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Q: WHAT IS REWARD MANAGEMENT?

Reward Management, in short, is a formal mechanism for improving or reinforcing quality performance. It can be used to support the organisation’s strategy, its goals and to place emphasis on “bottom-line” performance.

Increasingly, we find that Human Resource Management (HRM) is shifting away from “fixed” or bargained payment systems towards “variable” reward policies so as to emphasise the contribution which employees both individually and collectively make to organisational performance.

Q: WHAT WOULD CONSTITUTE AN EFFECTIVE REWARD SYSTEM?

An effective rewards system will normally consist of performance plans and a performance management system which sets out performance and quality standards aimed at encouraging specified behaviour and performance. The organisation must ensure that it is rewarding the things that are important and not those things which are inconsequential or insignificant.

For example, if innovation is important this is then assessed and rewarded.

If customer service is paramount then employees should be assessed on aspects of customer service. If quality is important, then bonuses must reflect reject rate or customer complaint rate. If quality is important bonuses should relate to number of items produced. If safety is an important item this is also assessed and rewarded.

One of the pitfalls is when behaviours are rewarded which the rewarder does not intend to reward and which is unimportant.

Q: WHAT ARE SOME OF THE BENEFITS TO BE DERIVED FROM A REWARD MANAGEMENT SYSTEM?

There are many benefits to be derived from a reward management system:

It can contribute to altering the culture and landscape of the organisation by triggering new behaviours that are consistent with organisational goals.

It can nurture a culture of positive achievement where people are rewarded on the basis of performance outcomes and the achievement of measurable targets and quality performance.

It is a powerful tool for sending messages to the employee about contributions and behaviours which are valued by the employer, and about the organisation’s attitude to individual performance and achievement.

It has the potential for boosting employees’ morale, increasing job satisfaction, attracting good employees and reducing turnover.

In addition, it helps to maintain a favourable competitive position and enhances the organisations’ image and reputation among employees and the wider public.

Q: WHAT KIND OF REWARDS CAN BE OFFERED BY AN ORGANISATION?

Basically, organisations can offer two types of rewards — Intrinsic rewards and extrinsic rewards. The intrinsic rewards include rewards associated with the job itself, such as challenging assignments, responsibility, autonomy and opportunities for growth.

Extrinsic rewards include all other rewards that are typically external to the job’s content such as higher pay, bonus, gainsharing, a promotion, a higher office.

Effective reward systems combine both types of rewards. Perhaps the ultimate reward to workers is for them to own part of the organisation. Employee Stock Ownership (ESOP) as well as more direct ownership are as two such options. United Airlines, for instance, gave employees 55 percent of its stock in exchange for wage and productivity concessions. Workers representation on boards and top management teams can be viewed as a lesser form of worker ownership or “co-determination” where they can exert control over the organisation’s direction and operation.

Q: WHAT ARE SOME OF THE PITFALLS OF REWARD SYSTEMS?

There is the tendency to take rewards for granted after a brief period of operation.

Status is recognised more than success — bonus is normally higher for those in more responsible positions within the organisation, a distinction which has no relationship to contribution.

Confusing productivity and quality measures with financial performance must be dealt with.

A subordinate who has been made to feel that he has done a good job throughout the year, and who is refused his “rightful” share may be offended enough to look for better treatment elsewhere.

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