Reward system - motivation
- 1. B A L Q E E S A L M A K H M A R I PERFORMANCE IMPLICATION OF REWARD SYSTEM IN ORGANIZATION
- 2. TABLE OF CONTENTS Motivation Organization reward systems Financial reward system Different studies and researches toward financial reward systems Non financial reward system
- 3. MOTIVATION • The term motivation derives from the Latin word movers , meaning “ to move” In the present context, motivation represents “ those psychological processes that cause the arousal, direction, and persistence of voluntary ceases if they are to successfully guide employees toward accomplishing organizational objectives.
- 4. MOTIVATION Motivation come from Monetary goals Non monetary goals Desire to achieve goals Enjoyment of work
- 5. ADVANTAGES OF WELL MOTIVATED EMPLOYEES Better productivity and commitment toward organization Better work quality synergies
- 6. ORGANIZATION REWARD SYSTEM • Definition according to Jeffery Kell & John W.solcm “ Relationship between organization and individual member by specifying the terms of exchange” Rewards are critical components of performance improvement cycle .
- 7. KEY FACTORS IN ORGANIZATION REWARD SYSTEM Key factors in org reward system Types of rewards Financial Non financial Distribution criteria Results attitude Other facts Desired outcome attract motivate Develop & satisfy
- 8. FINANCIAL REWARDS • monetary incentives that an employee earns as a result of good performance. These rewards are aligned with organizational goals. When an employee helps an organization in the achievement of its goals .
- 9. TYPES OF FINANCIAL REWARDS Direct (CASH) • WAGES& SALRIES • Incentives • BOUNSES • COMMISSION • PROFIT SHARING • Share options INDIRECT (BENEFITS) • INSURANCE • HOLIDAY • COMPANY CAR • Free meals
- 10. FIN REWARD TYPE MEANING IMPACT Wages& salaries - Normally paid at end of weekmonth to workers/mangers in org - Additional hours worked are paid high rate on overtime basis - enactment of the employees habitually increase - affect the employees performance in the organization (Agwu, 2012) Bonus system - Normally paid when certain targets have been achieved - Normally applicable at manager level in a company . - important tool for increasing the productivity (Agwu, 2013) - increase the work performance of the workforces Commission - Normally paid according to number of products sold . - Achievement of sales target
- 11. FIN REWARD TYPE MEANING IMPACT Profit sharing - Employee receive proportion of company profit - Improve employee loyalty - Employee more likely to accept changes in work practices if profit will increase - Create direct link ( pay& performance) - create sense of team sprit help when all employee are involved . Share options - Common incentives for senior mangers who are given shares in company - increase employee loyalty and commitment to the organization -
- 12. INDIRECT (BENEFITS) FIN REWARD TYPE MEANING IMPACT Fringe Benefits - An item received in addition to their normal wages salaries . - E.g ( car , health insurance , free meals , holidays ) - Increase loyalty to company . - Encourages non – productive employees to work harder.
- 13. RELATIONSHIP BETWEEN REWARD SYSTEM AND WORK ENGAGEMENT • Engaged workforce is “ the core stone of sustain a competitive advantage “ Macey 2011 • E.g Petronas company in Malaysia which considered to be from the top 8 best companies to work with . • The reasons for their success - They provide well being of employees and their families in form of ( comprehensive health coverage , maternity benefits , life insurance ,staff care services and recreational programs)
- 14. RELATIONSHIP BETWEEN REWARD SYSTEM AND WORK ENGAGEMENT Compensations to employees that benefit them Employees become more committed to their jobs Work engagement toward the organization
- 15. RELATIONSHIP BETWEEN FINANCIAL REWARD AND WORK ENGAGEMENT • Researchers views • Le Pine ( 2012) - “ Reward compensation can become one of the leading factor that will motivate employee to be more on doing with their work “ Macey (2011) - “The correct compensation for employee can be lead to an engaged workforce in company “
- 16. RELATIONSHIP BETWEEN REWARD SYSTEM AND WORK ENGAGEMENT Reward system Independent variable Work engagement Dependent variable
- 17. AGE RELATED DIFFERENCES IN REWARD PREFERENCES • Study indicate that by age , preferences shift from pay raises to other benefits and become more diverse . 20% 40% 60% 80% 20-29 30-39 40-49 50-59 Financial rewards prefrences with age groups
- 18. AGE RELATED DIFFERENCES IN REWARD PREFERENCES
- 19. STUDY FINDINGS Financial rewards • Oldest age groups • Males • Permanent employees Non financial rewards • Youngest age groups • Temporary employees • Females
- 20. THE INFLUENCE OF FINANCIAL REWARDS ELEMENTS ON PERCEIVED JOB ATTRACTIVENESS • This study focus on attracting talents and aim was to determine whether financial rewards elements ( Remuneration , benefits and variable pay ) are still attracting talent employee ? - Study results 1-Remuneration 2- Benefits 3- Variable pay
- 21. MORE TO MOTIVATION OTHER THAN JUST FINANCIAL REWARD PUSH!
