Performance Management and Reward

31/08/2022 0 By indiafreenotes

An effective reward system should be linked with the performance development system, which focuses on performance based pay and offers ample learning opportunities along with a healthy work environment. Variable pay can play a crucial role in boosting the performance of the employees especially the star performers instead of the fixed pay packages. Few such reward practices may take the forms of gain sharing, bonuses, team based incentives, profit sharing, ESOP’s and equity based incentive awards.

An efficient management of reward system may have a beneficial effect upon the performance in several ways instilling a sense of ownership amongst the employees, may facilitate long term focus with continuous improvement, reduces service operating costs, promotes team work, minimizes employee dissatisfaction and enhanced employee interest in the financial performance of the company. Few organizations like General Mills, reward their employees for attaining new skills which may add value to the organizational performance and thereby facilitate job rotation, cross training and self managed work teams. Few organizations also recognize exceptional performance by providing recognition awards and lump-sum merit awards for winning employee commitment and attaining long term beneficial results. Example, TISCO, offers instant or on the spot rewards, monthly rewards and annual rewards to its employees under its ‘Shabashi scheme’.

A healthy pay for performance strategy should incorporate the following components as is provided in the table given below:

Pay for Performance Strategy

Category Performance Measures Basis for Rewards
Corporate Leaders BSC, shareholders returns and EVA Employee stock ownership and profit sharing.
Business Unit Leaders Profitability of the unit Results Sharing.
Functional Leaders Level of contribution towards the corporate goals Milestone Awards
General Employees Specific KRA’s achieved measured periodically Profit/gain sharing, bonuses

Rewards can be a vital source of motivation for the employees but only if it is administered under right conditions. Few strategies which improve the effectiveness of rewards are given below:

  • Linking rewards with the performance
  • Implement team rewards for the interdependent jobs for example Xerox.
  • Ensuring that the rewards are relevant. Example Wal-Mart, rewards bonuses to the top executives which is based on the company’s overall performance whereas the frontline employees earn bonus on the basis of the sales figure or targets attained by their store.
  • Ensuring that the rewards are valued by the employees.
  • Checking out for the undesirable consequences of administration of any reward practice.

Components of Reward System

The key components or elements of an organization’s reward system can be categorized as follows:

  • Financial Reward
  • Non-financial Rewards

Financial Reward

The financial rewards include direct monetary rewards in terms of cash for their work and achievements. For example Salary, wages, incentives etc. given to the employees.

Non-financial Rewards

Behavioural scientists have been describing for the past 50 years that non-financial rewards is critical which contains many of the reward components for improving workplace performance. The non-financial rewards can be given in different forms which are as follows:

  • Enhanced Dignity and Satisfaction from Work Performed
  • Enhance Physiological Health, Intellectual Growth and Emotional Maturity
  • Promote Constructive Social Relationships with Coworkers
  • Design Jobs that Require Adequate Attention and Effort
  • Allocate Sufficient Resources to Perform Work Assignments
  • Grant Sufficient Control over the Jobs to Meet Personal Demands
  • Offer Supportive Leadership and Management

Enhanced Dignity and Satisfaction from Work Performed

It is the least costly and one of the most powerful rewards an organization can offer to an employee to recognize the person as a useful and valuable contributor at the workplace. When this kind of recognition is given, it leads to employee feelings of self-worth and pride in making a contribution. At the same time, there are few people want simply to be given something.

They have the personality who would much prefer to know that through their own efforts, they have earned and deserved rewards. Every compensation and non-compensation reward component used in organization should carry with it the message. “We need you and appreciate your efforts.”

Enhance Physiological Health, Intellectual Growth and Emotional Maturity

If the organization is considering the number of hours a person spends on the job i.e. on travel to and from the work site, and off the job in attempting to resolve job-related problems frequently receive minimal attention until a serious problem occurs.

Once this situation occurs, it overrides all other employee concerns and activities. In present scenario, the modern health practices recognize the direct relationship between the physiological health and intellectual and emotional well-being of each individual.

Promote Constructive Social Relationships with Coworkers

There is an old saying that “One man is no man.” Although there are constant reminders of what one dedicated person can achieve, there are even more reminders that one human alone is weak and however, with concerted action, people can accomplish almost anything.

This is the world of extreme specialization where people need and rely on other people more than ever. There is the opportunity to interact in a socially constructive manner with other people is one of the most valued rewards gained from working to enjoy the comradeship of workplace associates.

Design Jobs that Require Adequate Attention and Effort

Organizational scientists have discussed at length the problems arising boredom related to work assignments over the past 40 years that were developed in the last quarter of the nineteenth century.

The jobs were designed so that workers could be taught quickly how to perform a few highly repetitive tasks and workers then were required to perform these few tasks for as long as they remained on the job. It is proved to have serious drawbacks what first appeared to be an efficient way of melding human resources with machine technology.

Allocate Sufficient Resources to Perform Work Assignments

When the organization requires employees to perform assignments for which they have neither the knowledge nor the skills opens the door for problems. In this situation, not only is the organization likely to suffer because of outcome failures but employee job-related interest and satisfaction are apt to break down because of the likelihood or inevitability of failure.

In these times, most employees seek a sense of accomplishment from their work and they want some degree of challenge, but they also want to feel reasonable, sure that they can succeed.

Grant Sufficient Control over the Jobs to Meet Personal Demands

Behavioural scientists have discussed the need to grant employees greater opportunity to participate in organizational decision-making processes from the 1950s to the present time. The organizations are composed of all kinds of people with all kinds of decision-making desires is one problem with this participation concept.

There are some people who simply want to be told what to do, to be shown what is an acceptable level of performance, and then to be left alone to do their jobs. At the same time, there are few people in every organisation want to tell top management how to run the organization.

Between these two extremes present in every organization is a wide variety of demands for a greater voice in determining how to perform assignments.

Offer Supportive Leadership and Management

This dimension is very crucial and difficult to separate from all other non-compensation rewards, but it is so important that it must be recognized as a unique dimension of the non-compensation rewards and not just a component of the other factors.