Reward Management Theories

Reward Management TheoriesReward watchfulness has been described as a key function in HRM systems in modern makeups, and it is often knowing to get come forth, retain and motivate employees (Milkovich and Newman, 2004 cited in Yu, Ying ying and Angeles, 2011, pp 2). Because of the strategic nature of human resource in the attainment of merged goals and organizational competitiveness (Wright and McMahan, 1992), many authors have discussed the field of operation of recognise management from different perspectives. Some of these perspectives focus on dividing repay systems into two categories Extrinsic and intrinsic settle withs. Extrinsic reinforcing stimulus systems generally focus on offering performance- linked salary increases, monetary rewards, long term incentive broadcasts, team-based rewards, and security benefits to employees (Laursen and Foss, 2003). These authors argue in favour of the values of these types of reward in boosting the morale of employees and up(p) their productivity as the same time.The result of this to the organization is better bottom line performance through increased revenue and profitability (Yu, Ying Yang and Angeles, 2011). Intrinsic rewards argon non-monetary rewards and could come in form of enriching job responsibility and empowerment (Oldham and Cummings, 1996), providing training resources and comprehensive learning opportunities (Hennessey and Amabile, 1998), and chief(prenominal)taining good interpersonal relationships among employees (Ruppel and Harrington, 2000). Yu, Ying and Angeles (2011) identify two reward management perspectives based on the above classification and they call extrinsic reward systems, utilitarianism and intrinsic reward systems, romanticism. According to these authors, these are the two highly debatable theories of reward management in the HRM field. One of the basic assumptions underlying the theories of reward management is that the performance and motivation of employees can be imp roved by establishing a link between efforts and rewards through formalised and specific individual targets (Fay and Thompson, 2001).Although many authors and writers have established that there are enormous benefits for organizations in putting in a nates an effective reward management system, some authors still warn against over-reliance on reward systems because of its potential to create several organizational issues which focus on fairness and diversity (Beer and Cannon, 2004). Many other authors have critically examined the underlying philosophies of reward management and the variables that make up a typical reward mix. Baeten (2008 cited in Jonathan and Clare, 2011, pp 2) provides a deeper insight into this when they argue that there are 34 different workable theories underlying a reward management system. Eisenhardt (1988 cited in Jonathan and Clare, 2011, pp 3) however limits reward management theories to two namely The agency theory and the institutional theory. Agency t heories of reward management basically anticipate to align organization and individual objectives. The main aim is to use incentives to direct employees towards the interests of the owners of the business, and to fig the reward mix to reflect that. On the other hand institutional reward management theory focuses on the formal and informal pressures exerted on organizations by other organizations with which it is connected. Some of these pressures could come in form of employment legislations, legal requirements, tax policies, and a desire to aim the policies that others have adopted so as to gain the security that conformity is perceived to bring (DiMaggio and Powell , 1991). Finally other known theory of reward management under the institutional classification is normative pressure. This occurs when members of an organization collectively come together to define the conditions and methods of their works.4 The design of indemnity and set of proceduresHP operates in a highly comp etitive industry with a peculiar high staff turnover rates. Employees are often influenced by competitive reward policies that chair to the attainment of their personal development goals and objectives. Kerr (1999) argues that rewards should be the third thing in an organization measurements should be second, and clear articulation of the desired outcomes should be the first. In aim a reward policy for HP the following are the key objectives to be attained4.1 Policy statementHPs goal is to attract and retain the most talented workforce which are strategically connected to the organizations ability to meet its strategic goals and objectives. With this in mind we seek to offer a combination of the most competitive and flexible financial rewards in the US mobile and computer industry to all cadres of employees immediately they associate us. We believe that this is important to the maintenance of our existing leadership position in the industry and we seek to pursue this policy as d oggedly as possible with all fairness and equity.4.1.1 ProceduresAimThe central aim of this policy is to enable enhance HPs ability to recruit the most talented experts in the US mobile and computer engine room industry which we consider as strategic to the achievement of our corporate goals and objectives.ScopeThis financial reward policy shall dupe to all regular full time and regular part time employees of HP immediately they join the company.PrinciplesThe entire reward policy of this company shall be built on a foundation of equality, commitment to diversity, fairness and a sense of good judgementThe entire reward policy will be operated as transparently as possible and it will be made to comply with national regulatory frameworks for employee engagement in the computer and mobile technology industryAll categories of employees that contribute more by measure of productivity shall be financially rewarded more. HP shall not take any extra division of any employee for granted. W