New and Improved Rewards at Work
Top employees’ performance is among the driving factors towards overall organizational performance. It is therefore important that employers ensure that employees perform at their optimum if results are to be achieved. Motivation therefore plays a vital role in the improvement of employee and organizational performance. A highly motivated staff often translates to better organizational performance. On the contrary, employees who feel cheated by the system and unappreciated, are likely to leave the organization in search of greener pastures. With the changing times however, reward programs are also undergoing rapid transformation to become more adaptable especially to the younger generation (Smith, 2001). While these rewards and incentives remain purposely for the improvement of bottom-line results as well as individual performance, the innovation in the provision of these rewards has proven quite helpful in engaging employees even more in their work (Datta, 2012). Traditional reward systems have included monetary perks on employees, which have so far been effective. Changes in the corporate and social spheres have however led to more innovative methods of employee rewards that include non-monetary rewards and recognition. These (non-monetary rewards) have been known to motivate employees, assisting in confidence building and job satisfaction. It is however important that these innovative reward programs are tied to specific jobs. Even more is the importance of making a choice between equity-based reward schemes and the creative approaches to come up with a more suitable reward program, as well as the integration of the new reward schemes with the more traditional schemes to allow for variety.
The changing workforce continues to put pressure on organizations to come up with dependable and innovative means of rewarding these young employees, for improper compensation easily leads to lose of these top, creative and innovative talents (Smith, 2011). Purposefully, rewards and benefits are meant to increase employee involvement in work and ultimately improve the company’s performance. Traditional reward programs have been pegged on the monetary benefits that employees get for their work in an organization. Monetary payment will therefore continue to play an important role in increasing employee job satisfaction, however, there are innovative reward schemes, which are not necessarily monetary, but go a long way in increasing employee engagement at the work place. Such benefits cost the company much less in terms of the wage bill, but increase the overall company performance.
The current age of online sales, entertainment and virtually anything poses one of the most innovative ways of rewarding employees, and at the same time improving the company’s compensation strategy. By allowing employees to access social networks at work, use organization email for their personal communication and doing online shopping helps boost the morale of the employees, while improving their performance at work. The online rewards however go beyond these personal communication and shopping into instant feedback programs in which employees get to know the results of their work, which is broadcast across the company website, giving them recognition. Through such a program, employees are capable of seeing, “which colleagues have been honored, or view their department’s success in achieving safety benchmarks” this in essence, eliminates, “the disconnect between a job well done and an award received three months after the fact” (Smith, 2011).
Such a reward and benefits program therefore increases the employees’ confidence in the organization as well as job satisfaction. More importantly, the benefits program works towards the retention of employees and top talent in the organization. Rewards and benefits in this case therefore would include flexible work schedule and a relaxed dress code. Such rewards help in changing the attitude of the employees towards the company and their jobs in particular. The fact that the relationship between employees and the organization is benefits based on the performance of the employees, therefore, demands for care in the rewards program. To put it aptly, “the equity in rewards is a form of implicit stipulation where the organization promises a just and apportioning of rewards as a signal of an objective exchange of rewards for performance” (Datta, 2012, p. 480). Therefore, it is “incumbent on the organization to offer distributive justice through inducements to correctly reward current contribution and effect desired contributions” (Datta, 2012, p. 480).
Compensation has largely been set on the basis of industry and geography within which the employees work (Allen & Helms, 2002). This traditional form of compensation and reward revolves around the HR research on the base levels within a particular industry, market or geographic location. The current shifts in employee compensation however lean towards a more personal-based approach, shunning the traditional job-based tactic. This methodology now focuses on the competencies, skills and knowledge that an individual employee possesses. This is in tandem with industry demand in intellectual capital and technological evolutions in which these two determine the compensation levels rather than the total number of employees. For this trend therefore, benefits and compensations are pegged on an individual’s talent, instead of the job. This compensation therefore goes beyond their base salaries into the benefits, which by definition refer to “compensation other than an hourly wage or salary” (Beam & McFadden, 2001, p.5).
Given that sometimes the number of employees may be overwhelming to the organization (Beam & McFadden, 2001), it is important that in determining the benefits accorded to employees, the benefits be not only meaningful to the employees, but cost effective to the organization, even as they bring in results. A comprehensive reward program that recognizes the employee contribution, even as it offers monetary rewards is thus beneficial to both the organization and the employees. Organizations should therefore align reward systems with its strategies (Allen & Helms, 2002).
For instance, reward systems for product differentiation are more sensible if awarded to employees who foster innovation in the provision of products and services. The rewards, which may include recognition from the management, should however be regular and timely if the effect is to be felt, and modify employee behavior towards the achievement of strategic goals (Allen & Helms, 2002). Such a reward, therefore, provides benefits for specific job descriptions, as seen in awarding recognition, tuition reimbursement or payment for further studies to employees who show innovation in their work.
In search of cost reduction strategies and increase of profits, employees can therefore peg benefits on employees who come up with the best, executable and rewarding ideas. This is especially important, as earlier stated, given the number of employees that an organization may have (Beam & McFadden, 2001). Indiscriminately giving benefits may therefore prove expensive for the organization in light of such huge numbers in employees. Thus, employees who come up with strategies that can help minimize cost for organization can be awarded company stock, membership in company clubs or facilities as a way of motivating them, while challenging other members of the staff to do the same.
Rewarding specific jobs, also referred to as variable pay works as a means of employees’ recognition for their role in helping the company achieve its objectives. Additionally, such benefits act as carrots dangled at employees for their current and future performances (Allen & Helms, 2002). While such benefits are often based on the financial performance of a company, they can be diversified to include such specific job performance as quality in provision of goods or services, increased departmental productivity, milestones in organizational safety as well as teamwork.
