The Importance of Developing Reward Strategy - Literature review Example

Introduction The manner in which technology has developed and the world looking towards working as a single unit has increased the degree of competition and made it difficult for the business to ensure a competitive advantage. The problems intensifies when the different political, legal, environmental, social, technological and environmental have to be considered for all the economies as different factors have an effect on the overall performance. Organizations due to changing environment have looked towards retaining employees which has made it important that the human resource department look towards fulfilling their roles (Salwan, 2007). Organizations have thereby relied on developing ways through which employees are motivated through better rewards so that the performance of the organization improves and employees can be retained for a longer period of time Cox, Brown and Reilly (2010), have clearly highlighted the importance of developing reward strategy and has focused on the fact that contemporary reward strategies doesn’t provide the same benefits due to the lack of proper design and execution strategies. This has been matched by the lack of employee’s involvement in designing the reward management strategies as their preferences are not considered; lack of proper development of the reward strategy model and poor involvement of the line manager has made it difficult for the reward strategy to fetch the same benefit (Cox, Brown and Reilly, 2010). The paper thereby looks towards presenting a critical analysis on the findings of Cox, Brown and Reilly (2010), by supporting the views presented by the author by highlighting the manner in which the contemporary reward strategies fail. In addition to it the analysis also looks towards highlighting the different strategies that organizations have to be developed so that the productivity of the employees’ increases, the turnover rate for employees reduces and the goals of the business can be achieved. Thus, it looks towards developing proper strategies based on which employees can be retained and the workforce is managed in the most effective manner (Cox, Brown and Reilly, 2010). Critical Analysis Businesses which are able to find out the different needs of the employees and incorporating them while developing their reward strategies are able to ensure that the employees are motivated (Brown & Perkins, 2007). This will help to align the business vision and mission with the personal goals of the employees and will help to improve the performance of the organization. Armstrong & Brown (2006) has strengthened the same by stating that reward management strategies are aimed at improving business effectiveness by developing better rewards which helps to improve the opportunities that the business has. The process of developing reward management system has to include the person, the manner, process and place so that the performance of both the employee and the team can be increased. This has helped to identify the fact that the reward system should be developed where both intrinsic and extrinsic rewards are incorporated so that both the intrinsic and extrinsic motivation of the employees can be satisfied (Heneman, 2002, p. 262). The reward system which is developed should be based on the efforts and hard work of the employees so that differences between the workforces doesn’t arise. This will help to ensure that the differences between the employees don’t grow as performance will determine compensation that the employee is eligible for. This requires that the reward strategy which is developed should align with the business objective and strategy so that pursuing the goals will ensure that the requirements of both the employer and the employee are achieved (Brown & Perkins, 2007). This has been supported by Armstrong et al. (2009, p.1) where the author has stated that ensuring regular development of the reward strategies by ensuring innovation helps to reduce the chances of error and ensures that employees are compensated based on their performances. This follows the requirements as posted by Cox, Brown and Reilly (2010, p. 250) which states that developing reward strategies based on the employees preference ensures that the best reward strategy is formulated. The importance of these increases and better strategies can be formulated if the role of line manager is increased as it will look towards including both the financial and non financial incentives which will help to motivate the employees further. Challenges with Reward Strategies Developing and implementing reward strategies faces challenges as shown by Cox, Brown and Reilly (2010) where it has been highlighted that the lack of written reward strategies doesn’t provide the business to decide and evaluate a reward strategy as they are business based and driven by the business goals which makes it difficult to determine the most appropriate reward strategy. This requires that organizations look towards developing reward strategies based on their business requirements but instead businesses have focused on using reward strategies which are used by other business units (Heneman, 2002). This has made it difficult to ensure that the reward strategies align with the business strategy. Despite it while looking towards making changes it has to be ensured that the business grows and the compensation paid to the employees should not be at the cost of the opportunities that the business has. The report however doesn’t agree with Cox, Brown and Reilly (2010) where the author has advocated that a unique reward strategy should be developed. Instead the reward system shuld be developed based on the requirements of the business. Care should also be taken to ensure that the reward system looks towards incorporating the preferences of the employees and the reward structure should be such that it aligns with the business strategy (Brown & Perkins, 2007). This should also ensure that the manpower requirements are considered so that proper reward strategy can be