaluating the who, when, why and how the rewards are offered and examine the impact rewards has on individual employees, working teams and the organization in general. Rewards are categorized into intrinsic and extrinsic rewards and total employee motivation is achieved when both intrinsic and extrinsic needs are consistently and adequately met as discussed by Heneman (2002, p.262). The labor force should be remunerated and rewarded for their efforts, hard work, time and any other inputs they apply into work. Brown & Perkins (2007) highlights that to ensure rewards achieve the anticipated outcomes, it is important for the management to design and implement effective reward systems that align well with the strategic goals of the organization to ensure the needs of both the organization and the employee are totally met. According to Armstrong et al. (2009, p. 1), organizations that attain the anticipated outcomes of their reward strategies are those that manage their reward practices by predicting precisely what innovations and changes function best and avoid the mistake of rewarding A while expecting B. This corresponds with sentiments by Cox, Brown and Reilly (2010, p. 250) who stresses that effective strategies that generate anticipated results are those that are based on employee reward preferences and capabilities of the line managers where rewards are not primarily financial in nature but entails other non-financial forms of rewards. Challenges with reward strategies Among the challenges of developing and implementing effective and efficient reward strategies are varied as highlighted by Cox, Brown and Reilly (2010) and they include developing reward strategies that are based on reward strategy models which are business goal-driven and directed, and the persistent challenge of measuring reward system impact since most organizations do not care to have written reward strategies, which makes it hard for the managers to measure, monitor, evaluate and modify reward strategies. In addition, there is the tendency for the management to adopt trends and copy what others have done (Heneman, 2002). Nevertheless, it is important that the reward strategies are able to advance business goals and strategies but they should not do so in the expense of the needs of the intended employees. The report does concur with Cox, Brown and Reilly (2010) sentiments on the need to develop unique and innovative reward strategies. More importantly, the management should first identify the needs of the organization, the needs of the labor forces and establish what the objective of the reward management systems are and thereby, develop reward strategies specifically aligned to these needs and that suits the individual organization and individual employees as supported by Brown & Perkins (2007). (Armstrong & Brown, 2006, p. 119) indicates that replicating reward strategies of other firms is futile and instead the management should be aware of modern external trends in reward management that offers essential guidance on reward strategies that are suitable for the organization. Similarly, Brown & CIPD (2001, p. 154) notes that the challenge of reward strategies as a HR practice is not one of content which is the ‘what’ but one of process which is the ‘how’. Reward strategies often fail due to the fact that managers, pigeon hole them to pay practice in the hope of obtaining behavioral change among workers instead of establishing, developing, prioritizing and implementing reward strategies that allow use of other reward options and techniques to achieve expected outcomes (Cox, Brown and Reilly 2010). For instance, it would make more sense to try and modify the behavior of employees by changing how they are treated instead of changing how they are paid. According to Cox, Brown and Reilly (2010), another challenge that organizations face that make their reward strategies ineffective or generate less impressive outcomes is the fact that employees views and opinions are not engaged and integrated while developing the reward strategies. The authors notes that when the views of employees are sought, it is within a heavily circumscribed system encompassing material and financial rewards and continuous dependence on within-systems preferences which provide opportunity for employees to influence strategy design and not choice of strategy itself. This leads to reward strategies failing to attain the expected changes and outcomes for both the individual employee and the organization since employees do not either relate to the rewards or feel their efforts will not generate the kind of rewards and compensation they want (Brown & CIPD, 2001). According to the expectancy theory established by Victor Vroom, enhancing the motivation of employees to be more accountable, to fully exploit their potential, to enhance their performance and improve their innovation abilities, which are the main reasons for reward management, they can only be generated by interlinking the elements of expectancy, valence and instrumentality (Hallowell, 2005). The element of expectancy entails employees working harder when they believe that their efforts will generate high performance hence better rewards while the element of valence is when employees are more likely to do what the organization wants when the rewards offered are of great importance and value on them personally or professionally. On the other hand, the element of instrumentality entails employees doing what the organization requires of them for instance, behavior change, when they believe performing well will influence favorable and positive rewards. Based on this theory therefore, reward strategies can only be effective and generate positive results when not only employees are involved in designing the reward strategies but also when the reward strategies are based on the three elements of the expectancy theory as supported by Hallowell (2005). This ensures that the strategies are effectively designed to meet individual preferences of employees in regards to types and systems of rewards offered since different employees place different value on different rewards and their preferences on rewards differ. However, it is important that the voice and the views of the employees on designing and implementation of the reward strategies are effectively managed to ensure business goals are not compromised since reward management systems are meant to facilitate equitable balance of inputs with outputs. Apart from the challenges identified by Cox, Brown and Reilly (2010), the difficulties in implementing contemporary reward strategies includes lack of understanding and support from the labor forces, poor performance management, insufficient line management skills and training and weak supporting structures and processes as supported by Brown & CIPD (2001, p. 154). Cox, Brown and Reilly (2010) blames the disregard for employee preferences for varied types and systems of rewards on how reward strategy models are built which includes the total reward models and the contingency models. The contingency model suggests that managers should develop and implement reward strategies based on business strategy considerations by focusing on factors such as product market, technology, organizational culture, organizational structure and the industry among others where conformance to industrial, norms is encouraged and there are no reference to integrating employee views and preferences (Cox, Brown and Reilly 2010, p.253). Majority of organizations have implemented the total reward approach since they perceive it as an influencing factor to enhancing employment value proposition since it is associated to facilitating compelling employment opportunities which ensure firms are not only a great place to work but also it attracts and retains talent as discussed by Armstrong & Brown (2006, p. 120). According to Cox, Brown and Reilly (2010), the rise in adoption of total reward approach is indication of the increased importance given to the needs, opinions and wants of the workforce although its effectiveness is limited by narrow focus on flexible benefit systems that are executed in a provider-led and generic means which gives the workforce few choices in regards to the constituents of their rewards. Total reward approach entails providing employees with both intrinsic and extrinsic rewards where the former enhances the work environment in order to ensure continuous employee improvement, learning and development while the latter facilitates good pay and benefits to meet the physiological needs of the employee (Cox, 2000). The Maslow’s theory of needs illustrate the need for total approach since the needs of the employees are both external and internal in nature and therefore, employees are more likely to appreciate rewards and be motivated by them when their extrinsic and intrinsic needs are totally met (Cianci & Gambrel, 2003). Maslow describes the needs from extrinsic to intrinsic that is, physiological needs to security needs to social needs to self esteem needs and finally to self actualization. Therefore, when rewards meet only the material needs they fail to address the internal needs of the individual hence, they are deemed ineffective or they fail to give impressive results as noted by Cianci & Gambrel (2003). Despite the apparent need for basing reward strategies on mutual expectations and adopting varied forms of rewards to influence employee behavior and the need for greater employee engagement in reward package design as suggested by the psychological contract theory and the organizational justice theory respectively, majority of managers are still reluctant. Cox, Brown and Reilly (2010) attributes the reluctance to managers believing otherwise and their regard of consequences for employee management as unpalatable. Reward strategies that fail to take of are in some instances caused by business managers who do not see the business opportunities and competitiveness generated by reward strategies. Brown & Perkins (2007) indicates that effective implementation of reward strategies fails as a result of lack of dedication and misunderstanding or lack of understanding on the operational manager’s part about people management processes. Moreover, more challenges arising when line managers are not involved in reward strategies development processes and have no know how on the implementation areas which makes it difficult for them to shift from accurate running of pay and appraisal systems to ensuring each employee feels valuable and engaged in decision making processes. These sentiments rings true since lack of commitment from organizational managers, lack of line manager’s involvement and failing to equip them with development and implementation skills means adequate resources, time and commitment are not allocated to issues impacting the lives, productivity and performance of employees . This means that the desired changes expected from employees are unattainable since line managers cannot be able to effectively and efficiently develop and implement productive and sustainable reward strategies (Brown & CIPD, 2001). Solutions Armstrong et al. (2009) asserts that the solutions to overcoming the ineffectiveness of reward strategies can only be achieved by adopting an evidence- based approach since there is lack of evidence for and assessment of pay and reward practices thus limiting the effectiveness of reward strategies. The authors indicate that regardless of the costs of pay and reward strategies, increased reliance on shared service centers, enhanced adoption of balanced scorecards and international benchmarking, majority of firms lack solid evidence to assess or validate the implemented reward strategies. To ensure the above mentioned challenges which impede successful development and implementation of reward strategies are overcome, it is essential that the organization understands what the needs, preferences and expectations of their employees regarding rewards are. This can be attained by developing open and effective communication, teamwork and collaboration with employees to help eradicate boundaries and entice employees to convey their views and opinions about what they expect in rewards (Heneman, 2002). How then can the organization successfully customize reward systems across a whole labor force and ensure preferences for each employee are effectively taken into consideration? One may ask. This can amicably be resolved by actively, deliberately and extensively engaging the employees in the critical steps of designing reward strategies and packages and involving them in deciding about the content of the reward strategies as echoed by Cox (2000). In addition, organization can make available mixed reward strategies and approaches that offer different form and types of rewards such as written reward approaches, total reward approaches, job evaluation, pay systems and contingent pays among others to ensure employees are accessible to both extrinsic and intrinsic rewards (Brown & Perkins, 2007). This is because employees are not always enticed or motivated by financial incentives and rewards as echoed by Armstrong & Brown (2006). Important to note is that the organization can obtain required employee behavior changes by simply offering non-financial rewards such as career development, regular training, recognition of their hard work and safe and secure working environment which are not only cost effective but beneficial to the organization in attaining set business goals (Brown & CIPD, 2001). As Cox, Brown and Reilly (2010) concludes, there are adverse risks on reliance on financial rewards as the default reward systems for organizations and concepts of reward strategies