e believe that is crucial to fulfilling our commitment to equality and fairness.ResponsibilitiesRoleAccountabilityRewards teamEnsuring that financial policy reward activities are firmly in place and monitoring that the underlying principles of the reward are upheldHR Director and HR leadership teamProviding control initiatives in situations where the principles of the policy are not upheld precedential management groupEnsuring the proper alignment of HPs corporate strategy and the reward policy4.2 Correspondence to relevant national legislationThe US department of labour has established regulations regarding employees salaries and wages in place. One of such regulations is the fair labour standard defend of 1938 which is administered by the wages and hour division. This Act establishes standards for minimum wages, overtime, pay and record keeping. These standards affect over 130 million full time and part time employees at both private and universe sectors of the US economy. This act promotes fairness, justice and equity and empowers employees to initiate a law suit against any employer who violates any of the principles and policies of the Act. This new policy thoroughly complies with the standards set out in the US department of labour Act of 1938 in all fairness and equity. The policy is also transparent enough to give employees the autonomy to wreak law suits against HP if the companys policy is perceived to be contradictory to national legislations.4.3 International implicationsThe ILO (International Labour Organization) is the body in charge of administering labour standards and the organization in short comprises of 183 nations all around the world. The ILO has adopted 188 conventions which are treaties creating international labour law standards. The US has only adhered to two of these labour law standards which are the convention on the abolition of forced labour and the convention on the worst form of child labour. The US has resisted the adoption of the other parts of the convention including those that regulate recompense and rewards to employees from an international perspective. Compensation and rewards at both executive and employee level have not been thoroughly positive in line with ILO standards. The US claims that its policies have been developed internally and competitively and do not need to be adjusted to reflect international standards. As competitive as the existing reward policy in HP is, it is still important to adopt an international view in its implementation.Sourcehttp//www.iclg.co.uk/khadmin/Publications/pdf/4390.pdf-accessed on 30-04-20115 Evaluation of policy and procedures5.1 Reward valuation matrixArmstrong, Brown and Reilly (2009) prescribe six metrics for evaluating the success of any reward management policy. In view of this the procedures for evaluating the effectiveness of HPs reward policy are set out below.Reward AspectMeasured ByReward strategyClear reward strategy and annual plan in suppor t of business strategy and planProductivity and reward beProfit, value added or sales per employeeTotal pay and reward costs compared with competition in the US computer industryFinancial rewardFinancial recognition for behaviours in line with strategy and valuesAppropriate forms of recognise performance and contribution in placeProportion of staffs covered by methods of rewarding performance and contributionRisk assessment of bonus plan designClear demonstration of return on costs of bonusEmploymentRatio of job offers to acceptancesStaff involuntary turnover to resignation rates and holding of high performance to key skill staffStaff turnover and absence levelsReward management generalActual market position compared to desiredEqual pay reviews carried out and acted uponQuantity, quality and frequency of reward communicationEngagement and satisfaction with rewardsSurveyed overall employee engagement levelsEmployee overall satisfaction with pay and rewardsEmployee opinions that re wards are competitiveEmployee opinion that performance is rewarded and managed effectivelyEmployee opinion on level of understanding of rewardManagers feel reward arrangements are flexible and meet their needs.6 ConclusionReward management is an integral part of the measure of the competitiveness of an organization. As a key component of the overall human resource strategy, reward management is central to the productivity of employees which is also linked to the overall profitability of an organization, as well as its long term survival. It is no longer glib to think that a well crafted strategy can deliver an organizations core values without involving the element of employee reward management. Available and existing explore in this area suggests a strong link between the effectiveness of strategies with the involvement of an appropriate reward system (Richard and Ralph, 2001). Reward management is increasingly befitting a source of sustained competitive advantage for many organ izations. The old pay structure which is based on job analyses, descriptions and specifications is no longer reinforcement the attainment of long term organizational goals and objectives (Gomez-Mejia and Balkin, 1992).This report has established a clear link between reward management and the sustainable attainment of organization goals and objectives through the contribution of extrinsically and intrinsically motivated employees. Through an example of a world class organization the role of a reward policy and its valuation criteria has been discussed with a view to establishing a link between efforts and rewards through formalised and specified targets (Kessler and Purcell, 1992, cited in Giovanni and Tommasso, 2011, pp 2). In establishing the reward policy for an organization, the organizations corporate objectives are important inputs to the entire process, and an alignment between these aim and objectives and the reward policy is strategically important to the effectiveness of the reward policy