- 22. NON FINANCIAL REWARDS • After second world war , the general opinion of money as the prime motivator has been changed • Tylor was only theorist to emphasize pay in particular (price rate as best way of motivating employee ) • Mayo, Maslow and Herzberg all felt that non- financial rewards (team working , empowerment and job enrichment ) acted as better incentives for employee to work harder .
- 23. LEADS TO… • Directs employee behavior towards productivity and satisfaction. • Enhance success of organization • Leads to innovation • Competence in achieving strategic objectives • Internal motivation attained through desire to achieve and perform
- 24. WHAT IS NON-FINANCIAL REWARD? • Passing responsibility or giving non-monetary rewards • Do not generally mean non-financial value • Simply the reward is non-monetary • Tangible experience, promotion, etc. • Trainings • Favorable working conditions • Improved communication
- 25. CRUCIAL ELEMENT - FAIRNESS • Reward system should be transparent and objective • Easy to understand • Assists employees to strive harder • Favoritism negates motivational intent
- 26. FORMS OF NON-FINANCIAL REWARDS Formal or informal praise Public appreciation Acknowle dgment Travel/retail vouchers Recreational facilities Special experience Present Trophies or certificates Momentos Staff achievement awards Nominatio n based schemes
- 27. BEHAVIORS TO RECOGNIZE AND REWARD • Acknowledge inputs • Reflect outputs Empirical research by Rose (1998) suggests: • Excellent customer service • Actions above call duty • Performance improvement or innovation or ideas generation • Exceptional contribution and teamworking
- 28. DESIGNING NON-FINANCIAL REWARDS SYSTEM Public • Recognition ceremony • Tangible gifts Less frequently awarded • Retains its importance Recipient selection • Fair and deserving • Retain credibility Cultural significan ce • Demonstrate organization values • Offer role models
- 29. BENEFITS TO ORGANIZATIONS • Encourage strategic behaviors: - Highlight desired actions - Role models - Value and behaviors to promote can be steered • Employer branding: - Retains employees - Statement of organizational culture • Cost efficiency: - Fulfil objectives at low cost - Awards have symbolic value more than monetary
- 30. BENEFITS TO ORGANIZATIONS • Retention: - Building effective relationships - Difficult for rivals as relationship is not only instrumental • High street capability - High rate of assessed effectiveness - Longer lasting impact Example: i. survey of 372 managers by McCartney and Holbeche in 2003 ii. Reed survey in Personal Today Magazine in 2000
- 31. SOUTHWEST AIRLINE CASE • Background: Provides low cost experience Lowest turnover (6%) Enviable reputation in profit generation • Reward system: Strategic offerings Gifts at achieving major milestones Profit sharing plans (2014 $228m) Heros of heart award: high performing work groups Winning spirit award: monthly awarded based on nominations by CEO • Takeaway: Rewards need to be strong part of culture Require management buy in and consistent support Aligned to company values
- 32. FINNISH NURSES CASE Finnish nurses (1590 workers) survey at School of Business and Economics (Salminen 2005): • Background: Female dominated profession Collective labor agreements: wage settlement, working hours, holidays etc. Public sector pay rises determined by years served; higher salaries for older nurses Questionnaires were sent in December 2004 and March 2005
- 33. FINNISH NURSES CASE Results: • Four out of seven preferred non-financial rewards • Three out of seven preferred financial rewards • Age diversification showed difference preference eg. Older employees preferred higher pension and medical benefits and were willing to forego pay increases
- 34. OFFICE DEPOT CASE • Background: Provides office equipments over 2,200 retail stores in 57 countries Issue was to ensure safety as major work is storing and distributing Warehousing and storage industry faces 15,000 injuries annually (Edwards, 2007) Adheres to OSHA standards Previous reward system was based on facility meeting overall safety metrics demotivated employees working in facilities that did not meet the requirements • Redesigned reward system in 2007: Reward individuals than teams for working safely Safety points earned monthly when injury free Not penalized if reported injures Redeem points through third party vendors • Results: Accident rate decreased by 19% Savings by fewer injuries were more than cost of administering the project One nicely managed reward system encourages target behavior Balance should be maintained between individual rewards and group rewards
