Reward Management Strategies and Practices

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Program Relevance

The primary carrier of competitive ideas and solutions for non-standard tasks is the organization’s staff. The undoubted importance of the employees lies in the implementation of all internal processes, the design of corporate culture, and the ability to ensure the performance of the enterprise (Zheng et al., 2017). However, there are often situations in which staff is not motivated to perform tasks, which ultimately affects the department’s efficiency and productivity.

A lack of proper incentives may lead to employees’ resistance to performing their professional duties (Akhmetshin et al., 2018). The solution to this situation, which hinders further economic growth, should be the awareness of the need to change approaches to the management of innovation activity, which differs from the functional instability, high risk of the result, and the importance of the role of the organization’s personnel.

The Essence of the Reward

Subsequent research needs to determine what the practice of rewarding as a motivational program is. Staff remuneration is understood to mean all expenses incurred by an employer based on an employment contract: in other words, the ratio of the employer’s total expenses not related to the labor costs of employees and their income (Antoni et al., 2017). Based on this view of the problem, it is essential to note that the process of determining an employee’s material remuneration should, on the one hand, take into account the employee’s professional activity and, on the other hand, motivate them to achieve the desired level of activity.

It should be noted that despite the fundamental role of material reward, it will not be effective without considering external factors. In particular, it should be combined with socio-psychological and organizational-administrative aspects, including the team’s recognition, participation in management decision-making, power, privileges, interest in work, promotion, and comfortable, stimulating working conditions.

Types of Rewards

A comprehensive examination of the various aspects of motivational practices reveals two main areas in which staff remuneration occurs. As a rule, HR managers deal with the internal and external environment of this practice. Internal remuneration is allocated during the performance of work tasks: it is tied to the emotional effect of achieving results, the content and significance of the work performed, and self-respect. Moreover, communication that occurs during the work process can also be considered as internal remuneration. From this point of view, the creation of an environment that encourages healthy communication, in which the main emphasis between colleagues will be on work processes, is crucial for the management of the company.

At the same time, the external reward does not arise in the course of task performance but is realized through the organization’s actions. This may include a promotion, commendation, and recognition by peers at a higher level, salary increases, and additional bonuses (Perkins and Jones, 2018). The nature and amount of compensation received by staff members from the organization as compensation for their work have a direct impact on the ability to attract, retain and motivate the staffing company requires.

Beauregarde’s Situation Analysis

The current remuneration policy implemented by Veruca Salt is based on a system for evaluating employees because of their professional achievements. According to the company’s proposed description, each of the 250 employees in the retail chain and 50 employees in the production hall is rated on a ten-point scale each year, and if they achieve high grades, they are rewarded with a promotion to an administrative position. This system is not an innovative and incentive solution; therefore, it is widely studied by several specialists in human resources policy, professional development, and psychological aspects of the employee.

For example, the work of Lewis, Swartz, and Lyons (2016) reflects the idea that to evaluate the employee’s performance, the degree of job performance, and the quality of work spent, the employer must ensure that the work performed is monitored and recorded. In doing this, communication with the supervisor is key, who must voice their opinion about the quality of the employee’s work, thank the employee for the excellent work and give constructive criticism if some indicators show results below target. It is assumed that any employee of the company has the right to familiarise themselves with the assessment of their professional performance and, if they do not agree, to file an appeal, which makes this point system of incentives and rewards fair.

However, the policy by Veruca Salt produces results that are the opposite of what would be expected. As a result of the inherently low remuneration of employees, many of them refuse to continue working at Beauregarde’s even though the evaluated reward system. High turnover among employees and managers is an indicator of program errors that must be corrected immediately.

Additionally, it should be noted that the loss of key administrative employees has a double negative effect: on the one hand, the company loses essential professionals, and on the other hand, leaving leads to lower motivation among subordinate employees. The fact of dissatisfaction with working conditions, reward system, and management’s attitude is unequivocally confirmed by interviews in which former Beauregarde employees speak negatively about the company.

Correlation of Practice with Theory

The use of the scoring system to evaluate performance and motivate staff, despite the complexity and high requirements for the qualification of the staff conducting the evaluation, if properly applied, contributes to the creation of an atmosphere of fairness in the interaction between the manager and subordinates, encourages the growth of responsibility and autonomy and increases employee satisfaction with the work performed and their commitment to their organization. By evaluating workers in this way, the manager can improve the productivity of the enterprise and successfully manage them, since the implementation of this system allows a shift from evaluation tools to a staff management system (Abdullah and Tarí, 2017).

