IBIMA Publishing

The Journal of Organizational Management Studies

https://ibimapublishing.com/articles/JOMS/2021/642473/
Vol. 2021 (2021), Article ID 642473, 12 pages, ISSN: 2166-0816
DOI: 10.5171/2021.642473

Research Article

Rewards Management in Organizations:

A Retrospective on what Organizations Have Set
out and achieved in order to Identify Future
Actions
Radu MARIN

National University of Political Studies and Public Administration, Bucharest, Romania,

[email protected]

Received date:25 November 2020; Accepted date: 9 February 2021; Published date: 26 July 2021

Academic Editor: Agatha Popescu

Copyright © 2021 Radu MARIN. Distributed under Creative Commons Attribution 4.0
International CC-BY 4.0

Abstract

The current paper’s objective is to highlight the idea that the companies should aim to implement
an efficient total reward management, in order to attract, retain, motivate and improve the
performance of its employees. Different types of rewards which can be offered to employees and
the evolution over time of employees’ preferences for every type will be analyzed. This evolution
has led to the transition from the compensation model to total rewards management model. By
analyzing the studies published so far, the paper will present ways in which total rewards
management can be effectively used within companies. The paper will also demonstrate that total
rewards management has a determining role for increasing the performance of companies. The
paper aims to present the influence of the entire package of rewards that can be offered by
companies to their employees, given the fact that many of the studies published so far have
focused only on the analysis of one or several rewards. This paper also aims to identify the full
package that will be most appreciated by employees based on cultural, gender and age
differentials.

Keywords: compensation management, total rewards management, employee attraction,

motivation and retention, company performance

JEL Classification: J33, M52, M54.

________________

Cite this Article as: Radu MARIN (2021)," Rewards Management in Organizations: A Retrospective on what
Organizations Have Set out and achieved in order to Identify Future Actions”, The Journal of Organizational
Management Studies, Vol. 2021 (2021), Article ID 642473, DOI: 10.5171/2021.642473
The Journal of Organizational Management Studies 2
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Introduction unemployment, life insurance, paid leave and

any other benefits that employers can provide
The present paper will analyze which were (flexible schedule, personal development and
the factors that influenced the personnel career development programs, a good work-
policies chosen by the companies and life balance, job recognition programs). In
determined the transition from compensation addition, the difference between
management to total rewards management. compensation and total rewards can also be
The role of compensation management is to seen in terms of time: while compensations
design and implement within companies the reflect present or past rewards given for
full compensation package. In the literature, employees’ activity, total rewards have an
this is also known as salary administration, openness to the future. However, there are
payroll management, reward management, also organizations that have a broader view of
although, as we will see in this paper, these the concept of compensation, including a
concepst are either restrictive or too number of benefits that generally exceed this
permissive regarding the rewards that are notion, such as health and life insurance,
administrated within compensation retirement plans.
management. In our opinion, we consider the
concepts of salary administration and payroll Research outline
management as being limited. Although they
still have an important role in employees’ We have aimed to analyse the studies
preferences, they represent only a fragment of published in the last two decades in order to
the rewards that can be offered to employees. identify the way in which employees’
Also, these concepts have a lesser impact on preferences have changed towards certain
employees in the modern economy, especially rewards and how companies understood to
on highly qualified employees, who, in respond to those changes. Another goal of the
general, have attractive salary packages by study is to highlight how organizations’
default. In our opinion, the use of the term performance can be influenced in a favourable
compensation management is due to the fact way by adopting the correct rewards package.
that employees perceive the rewards received
from the organization as compensation for Gross and Friedman (2004) considered that
their efforts, as compensation for the time the structure of rewards granted by the
spent working, in the expense of personal life. employer has changed due to the fact that
From a semantic point of view, perhaps the employees' preferences for rewards have
term of compensations better defines the fact changed. Thus, if in the past employees were
that the rewards they contain are practically asking questions about how much they
something offered in exchange (a currently earn or how consistent their
compensation) for the employees' activity. On retirement plan will be, more and more
the other hand, in the modern view, employees are starting to ask questions about
compensations contain only the basic salary, how much the whole rewards package will be
bonuses, profit sharing or the option to buy over their entire activity in an organization. In
shares, meals at the company’s canteen, the modern economy, based on knowledge
different types of free subscriptions offered and globalization, attracting and retaining a
by the employer (practically all those rewards highly skilled workforce within organizations
that have a financial expression). Total is essential in order to achieve the desired
rewards add additional categories of rewards level of competitiveness and performance. In
to the ones included in the compensation, this regard, McCormick (2015) highlighted
which can take a variety of forms: health the opinion of successful companies that a
insurance, retirement plans, sickness comprehensive plan in terms of overall
insurance, incapacity for work, reward strategy can lead to differentiation

