Reward Systems in Human Resource Management

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In a competitive business environment, every employer competes to ensure that his or her business improves on the quality of services it offers while at the same time reducing its operation cost. In the meantime, growth in the global economy has led to competition in job market. While business operators expect their employees to deliver in their organizations, employees on the other hand expect more from their employers (Articlesbase 2009, para. 1). Developing a successful reward system is one of the important roles of managers. Employee reward system is one of the methods used by employers to motivate their employees. In order to benefit from rewarding systems, people responsible for developing a reward system within an organization need to be aware of goals and objectives of an organization as well as behaviors that will facilitate in attaining these them. To develop such a system, human resource management skills are required. While most organizations assume this, companies develop rewarding systems that often fail to help them attain their goals. For instance, a business that aims at nurturing teamwork within its workforce should not reward employees who improve their productivity without involving other employees within the organization. On the other hand, if a business aims at improving quality of products or services it offers, it is not advisable to develop a rewarding system that rewards employees on increasing quantity of work accomplished (Articlesbase 2009, para. 4).This discussion will try to assess whether all managers are human resource managers. It will evaluate this, by using real word examples and analyzing them with relevant human resource management concept. It will go further, and recommend appropriate strategy that can be implemented by organizations managers to ensure, they play the role of human resource management efficiently.

Conducting performance analysis ensures that business develops a rewarding system that rewards employees based on its goals (Britton, Samantha & Terry 1999, p. 25). Since rewarding systems cost organizations in terms of time and money, employers need to ensure that performance has been improved in their organizations before rewarding their employees. When developing a rewarding system within a business, it is important to guarantee that rewards offered to employees match their output. This leads to employee motivation. Employers also need to make sure that they have rewarded both group and individual achievement in order to foster both individual performance as well as teamwork within the organization. For reward system to be effective, organization need to clearly outline what the business expects from every employee (Britton, Samantha & Terry 1999, pp. 27-39). Employees are found to perform effectively in organizations if they are aware of what they are expected to deliver in their respective areas of specialization. Business organizations use various types of rewarding systems to motivate and acknowledge employee performance. Some of these rewarding systems include bonuses, profit sharing and stock options.

For many years, business organizations have used bonuses as a rewarding system (Clemmer n.d, para. 1-3). Organizations use bonuses to reward individual employees who help in realization of organization goals. The method is used in business organizations to ensure that employees improve their productivity thus increasing business profit. The system is also used in rewarding group achievements. Certainly, most of business organizations are shifting from using the rewarding system in rewarding individual employees to rewarding contributions made by different groups within the business. There are various advantages associated with use of bonus as a method of rewarding individual and group accomplishment within an organization. Awarding bonuses to individuals who perform well within an organization leads to motivated workforce. Employees perform well when they realize that their contribution in the organization is acknowledged by management. Bonuses lead to individuals within the business strives to improve their performance. This system helps the business to achieve employees’ royalty. As a result, employees become dedicated to their duties within the business (Glasscock & Kimberly 1996, pp. 75-80). The method facilitates in improving performance of employees who are not dedicated to the organization. As these employees see effort of their colleagues being rewarded, they also strive to work hard in the organization with the aim of also being rewarded in future.

To enhance motivation and encourage team work in the work place, most organizations have introduced group rewarding bonus systems. Though, organizations where teamwork is emphasized at the expense of an individual effort, employees fail to perform effectively as they perceive their effort in the group is not being recognized. In such situations, every employee in the group looks upon the others to perform any responsibility allocated to the group. This is the major factor that leads group rewarding bonus systems occasionally perform poorly. In some areas, rewarding group accomplishment facilitates in improving employee performance. This is because all employees are motivated as they perceive to contribute equally in the group (Glasscock & Kimberly 1996, pp. 81-89). The bonus system helps the company focus on areas that can enhance performance as well as business profit. Business organizations offer bonuses to employees working in areas that increase organization profit. This ensures that employees in these fields work hard thus increasing organization profit.

A human resource manager should be able to recognize contribution from every employee. Not all managers have skills to manage human resources. One of the most important roles of a human resource manager is to manage employee recruitment. Organizations incur a lot of expense in employee recruitment. Organizations that do not reward their employees whenever they perform well lose most f their employees. Employees leave the organization to work in organizations where their contribution is acknowledged. Such organizations keep on recruiting new employees to occupy the left vacancies (Henemen & Courtney 1995, p. 3). To get qualified personnel to work for them, it requires the business to offer competitive salary. Acknowledging employee performance through giving them bonus helps business organizations retain their skilled personnel as well as recruit new experienced employees. Consequently, the business is saved the cost of recruiting new employees every time as those with experience leave the business.

On the other hand, the system is seen to be ineffective in improving employee performance as it acts as a short-term motivator. Rewarding employees for their accomplishment in previous years, makes every employee work hard to ensure that his or her performance is acknowledged next time. The aim of improving employees’ performances should not only facilitate in attaining short-term goals of the business. Instead, the rewarding system should ensure that it has helped the organization in attaining its long-term goals (Henemen & Courtney 1995, pp. 4-7). A manager may be able to manage the resources for this system but inability to connect with the human resources can lead to failure. Unlike other managers, a human resource manager should be sensitive to employees. He or she should be able to read in between the lines in order to ascertain employees’ need. A reward system prepared in human resource manager’s perspective address not only the psychological needs but also the higher needs. This system makes most employees strive to improve the quality of their services within the organization in order to be rewarded, rather than striving to improve their performance in bid to attain long-term organization goals. Bonus system of employee rewarding focuses on rewarding employees based on their individual and groups’ fundamental functions. As a result, most employees perceive it as an entitlement. Failure to reward employees at one time leads to them performing poorly in the organization. Rather than taking the reward as an acknowledgement from the management for their performance, employees take it as part of their pay in the organization. The system is blamed for discouraging innovation within an organization. As every employee or group within the organization strive to improve their performance, they take little time to introduce new performance methods within the organization (Klubnik 1995, pp. 28-32).