While traditionally a reserve of high-ranking executives, variable pay presents an innovative benefits scheme even for lower cadre employees. Merit pay is one such benefit scheme that provides increases in an individual employee’s pay based on the employee’s performance. An evaluation of the employee’s performance therefore determines the increase awarded, and is ultimately embedded on the employee’s salary base. The same applies to a team-based reward, which accords benefits in relation to a team’s achievements. The achievement in this case can be the successful completion of a project or beating a deadline and attaining sales targets (Datta, 2012). Benefits in this case could include monetary rewards, but such benefits as time offs, an excursion or team treats can act as benefits for such exemplary performances.
Even in using these innovative reward schemes, it is important to be cautious in balancing their effectiveness with the equity-based reward schemes. By definition, an effective reward scheme is “a system that is data-driven, equitable, and objective rather than built on biases, prejudices, stereotypes, and conjecture” (Datta, 2012, p. 480). Therefore, there is need for any reward system used to be hinged upon performance and not dubious and unfathomable criterion that will only sow disgruntlement upon employees. Emphasis on clarity, equity and performance for the reward scheme is thus put in the sense that, “performance appraisal systems are more effective when there is a connection between the results of the performance management system and the reward system of the organization” (Lawler, 2003, p. 399).
In a sense, creative reward systems have proven efficient in their motivation of employees. The system has however not been effective, especially in relation towards the rest of the employees in the organization. In reference to GE’s “forced ranking” 20/70/10, the distribution was efficient in rewarding employees within the organization, since it emphasized on rewarding employees who deserved benefits for their performance (Datta, 2012). The results of such a scheme were, on the other hand, disastrous to the organization. The scheme “was unsuccessful because it diluted employee morale and “created a ‘zero-sum game’ that dissuaded collaboration and teamwork” (Robbins, 2005, p. 531). Such a creative rewards program was not only ineffective; it was also the source of a lawsuit.
While innovative reward schemes have a way of increasing the motivation of employees in the organization, they can also be a source of many other organizational problems including unhealthy competition among employees. Ineffective and inequitable reward schemes are likely the cause of changed employee perception, which effectively lead to less motivation of employees in prospective tasks (Datta, 2012). The result of reduced motivation among employees usually has a spiraling effect on the organization and its performance. Thus, not only do employees perform poorly, they also poorly handle customers, which degenerate into a bad organizational image and decreased organizational performance.
The use of an inequitable reward scheme, in favor of a creative approach can only compound problems within an organization. While such a reward scheme may induce individual morale and performance, as seen in GE, it can increase employees’ tendency into litigation against the organization. This is in addition to an overall perception of inequality within the organization, loss of confidence in employee aptitude and worst of all, spark disagreement and tendencies of sabotage towards colleagues, executives and the whole organization (Robbins, 2005). Consequently, an equity-based rewards program is more effective since no single individual, department or unit can be responsible for the overall performance of the organization.
The fact that innovative rewards programs may be prone to inequalities does not mean that innovation cannot be infused into the reward programs. Most organizations use total reward strategies, which offer monetary and nonmonetary rewards to employees (Heneman, 2007), and with them achieve better performance results. In their basic form, total reward programs may not necessarily work for the employees. It is therefore important that these strategies be tweaked to integrate innovation into the total rewards program.
Among the key element of integrating innovation into the total rewards program involves determining what the employees want, rewards that enhance the employee loyalty to the organization, then the development of a total rewards strategy that rewards employees on their value in the organization (Heneman, 2007). By finding out what employees want and working towards integrating these ideas into the total rewards strategies, a marriage between TRP and innovation occurs, which goes a long way in improving employee engagement, retention and positive perception to the organization, and ultimately improve organizational performance.
There is therefore a need to formulate a process that will ensure the optimization of TRP. The first stage for TRP optimization would be the assessment of the current TRP (Heneman, 2007). This assessment will determine the impact of the TRP on employee performance and general organizational performance. The assessment should also be in depth, and look into industry benchmarks, examine current policies as well as collect employee views towards the incumbent TRPs (Heneman, 2007).
The second phase of the process is designing the reward program. It is important that the whole process be undertaken by a team to make the work easier. In the second phase therefore, the team “identifies which employee and organizational attributes to reward and which types of rewards to offer. The team should contemplate all sorts of reward strategies, such as, compensation, benefits, personal and professional development, and work environment” (Heneman, 2007, p. 9).
With the design in place, the next phase should be the execution of the program. Here, the team implements the program with consideration of the eligibility of employees to the program. The team also needs to lobby for support of the program from top management, and put in place measures to determine employee qualification to the rewards program (Heneman, 2007). These should be consistent and valid to avoid any disgruntlement among employees who may feel the program is biased.
final phase of the program, as it is with every program, is the evaluation
phase that measures the effectiveness and efficiency of the program rolled out.
The evaluation in this case looks at the actual results against the set goals.
The goal of the assessment is therefore to relay to the management the
effectiveness of the TRP and assure it of the program’s success.
Allen, R. & Helms, M. (2002). Employee perceptions of relationships between strategy rewards and organizational performance. Journal of Business Strategies, 19 (2). 115-139.
Beam, B. T. & McFadden, J. J. (2001). Employee Benefits. New York: McGraw-Hill
Datta, P. (2012). An applied organizational rewards distribution system. Management Decisions, 50(3):479-501
Heneman, R. L. (2007). Implementing Total Reward Strategies. Duke Street, Alexandria, VA: SHRM Foundation
Lawler, E.E. II (2003). Reward practices and performance management system effectiveness. Organizational Dynamics, 32 (4): 396-404.
Robbins, S.P. (2005). Organizational Behavior, 11th ed. Englewood Cliffs, NJ: Prentice Hall
Smith, M. (2001). Streamlined rewards, improved results. Potentials, 34(5):66-76