Employee Reward Management and Practice

Introduction

The role of human resource management is very important to various organizations because it is the duty of this functional department to ensure that reward practices are directly linked to the performance of employees who work for an organization (Baron & Armstrong 2007, 122; Marchington et al. 2002, 133). The dynamic business environment circumstances have a big impact on reward policies and practices and may often lead to an increase in payroll costs that employers are required to meet. Each and every organization usually has a well-constructed framework that defines the policies and procedures which are to be followed to ensure that proper remuneration practices are adhered to in order to ensure that each employee within the organization is properly rewarded for their input (Wardy 2010, 46).

As the environment changes so does the demands of employees especially when inflation occurs, and the living expenses go up, or when the level of competition within the industry dictates the level of remuneration, it becomes the duty of human resource department to come up with techniques that will allow the firm save on payroll costs without compromising organizational performance (Schwartz 2001, 66).

It is thus imperative that human resource executives reduce payroll costs significantly, but keep in mind all cost-cutting strategies should, at the end of the practice, not affect the level of performance within the organization (Armstrong 2007, 32). Hence if cost-cutting measures are carried out, it is vital that all factors that motivate employee performance are not negatively affected or otherwise the whole cost reduction program may end up injurious to the organization (Gratton 1999, 64-66).

Organizational reward systems may often be made of both fixed and variable components, which are mainly financial in nature, which adds up to the gross income of an employee (Schuler & Jackson 1999, 72-73). Besides organizational rewards being monetary, sometimes non financial awards such as titles and symbols of status are used in order to reward performance within the organization (Lewis 2000, 15-28).

Processes are systematic sets of activities that are used to evaluate performance and contribution within an organization and, therefore, to determine the level of rewards that are to be awarded to employees ( Perkins 2008, 153). Human resource processes consist of employee appraisal techniques that enable employee’s efforts to be measured and quantify so that reward can be awarded according to the market rates and hence as the environment changes so do the processes within an organization change, for example, if a labor market was previously uncompetitive but now becomes highly competitive human resource executives may be forced to change their processes to allow it adapt to the environment. Practices and Structures are used to motivating people by the use of financial and non financial techniques and are often subject to environmental changes (Perkins 2008, 148).

Reward policies are a set of broad guidelines that are to be followed by human resource executives to reward employees, and therefore most, are linked to performance (Baron & Armstrong 2007, 42). Organizations often use their reward systems to appreciate their employees for their input and motivate them to become better employees in the future. Consequently, if existing reward systems do not encourage employees or they are not efficient, they may be scrapped or realigned to serve their purpose (Breulm & Gardner 2004, 18). Since organizations are cost-conscious while carrying out their reward programs when costs arise due to various changes in the environment such as competition, changes in the labor market and so forth human resource executives may be forced to employ less skilled employees whom are cheaper, lay off some portion of their staff, use part-time employees or even exploit tax benefits such as tax credit to keep costs at an all-time low (Schwartz 2001, 26).

Problems Associated With Performance and Reward Management

Human resource executives are always faced with the challenge of accurately developing evidence-based reward systems and measuring actual performance (Armstrong 2007, 42). This is because organizational reward systems are supposed to meet both the expectations of employees and the employer at the same time so that both the goals of the organization and the employees are met (Brooke, Russell & Price 1988, 139-145). If the existing processes and practices are contrary to the goals of the organization and the employees, then there may arise a situation whereby one of the parties feels aggrieved because of the inequality that presents itself. If such a situation exists then employees may decide to leave the organization simply because they have ended up unmotivated (Wardy 2010, 76).

It sometimes becomes difficult for human resource experts to address the exact need and wants of employees using human resource policies and procedures. It is vital that motives of employees are accurately determined using psychometric techniques that will help design appropriate reward systems (Breulm & Gardner 2004, 148). Some employees are rather motivated by intrinsic and not extrinsic desires and therefore when human resource managers reward them highly with tangible rewards such as money and property they only end up being motivated in the short run, while conversely some employees are motivated by materialistic needs and may need to be rewarded by tangible rewards (Brooke, Russell & Price 1988, 139-145).

Failure to meet the reward expectations of employees during performance may be perceived as inequality that may affect their future output and loyalty to the institution (Brooke, Russell & Price 1988, 139-145). Gain and profit sharing is an important part of performance management and organizational reward systems when employees achieve their targets and make profits they expect to have a certain proportion of the gain distributed to them in a portion that is somewhat equal to their effort (Gomez-Mejia, Balkin & Cardy 2008 163).

The ability to measure input and output is a challenge that affects organizational reward policies and practices; if employees who perceive their input as most significant and responsible for the brilliant performance get the smallest chunk of the gain then it becomes a problem and may affect future performance of such individuals (Wardy 2010, 45-47). It is therefore the duty of human resource officials to put in place policies and procedures that will allow accurate reward systems that are able to quantify the level of input and output and factor that into reward systems (Green 1999, 13-15)

The link between different motivation levels and employee output in organizations
Figure 1 The link between different motivation levels and employee output in organizations adapted from Schuler. R. S. & Jackson.S. E., 1999. Strategic human resource management. New York: Wiley-Blackwell.

