Reward SystemsExclusive SummaryThe Video case study from the Chapter ‘Reward Systems’ brings to light a range of different problems faced by the organisation Focus Pointe, most of which stem from unsuccessful or nonexistent reward systems. Focus Pointe faces human resource management (HRM) issues common to many organisations in the areas of recruitment, retention and organisational culture. As these issues can all be linked to the organisation’s reward system, an analysis and reform of this system may provide answers to these issues and enable the organisation to become more competitive and successful. A reward system or reward management is the aspect of HRM in an organisation that deals with the administration of remuneration.
It is this very function at the Focus Pointe which seems to have the deficiency. Organisations, like Focus Pointe, can use two types of rewards for goal achievement: financial and non-financial. Financial rewards refer to compensation with cash value such as salaries, bonus pay, stock options and benefits. Non-financial rewards include recognition, training and psychological characteristics of work (Heery & Noon, 2001). A successful reward system can help the organisation to attract and retain the best employees whilst promoting a constructive organisational culture. Reward systems are designed by businesses as a means of compensating employees for their contributions.
Appropriate reward systems are important to organisations as they can used as an incentive for goals to be achieved and to influence the level of motivation amongst employees. For example, if monetary increases are offered to employees who attain certain production levels then workers may be more highly motivated to reach the target. Monetary rewards have a recognised cash value, for example base pay, pay increases, bonus pay, stock options and benefits which may appeal to cash-motivated employees.
However, other employees may have a preference for more money, but find the extra effort for the monetary rewards not worth giving up the time spent in other activities (Bushardt, Toso, Schnake 1991, 25-28). As a result, reward systems must often contain a nonmonetary component for those employees with different values. Workers who are motivated to succeed and gain promotion are offered nonmonetary rewards with less well-known cash value such as promotion, recognition and training (Heneman, Fisher, Dixon, 2001, 18-30)Attracting and recruiting new employees who are ‘right for the job’ is one of the key issues of HR.
Recruitment has become especially important since the late nineties as the unemployment rate has reduced and the labour market has become tighter. This means greater competition for fewer skilled employees (Bailey, 1998, 11-12). The Harding case shows Focus Pointe is keen on recruiting new employees with sales skills as well as technical knowledge. This could prove difficult if they do not have an effective recruitment strategy. Implementing a suitable reward system that is congruent with the organisation’s goals and business strategy can be a very valuable recruitment tool. Types of RewardsRewards can be given in many different forms to attract potential employees.
The first and most obvious is monetary bonuses. For example, an organisation that produced Internet security products – International Creative Technologies Ltd, gave new employees $5,000 to $30,000 if they took the job and stayed for six months (“Find and keep”, August 1997). Another way to attract skilled recruits is to provide employee training.
If the recruitment scheme offers new employees training and development opportunities, they may be more inclined to join the organisation in order to expand their career prospects. This has been proven by numerous survey findings, where training ranks as the number one attraction and retention tool (Bailey, 1998, 11-12). Other non-financial incentives that organisations can use to attract job candidates include: promises such as flexible work schedules, the setting of career goals so that recruits can see their opportunities for advancement, having assignments that will help employees move in the right direction and explaining that the organisation promotes from within (“Find and keep”, August 1997).
For example, an organisation with an innovative business strategy can encourage recruits to try new things and take risks.