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from competition, attracting highly qualified behavior in the direction that the organization
employees and increasing the productivity, needs them to go. Fernandes (1998) pointed
obtaining a better yield. This is why Bwowe out that, in order to increase productivity and
and Marongwe (2018) consider that many ensure the attraction and retention of key
organizations pay much more attention to the employees, many employers have been forced
restructuring of the reward system, given its to revise their reward policies. However, the
positive effect on employee motivation and author points out that certain rewards such as
retention. Rumpel and Medcof (2006) also freedom, flexibility and delegation of
consider that the implementation of a total decisions to employees can also lead to
reward system can bring the following adverse effects, such as abusive entry into the
functional benefits to the organization: employees’ private space and the transfer of
attracting, motivating and retaining risks to the employee. Heneman (2001)
employees. Keeping the same approach, pointed out that, although the specyalised
Adeoye and Fields (2014) considered that literature considers compensation policies to
implementing a rewards management system have a positive impact on the organization's
allows the companies to gain a competitive efficiency, there is still very little information
advantage, due to the fact that they will attract on how they can be linked to the
qualified personel that can be transformed in organizations’ business strategy. We find this
a stable workforce. Moreover, Milne (2001) idea also expressed by Dessler (2016), who
considers that, besides encouraging employee stressed that a compensation package must
engagement, implementing a reward system be created in ordert to gain a competitive
will also contribute in an essential mode to the advantage, by modeling the desired behavior
knowledge sharing behaviour among among employees, respectively to create a
employees. link between each type of rewards and a
specific business objective. The author
Another important aspect, in terms of the concludes that this is why many organizations
benefits gained due to compensation use a total rewards strategy to support
management, is analyzed by Greene (2014), achieving their goals, noting that this strategy
which considers that the existence of a state of adds more challenging work, career
commitment, satisfaction and motivation development and recognition to the
among employees causes them to be more traditional rewards, such as payments,
productive and more involved in relationship incentives, and benefits. Based on the theory
with the organization. The author concludes of equity, the author considers that the award
that, due to this fact, organizations have begun of compensation must be fair both externally,
to consider employees involved in work as in terms of awarding rewards within the
valuable resources. In the same direction, organization in relation to rewards for similar
Maung and Walsh (2016) present the activities in other organizations, and
employees efforts as determinants for the internally, respectively equity in terms of
success and survival of organizations and rewards for various activities within the
consider the reward system as an essential organization. Awarded rewards should also
factor for obtaining employee motivation. We be fairily distributed among employees
find the same idea presented by Bustamam performing comparable activities and the
and Abdullah (2014), which considers the processes and procedures established for
implementation of a reward system within awarding compensation must be perceived by
organizations as an essential management employees as being fair (Dessler, 2016). Day,
tool, which, by increasing employees’ Johnson and Barron (2014) also present the
motivation and satisfaction, contributes to fact that the resources allocation is generally
increasing the performance of the influenced by three criteria, two of which are
organization. In this regard, Adeoye, Atiku equality and equity. In the same direction,
and Fields (2016) note that the main reason Bwowe and Marongwe (2018) find that, in
for awarding rewards is to shape employees’ order to promote fairness and correctness to