Nevertheless, it is essential to highlight three shortcomings that exist in the implementation of a points-based reward system. First, it is a reasonably long process as the organization requires a considerable amount of time to identify specific results: it means that the level of compensation or promotion will not be regular. Second, the system is quite laborious, as it requires the finance and HR management departments to undertake extensive analytical work not only to assess the staff member’s competencies but also to determine fair rewards. Finally, the most obvious disadvantage of the scoring system is the subjectivity of evaluation: employees have to blindly trust the responsible department, which often causes interpersonal conflicts based on remuneration.

Strategic Decisions for Beauregarde’s

The company is going through the worst economic period in the history of its existence, which may lead to the failure of Beauregarde’s liquidity, closure of retail outlets, and bankruptcy. Nevertheless, this section will highlight several specific measures that Veruca Salt can take to ensure compliance with these challenging conditions. First and foremost, it is necessary to determine that the proposed measures are based on the current score-rating program applied in practice in the company.

The critical problem for Beauregarde’s workers is the lack of necessary incentives, which is expressed in the lack of loyalty, involvement, and positive psychological climate in the team. Looking at the professional practice of competitive organizations, both employees and managers choose the path of dismissal and work in similar industries with a more developed incentive system.

To address this situation, it is necessary to revise the reward policy for the next 12 months. In particular, it becomes clear from the observations of behaviorists that remuneration is reduced to zero if it is postponed indefinitely and is not issued immediately after a qualitatively completed order (White, 2016). In other words, as long as the employees of a confectionery firm are not rewarded “here and now,” they have hardly any idea what they are working for. Salt’s economic policy offers specialists minimal financing at the initial stages, which leads an employee to a situation where, in the absence of motivating levers, they are extremely poorly paid. It is not difficult to assess that such conditions are not conducive to the employee’s desire to perform their work plan effectively.

The prospect of solving this problem is opened by the introduction of regular, uneven compensation payments and incentives that give the staff a firm vision of tomorrow.

In the study, a modified scenario for the motivational program could be presented as rewarding for actions that are training or innovation for employees. Due to the current situation, the company is filled with new, incompetent staff who are irresponsible to work processes. If it is assumed that their replacement is not possible, a significant step towards achieving efficiency will be a program of competence training combined with a motivation system (Ahmed et al., 2016). In particular, for the results achieved in training, specialists will receive a small reward that will encourage them to continue to succeed. This method allows using a system of accumulating points, which are then exchanged for something more tangible. Furthermore, closer acquaintance with employees, even at the training stage, makes it possible to develop a more personalized approach in future rewards.

International Staff’s Rewards

The current economic situation of the company does not allow Salt to enter the international market, but a significant review of its remuneration practices will be able to guarantee qualitative changes contributing to competitiveness. Further discussions will be based on the assumption that Beauregarde has been able to transform itself into a global company, and now the critical issue is research into management practices and rewarding employees with different cultural backgrounds.

The policy of an international firm is primarily based on a universal approach to HR management in developed countries. Nevertheless, such programs are not homogeneous because, while specific measures are standard in the US, they may be considered unacceptable in Japan (Tekieli, Festing, and Baeten, 2018). Pay practices most directly affect an international firm’s competitive advantage, both locally and globally. The level of compensation depends on factors such as the funds invested in the business, the supply and demand for certain professions in the region, national legislation, and the characteristics of the production system. The form of rewards depends directly on the customs, taxes, and requirements of the regional government (Eklund, 2019).

International firms often charge higher wages than local firms to attract highly skilled labor from existing businesses. Additional benefits may vary, therefore, in addition to the main incentives, a particular set of benefits is provided to the worker, which may refer to tangible, intangible, or mixed incentives.

The changing modern market demonstrates the importance of the finance department’s analytical work in determining the amount and form of compensation in individual countries. International companies must keep in mind the ever-changing local currency exchange rates, locally specific changes and trends in motivation systems, and employee productivity (Tekieli, Festing, and Baeten, 2018).

The starting point for understanding the rewarding process for employees with different cultural backgrounds is to analyze their needs and values. Each culture has its own set of factors, under the influence of which the behavior of a person in the performance of their duties is formed. For example, if an employee needs to be satisfied with their work, the remuneration should be tailored to the employee’s needs: providing office space may not be sufficient if the worker is looking for high earnings and promotion opportunities.

To simplify the settlement system, teams may be encouraged to use either a stable compensation practice, citizenship dependent, or entirely independent of the region. The first option is based on equal salary levels for all employees, but a culturally different remuneration system: while American employees can be encouraged with money, colleagues from other regions can be supported with additional leave or benefits. The second system implies that each branch has its approach to rewarding subordinates.