developed. This has been backed by a study presented by Armstrong & Brown (2006, p.119) which requires that the reward strategies should be developed based on the business requirements and using the same strategy which has been followed by other business might not provide the same benefit due to the different business model that the other business might be using. Brown & CIPD (2001, p. 154) also says that reward strategy thereby presents a challenge of looking what to do but the process in which it has to be done presents a challenge. The fact that the management doesn’t look towards developing, testing and monitoring new reward strategies but instead look towards using the same old strategies doesn’t provide the same benefit that the reward management system should (Cox, Brown and Reilly, 2010). This will help to ensure that the behavior of the employees is changed and which will thereby help to gain the required efficiency and ensure that the workforce is motivated. Cox, Brown and Reilly (2010), have highlighted that the reward strategies doesn’t provide the same benefits due to the fact that the opinions of the employees are not used while determining the reward strategies. The fact that employees are looked at people whose role is to carry out the work responsibilities it results in minimum engagement form the employees. This results is a gap in the reward strategies as the objectives of both the organization and the employees are not achieved as the employees are not able to associate with the rewards or efforts based on whom they are compensated making the reward strategies to fail (Brown & CIPD, 2011). This is based by the expectancy theory formulated by Victor Vroom which requires that the reward strategies are developed based on expectancy, valence and instrumentality which looks towards identifying the needs of the employees, ensuring that their expectations are met and ensuring innovation and application of new methods thereby making the reward strategies provide maximum benefit (Hallowell, 2005). This will make the employees realize the association of hard work and pay which will thereby transform into better efforts which will be compensated in the form of rewards thereby helping the employees to accomplish both the personal and professional goals. The instrumentality also ensures that the employees are able to make the required changes in their behavior through which the overall performance of the organization gets enhanced. This will help in the generation of positive reward strategies which will look towards including the three elements of expectancy theory which will thereby ensure that the reward strategies are developed correctly (Hallowell, 2005). This strategy ensures that the individual preference of the employees is also considered which thereby ensures that the reward strategies are developed based on the preferences and requirements of the employees. While looking towards using the preference of the employees it is important to consider that the business goals are not compromised instead it helps to enhance both the achievement of the organizational goals as well as delivery of a strong reward system. Cox, Brown and Reilly (2010), has brought forward the fact that the complexities while developing reward strategies lies in implementing contemporary reward strategies includes lack of understanding and support from the labor forces, poor performance management, insufficient line management skills and training and weak supporting structures and processes which has been supported by a study conducted by Brown & CIPD (2001, p. 154). Cox, Brown and Reilly (2010) has thereby highlighted that the reward strategies are not developed based on the different contingency model which has made it difficult to ensure that the reward strategies provide the same advantage. The contingency model requires that the reward strategies are developed based on the business strategies which should incorporate the product market, technology, organizational culture and so on along with industrial norms and employees preference so that the reward structure is better (Cox, Brown and Reilly, 2010, p. 253). This has made organization to look towards implementing total reward management approach which will help to ensure that work environment is created which will help to retain employees for a longer period of time (Armstrong & Brown, 2006, p. 120) Cox, Brown and Reilly (2010) has stated that the total reward management system aims at giving important to the needs, opinions and wants of the employees’ which looks towards providing the provider led and generic led benefits while developing the reward system. Total reward system thereby requires that it looks towards providing both the intrinsic and extrinsic rewards which is aimed at improvements in the skills of the employees, better pay structure and learning and development so that all the needs of the employees can be satisfied (Cox, 2000). This goes with the Maslow Hierarchy of Needs which suggests that when one need of the employee is satisfied the other need of the employee arises (Cianci & Gambrel, 2003). This model helps to deals with both the intrinsic and extrinsic needs and requirements of the employees and working on it will ensure that the requirements of developing the reward system are attained. It has also been seen that reward strategies are not able to provide the required effectiveness due to the fact that lack of understanding or dedication from the line manager or the operational manager doesn’t provide the same benefits (Brown & Perkins, 2007). The challenge compounds when the line managers are not involved while developing reward strategies as they are better equipped to know the different running and areas which when developed will help to ensure that the pay and appraisal system model is developed based on the business requirements and ensures that both the organization and the employees benefit due to it. Solutions Armstrong et al. (2009) has stated that looking towards evidence based approach which aims at studying the different factors and including