Smart Marketers Firm’s Financial Reward System

One of the most challenging tasks in human resource management is to implement an effective reward and recognition system. Human resources are some of the most important resources in an organization. The way human resources are managed has high contribution to success or failure of an organization. Well managed human resources can be a competitive advantage of an organization while poorly managed human resources can lead to organizational failure. In human resource management, it is imperative to ensure that employees are motivated, loyal and productive. This entails making sure that each employee’s work is appropriate, satisfying and contribute to overall organization’s goals. Human resource management should also ensure that employees are motivated in their work, their productivity is enhanced and exceptional performance is recognized.

Reward system is one of the tools used in human resource management. A reward system constitute of rules and procedures that are used to allocate benefits and compensation to human resources. Reward systems can be divided into two major groups: financial reward systems and non financial reward systems (Stockley, 2009, par 4). Financial reward systems use financial benefit to reward employees while non financial reward system use of non financial benefit (Persico & Morris, 1997). A reward system is double edged sword; it can either motivate or discourage employees.

Increased competition in business has motivated business managers to seek new ways for improving performance while reducing cost. In addition, change in job market has resulted to high competition for employees. While organizations seek to make best use of employees, employees seek to benefit more from their contribution (Armstrong, 2004, p. 208). Financial reward system is one of the ways that are used to motivate employees. The paper feature financial reward systems in Smart Marketers.

Smart Marketers is small marketing firm. The firms business is to offer marketing services to other firms. Some of the services offered by Smart Marketers include market research, market survey, market entry, advertisement and promotion, branding, consumer evaluation, marketing consultancy and developing and implementing marketing strategies (Persico & Morris, 1997, p.247). The firm’s vision is to be the marketing firm of choice whiles its mission is to offer innovative marketing services. The firm boasts of being innovative in marketing. Increased growth in business has led to considerable growth in the number of employees in the firm. Currently, the firm has 85 employees. One of the major challenges to the firm is retaining employees. Increase in competitors in marketing industry and scarcity of skilled employee has necessitated the firm explore human resource management technique. One of considerations for human resource management is to implement a financial reward system.

Smart Marketers is concerned with optimizing its return from marketing services. As a marketing firm, the motivation of employees contributes highly to the overall performance of the firm. The services offered by the firm depend highly on employee where inefficiency of the employee contributes negatively to the firm’s performance. Most of the services offered by the firm require are time bound while employee attitude has direct effect to the overall performance. Considering that human resources contribute highly to performance of the firm, the firm’s management can use different human resource management tools to influence performance (Armstrong, 2004, p. 211). Smart Marketers performance depends highly on its human resource. By using a reward system, the firm can be able control the behavior of its employees and influence its performance.

Motivation of employees has direct influence on their influence on their performance. Highly motivated employees are more likely to perform better while poorly motivated employees have relatively poor performance. Taking this into consideration, the Smart Marketers can gain competitive advantage by ensuring high motivation in their employees. By effective use of a reward system, Smart Marketers motivate its employees and improve its performance.

According to rational economic man model of human resources management, employees view a reward and desirable. For this reason, employees are motivated to act in a manner that can lead to a reward. However, a reward can have negative effect when not used effectively. Instead of motivating employees, some rewards can lower employee motivation and decrease performance (Slocum, & Kerr, 1987, p.111). Employees evaluate the effort that they make with anticipated reward. If an employee considers a reward as worth of effort then he or she is more likely to be motivated to act in the manner expected for the reward. On the other hand, if an employee does no consider a reward worth of expected effort then he or she is less likely to be motivated by the reward.

When designing a reward system for Smart Marketers, it is considered that different individuals respond differently to motivation factor. The things that motivate some employees may differ with what motivates other employees. It is also considered that motivation factors change with time, age and other factors. While some financial reward may be effective in employees as a certain a stage of life, the same reward may be ineffective at other stage of life (Persico & Morris, 1997, p.246). The reward system also considers other social economic factors. The level of skills, experience and economic situation are considered in the reward system.

The goals of Smart Marketers are highly considered in the reward system (Armstrong, 2004, p. 213). The reward system is structured in a way that it will help the firm to accomplish its goals. As a marketing firm, the firm is evaluated by how it helps other firms market their products. It is evaluated by validity of market survey, effectiveness of marketing strategy, effectiveness of advertisement and its contribution in increasing it client’s sales. The financial reward is modeled in order to motivate Smart Marketers’ employees to work to the best interest of the firm. By rewarding employees for their efforts toward the firm’s goals, the firm hopes to motivate positive behavior and improve performance (Slocum, & Kerr, 1987, p.111). A successful reward is not easy to achieve. The firm’s goals are not the only factors to consider but the acceptability of the system to employees is considered. One of the major considerations made in the reward system is that employees have their personal goals. The reward system aims at integrating individuals’ personal goals with the firm’s goals. The main objective is to enable the employees to attain their individual goals as part of the firm’s goals (Kerr, 2008, p. 167). The figure below demonstrates the basic framework of the Smart Marketers’ reward system:

Smart Marketers’ reward system

Financial rewards are core to Smart Marketers reward system. The financial reward system uses financial rewards in order to motivate the employees toward the organization. The financial reward system constitutes financial rewards as compensation, bonus, commissions, overwork pay, merit pay, incentive and cost-of-living adjustments.

Money is the major factor that motivates people to seek employment (Stockley, 2009, par 3). People expect to be given fair financial reward for serviced offered. The reward system for Smart Marketer appreciates the need for fair monetary compensation for services offered. The company seeks to give equitable reward to its employees in order to motivate and encourage them to contribute more to the firm’s performance.