Particular attention should be paid to the fact that this model can be controversial, as workers from different countries may receive disproportionate rewards for the same work. Finally, the third system provides for an equal reward for the same work regardless of nationality. That approach was the most difficult to implement but could guarantee the best results.

Managers’ Rewards

Any changes implemented in the company should have a clear goal. In other words, transforming the organizational business structure only for the sake of modifications is not only meaningless but also unjustified by the obtained expected results. Management of the company and its changes is a quite serious responsibility, the burden of which is placed on directors.

Remuneration systems for top management of corporations are one of the most discussed topics among corporate governance specialists. Nevertheless, there is no rule stating that an administrative employee will be motivated to perform their job duties a priori. Some managers did not seek to fill the vacant position but were promoted at the direction of their immediate supervisor. The thoughts mentioned above naturally lead to the conclusion that the necessity to inspire the leader to manage effectively and to thank them for the achieved results is not abstract.

However, it is important to note, that the promotion of professional work at the administrative level is always linked to the principles of social equality, in which the manager receives fair compensation to his subordinate. Otherwise, the critical problem is the alienation effect of managers, which does not contribute to the design of a unified corporate culture (Hargreaves, 2018). Nevertheless, it is the leaders responsible for the company’s strategic development, therefore, their compensation level should be commensurate with their responsibilities.

One of the most important directions of activity of top management or directors of any company is the creation of a special environment for highly productive work of employees. In doing so, remuneration of a strategic manager is based on the degree of responsibility for the prosperity and stability of the company, professional sacrifice, and abandonment of individual goals if they run counter to corporate ones. The compensation package for any category of personnel includes a fixed salary, a variable part in the form of additional bonuses, and a social package.

The use of any elements of a compensation package in a particular company depends on ownership, business scope, functional responsibilities, authority, responsibility, and levels of management. The choice of compensation and compensation criteria for line managers and middle managers is based on career prospects, and for senior managers on the degree of participation in the company’s core business by increasing the company’s market value and granting the right to purchase a stake in its shares.

In determining the amount and form of compensation for managers, consideration should be given not only to the scope and nature of the activity prescribed for the position but also to the person’s personal qualities. For motivational purposes, managers’ salaries may be increased if the quality or volume of the product produced increases, if the set targets are met and if turnover in the entrusted division is eliminated (DeFond et al., 2018). The procedure and conditions for increasing remuneration are set out individually in the employment contract. The structure of remuneration of an executive officer usually consists of necessary payments, additional bonuses, bonuses for excess productivity, social payments, and dividends on company shares.

Reference List

  1. Abdullah, M.M.B. and Tarí, J.J. (2017) ‘Hard quality management and performance: the moderating role of soft quality management,’ International Journal for Quality Research, 11(3), pp. 587–602.
  2. Ahmed, U., Abdul Majid, A.H., Mohd Zin, M.L., Phulpoto, W. and Umrani, W.A. (2016) ‘Role and impact of reward and accountability on training transfer,’ Business and Economics Journal, 7(1), pp. 1-6.
  3. Akhmetshin, E., Morozov, I., Pavlyuk, A.V., Yumashev, A., Yumasheva, N. and Gubarkov, S. (2018) ‘Motivation of personnel in an innovative business climate,’ European Research Studies Journal, XXI(1), pp. 352-361.
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  5. DeFond, M., Hu, J., Hung, M. and Li, S. (2018) The usefulness of fair value accounting in executive compensation. Web.
  6. Eklund, M.A. (2019) ‘Compensation according to culture,’ in Eklund, M. A. (eds.) Fairness of CEO compensation, pp. 105-112.
  7. Hargreaves, D. (2018) Are chief executives overpaid? New York: John Wiley & Sons.
  8. Lewis, Z.H., Swartz, M.C. and Lyons, E.J. (2016) ‘What’s the point? A review of reward systems implemented in gamification interventions,’ Games for Health Journal, 5(2), pp. 93-99.
  9. Perkins, S.J. and Jones, S. (2020) Reward management: alternatives, consequences and contexts. London: Kogan Page Publishers.
  10. Tekieli, M., Festing, M. and Baeten, X. (2018) ‘Centralization and effectiveness of reward management in multinational enterprises,’ Journal of Personnel Psychology, 17, pp. 55-65.
  11. White, G. (2016) Reward management. Cheltenham: Edward Elgar Publishing Limited.
  12. Zheng, W., Wu, Y.C.J., Chen, X. and Lin, S.J. (2017) ‘Why do employees have counterproductive work behavior? The role of founder’s Machiavellianism and the corporate culture in China,’ Management Decision, 9, pp. 1-14.

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BusinessEssay. "Reward Management Strategies and Practices." December 15, 2022.