L8 - Reward Mgt

• Reward


  How people are rewarded in accordance with their value to the organisation. It is concerned with both financial and non-financial rewards and embraces the philosophies, strategies, policies, plans and processes used by organisations to develop and maintain reward systems.
• Reward Management


  A fundamental concept in Human Resources and organizational development. It concerns the strategies, policies, and processes that organizations use to reward their employees in return for the effort they put into their work.
• Motivation


  The premise of reward management is grounded in the theory of motivation. Specifically, it aligns with Maslow's hierarchy of needs, which suggests that people are driven to achieve certain needs, and when one need is fulfilled, they move on to the next.
• Intrinsic rewards


  Internal, intangible, and self-administered. They derive from the employee doing something they find satisfying.
• Extrinsic rewards


  External to the job itself and usually administered by the organization. They are usually tangible, like salary, bonuses, promotions, and benefits.
• Remuneration


  Salary or wage, allowances and other benefits payable to the employee in consideration for their personal service to the employer under the employment contract.
• Elements of Total Reward


  • Financial Reward/Reward

  Development Rewards

  Social Rewards

  Intrinsic Reward
• Extrinsic Rewards


  Rewards that are external to the job and come from management, such as base pay, benefits, promotions, bonuses, etc.
• Non-financial rewards


  • Employee involvement, thank-you prizes, performance appraisal, job design/enrichment
• Intrinsic Reward


  The satisfiers that the employees get from the job itself, such as participation in decision making, job freedom, responsibility, task variety, pride in work, etc.
• Fringe Benefits


  Extra benefits provided to employees in addition to compensation, which can be monetary or non-monetary, and are connected with employment but not the employees' contributions.
• Factors affecting Remuneration Level


  • Job Analysis & Job Evaluation, Market Rate, Organisations ability to pay, Cost of living, Productivity, Trade Union, Government Legislations
• Key Theories of Motivation


  • Maslow's Hierarchy of Needs, Incentive Theory, Herzberg Two Factor Theory
• Maslow's Hierarchy of Needs


  Theory that people are driven to achieve certain needs, and when one need is fulfilled, they move on to the next.
• Incentive Theory


  People work in accordance with how they are paid, so organizations need to align the interests of executives with shareholders.
• Herzberg Two Factor Theory


  Hygiene factors (e.g. compensation) can cause job dissatisfaction if bad, but more of them won't improve job satisfaction. Motivators (e.g. challenging work, recognition) are what truly motivate employees.
• Strategic Reward Management


  Aligning the reward strategy with the organization's overall business strategy and goals, to create the desired employee behaviors.
• HR strategy


  Strategy by creating in employees certain behaviours, the need for which are implied by the business strategy
• Strategies included in HR strategy


  • Reward strategy
  • Cultural strategy
  • Structure strategy
  • Recruitment and selection
  • Training
  • Performance management
  • Diversity
• Reward strategy


  Influenced by both internal and external environment
• More competitive product markets


  The need to generate greater employee productivity through making this a key driver of reward strategy
• The drive for more customer focused organisational culture


  Greater need for reward strategies that emphasise the demonstration of customer-focused behaviour as a key performance criterion
• Link between intra-organisational factors and strategic reward management


  • Link with business strategy
  • Link between reward strategy and cultural strategy, structural strategy, and other HR strategy
  • Link with organisational culture
• Link between reward strategy and other HR strategies


  • Competence-related pay
  • Individual Performance Related Pay (IPRP)
  • Rewarding Team Performance
  • Rewarding Organisational Performance
• Competence-related pay


  A method of rewarding people wholly or partly by references to the level of competence they demonstrate in carrying out their roles. It is a method of paying people for their ability to perform.
• Individual Performance Related Pay (IPRP)


  A method of payment where an individual employee receives increase in pay based wholly or partly on the regular and systematic assessment of a job
• Ways of rewarding organisational performance


  • Performance Related Schemes
  • Employee Share Ownership Schemes
  • Grainsharing
• Grainsharing


  Designed so that employees share the financial results of improvement in productivity, cost savings or quality. It can be made in three ways: as a percentage of base pay, as one-off cash bonus or as a payment per hour worked.
• Structural change strategies


  • Broad Banding
  • Job Families
• Job-family-based reward structure


  A job family is a group of jobs that may be similar in purpose and content although carried out in different levels in the organisation.
• Broad-banded reward structure


  The compression of hierarchy of pay grades or salary ranges into smaller number of wide bands
• Performance-based reward system


  People are rewarded in accordance with their value to the organisation-entails people are the focus of concern and not the job. This is reflected in individual performance related pay scheme.
• Purposes of compensation system


  • To attract people to join them
  • To motivate them to perform
• Criteria for effective rewards


  • They are available
  • They are linked to Performance
  • They are visible
  • They are timely
  • They are reversible
  • They are valued by the receiver
• The process must be very objective and done in a transparent way to reduce perceived bias
• Supervisors and managers play a very important role in deciding remuneration for employee based on performance
• Rewarding higher performers is part of motivating and retaining top employees who contribute to organisational goal while at the same time motivate other employees to improve their performance
• Different methods/tools used to reward employees


  • Remuneration tied to KPI
  • Outcome-behaviour Matrix
  • Reinforcement versus Consequences
• Outcome-Behaviour Matrix


  • Quadrant 4: Good outcome, right behaviour (ideal)
  • Quadrant 3: Good outcome, wrong behaviour (isolated events)
  • Quadrant 2: Bad Outcome, right behaviour (take a risk)
  • Quadrant 1: Bad Outcome, bad behaviour (accountability required)
• Reinforcement versus Consequences


  • Positive reinforcement involves both financial and non financial rewards
  • Negative consequences can be financial or non-financial