Smart Marketers financial reward system is critical to its human resource management. The reward system aim at meeting the following objective: ensure external competitiveness of the firm, achieve internal equity in compensation, ensure legal compliance, achieve motivational effect, and link to performance. In addition cost effectiveness and firm’s culture is considered in the financial reward system. Considering that there is high competition for skilled employees, the system aims at attracting and retaining the needed human resources (Persico & Morris, 1997, p.243). The reward system aim at ensuring harmony between employee contribution to the firm and the compensation offered. Legal considerations are considered in designing the financial reward system in order to ensure legal compliance. The financial reward system is structured in a way that links with performance and have motivation effect to the employees (Wilson, 2003, p.69). The cost of the reward system is also considered in order to ensure that the system is cost effective. However, the reward system is not considered is isolation. Appendix 1 shows how the reward system is liked to other human resource management systems.

Smart Marketers has permanent and temporal employees. Permanent employees are entitled to a salary that has two parts: a basic pay and a merit pay. The basic pay is predetermined while the other part is depended on performance. Basic pay is constant but varies from one employee to the other. The other part of the salary is determined by various factors in the organization but most of all on the performance of the employees.

Financial rewards are very important to an organization. The basic pay forms the foundation of financial reward at Smart Marketers. There are various factors that are considered in determining the basic pay of an employee. The firm seeks to ensure that financial rewards offered are fair to all employees. Thus, the basic pay is determined by a number of factors. The education, skills and experience determines the salary of an employee. An employee that is more educated, skilled and experience is awarded higher basic pay than other employees that are either less educates, skilled or with limited skills. The firm an entry basic pay that is offered to employees as they joint the firms.

Various considerations are considered when setting financial compensations. The minimum requirements set by the law are considered (Armstrong, 2004, p. 206). The compensations for all employees in Smart Marketer are tagged to legal requirements. The reward system has ensured that all compensations are above the minimum requirement. The contribution of an employee to the firm’s objective is considered. The more the contributions of an employee to the firm’s goals lead to higher compensation (Stockley, 2009, par 7). The position of an individual in the firms also determines the amount of compensation. The individuals in management positions earns higher than employees under them. Smart Marketers has hierarchy of management. The firm is divided into department where each department is headed by a manager. Further, the employees are grouped into working teams that are led by a team leader. The managers earn the highest compensation in a department while team leader earns allowances for the position.

Merit pay is included in the financial reward system to motivate employees toward exceptional performance (Wilson, 2003, p.89). Merit pay is in the form of bonus and commission. Bonuses are additional payment for extraordinary performance. Smart Marketer makes use of piece work programs. Individuals or teams are assigned a certain piece of work per days. Bonuses are offered to individual who meet or go beyond the set targets. Some employees are offered commissions on the value of their services. Merit pay constitutes part of the compensation. Unlike the basic pay, merit pay is depended on the performance of an individual.

Before setting the financial reward system, a wage survey was carried out. The objective of the wage survey was to establish the range of wages offered by other marketing firms and other firms that compete for employees with Smart Marketers. The purpose of the survey was to come up with compensations that did not divert much from other compensations in other firms (Deeprose, 1994, p.65). Job market compensation is an important factor to consider in financial reward system. The employee should feel that the compensation is fair. The financial reward system uses the survey results as a reference.

Job evaluation and appraisal is an important element in Smart Marketers’ financial reward system. The employees are evaluated quarterly. The evaluation evaluates the contribution of every employee to the firm’s performance. Each of the 85 employees has records on their performance recorded. The records record offer and important framework for consistent performance of the employees. Both long-term and short-term rewards are used in the firm.

Equity considerations were made before coming up with the financial reward system for Smart Marketers. Equity consideration is concerned with coming up with a fair rewards for all employee. The financial reward system recognizes the risk of under rewarding the employees. Under rewarding can lead to employee protest and even some employees transferring. On the other hand, over rewarding can lead to complacency and justifications that can affect the firm’s performance. To ensure equity, rewards for both internal and external pay comparators were considered. The internal pay structure and consistency with labor market were considered.

Individual and group rewards are considered in the financial reward system. Individual rewards recognize performance from an individual while group reward recognizes extraordinary performance from a group. The working teams are the basis units of group reward in Smart Marketers. Like individuals, groups are evaluated using certain evaluation criteria. The groups that meet the set targets earn bonuses that are shared among the group members.

Financial reward systems form a fundament part of human resource management. Human resource managers are expected to set criteria for rewarding employees in an organization. Since reward system can either motivate or discourage employees, care must be taken to come up with an effective financial reward system. A good financial reward system should offer fair compensation to employee, motivate employees and help an organization to meet its objectives. Smart Marketers recognizes the need for an effective financial reward system. Its financial reward system appreciates the need for fair compensations, equity, personal goals and employee motivation. The reward system offer both individual and group rewards to employees. By using the good financial reward system, Smart Marketers will be able to achieve it vision.


Armstrong, M. (2004). How to be an even better manager: a complete A-Z of proven techniques & essential skills. London: Kogan Page Publishers.

Deeprose, D. (1994). How to recognize & reward employees. Boston: AMACOM Div American Mgmt Assn.

Kerr, S. (2008). Reward systems: does yours measure up? Massachusetts: Harvard Business Press.

Persico, J. & Morris, P. (1997). The new business values for success in the twenty-first century: improvement, innovation, inclusion, incentives, information. New York: Routledge.

Slocum, J. & Kerr, J. (1987).Managing corporate culture through reward systems. The academy of management executive 1(2).

Stockley, D. (2009). Achieving fair financial and non financial rewards. Web.

Wilson, T. (2003). Innovative reward systems for the changing workplace. New York: McGraw-Hill Professional.


Appendix 1: Consistency between reward system and other human resource systems

Consistency between reward system and other human resource systems

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