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different categories of employees, agree that the company's business strategy

organizations must link performance must be the foundation for implementing
rewards, otherwise it can become very human resources policies and developing a
difficult for organizations to offer the strategy for rewarding employees. Khan,
deserved recognition, which would lead to Aslam and Lodh (2011) considered
incorrectness. compensation management to be very
important so that organizations do not end up
Aksakal and Dağdeviren (2014) view rewards having problems and an important means that
as what is offered in exchange for desired companies have at their disposal in trying to
behavior, as a factor in motivating employees attract and retain valuable employees.
to have flexible and better performance and Compensation policy is considered being part
reward management, whose main goal must of human resources policies. The authors
be to properly reward employees, must defined compensation as being represented
ensure the creation of the reward structure by all forms of payment obtained by
that operates within the organization. The employees as a result of their work, but noted
authors believe that rewards management that the compensation includes both financial
should focus on both financial and non- and non-financial rewards. The definition was
financial rewards. We can observe that, in the taken from Dessler (2016) who considered
article, the authors believe that reward salaries, incentives, commissions and bonuses
management must be based on two as direct financial payments, and financial
motivation theories: the theory of equity, benefits such as insurance and paid leave as
because it emphasizes that its main objective indirect financial payments.
is to properly reward employees, and
Skinner's theory because it considers the Medcof and Rumpel (2007), based on the
rewards to be a positive consolidation. findings of previous studies, stated that total
rewards include everything an employee
Findings appreciates in the relation with it’s employer,
including payments, benefits, a challenging
Reward Packages Evolution work, learning and career development and
work / life effectiveness, but not limited to
Bussin and Van Rooy (2014) highlight a major them. Therefore, they believed that
problem that may arise if an unitary structure establishing a package of total rewards should
is to be implemented in terms of the reward be based on an inventory of rewards that the
policies adopted, namely the fact that, organization has the opportunity to offer to its
depending on the generation the employees employees, but also on a study of the
are part of, certain types of rewards can be importance that each of these rewards has for
different. In today's organizations, with employees (Medcof and Rumpel, 2007).
employees from multiple generations,
choosing this type of unitary reward policies Martocchio (2017) considers compensation
could lead to the impossibility of obtaining the to be composed of intrinsic and extrinsic
desired result, namely the attraction, rewards received by employees in exchange
motivation and retention of employees. This, for their work and membership in the
the authors conclude, could have a negative organization.
effect especially on labor markets with few
highly and medium skilled workers, especially Fernandes (1998) emphasized that
in the context of increased labor mobility employers should review their reward
(Bussin and Van Rooy, 2014). strategy so that, on the one hand, they can
identify the most effective rewards and, on the
Another aspect regarding the rewarding other hand, strengthen the business
strategy is highlighted by the Worldatwork objectives, showing that reward strategies
study (2015) which shows that HR specialists must seek to motivate those employees who

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pursue both career-related aspirations, and (2013). Based on these considerations, the
the achievement of the business objectives of authors proposed adding to the reward
the organization. In the same approach, package employee performance recognition
Kaplan (2007) shows that the strategy programs and performance-based payment
regarding total rewards is "a holistic approach programs, stock options and improved work-
that aligns with business strategy and life balance (flexible work schedule, work
people's strategy", considering that it refers to sharing, telework). The paper presented by
everything that employees value in the Pregnolato (2010) indicates that, in terms of
relation with their employers. Gross and employee retention, in the total reward
Friedman (2004) noted a paradigm shift in package the components have the following
total rewards programs: while organizations importance: benefits (35.2%), performance
initially viewed this type of program as a and recognition (20%), remuneration (17%),
useful tool that can be used for attracting and the possibility to advance in career (10.3%),
retaining employees, over the time they began the learning opportunity (9.1%) and the
to aknowledge the role that employees have work-life balance (8.4%). The paper found
in achieving business objectives. relatively small gender differences in
preference for one or other of these
The study carried out by Alhmoud and Rjoub components. With regard to age categories, it
(2020), based on the finding that the current was found that, while for Baby Boomers and
labor market is dominated by Generation X generation X the preferences follow the
and Generation Y, sought to determine the general rule, generation Y follows the general
extent to which different types of rewards rule for four components, while in terms of
impact employee retention. The authors work-life balance it is considered fourth in the
divided the rewards into three categories: order of preferences, while career
extrinsic, intrinsic and social. The conclusions advancement ranks last in importance.
of the study, although limiting as highlighted
by the authors, given that the research was Bussin and Toerien (2015) also conducted a
conducted in a single field of activity and in a study in South Africa, as in the previous study,
single country, revealed that, in terms of but only on the workforce operating in the IT
retention among representatives of both sector, considering the total rewards model
generations, the role of the extrinsic rewards developed by WorldatWork. The study found
is decisive, neither of the two generations that there was an additional problem in
being influenced by the social rewards. The establishing and implementing a total
study concluded that, in terms of retention, rewards package, due to the fact that
intrinsic rewards are more appreciated by employees' preferred rewards differed
representatives of generation Y and are of no significantly in the three study scenarios,
interest to those in generation X (Alhmoud namely to join an organization, to be
and Rjoub, 2020). motivated within an organization and to stay
within an organization. However, analyzing
Robbins, DeCenzo, Coulter and Anderson the total rewards preferred by employees, the
(2013) also believed that employees can be study found that the components of
motivated to behave appropriately by compensation (salary, incentives and
applying a fair reward program, and based on bonuses) retain their predominant
previous studies concluded that not all importance, benefits being also considered
employees think that money are the most very important (health insurance, retirement
important reward. Based on a 2000 study plans) and also rewards related to work-life
conducted in Canada, the authors stated that, balance, life and flexible work schedule.
in terms of employee satisfaction, paycheck Management quality has been identified as
and benefits matter less than a reliable top the most important reward in employee
management and a good work-life balance preferences.
(Robbins, DeCenzo, Coulter and Anderson

