Reward Management - Literature review Example

Introduction Increasing technological advancement and the world functioning as a single body with borders disappearing has increased the degree of competition and requires that business looks towards developing ways through which competitive sustainability and better performance can be achieved. The complexity of the problems compounds due to changes witnessed in political, social, environmental, technological, legal financial and economical forces which has made it important that decisions taken are sounder and better. This has made organizations to ensure that they are able to retain and hire the best talent which has increased the role of human resources in the daily lives (Salwan, 2007). This has made organizations look towards preserving the human resource capital by ensuring proper motivation and rewards so that long term productivity of the organization can be assured (Heneman, 2002). According to Cox, Brown and Reilly (2010), contemporary reward strategies fail due to problems in the process of designing and executing of reward strategies. There are systems where there is an inadequate focus on employee preferences for varied reward types, problems in the construction of models of reward strategy and lack of adequate skills on the line manager’s part (Cox, Brown & Reilly, 2010). In addition to it the paper also looks towards presenting a critical analysis of the different findings presented by Cox, Brown and Reilly (2010) which will help to determine the manner in which the reward management system is developed and the different areas which have to be included while determining the reward structure. Organization have to look towards developing a methodology through which the business is able to retain the human resource so that productivity of the workers increase, the turnover rate for employees fall which will help to ensure that the anticipated goals and outcomes can be easily determined. This is important that proper strategies are developed which will help to retain manpower and ensure that the organization is able to gain effectiveness is managing the work force (Cox, Brown & Reilly, 2010). The paper looks towards determining the manner in which the author has looked towards developing a methodology through which the preference of an employee is understood and the different parameters based on which the performance of an employee will be evaluated will be identified. This will help to ensure that the reward strategy is developed in the most appropriate way and looks towards providing the employees with the correct reward based on the different inputs provided by them. In addition to it the paper also looks towards presenting a critical analysis of the different findings presented by Cox, Brown and Reilly (2010) which will help to determine the manner in which the reward management system is developed and the different areas which have to be included while determining the reward structure. Critical Analysis Developing and implementing a reward strategy which looks towards incorporating the various aspect of performance which will determine the reward for an employee will help the business to ensure that it is able to motivate the workforce and create accountability which will help to deliver superior performance which thereby will look towards achieving the goals, vision and mission of the business (Brown & Perkins, 2007). This has been defined by Armstrong & Brown (2006) where they state that reward management is the formulation of different rewards and controls which helps to gain effectiveness and multiplies the business opportunities. This looks towards identifying the person, the manner, process and place where reward is given and the manner it has an effect on the performance of the individual and the group team of the organization. This makes reward fall into intrinsic and extrinsic rewards where the motivation level of employees is determined by the culmination of both intrinsic and extrinsic motivation as stated by Heneman (2002, p. 262). The workforce has to be compensated for their efforts, hard work, and other inputs which are applicable to their work culture. Brown & Perkins (2007) states that the best reward strategy can be implemented when the designing and implementation of the reward strategy falls in line with the overall business strategy so that the expectation of both the employer and the employees can be met. Armstrong et al. (2009, p.1), states that organizations that are able to understand the reward strategies and develop the reward practices which looks towards continuous innovation & change helps to ensure minimum mistakes and providing the correct employees with the reward This matches with the requirements of Cox, Brown and Reilly (2010, p. 250) which states that organizations that look towards developing their overall strategies where employees are remunerated based on preference & capabilities of the line managers look towards using a mix of both financial and non-financial rewards to ensure maximum satisfaction and motivation for the employees. Challenges with Reward Strategies The challenges in developing and implementing proper reward strategies as shown by Cox, Brown and Reilly (2010) includes developing strategies which are based on the different reward strategy model which are business goal driven, and the challenge of using these strategies intensifies