Introduction

Performance becomes a key to the employer once an employee is appointed

and allocated rightfully. For the employee, the natural expectation is to be
rewarded. This article discusses the concept and practice of reward
management. It defines the vision and briefly outlines its scope and
approaches. Its application will further explore its strengths and challenges
and suggest possible ways to overcome them.

There is no disagreement with the view that employees need to be recognized

or appreciated for every work they have contributed or achieved for their
employer. An organization’s reward management systems contribute to its
success by providing a framework of reward systems that help attract, retain,
and engage people responsible for carrying out the organization’s activities to
achieve its goals and objectives.

What is a Reward?

A reward can be described as a form of appreciation, both monitory and non-

monitory, to individuals for their contribution to the organization. These can
be salary, recognition, performance-related pay, bonuses, housing allowance,
or promotion. Mondy talks of compensation administration in place of reward.
He views it as one of the management’s most challenging human resource
areas.

Dessler, on the other hand, sees the award as employee compensation for all
types of salaried employees receive and arises from their
employment. According to Bratton and Gold, rewards are all forms of
financial returns, and tangible service and benefits employees receive as part
of an employment relationship. Looking at all these definitions, the reward
can be summarised as an employer’s approach in terms of forms. And
 volumes of appreciation for employees’ contributions towards the
organizational performance and realization of its goals.

Reward Management

Reward management is concerned with formulating and implementing

strategies and policies to reward people fairly, equitably, and consistently
according to their value to the organization. Perkins and White view reward
management as the combined action an employer may take to specify what
levels of employee rewards will be offered based on what criteria and data
available and how the offer will be regulated over time.

They also point out that there is a need for both parties to be clear of the links
between the organization’s goals and values which have to be understood and
acted upon by both parties to the employment relationship. Rewards play an
essential role in the organization’s ability to attract and retain high-performing
employees. Based on the views of reward management stated above, it is clear
that rewards are an essential element of organizational success. If they are
correctly handled, they can make the organization more effective. If not
handled properly, they can bring down an organization because they will not
feel motivated and cannot give their best.

Objectives of Rewards

The following are some of the significant aims of rewards:

1. Attract and retain high-performing employees- once you reward people for
their efforts, they feel valued and recognized and hence feel the sense of
belonging and cannot move out of the organization because they feel part of
the family.
2. Motivate employees- rewards help achieve motivation to a more significant
extent because they bring out that enthusiasm and drive for people to achieve
more so that they receive more rewards.

3. Enhance the organization’s corporate reputation as a caring or good

organization to be branded as an employer of choice. This helps the
organization attract the best possible candidates whenever it wants to recruit.

4. Achieve fairness for the contributions that people make to the organization.
Rewards are another way of making people feel fairly treated. People are
committed to the organization once they feel treated reasonably.

5. Driving change- pay can be explicitly used as one of the tools stimulating and
implementing change management.

6. Reward system aims at enhancing the motivation of individual employees

On the other hand, maintains that reward management has the following

aims:

1. Reward people for the value they create.

2. Reward the right things to convey the right message about what is vital in
terms of behaviour and outcomes.

3. Develop a performance culture.

4. Help to attract and retain the high-quality people the organization needs.
Develop a positive employment relationship and a psychological
contract.
2.0 Aims of Reward Management

The following are the aims of reward management;

 reward people according to the value they create;

 reward the right things to convey the right message about what is
important in terms of behaviours and outcomes;
  help to attract and retain the high-quality people the organization
needs;

 align reward practices with business goals and with employee values
and needs;

 develop a high-performance culture;

 motivate people and obtain their engagement and commitment.

Achieving the Aims of Reward Management

Reward management adopts a total reward ‘approach, which emphasizes

the importance of considering all aspects of reward as a coherent whole that
is linked to other Human Resource (HR) initiatives designed to achieve the
motivation, commitment, engagement and development of employees. This
requires the integration of reward strategies with other HRM strategies,
including talent management and human resource development. Reward
management is an integral part of an HRM approach to managing people.
The aims can be achieved in the following ways:
2.3.1 Distributive justice
Distributive justice refers to how rewards are provided to people. They will
feel that they have been treated justly if they believe that the rewards have
been distributed in accordance with the value of their contribution, that they
receive what was promised to them and that they get what they need.
2.3.2 Procedural justice

Procedural justice refers to the ways in which managerial decisions are

made and reward policies are put into practice. The five factors that affect
perceptions of procedural justice as identified by Tyler and Bies (1990) are:
 The viewpoint of employees is given proper consideration.

 Personal bias towards employees is suppressed.

 The criteria for decisions are applied consistently to all employees.

 Employees are provided with early feedback about the outcome of

decisions.

 Employees are provided with adequate explanations of why

decisions have been made.