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Rumpel and Medcof (2006) show the of respondents perceive the rewards offered
relationship between total rewards and by organizations as very effective in driving
compensations. The authors state that, in business outcomes. The study revealed that
order to increase productivity, to reduce the respondents consider the rewards offered by
employee desire to leave the company and to their organizations to be "very effective" in
increase employee engagement, driving business outcomes in the following
organisations can implement flexible working proportion: alignment with business goals
hours, training programmes, career (12%), talent retention (8%), talent attraction
development opportunities and a strong (6%), talent growth and development (5%)
performance management and they can and talent motivation (3%). A possible
integrate them with monetary response to these results was provided by
compensations. In this way, it can be achieved Deloitte (2018b, p. 33-35) which found out
something that the authors define as that total reward packages do not align with
“employee value proposition”, meaning all employees’ preferences in three aspects: 1.
that the employees receive in exchange for employees have a more favourable reaction to
their work within organization (Rumpel and agile compensation granted more often than
Medcof, 2006). In this respect, Jiang, Xiao, Q those granted on an annual basis; 2.
and Xiao (2009) state that rewards are a organisations fail to create a wider range of
compensation received by the employee in rewards, which would lead to a more diverse
exchange for it’s work and it can be monetary workforce, because they do not try to better
or it can be converted into a monetary form understand employees’ preferences; 3.
and also it can have non-monetary forms, such employees do not perceive many of the
as: stable work place, good relationship with current reward programs as being fair.
colleagues, decision making involvement,
challenging tasks, development Total Rewards Model Evolution
opportunities. Keeping the same approach,
the authors define total rewards as being Armstrong and Brown (2006), consider that a
formed of monetary payments, benefits, functional reward model for the 21st century
flexible working hours, educational assistance will have to focus on the growth of employees’
and all the opportunities offered in order to involvement as they should be motivated and
achieve both professional and personal productive. The authors believe that a reward
performance. The authors highlight that, system should be based on four core values:
although the term total rewards is assimilated fairness (people should be rewarded based on
to the one of total compensations, total their contribution to the organization, and
rewards represents all the elements that employees should feel that the rewards are
employees appreciate in the relation with fair), equity (equal rewards for the same type
their employer and it is the most modern term of work), consistency (rewards are not set
related to rewards (Jiang, Xiao, Qi and Xiao, arbitrarily and do not differ in time or
2009). The authors started from the term between different people) and transparency
total rewards introduced by Fernandes (employees understand how the rewards
(1998), who defined it as "the sum of the system works and how it will affect them)
values of each element in the employee's (Armstrong and Brown, 2006).
reward package".
Brown (2018) developed a total rewards
Although organizations have been trying for a model, defining the terms of total rewards,
very long time to align total reward total remuneration, total compensation and
management with the organizations’ business total cash. Total cash paid to employees has as
strategy, Deloitte (2018a), having as starting rewards basic payments (basic salary, hourly
point the Bersin Deloitte Consulting LLP salary) and short-term variables (annual
“High-impact Total rewards research” 2018 incentives, individual bonuses, team
study, points out that only a small percentage bonuses). Adding to the total money the long-