The other system used in employee rewarding is profit sharing. This is where a business sets aside part of its profit to be shared among the employees. This is after business organization has conducted its financial auditing at the end of its financial year. The amount of profit allocated to each employee is proportional to a specific percentage of his or her salary. The main aim of using this system in rewarding employees is to acknowledge their contribution in improving business profit. The system has various benefits to business organization. As employees get portion of the profit based on the profit they have accumulated in the business, they strive to increase business profit (Klubnik 1995, pp. 33-41). This facilitates in improving business growth. Growth in business depends on the profit made. As employee strive to increase business profit so as to get big share of the profit, the business benefits as part of the profit is used in its expansion.

For a person to qualify for the profit, he or she is required to have worked in the company for a certain period of time. For organizations that realize a lot of profit, the method facilitates employee retention. This is because every employee would like to work with business organizations where their efforts are rewarded. Employees will be willing to remain in the organization as long as they are assured that in future they will be able to enjoy part of the business’ profit. The method makes employees feel to be part of the business. By getting part of the business profit, employees feel to co-own the business with their employers (Metzger 1978, pp. 144-163). This makes them wish to remain in the business. Their level of commitment to business activities is also improves. The method fosters a culture of teamwork in the business. Employees work together to improve the profit margin of their business.

Despite the method having some advantages; it is also associated with various disadvantages. Since every employee receive a share of the profit equal to a specific percentage of his or her salary, the method does not recognize individual contribution in the organization. Some employees may not have contributed in attainment of the profit but since they are part of the organization, they receive higher share of the profit than those who contributed to its achievement. This leads to employees being demoralized (Parker & Liz 2001, p. 64). For employees who receive less portion of the profit despite their contribution in its attainment, they stop being committed to the business. Employees who do not contribute in improving business profit are never motivated to do so as they are always assured of getting part of the profit. As a result, the method discourages employees from being innovative and creative in the organization as their contribution is not recognized.

From another perspective, this method is considered to hinder business growth. Most businesses depends on the profit they make for their expansion. Allocating part of the profit to employees leads to the business being left with fewer funds to finance its expansion. Profit in the business comes as a result of numerous activities that take place within the business. This method does not help employees link their actions, decisions and participations to organization goals. As a result, it does not provide an opportunity for business to identify changes that need to be made in the organization to attain its goals (Parker & Liz 2001, pp. 66-75). Just like bonus system of employee rewarding, this method may be viewed by employees as an entitlement if not well communicated to them. Employees may demand for reward whenever the business makes profit without considering the amount of profit made by the business. Failure to reward employees may appear as denying them their rights making them fail to actively participate in the business. Some may even quit from the business leading it to incur extra expense in recruiting new employees.

Business organizations also use stock option as a system of employee rewarding. Initially, the method was being used to reward employees in the top management levels within an organization. However, the system is gradually being adapted as a method of rewarding junior management teams as well as other employees in organizations (Sarvadi 2009, para. 3-6). Stock option system gives employees the privilege to buy a specific number of organization’s shares at a lower price for a certain period. Organization’s board of directors authorizes the system. The number of shares provided for employees depends on organization’s outstanding shares. For an employee to qualify for the system, he or she has to have worked in the company for a certain period of time. Incase one wish to leave the company before he or she is fully vested to the company, the person is denied the privilege of enjoying stock option. Once a person has bought the shares, he is allowed to retain the shares or sell them on open market at a different price (Spitzer 1996, pp. 12-33).

Some of the advantages of this system is that the company is relieved its tax burden. Since organizations are not taxed on their expenses, this works as one of organizations expenses thus it is not taxed. Another benefit accrued from the system is that as the method is considered to be part of compensation, it is not reflected as one of the business expense in its records. Company value is perceived to be high making it possible to attract and recruit experienced personnel. The method helps business organizations avoid cases reduction in business earnings. This is through reducing the number of outstanding shares within a business (Torrington, Hall &Taylor 2008, pp. 121-153).

This system of employee rewarding poses a threat to both the company and the employee. In case where employees buy shares at a price higher that the market price, they do not benefit from the shares as they cannot sell them through open market. Most of organization fund is obtained through selling its shares on open market. Rewarding employees through the system implies that the company is left with fewer shares to trade publicly.

From the above discussion, it is very clear that not all managers are human resource managers. Human resource management skills are not obvious to all managers. Inability of some managers to respond effectively to employees needs lead to great failure in human resource management. To ensure that all managers are human resource managers, they should make ensure their organization have rewarding systems. A rewarding system provides criteria to respond to employees’ needs. For any of these systems to be effective, they must satisfy employees. Thus, they must be developed in a manner that significantly reward employees based on their contribution in the organization. This is because they are vital tools that help in employee recruitment and retention. In most cases, employees compare themselves with employees working at a similar level but in different organizations. In case they find that these employees are well rewarded than them, they may decide to leave the organization (Weber 1991, pp. 32-45). It is imperative for organizations to communicate the rewarding system to its employees. This will help in them not taking it as an entitlement thus eliminating employee protesting whenever they are not rewarded. Human resources are some of the most important resources for any organizations. For this reason, organizations should invest on improving human resource management. Human resource management workshops and seminars are or great help to making all managers to be human resource managers.


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