as there are no written reward strategies which will enable the manager to monitor, evaluate and make changes in the reward strategies to be beneficial for the business and the employees. Instead the management looks towards adopting strategies and methods which have already being used by other organizations (Heneman, 2002). Despite it the reward strategies should be such that it looks towards making the business grow and ensure advancement but should not be at the expenses of the employees. The report doesn’t agree with the sentiments of Cox, Brown and Reilly (2010) where there is a need to develop unique and innovative strategies for reward. Instead the management should look towards identifying the requirements of the organization, the required manpower and based on it develop the reward strategy and develop the reward management system which aligns with the individual and organizational needs so that the objectives and need of the business can be achieved (Brown & Perkins, 2007). Armstrong & Brown, (2006, p. 119) shows that using the reward strategies which other organizations have followed is futile and should instead look towards identifying the present trends in reward management and provide the required guidance through which reward strategies are developed based on the organization needs. In a similar way Brown & CIPD (2001, p. 154) shows that the challenge for the reward strategy is not of what to do but how the things have to be done. The prime reason for the reward strategies to fail is that managers look towards using the same strategies which have been tested elsewhere and don’t look towards identifying, developing and implementing new reward strategies which suits the business and developing new techniques will help to achieve better efficiency and results (Cox, Brown and Reilly, 2010). For example, it would be better to ensure that the behavior of the employee is modified instead of making changes in the way the employees are compensated so that better efficiency can be achieved. Cox, Brown and Reilly (2010), also highlights that the other challenges and reason for the failure of reward strategies is that while developing or formulating a reward strategies business doesn’t look towards involvement of the employees as their views and opinions are not considered which thereby has an effect on their reward strategies. The authors has also looked towards presenting the fact that taking the advice of the employees which doesn’t look towards developing the material and financial rewards results in continuous dependence on the employees which would thereby look towards having problems associated with influencing strategic design so that better rewards management can be achieved. This has an effect on the performance of the reward strategies as employees don’t look towards implementing their voices which makes the employees doubt their confidence which thereby have an effect on the reward and compensation strategy and doesn’t provide the same effectiveness (Brown & CIPD, 2001). The expectancy theory formulated by Victor Vroom, states that reward management strategies are made to ensure that the motivation of employees improves, the commitment level of employees improves, the employees are able to work at their full potential and ensure commitment towards the organization which can be achieved when the management ensures proper linkage of expectancy, valence and instrumentality (Hallowell, 2005). The different elements of the theory states that employees look towards better commitment and hard work when they know that their work will be compensated through rewards; valence corresponds to working in the way the company wants to work and ensuring delivery of performance on the highest standards and looks towards managing the value of the employees both in their personal and professional goals. In comparison instrumentality entails employees to make changes in their behavior so that they are able to ensure favorable outcomes and ensure positive rewards based on which the performance enhances. Using this theory the reward strategies formulated will provide the required return and reward only when employee involvement in it is considered and the reward strategies are made based on the three different elements of expectancy theory as supported by Hallowell (2005). This helps to ensure that the reward strategies are made based on the preference of the employees and since different employees have different preference towards different reward strategies it ensures that the appropriate and correct reward strategies are made. Despite it care and precaution should be taken while designing the reward strategy by ensuring that the goals of the business are not compromised but instead the reward system is developed which facilitates an equitable balance so that employees can be compensated correctly and equity maintained between the goals of the organization and the personal desire of the employees Cox, Brown and Reilly (2010), states that the challenges that business faces while implementing contemporary reward strategies arises due to the lack of effort seen from the workforce, unable to maintain the high performance standard, lack of proper time management process and training and the support structure which doesn’t favor such changes. This has been supported by Brown & CIPD (2001, p. 154) where the same points have been reiterated. Cox, Brown and