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term rewards / incentives (stock/equity, employees to integrate employee

profit shares), the total compensations are responsibilities with those related to personal
obtained. If passive benefits (retirement plan, life) and 3. allowances (for accommodation,
health and well-being plans, paid leave) and transport). Relational rewards are related to
active benefits (business car, professional recognition and status, employment security,
memberships, discounts) are added to these, challenging work and learning opportunities
the total remuneration is obtained. All these (Milkovich, Newman and Gerhart, 2014).
classes of reward elements are considered by
the author to be extrinsic and a monetary Tropman (2001) considers total
value can be associated with them. If an compensation as an equation with ten
element containing extrinsic rewards is added unknown exponents: 1. base pay or salary
to total remuneration, meaning engagement (which, as the author notes, represents for the
factors (quality of work, growth opportunity, organization the highest cost in total
enabling environment, work-life balance, compensation); 2. augmented pay
inspiration/value), a total reward system will (representing those payments granted on a
be obtained. one-time basis consisting of overtime
payments, incentive payments, profit sharing
Milkovich, Newman and Gerhart (2014) and stock options); 3. benefits
defined compensation as being represented (unemployment insurance, health insurance,
by “all forms of financial rewards, tangible social insurance and retirement fund set up by
services and benefits that employees receive the employer); 4. providing work equipment;
as part of the employment relationship”. 5. offering discounts for the purchase of the
Taking these considerents as starting point, company's products; 6. advancement
they presented a total returns structure that opportunity; 7. development opportunity; 8.
employees receive in exchange for their work psychic income (emotional rewards or
within the organization, structure containing disappointments related in particular to work
two rewards categories: compensation itself and to relationships with colleagues and
(monetary compensation and benefits) and superiors); 9. quality of life (representing the
relational rewards. Monetary compensation is relationship between professional activity
formed of: basic salary, periodic monetary and personal life, the way in which they
compensations (with adjustment role, which intertwine); 10.the factor named by the
can be both performance-based salary author factor X. This factor refers to the
increases, with the role of providing similar special needs and desires of specific
payments for similar work, and increases with categories of employees, needs and desires
the role of rewarding developments in terms that redefine their expectations in relation to
of experience or qualifications or to offset employers. The author considers that it is the
increases in living costs), short-term role of the compensation manager to identify
incentives (performance-based payments, the specific needs defined by the X factor.
granted on a regular basis and based on He/she must be proactive and have the ability
previously communicated criteria) and long- not only to solve employees’ requests, but also
term incentives, respectively those incentives to generate requests from employees, by
granted to reward efforts that employees consulting them on their preferences.
made over a longer period of time (the option
to receive or buy shares at a set price). Armstrong and Taylor (2014) considered that
Benefits consist of: 1. those measures taken to the reward strategy and the business strategy
protect the income of employees (income must be integrated and they defined the need
insurance during periods when, for various to establish a reward strategy. This was
reasons, the employees are unfit for work or designed to help both establish the reward
lose their job, health insurance, life insurance, system that the organization wanted to
savings programs and retirement programs), develop in the future and the steps to be
2. work / life balance (which allows followed in order to implement this system.