which emphasizes on planning, theories and intent instead of focusing on processes, communications and impact respectively. This is particularly true since research indicate that although different employees attach different significance and value on pay systems, majority of them value non-financial rewards and are more likely to be motivated, committed and accountable to organizational objectives if both their extrinsic and intrinsic needs are also catered as supported by Zingheim & Schuster (2000). The report does not dispute the fundamental role pay systems play in attracting and retaining valuable employees, but it supports Cox, Brown and Reilly (2010) in suggesting that greater and broader benefits such as enhanced productivity, engagement, performance and behavior change among employees are easily generated by used of mixed reward strategies especially the adoption of total reward approach that offer both intrinsic and extrinsic rewards to employees. As earlier indicated, lack of sufficient knowledge on development and implementation efficiency by the line manager and their alienation from the reward strategy development processes are an impediment to attaining promises and benefits of reward management. To counter this challenge, it is critical that the line managers are not only consulted and involved in the whole processes of designing, implementing, evaluating, monitoring, and measuring reward strategies, but they should be continuously equipped with skills and knowledge on how to develop and implement realistic, sustainable, specific, measurable and attainable reward strategies (Heneman, 2002). Cox (2000) asserts that the line managers should be made aware on how their individual capacity to recognize and appreciate the work put in by employees, recognize training needs, support career enhancement and develop favorable working conditions impact on the employee’s morale, engagement and performance. As Cox, Brown and Reilly (2010) suggests, concentrating on aligning reward strategies with business strategies and priorities in a more flexible way through line manager and employee involvement ensures organizations are safeguarded from rigid and mechanistic contingency models. Therefore, adoption of the total reward model is the solution to ensuring reward strategies are not only effective and efficient in the short term but also they are competitive and sustainable. It is important for organizations that seek to enjoy the promises and benefits of their reward systems and strategies identify their unique business needs, identify the preferences of their employees and thereby design reward strategies that are unique to their organization (Brown & CIPD, 2001). In addition, developing reward strategies that are able to ensure both the business strategies and reward strategies compliment each other and deliver successful reward systems that appeal to both the organization and the entire workforce. The main purpose of strategies is to generate uniqueness or competitiveness which an organization cannot do if they simply copy reward strategies developed and implemented elsewhere either within or across the sector or industry. The perception of the one size fits all reward strategies to motivate workers is ill advised since employees are not only individually different but also respond to varied reward types and forms different based on their different preferences. This means an organization to attain anticipated outcomes from its reward systems it has to tailor the reward strategies to the unique preferences and needs of both the employee and the organization through involvement as indicated by Cox (2000). The report supports conclusions made by Cox, Brown and Reilly (2010) failure to achieve impressive results from reward strategies are as a result of problems in the process of designing and execution of reward strategies which have inadequate focus on employee preferences for varied reward types and problems in the construction of models of reward strategy. However, the report does not suggest an eradication of pay systems but advocates for adoption of mixed strategies that are based on the total reward approach where employees are accessible to both intrinsic and extrinsic rewards. Conclusion Reward management is an essential component in an organization since it supports the attainment of business goals by communication of desired behaviors to the workforce. Reward systems draws a clear connection between employee performance and organizational performance and therefore acts as a catalyst for positive behavioral change. Developing and implementing reward strategies is not merely about planning and intent but it entails communication, processes and active engagement of employees and the line managers. Based on the critical analysis, the report greatly agrees with the opinions and conclusions made (Cox, Brown and Reilly 2010). According to Cox, Brown and Reilly (2010), contemporary reward strategies fail due to problems in the process of designing and execution of reward strategies which have inadequate focus on employee preferences for varied reward types, problems in the construction of models of reward strategy and lack of adequate skills on the line manager’s part. The most effective and sustainable reward strategies are those based on total reward approach, those informed by the employee’s preferences and those aligned to business strategies. References Armstrong, M. and Brown, D. 2006. Strategic reward: making it happen. London: Kogan Page Publishers. Armstrong, M., Brown, D., and Reilly, P. 2009. Increasing the effectiveness of reward management. Brighton: Institute for employment studies. Brown, D. & CIPD. 2001. Reward strategies: from intent to impact. New York: CIPD Publishing. Brown, D., & Perkins, S. 2007. Reward strategy: The reality of making it happen. World at Work Journal, vol. 16, no. 2, pp. 82–93. Cianci, R., & Gambrel, P.A. 2003. Maslow's hierarchy of needs: Does it apply in a collectivist culture. Journal of Applied Management and Entrepreneurship, vol. 8, no. 2, pp. 143-161. Cox, A. 2000. The importance of employee participation in determining pay system effectiveness. International Journal of Management Reviews, pp. 357–375. Cox, A., Brown, D. & Reilly, P. 2010. Reward Strategy: Time for a More Realistic Reconceptualization and Reinterpretation? Wiley Inter Science, DOI: 10.1002/tie.20328 Hallowell, E.M. 2005. Overload circuits: why smart people underperform. Harvard Business Review, vol. 83, pp 54-62. Heneman, R.L. 2002. Strategic reward management: design, implementation, and evaluation. Sidney: IAP. Salwan, P. 2007. Best Business Practices for Global Competitiveness. Sidney: Pvt. Ltd. Zingheim, P., & Schuster, J. 2000. Pay people right! Breakthrough reward strategies to create great companies. 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