2.3.3 Fairness

A fair reward system is one that operates in accordance with the principles
of distributive and procedural justice. It also conforms to the felt-fair
‘principle formulated by Eliot Jaques (1961). This states that pay systems
will be fair if they are felt to be fair. The assumptions underpinning the
theory are that:
 there is an unrecognized standard of fair payment for any level of

work;

 unconscious knowledge of the standard is shared among the

population at work;
 pay must match the level of work and the capacity of the individual
 to do it;

 people should not receive less pay than they deserve by

comparison with their fellowworkers

2.3.4 Equity

Equity is achieved when people are rewarded appropriately in relation to

others within the organization. Equitable reward processes ensure that
relativities between jobs are measured as objectively as possible and that
equal pay is provided for work of equal value.
2.3.5 Consistency

A consistent approach to reward management means that decisions on pay

do not vary arbitrarily – without due cause – between different people or at
different times. They do not deviate irrationally from what would generally
be regarded as fair and equitable.
2.3.6 Transparency

Transparency exists when people understand how reward processes

function and how they are affected by them. The reasons for pay decisions
are explained at the time they are made. Employees have a voice in the
development of reward policies and practices.
2.3.7 Strategic alignment

The strategic alignment of reward practices ensures that reward initiatives

are planned by reference to the requirements of the business strategy and
are designed to support the
achievement of business goals.
2.3.8 Contextual and culture fit

The design of reward processes should be governed by the context (the

characteristics of the organization, its business strategy and the type of
employees) and the organization ‘s culture (its values and behavioural norms).
Account should be taken of good practice elsewhere, but this should not be
regarded as best practice, ie universally
applicable. Best fit is more important than best practice.

2.3.9 Fit for purpose

The formulation of reward strategy and the design of the reward system should
be based on an understanding of the objectives of reward management and
should be developed to achieve that purpose.

2.3.10 Developing a high-performance culture

A high-performance culture is one in which people are aware of the need to

perform well and behave accordingly in order to meet or exceed expectations.
Employees are engaged in their work and committed to the organization. Such a
culture embraces a number of interrelated processes that together make an
impact on the performance of the organization through its people in such areas
as productivity, quality, levels of customer service, growth, profits and,
ultimately in profit-making firms, the delivery of increased shareholder value. In
a more heavily service- and knowledge-based economy, employees have
become the most important determinant of organizational success.
 A high-performance culture can be developed by taking into account
characteristics such as those listed above and applying an integrated set of
processes, of which reward
is an important part. Besides reward, the processes include those concerned with
resourcing and talent management (ensuring that the organization has the high
performing people it needs), learning and development, performance
management, the enhancement of the working environment (for example, work
design and work/ life balance) and communication

5.

Types of Rewards

There are two kinds of rewards- extrinsic rewards and intrinsic rewards.

Extrinsic rewards include:

Bonuses

The scheme of bonuses varies from one organization to another. Others are fixed in
that employees will get their rewards if the organization gets higher or lower
profits at the end of the year. For others, dividends are paid when the organization
has performed well and made huge profits.

Salary Raises

This is achieved after employees’ hard work and effort, attaining and acquiring
new skills or academic certificates as appreciation for employees’ duty in an
organization. This motivates employees, thereby having the potential to offer long-
term satisfaction.

Gifts

Short-term awards are presented as a token of appreciation for achieving the

organization’s desired goal. Any employee would appreciate any form of
recognition and deep appreciation from management.

This provides a clear vision of the employee’s correct path or direction for
increasing their efforts to achieve higher attainments.

Promotion

It elevates the employee to a higher level and gives the title with increased pay,
liability and responsibility due to the employee’s efforts affecting the long-term
satisfaction of the employee. In this type of reward, the employee is motivated to
contribute to management’s trust and acquire their delegation and responsibility.

Intrinsic rewards include:

Recognition

This is the act of recognizing an employee’s performance by verbal appreciation.

This type of award can lead to a formal meeting for realizing someone or an
informal action such as a “slap on the back” to boost employees’ self-esteem and
happiness, which can result in additional contribution efforts.

Trust and empowerment

Trustor empowerment in organizations between the manager and the employee

adds value to the relationship. A highly trusted employee will not experience strict
supervision. Such an employee shall enjoy a lot of autonomy or freedom in their
work performance than a less trusted employee who might face strict control.
Empowerment occurs when managers delegate tasks to employees, thereby adding
importance to an employee where his decisions and actions are reflected.

Total Reward

Total reward involves viewing reward management as a combination of tangible

and intangible, extrinsic and intrinsic ingredients that help make work and jobs’
rewarding’ in the broadest sense of the word. Total reward comprises pay,
contingent pay, bonuses, incentives, share ownership, profit-sharing, pension,
holidays, healthcare, other perks, and flexibility; learning, and development,
training, and career development; leadership, organizational values, voice,
recognition, achievement, job design and work-life balance.

Stein pointed out that a comprehensive communication strategy is needed to help

employees understand the total value invested by the organization in its approach
to rewarding. According to Mathis and Jackson, communication and satisfaction
are linked. For instance, employees often do not fully understand their health
benefits, which can cause individual dissatisfaction. Employers can use various
means, including videos, CDs, e-mail, electronic alerts, newsletters, and employee
meetings, to communicate benefits to employees.
Approaches to Reward Management

To conduct an effective reward management scheme, writers agree on the value of

job evaluation, market pricing, and grade and pay structure.

