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    Concept of a reward system and its affiliation

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    Discuss the concept of a reward system and its affiliation with a performance management system.

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    Reward System & Performance Management System


    Reward System

    A reward system can be anything that attracts an employee's attention and stimulates him to work. It is a systematically planned program to motivate individual or group performance. The way in which an organization can fulfill its dream with the help of its employees, is to share the dream with them. According to the scholar Deeprose, reward system gives motivation and encouragement to the employees to work for the organization. They are far more than just bonus plans and stock options. Reward systems mostly include various awards, recognition, promotions, reassignment, non-monetary bonuses linked to the performance of the employees. It includes a variety of monetary as well as non-monetary rewards (Deeprose, 2007).

    The use of reward system assumes that people's actions are related to their skills and ability to achieve important long-run goals. Even though many organizations, by choice or tradition or contract, allocate performance on non-performance criteria, rewards should be regarded as a "pay off" for performance. A reward plan should have the following features:

    Ø It should consist of both monetary and non-monetary elements. Mixed elements can provide the diversity needed to match the needs of individual employees.

    Ø The timing, accuracy and frequency of rewards are the very basis of a successful plan.

    Ø The plan requires that it should be properly communicated to the employees to encourage individual performance, provide feedback and encourage redirection.

    These features are contingencies, which affect the suitability and design of rewards of varying degrees. The effective use of rewards depends on three variables- the individual, work situation and reward plan. Different people value things differently. Enlightened managers realize that all people do not attach the same value to monetary rewards, incentives or prizes. Employees view these things differently because of age, marital status, economic needs and future objectives. However, even though employee reaction to rewards varies greatly, rewards have some redeeming programs to motivate employees.

    Rewards are important motivators. Their effectiveness depends upon three factors: drives, preference value and satisfying value of the goal objects. Financial incentives are linked more effectively with basic motivation or deficiency needs (which are necessary for survival). Non-financial incentives are linked more closely with higher motivation or becoming needs (self actualization needs). While budgetary restrictions and temporary improvements in performance place a limit on the potency of money as a motivator, non-financial rewards involve only human ingenuity as investment and also insure a relatively stable acceleration in output. Monetary rewards imply external motivation, whereas non-monetary rewards involve internal motivation. Both are important. It is a judicious mix-up of two that tends to cement rewards with motivation.

    According to leading researcher Jeffrey Pfeffer, rewards can be termed as both extrinsic and intrinsic rewards. Extrinsic rewards are tangible in nature and are normally under the control of an organization. It includes direct and indirect compensation and non-financial compensation. Direct compensation includes basic wage or salary, overtime holidays and premiums, performance bonus, profit sharing and stock options. Indirect compensation includes protection programs, pay for time not worked and services and pre-requisites. Non- financial compensation includes preferred office furnishings, preferred lunch hours, assigned parking spaces, preferred work assignments, business cards and impressive job titles (Fisher, Schoenfeldt & Shaw, 2004).

    Intrinsic rewards are intangible in nature and are internal to the individual. These rewards are those which an individual receives for himself. They are largely a result of the job that the worker does. The techniques of job enrichment, shorter work weeks, flexible work hours, project structures and job rotation can offer intrinsic rewards by providing interesting and challenging jobs and allowing the worker a greater freedom. The basic purpose of a reward system is to improve employee morale and job satisfaction. This would result in improved performance and loyalty to the organization. A good reward system helps in identifying the best performers and rewarding them to increase their job satisfaction.

    According to Sarvadi, giving non-monetary rewards ...

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