The environment is not static and therefore organizations are forced to change and alter their strategies in accordance to the various changes that are presented by the environment (Breulm & Gardner 2004, 31-45). If the environment dynamically changes and becomes more competitive then it is the duty of those in charge to put in place reward practices and policies that are reflective ot the situation but if the environment becomes less competitive then human resource experts are supposed to react in the most appropriate way by implementing policies and practices that are up to market standards (Wardy 2010, 30-38).

When organizations change so do all functional areas such as the human resource department within the organization change (Buehler, Griffin & Ross 1994, 366-388). The kind of policies and practices and procedures of the Human resource system are thus likely to be reflective of the current situation in the market. Environmental changes may thus mean changes in resourcing techniques, performance management, learning and development, reward management and employee retention policies (Breulm & Gardner 2004, 43). As the business environment changes employees face more pressure to perform and meet their targets thus making it necessary for human resource experts to redesign organizational management performance management systems.

Competition within the industry often dictates the labor practices and therefore companies within the same industry will operate with almost similar standards (Wardy 2010, 131-140). As competition within the labor within the labor industry rises the mobility of labor also goes high and therefore employee retention strategies must be implemented in a realistic manner such that the organization is able to optimally satisfy employees but at the same time reduce unnecessary payroll costs. Changes in the business environment should thus offer opportunities under which organizations can implement rewards policies and practices that favour both the goals of the organization and the employees who are considered important to the organization (Breulm & Gardner 2004, 38-39).

As the environment changes so does the motivation of employees and it is therefore the task of human resource experts to develop mechanisms that will allow them to use continuous evaluation techniques that will enable them use psychometric boundaries to determine the real motives behind employee performance (Breulm & Gardner 2004, 177). When the real motives behind employee performance are determined it is thus imperative that the human resource function is able to implement them into the reward policies and practices of the company while having the concern of reducing payroll costs in mind.

Emergent Practices With Regard to Reward

The pressure to perform and increase competition especially in the commercial world has forced human resource executives to adapt more vigorous and individualized systems of rewarding employees within organization (Wardy 2010, 155). Employees are the most important resource to the organization and therefore human resource experts are forced to identify the most talented individuals and create reward packages that will encourage them to maximize their output and be loyal to their organization (Brooke, Russell & Price 1988, 139-145).Unlike previously human resource departments now take part in serious strategic planning whereby the talent and knowledge of every organizational employee is put into consideration and determined using various techniques.

Organizations like Barclays bank now use psychometric tastes to determine the personality of prospective employees (Armstrong 2007, 188). Once this is done then it becomes easy to identify which department that this employee can be assigned to with an aim of maximizing output of these individuals within their various functional areas (Baron & Armstrong 2007, 38). Thus, depending on the various tests that individuals are given and the departments which they are signed to. Barclays Bank is able to design a reward package that is most likely to cater for their needs as employees. The advantage of using such a technique is that it becomes possible for employers to determine the needs of employees and factor them into the various reward systems that they develop (Anonymous 2010). Reward policies and practices are developed for one reason in particular and this is to ensure that employees inputs are appreciated and that employees are further motivated even to put in more effort in their next attempt (Buehler, Griffin and Ross 1994, 367).

Barclays Bank reward policy is to reward employees who assist it in achieving organizational targets handsomely and thus it is their practice to go a step further and even customize reward packages of various employees who exhibit talent and perform exemplary (Armstrong 2007, 180). Human resource executives are coming up with more effective techniques that allow them to pinpoint the most talented individuals in an organization and thus develop reward policies and practices that favor them (Wardy 2010, 62; Knights & Willmott 2007, 122).It is by doing so that organizations are able to encourage other underperforming employees to work harder because performance has become directly linked to reward.

How organizations are supposed to link individual performance to organizational reward systems
Figure 2 How organizations are supposed to link individual performance to organizational reward systems Adapted from Schwartz, A., 2001. Performance Appraisal: Appraisal and Meeting. NY: Andrew Schwartz.

Modern trends suggest that employers no longer place each employee in the same basket while rewarding them. Performance management systems are becoming more radical and hence human resource experts are also moving from a mass oriented approach to a more individual based reward system where performance appraisals guide them in the reward process (Baron & Armstrong 2007, 60-64). In other words, employees are becoming more involved in the reward management systems of their organizations and are even at times called upon to negotiate and bargain for what they want.