Job evaluation

This is a systematic and formal process for defining the relative worth and size of
jobs within an organization to establish internal relativities. This approach is what
Bratton and Gold call internal equity. It is done in two ways: Analytical and Non-
Analytical schemes. Analytical scheme evaluates the job based on breaking whole
jobs into several defined elements or factors such as responsibility, decisions, and
the knowledge and skill required. The non-analytical job evaluation scheme
involves the comparison of whole jobs to rank them in grades without reference to
their elements or factors.

Market pricing

This is also known as external competitiveness, which refers to comparisons of the

organization’s pay relative to the gain of competitive organizations. The
organization has three options: being a pay leader, matching the market rate, or
lagging competitive organizations. Describes such organizations that adopt this
method as market-driven. Such organizations attract top-class employees at
whatever cost without regard to their level in the hierarchy. Individuals negotiate
their salaries and other benefits, and the same is based on how successful one was
in the negotiation. People can be in similar positions with similar qualifications but
get different benefits.
 Grade and pay structures

This is a framework within which an organization’s pay policy can be

implemented. A grade structure consists of a hierarchy of grades bands or levels
into which groups of broadly comparable jobs are placed. Therefore, the grade
structure becomes a pay structure when paying ranges are attached to each grade.
As Bratton and Gold state, jobs in each category are considered equal for pay
purposes; they have about the same number of points. Each grade will have its pay
range, and all the jobs within the stage have the same content.

This, among the three approaches, appears to be the best as it combines elements
of the job evaluation and the market price analysis approaches. On the other hand,
it also allows for consistency to be attained in the rewards management process by
the organization.

Benefits of a Robust Reward System

Several benefits accrue to organizations that have a robust reward management

system.

1. The reward management system serves to enforce positive effort by members of

the organization in terms of the desired behaviour. A state that rewards the right
things conveys the right message about essential behaviour and output-wise.

2. Rewards also help attract and retain high-quality people the organization needs to
achieve its goals. Poor rewards lead to high employee turnover rates as employees
may opt to work for competing organizations that offer better reward packages.
3. A sound reward management system motivates people and obtains their
commitment and engagement towards attaining the organization’s goals. There is a
positive correlation between employee satisfaction of personal goals and
organizational goals.

4. Reward management also helps to ensure consistency of the rewards process,

thereby ensuring fairness in the employee reward programs.
Challenges

Reward management systems face several challenges which directly impact on its
effectiveness as follows:

1. People respond in different ways to any form of motivation. It cannot be assumed

that a specific set of rewards will motivate all employees equally. As points out, a
bundle of reward systems may inspire some while demotivating others.

2. Financial rewards may motivate only those who receive them and demotivate those
who do not.

3. Disparities in market price analysis schemes may cause demotivation to those who
cannot negotiate or those who joined the organization when market rates were
running low. This can make equally talented people leave the organization and opt
for better rewards.

4. The reward schemes are dependent on accurate and reliable methods of measuring
performance, contribution, competence, and skill, which might not exist.

5. Performance appraisals in organizations depend on the judgment of managers,

which in the absence of reliable criteria can be biased, inconsistent, and ill-
informed, thereby causing deep grievances in reward systems
 Some of the ways which may be used to minimize the challenges are:

1. Involving all stakeholders, including managers, employees, and employee

representatives, such as union and government agents, in designing the reward
scheme.

2. Organisations must strive to create an atmosphere of trust in the organization.

States that reward programs are more likely to work smoothly where there is trust,
involvement, and commitment to fairness.

3. Line managers, on the other hand, have to be equipped with the necessary skills to
manage the system. This helps them execute their duties with a degree of
impartiality, objectivity, and effectiveness.

4. There should be an accurate, consistent, and fair assessment of the performance

contributions. Pay differences must be genuinely related to the performance of
individuals, and such differences should be visible enough.

5. The purpose, methodology, and effect of the scheme should be communicated and
understood by all organization members. This will help build trust between the
organization and its employees.

6. Rewards must be attainable and worth attaining. The rewards should be

commensurate with one’s contribution and value to the organization and should be
within the organization’s reach while attracting the right people to the
organization.
Conclusion

Reward management aims to align and manage all organizational resources to

achieve the highest possible performance by improving current staff through
encouragement, setting targets, and improving on past mistakes. The challenges of
reward management include reward being unable to attract critical skills, inability
to change compensation, and employees not understanding or appreciating the
bounty. Though money or financial incentives are seen as the best source of
motivation, it is essential to note that they cannot motivate all people all the time.

Therefore, reward management systems have to be designed in such a way as to

provide the best mix of all kinds of motivation according to the needs of the
organization and its members. Organizations need to put in efforts that aim to
manage the rewarding process very effectively and efficiently to avoid losing the
most valuable resources that could have contributed effectively toward achieving
the organizational goals. If employees are appropriately rewarded, then the
retention rate will be high.

However, where they are not adequately rewarded, the turnover rate is very high,
making hiring costly through frequent recruitment, let alone the negative impacts
that low rewards can have on the organization