Reilly (2010), further states that the employees are not seen to recognize the different reward structure due to the different reward strategy models which looks at using contingency models as well while determining the reward structure. The contingency model looks towards explaining that the reward strategies should be developed based on different aspects like product market, technology, organizational culture, organizational structure and the industry and the views and employees preference should not be considered while determining the reward system (Cox, Brown and Reilly 2010, p.253). Firms instead have used it differently where they try to look towards using it as a method where they can look towards retaining people and providing them a better opportunity to work by having the workplace look favorable to them which also helps to control employee turnover and ensure long term productivity for the organization (Armstrong & Brown, 2006, p. 120). Cox, Brown and Reilly (2010), further states that the reward system has increased the importance being given to the needs and requirements of the employees and the workforce where their opinion should count but instead their usefulness has been narrowed down by focusing on developing a system which is aimed at provider-led and generic ways where the employees are not provided an opportunity to choose their preferred reward system. Total reward system looks towards including both extrinsic and intrinsic rewards where extrinsic rewards are aimed at good pay and promotions whereas intrinsic rewards are aimed at providing proper training and improving the work environment so that the safety, psychological needs of the employees can be satisfied (Cox, 2000). This goes in line with the Maslow Hierarchy of Needs which states that the employees needs are both extrinsic and intrinsic and developing a process through which both the extrinsic and intrinsic wants of the employees are satisfied helps to provide maximum benefit to the organization and motivates the workforce (Cianci & Gambrel, 2003). Maslow has looked towards determining the needs as physiological needs to security needs to social needs to self esteem needs and finally to self actualization and can provide maximum value when the reward structure looks towards achieving one need after the another based on the employees choice & preference (Cianci & Gambrel, 2003). Despite the requirement to develop strategies which looks towards active employee involvement in determining the reward strategies as shown by the contingent theory and organizational justice theory still the role of employees are largely limited and they look towards acting in a similar manner as they used to. Cox, Brown and Reilly (2010) thereby argues that the thinking of the manager to act in a same way and not looking to change and make ramifications in the reward strategy is a concern. Brown & Perkins (2007) thereby highlight that the reward strategies fail due to lack of effectiveness and the willingness of operational manager to understand the manner in which the management process works has affected the entire reward strategy. The problem compounds when the involvement of line managers is limited which makes it difficult to develop a proper performance appraisal system based on which the reward system can be developed. This makes it difficult to ensure that the employees, line manager and the operational manager work together in developing productive and sustainable reward management strategies which will provide the required efficiency (Brown & CIPD, 2001). Solutions Armstrong et al. (2009) states that the ineffectiveness which is present in the reward structure can be dealt by using a evidence based approach which will look towards gaining evidence for the assessment based on pay and reward which will thereby help to improve the manner in which reward strategies is being used. The validity of reward management strategies can be achieved by using shared service centers, balance scorecards, benchmarking and other methods which will help to understand the effectiveness of reward method that has been adopted. To achieve the desired objectives the management has to look towards understanding the requirements of the employees with regard to their needs and preferences for different reward strategies. The management through openness in policies where the process of communication is improved and employees are able to voice their opinion can make the required changes to ensure effectiveness and will help in correct determination of the reward for the employees (Heneman, 2002). To ensure that the preference of each employee is considered it is important that the management understands and develops a process through which the differences can be resolved and the employees can be engaged and opinions taken to ensure that the reward strategies are developed which will look towards matching the requirements of the employees (Cox, 2000). Organization can also look towards using different methods in which reward strategies will be chosen and can look towards having different form of strategies like written reward approaches, total reward approaches, job evaluation, pay systems and contingent pays among others to ensure employees are accessible to both extrinsic and intrinsic rewards (Brown & Perkins, 2007). This will help the employees to ensure that the non financial incentives are also looked