Since individuals are diverse in nature it thus becomes necessary to factor this in the reward management policies and practices, and by doing so each and every employee ends up more satisfied with the kind of rewards which are handed to them by their employers. Contrary to classical beliefs those financial rewards are considered the most important form of reward systems in organizations human resource executives are appreciating the fact that non-financial reward systems also play a big role towards increasing job satisfaction and motivating employees and therefore they are integrating this into the various reward policies and practices within the organization (Brooke, Russell & Price 1988, 92-96). Organizations like ING Group also have understood the importance of using careful evaluation techniques to identify the personal characteristics and triggers of human behavior and incorporated them into their performance management and reward systems.

The company’s policy is to appreciate and reward every employee within their organization with some form of equity and thus it is their policy to carefully plan the human resource function in such a way that their practices are an exact representation of their policies. Because companies such as ING Group are using a more geocentric and multinational approach that allows it to factor culture of various employees in the reward policies and practices of the organization (Baron & Armstrong 2007, 162-164; Redman & Wilkinson 2002, 155). For example individuals in the western world are more aggressive capitalistic in nature and thus materialistic in nature and title may not mean much to them so long as they are properly compensated while in other parts of the world such as Asia and Africa individuals take titles very seriously (Bovey & Hede 2001, 534-548). With such a fact it becomes important to use a geocentric approach to formulate reward policies and practices.

Conclusion

Reward policies and practices of organization are very important to an organization because it ensures that the effort of employees is appropriately appreciated by the organization (Breulm & Gardner 2004, 43-52). It is thus imperative that organizations carefully plan and implement appropriate policies and practices that will alow individual within the organization to work hard knowing that performance is directly proportional to rewards given within the organization. It is also important that the human resource function of an organization to strategically plan the human resource function so that as the environment changes performance management and reward policies and practices change according to the environment (Strebel 1996, 62). The need to adapt to change is thus an important part of the organization and if the human resource department fails to notice this then both organizational performance and employee satisfaction may be compromised (Bovey & Hede 2001, 534-548).

The greatest challenge for human resource experts is to create a perfect reward system that is agreed upon by both the employee and employers, because it is always certain that some employees will always feel aggrieved and may feel as if certain policies and practices as unfair and unequal. It hence becomes necessary to ensure that gain and profit sharing structures within an organization are developed in such a way that employee efforts are a direct reflection of the rewards that are given out to them because if employers fail to do this then the most talented individuals within the organization may be tempted to move to other organizations which appreciate them much better (Breulm & Gardner 2004, 144-146).

It thereby becomes important that human resource executives accurately use a more individualistic approach to ensure that they narrow down upon the needs and wants of specific employees. The failure of the human resource department to accurately customize reward policies and practices that are in tandem with the needs of the staff may end up affecting organizational performance. Once human resource executives embrace organizational diversity and incorporate it into the framework of reward and performance management it will become easy for employers to tend to the needs of Employees from a more individualistic approach (Armstrong & Appelbaum 2003, 18).

It is therefore imperative that the role played by organizational reward systems ensures that a high level of motivation is maintained and job satisfaction is maintained by simply developing the appropriate reward systems in an organization. This can thus be effectively achieved if human resource experts successfully create a link between motivation and reward so that employees can increase their output based on the effectiveness of the reward system (Breulm & Gardner 2004, 43-52). As for organizations who operate in very many geographical regions and are multinational it is hence important that the reward policies and practices also follow a geocentric approach whereby the culture of employees can be factored into the reward systems simply because the needs and motives of employees change from region to region. By doing so, employee performance can be easily boosted to increase performance and justify the payroll costs that employers are subjected to.

Recommendations

Human resource executives should ensure that they use a balanced mix of both financial and non financial reward systems to encourage employee performance and motivate employees by doing so this will not only reduce payroll costs but also ensure that employees are motivated to increase their output within various functional areas of the organization. The use of non financial reward systems will, therefore, reduce the burden that employees usually face while rewarding employees, especially when using money as the main form of rewarding performance within an organization.

Due to the highly dynamic nature of the environment, it is the duty of the human resource executives to ensure that the organization is able to continuously review its reward policies and practices so that they reflect the situation on the market. This is simply because of the human resource function ignores the impact imposed on the organization by the highly dynamic environment, the employee turnover may rise, and the organization may end up facing extra incremental payroll costs in the process of acquiring new employees due to the effects of labor mobility.

Since some organizations operate using a multinational or geocentric approach, it is appropriate that human resource executives know that a unified worldwide reward system may not go well in various parts of the world. It, therefore, becomes necessary to customize reward policies and practices to fit in with the culture of certain parts of the world in which their companies operate.

The heterogenic nature of employees should, therefore, be used as an opportunity that the company can save payroll costs by effectively setting payroll practices and policies that will ensure the most talented and highest performing employees are identified and rewarded. This is because if a homogeneous reward system is used, talented and hardworking employees may be demotivated and see no need to put in extra effort into their work. Hence if an organization uses a homogeneous mode of payment, a lot of money will be lost because some lazy employees will be rewarded for work that was done by others because there is no way to track performance per employee.

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