different factors to ensure effectiveness will help in designing the best reward strategies. This can be achieved by looking towards having methods which is aimed at using different service centers to understand the contribution of the employees, balance score card approach and benchmarking will help to develop evidence based reward strategies. To ensure best development of the reward strategies it is essential that the organization understands the needs, preferences and requirements of the employees so that they can be included and inculcated while developing the reward strategies. This can be achieved to a large extent by having proper communication with the employees, ensuring proper teamwork where the differences between the employees is removed and including the views of the employees so that best strategies for reward can be formulated (Heneman, 2002). Involving the employees in complex matters and ensuring that they act deliberately will help to ensure that the contribution of the employees are better understood based on which the reward strategies can be formulated (Cox, 2000) The reward strategies developed should be a total reward strategies which looks at different factors and ensures that both the intrinsic and extrinsic needs of the employees are satisfied (Brown & Perkins, 2007). This is because of the fact that employees are not always motivated by financial incentives and having non financial incentives ensures better motivation and commitment (Armstrong & Brown, 2006). This will also help to bring about a change in employees behavior as having non financial incentives like promotion, carrier advancement, training and safe environment helps to make the employees work harder and alter their behavior (Brown & CIPD, 2001). Cox, Brown and Reilly (2010) has concluded that business has to face adverse risk when they rely on default reward system which doesn’t emphasis on planning, theories and process as it impacts the working and doesn’t provide the same benefit that the reward system should. This has been backed by a study carried out by Zingheim & Schuster (2000) which states that more people are motivated by non financial incentives as compared to the financial incentives because it helps to meet both the extrinsic and intrinsic needs. The report doesn’t dispute the fact that pay system has an important role in determining the pay structure which helps to retain employees but supports the findings by Cox, Brown and Reilly (2010) that better benefits and rewards can be reaped if the reward strategies incorporate the views and preference of the employees and has non financial incentives integrated in the reward structure. It has been highlighted that the lack of involvement of line managers results in ineffective reward strategies. This requires that the role of line managers is increased and they are consulted while developing the reward strategies as they have the required knowledge and skills which will enable them to develop realistic, sustainable, specific and measureable reward strategies (Heneman, 2002). Cox, Brown and Reilly (2010) states that involving line managers will ensure better recognition of the training needs and the different factors which has to be included so that the reward strategies provide the correct result. Cox, Brown and Reilly (2010) also states that it will help to provide flexibility and will help to ensure that the contribution of the line managers provides maximum benefit in developing reward strategies. This thereby requires that reward strategies are developed based on the unique business model that the organization follows which will help to understand the needs and preference of the employees better (Brown & CIPD, 2001). In addition to it being able to ensure that both the employees and the organization objectives are considered will help to formulate strong reward strategies which will also ensure that the goals of the business and the employees are interrelated. This will ensure higher satisfaction level for both the employer and the employee and will ensure better coordination. This requires that the reward strategies should be such that it looks towards understanding the needs and preference of both the employer and the employee and should be unique for all the business models (Cox, 2000). The report thereby supports the finding made by Cox, Brown and Reilly (2010) which states that reward strategies doesn’t provide the same benefits due to the problem associated with designing and execution of reward strategies as the focus on both the employer and the employees is not considered. However the report doesn’t say that a particular reward structure is not good or appropriate but requires the adoption of a mixed approach which looks at incorporating the different things of total reward approach so that maximum benefit can be achieved from the development of the reward strategies. Conclusion Reward management strategies are an essential part of the business as developing strong reward strategies help to ensure that the behavior of the employees can be changed towards the goal of the business. The fact that a positive relation is established between the employee performance and organizational performance it ensures as a catalyst which ensures positive changes. The reward strategies only doesn’t look towards having financial benefits but includes a lot of different things like training, communication, process and involvement of the employees so that better reward strategies can be developed (Cox, Brown and Reilly 2010). According to Cox, Brown and Reilly (2010) contemporary reward strategies fail due to the fact that the reward strategies developed doesn’t focus on the employees preferences and doesn’t focus on their requirements due to which the benefits are not achieved. This will thereby require that the reward strategies focus on the total reward strategies which looks towards incorporating different things so that the preference of the both the employees and the organization can be aligned towards a common purpose. 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