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The authors pointed out that this reward reward strategy was considered to contribute
system should lead to benefits for both the to employee attraction, motivation, retention
organization and its employees. The and engagement. What should be noted is that
constructed model considered that the total at each change to the model, WorldatWork
reward package should encompass both the presented a total rewards inventory that
financial rewards, considered by the authors broadly defined the rewards that can be
as representing the total remuneration and awarded within each component of the total
representing the transactional rewards, and rewards strategy.
the non-financial or intrinsic rewards,
considered by the authors to be relational Discussions
rewards. The first class of rewards included,
in the authors' opinion, the basic salary, As a first objective, this paper aims to analyse
contingent pay and employee benefits, and the evolution of the categories of rewards
the second the attractiveness of work itself, offered by organisations. The research was
work experience, non-financial recognition, based on empirical studies, surveys, reports
achievement and growth (Armstrong and and books that have addressed this topic in
Taylor, 2014). recent decades. The two concepts used by
organizations to manage employee rewards
It is very interesting how WorldatWork has were analyzed: compensation management
developed models on total rewards. The and total reward management. Based on the
original model was developed in 2000 and research carried out, we can say that there is
was based on the interaction of the total still a confusion in the literature between the
reward strategy with the organization's term of compensation and that of total
strategy and employee results. The model rewards, often considering the two reward
considered that the reward strategy is based schemes to be identical. We consider that,
on the following five components: while the compensation package includes
compensation, well-being, benefits, only salaries, bonuses and, in some
development and recognition. The stated approaches, a number of benefits,
purpose of the model was to lead to a representing practically costs of the
productive, inspired and commited organization, made to reward human
workforce. WorldatWork believed that, in resources, the total reward system should be
order to implement a correct total rewards seen as a summation of the investment that
model, organizations must also take into the organization makes in its own employees
account external influences. WorldatWork (compensation, ensuring personal and
has always sought to improve the total professional development) with those factors
rewards model. The model published in 2006 that make employees appreciate the fact that
changes the five components of the reward they work for a particular organization, such
strategy. Compensation and benefits were as career advancement, flexible work
maintained, adding work-life balance, schedules, a good work-life balance.
performance / recognition and development /
career opportunities. The implementation of The second objective of the paper was to
this model was to contribute to the attraction, identify any differences in employees'
motivation and retention of employees. The preferences in terms of a particular type of
last change was made to the model in 2015. reward, based on age and gender criteria. We
The model was based on a six-component considered this analysis to be important,
rewards strategy. The two components that taking into account that in the current labour
remained unchanged were compensation and market we find a great generational variety,
benefits. The other four components that and women are taking on an increasingly
complemented the reward strategy were: important role. The results of the research
work-life efficiency, recognition, performance revealed that, while the rewards awarded
management and talent development. This under the compensation package still play a

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very large role, organisations will have to pay employees as possible from an increasingly
increasing attention to those rewards related diversified workforce.
to good effectiveness of both work and
personal life, recognition of employees’ The literature highlights two important
efforts and performance, effective factors in establishing reward systems. The
performance management and talent first factor is based on analysing employee
development. preferences for certain types of rewards in
order to implement a reward system that
The third objective of the article was to meets the needs of as many employees as
analyze a number of models on the total possible, but focusing on the preferences of
rewards developed in recent decades. The employees with a high level of knowledge and
study of these models was done in order to qualification, which are basically the
have a better understanding on how they employees who have the greatest
helped define and explain the contribution contribution in achieving the organization's
that current reward packages make to performance objectives and ensuring a high
achieving employee satifaction and business level of competitiveness. The second aspect to
goals. We believe that the total rewards model be pursued in the construction of the rewards
developed and continuously improved by the system is that they must be based on the
WorldatWork Association can be currently principle of internal equity (rewards to be
used successfully to implement total reward awarded non-discriminatorily according to
management. The total reward management performance, position within the
can be adapted in the future, based on the organisation, responsibilities, experience and
evolution that will take place in terms of qualifications), on the principle of external
rewards, bearing in mind both the dynamic equity (rewards granted to be similar to those
relationship between employees and granted in the labour market) and can be
organizations and the external influences that borne by the company's budget.
are faced by organisations. It should be noted
that the article did not intend to present all the Surveys undertaken in recent decades show
models that were developed during this that, while there have been many
period of time, considering that it is sufficient organisations that have set out to introduce
to present only those models that have effective reward management, very few have
definitely contributed to the development of succeeded in this endeavour. They also
the management of total rewards. showed that few of the organisations that had
implemented total management had achieved
Conclusion the expected results from its implementation.
We consider these issues to be very
The conclusions drawn from the analysis of interesting themes for future research.
the works published so far show that the need
to implement a system of total rewards has Acknowledgment
arisen with the aim of supplementing and
diversifying the compensation system. From There was no external funding.
an organization perspective, this was
necessary in order to make the rewards References
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Radu MARIN, The Journal of Organizational Management Studies, DOI: 10.5171/2021.642473