Reward System

Topics: Reward system, Strategic planning, Organization Pages: 10 (2931 words) Published: August 6, 2012

Management faces lots of challenges in determining their employees reward. The reward system an organization adopts must have a balance in market competitiveness, organizational performance internal equity, and individual performance considerations ( Scott et al, 2011 ) The above authors pointed out the importance of fairness in setting up reward systems and pointed out that no matter how complicated the reward policies and practices seems to be, employees must have a perception of fairness in order to successfully attract, engage and retain employees

Business environment in today’s setting is highly competitive as a result of this competition, organizations allocate numerous rewards to attract and motivate workforce, such as pay, fringe promotions and benefits.

However, not all employers have the required knowledge and proficiency for effective decision regarding the structure of their reward systems.

The success of an organization lies in a motivated workforce because highly motivated employees make every effort to produce at the highest possible level and put in greater effort than workers who are not motivated (Bagraim, 2006:70). Rewards are one of the vital elements to motivate workers for their best contribution towards generating great innovation ideas leading to better business functionality both financially and non-financially. For employees to share and fully get involved in the organization’s vision, Edward and Christopher (2006) believe that motivation is a necessary ingredient. Indisputably, many researches have proven that reward strategies are the mechanisms that make this happen (Lee and Wong, 2006; Paul, 1981).

Reward strategy, according Armstrong (2000) is the policy that provides clear-cut directions for an organization to design and develop programmes that will ensure it rewards the performance outcomes and supports the accomplishment of its business goals. Also Vicki (1994) suggests that reward strategy gives specific direction to how companies design each employee reward programs. Reward strategy has also been defined as the deliberate utilization of the pay system as vital integrating machinery through which the efforts of different sub-units and individuals are aimed at achieving an organization’s strategic goals (Gomez-Mejia and Balkin (1992) cited in Armstrong, 2000)

Studies have revealed that reward structures have positive effects on the performance measures. Sarin and Mahajan (2001) found out from their study on the implications on reward strategy that the type of strategy an organization uses has a strong influence on the team performance.

The performance dimensions which are not affected uniformly by the reward structure should encourage the practitioners to reexamine some currently accepted theories and practices.

Furthermore, Lee and Wong (2006) found out that reward also plays a significant role in a company’s innovation performance. Also, Paul (1981) advocates that a reward strategy points out the important areas of an organization, and guiding its future orientation. This signifies that developing a suitable reward strategy is indeed very imperative organizations. In this present day and age, The Star (2010) suggests that a more flexible and different approach will be needed in order to meet the shifting lifestyles as well as the requirements of today's young professionals Recent global report by Woods (2010) illustrates that the financial sector has altered the mix of pay, switches the focal point of their reward from short-term incentive plan to long-term incentives plan.

They are changing to be more focused more on balanced, deferral of bonus payouts over a multi-year timeframe and risk-adjusted performance measurement (San et al 2012). Also a study conducted by Hay Group (2010) shows that most...
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