- 35. NUCOR CORPORATION CASE • Background: Steel producer, shipping 23m tons Focused on team work Production workers can earn bonuses up to 200% of basic salary • Redesigned reward system: Incentive program focuses on team work and quality Production workers affected by bad quality Responsibility and authority given to lower-level employees Awards free meals and clothing for meeting safety requirements Service awards held every 5 years • Results: Highest productivity Highly paid workers Lowest labor cost per ton
- 36. REASONS WHY SOME NON-FINANCIAL REWARD SCHEMES FAIL • Some offers are based on what organization thinks is valuable than what recipient thinks • Assessment method not fair, scheme will be undermined • Non-financial rewards not fitting cultural environment • Subsequent taxation may reduce value of the reward • Fraudulent nomination
- 37. FUTURE RESEARCH TOPIC • Which management style is more motivational: autocratic or democratic? Autocratic • Senior management takes decisions • One-way communication (giving orders) Democratic • Decision making is encouraged for employees also • Delegation of authority to employees
- 38. REFERENCES • Von Bonsdorff, M. E. (2011). Age-related differences in reward preferences. International Journal Of Human Resource Management,22(6), 1262-1276. doi:10.1080/09585192.2011.559098 • Taufek, F. M., Zulkifle, Z. B., & Sharif, M. M. (2016). Sustainability in Employment: Reward System and Work Engagement. Procedia Economics And Finance, 35(7th International Economics & Business Management Conference (IEBMC 2015), 699-704. doi:10.1016/S2212-5671(16)00087-3 • Chumbley, J., & Fehr, E. (2014). Does General Motivation Energize Financial Reward-Seeking Behavior? Evidence from an Effort Task. Plos ONE, 9(9), 1-6. doi:10.1371/journal.pone.0101936
- 39. CONTINUED • Schlechter, A., Hung, A., & Bussin, M. (2014). Understanding talent attraction : the influence of financial rewards elements on perceived job attractiveness : original research. SA Journal Of Human Resource Management, (1), 1. doi:10.4102/sajhrm.v12i1.647 • Garbers, Y., & Konradt, U. (2014). The effect of financial incentives on performance: A quantitative review of individual and team-based financial incentives. Journal Of Occupational & Organizational Psychology, 87(1), 102-137. doi:10.1111/joop.12039 • Staunton, L., Gellert, P., Knittle, K., & Sniehotta, F. F. (2015). Perceived control and intrinsic vs. extrinsic motivation for oral self- care: a full factorial experimental test of theory-based persuasive messages. Annals Of Behavioral Medicine: A Publication Of The Society Of Behavioral Medicine, 49(2), 258-268. doi:10.1007/s12160-014-9655-2
- 40. CONTINUED • De Gieter, S., & Hofmans, J. (2015). How reward satisfaction affects employees' turnover intentions and performance: an individual differences approach. Human Resource Management Journal, 25(2), 200-216. doi:10.1111/1748-8583.12072 • Silverman, M. (2004). Non-financial recognition: The most effective of rewards. Institute for Employment Studies Research Network. • Von Bonsdorff, M. E. (2011). Age-related differences in reward preferences. International Journal Of Human Resource Management, 22(6), 1262-1276. doi:10.1080/09585192.2011.559098
- 41. CONTINUED • Rai, S. (2004). Motivational Theories and Incentives Approaches. IIMB Management Review (Indian Institute Of Management Bangalore), 16(4), 43-50. • Holston, C., & Kleiner, B. (2015). Excellence In Reward Systems. Franklin Business & Law Journal, 2015(3), 29-40. • Sheikh Ahmed, T. M., Oyagi, B., & Tirimba, O. I. (2015). Assessment of Non-Financial Motivation on Employee Productivity: Case of Ministry of Finance Headquarters in Hargeisa Somaliland. International Journal Of Business Management & Economic Research, 6(6), 400-416. • Silverman, M. (2004). Non-financial recognition: The most effective of rewards. Institute for Employment Studies Research Network.
- 42. CONTINUED • CIORBAGIU-NAON, R. (2010). MODALITIES OF NON- FINANCIAL MOTIVATION OF EMPLOYEES WITHIN ORGANIZATIONS.Annals Of The University Of Petrosani Economics, 10(4), 41-54. • RAHMAN MALIK, M. A., BUTT, A. N., & JIN NAM, C. (2015). Rewards and employee creative performance: Moderating effects of creative self-efficacy, reward importance, and locus of control. Journal Of Organizational Behavior, 36(1), 59-74. doi:10.1002/job.1943 • De Gieter, S., & Hofmans, J. (2015). How reward satisfaction affects employees' turnover intentions and performance: an individual differences approach. Human Resource Management Journal, 25(2), 200-216. doi:10.1111/1748- 8583.12072