at (Armstrong & Brown, 2006). This will also help the management to ensure that the behavior of the employees is molded and changed as the non financial incentives like promotion, training, career development and a conducive working environment will ensure that the employees and the organization both are able to achieve their goals (Brown & CIPD, 2001). Cox, Brown and Reilly (2010) has concluded by stating that focusing on the financial rewards and ignoring the non financial rewards results in non development of process and communication which has an impact on planning and theories for the future. This has been supported by a study which states that only providing the financial incentives doesn’t motivate the employees and require that the employees are provided non financial incentives as it helps to ensure maximum motivation and when both financial and non financial incentives are used the performance of the employees gets enhanced and the motivation level increases (Zinghein & Schuster, 2000). The report supports the fact that to ensure proper employee turnover and retention it is important to have a proper reward strategy which has been supported by Cox, Brown and Reilly (2010) which states that having broader roles of employees which looks towards increasing productivity and making the required changes in the behavior will ensure that using a mixed reward strategy which uses both extrinsic and intrinsic reward will ensure better productivity. This makes it important to ensure that the reward strategy is realistic line managers are provided with a wider role. This will require regular involvement of the line manager as well as providing the required training and so that they line manager are able to develop realistic, sustainable, measurable and attainable strategies (Heneman, 2002). Cox, Brown and Reilly (2010) suggest that developing a methodology which aims at involvement of line managers by adopting a more flexible approach will ensure that the rigidity that is present in determining the reward strategy will be better handled. This will help to ensure that the reward strategies developed provide the required effectiveness and ensures that a competitive and sustainable environment for policies can be developed. The report further supports the finding by Cox, Brown and Reilly (2010) which says that the ineffectiveness in developing reward strategies is due to the fact that the lack of employee involvement which will help to find out the employee preference has resulted in the reward strategies to be ineffective and hasn’t thereby focused on total reward strategies. The report further doesn’t look towards removing any pay system but instead advocates the used of mixed pay system which looks at both the extrinsic and intrinsc rewards so that employees are better motivated. Conclusion Reward management is thereby an essential part of the business functioning and helps to make changes in the employee behavior so that better goals can be achieved. Reward system looks towards acting as a catalyst as it looks towards ensuring proper alignment of the employee performance and the organizational goal so that effectiveness can be achieved. Further, the development of reward strategies requires the involvement of line managers and employees so that better reward strategies can be made. The report thereby agrees with the findings presented by Cox, Brown and Reilly (2010) which highlights that the contemporary policies are not able to deliver the required result due to problem associated with proper designing and implementation of the rewards policies especially the different reward strategies which can be used. The problem also compounds due to the lack of involvement of line managers. Thus, the most effective reward strategy is one which is based on total reward strategy which looks at having a mix of both intrinsic and extrinsic rewards at the same time looks towards aligning the preference of the employees with the goal of the business. References Armstrong, M. and Brown, D. 2006. Strategic reward: making it happen. London: Kogan Page Publishers. Armstrong, M., Brown, D., and Reilly, P. 2009. Increasing the effectiveness of reward management. Brighton: Institute for employment studies. Brown, D. & CIPD. 2001. Reward strategies: from intent to impact. New York: CIPD Publishing. Brown, D., & Perkins, S. 2007. Reward strategy: The reality of making it happen. World at Work Journal, vol. 16, no. 2, pp. 82–93. Cianci, R., & Gambrel, P.A. 2003. Maslow's hierarchy of needs: Does it apply in a collectivist culture. Journal of Applied Management and Entrepreneurship, vol. 8, no. 2, pp. 143-161. Cox, A. 2000. The importance of employee participation in determining pay system effectiveness. International Journal of Management Reviews, pp. 357–375. Cox, A., Brown, D. & Reilly, P. 2010. Reward Strategy: Time for a More Realistic Reconceptualization and Reinterpretation? Wiley Inter Science, DOI: 10.1002/tie.20328 Hallowell, E.M. 2005. Overload circuits: why smart people underperform. Harvard Business Review, vol. 83, pp 54-62. Heneman, R.L. 2002. Strategic reward management: design, implementation, and evaluation. Sidney: IAP. Salwan, P. 2007. Best Business Practices for Global Competitiveness. Sidney: Pvt. Ltd. Zingheim, P., & Schuster, J. 2000. Pay people right! Breakthrough reward strategies to create great companies. San Francisco, CA: Jossey-Bass. Read More