In the context of managing people, the reward system emphasises a core facet of the employment relationship: it constitutes an economic exchange or relationship. That is, an employee undertakes a certain amount of physical and mental efforts and accepts the instructions of others, in return receiving a level of payment or reward. Reward isone of the four human resource management policy areas incorporated into Beer et al.’s (1984) conceptual model and is identified as a key management ‘lever’ in Storey’s model of HRM.
Nature of reward management:
Compensation is often used as an alternative to reward. According to Armstrong ‘reward management best captures the current changes in management thinking on pay, with an emphasis on employee performance and flexibility (1998). Reward refers to all of the monetary, non-monetary and psychological payments that an organisation provides for its employees in exchange for work they perform. An organisation can provide two types of reward: extrinsic and intrinsic. * Extrinsic rewards satisfy an employee’s basic needs for survival, security, recognition, and derive from factors associated with the job context. This includes financial payments, working conditions and managerial behaviour. * Intrinsic rewards refer to psychological ‘employment’ and the satisfaction of ‘employment’ (Bartol & Locke, 2000), sometimes called ‘psychic income’, that a worker derives from his or her paid work, and satisfy ‘higher-level’ needs for self-esteem and personal development.
A reward system is a key mechanism that can influence each step of the strategy process. Current management literature suggest that a major determinant of success in business strategy implementation is an effective reward system, ‘effective’ meaning that the reward system fits or is aligned with the organizational strategy. 1) Strategic Perspective- focuses on those