DOES REWARD MANAGEMENT AFFECT EMPLOYEE PERFORMANCE?

Increasingly, organizations are realizing that they have to establish an equitable balance between the employee’s contribution to the organization and the organization’s contribution to the employee. Establishing this balance is one of the main reasons to reward employees. Organizations that follow a strategic approach to creating this balance focus on the three main components of a reward system, which includes, compensation, benefits and recognition. Studies that have been conducted on the topic indicates that the most common problem in organizations today is that they miss the important component of Reward, which is the low-cost, high-return ingredient to a well- balanced reward system. A key focus of recognition is to make employees feel appreciated and valued. Research has proven that employees who get recognized tend to have higher self-esteem, more confidence, more willingness to take on new challenges and more eagerness to be innovative (Puwanenthiren, 2011)

Akerlof and Kranton (2010) reported that many organizations would be successful in their goals and purposes if they understand the identity economics. People's identity that is their conception of who they are, and of who they choose to be, may be the most important factor affecting their economic lives and may indicate what would be the most appropriate incentives for them to perform in their job. There seems to be evidence to confirm the positive relationship between financial factors and job performance in service organizations. Money is the fundamental inducement; no other incentive or motivational technique comes even close to it with respect to its influential value. All businesses use pay, promotion, bonuses or other types of rewards to motivate and encourage high-level performances of employees. Reward management has the supremacy to magnetize, maintain and motivate individuals towards higher performance. According to Lemieux, MacLeod, & Parent (2009), the existing evidence shows that when there is a good performance measures, performance-pay can enhance employee productivity and improve match quality. However, the use of performance-pay is constrained by the quality of available performance

The task of developing a strategic rewards framework for organizations is usually challenging but necessary to survive in the competitive and changing market place. The process however cannot be copied from the organizations but needs to be designed, developed and grown within the unique environment of the organization (Wilson, 2003). A well designed incentive program rewards measurable changes in behaviours that contribute to clearly defined goals. The challenge in developing such a program lies in determining what rewards are effective agents of change, what behaviours can be changed and the cost and benefits of eliciting change (Hartman, Kurtz & Moser,1994

Employees should be aware of the relationship between how they perform and the rewards they get. Organizations should apply performance management programs which assist in planning employee performance, monitor performance by effecting proper measuring tools. Rewards should be used as a way of strengthening good behaviour among employees as well as productivity. Hence reward systems should focus on reinforcing positive behaviour. Employees could be rewarded for working overtime, taking initiative, team work, reliability, exceptional attendance, outstanding customer feedback, meeting deadlines or timeliness, productivity. Employers and managers should then design or come up with a system to measure or quantify all these aspects so that rewards are then given accordingly. A good reward system that focuses on rewarding employees and their teams will serve as a driving force for employees to have higher performance hence end up accomplishing the organizational goals and objectives (Njanja, Maina, Kibet & Kageni, 2013)

An effective reward program may have three components: immediate, short-term and long term. This means immediate recognition of a good performance, short- term rewards for performance could be offered monthly or quarterly and long- term rewards are given for showing loyalty over the years (Schoeffler, 2005). Immediate rewards are given to employees repetitively so that they can be aware of their outstanding performance. Immediate rewards include being praised by an immediate supervisor or it could be a tangible reward. Short term rewards are made either monthly or quarterly basis depending on performance. Examples of such rewards include cash benefits or special gifts for exceptional performance (Yokoyama, 2010).

Rewarding should not only be applied to individual employees within the organization but also to teams that perform excellently. Incentives given for good behavior usually improve the relationship between the employees and management because employees feel that they are being appreciated for their efforts and good work. This leads to increased employee morale, better customer care as well as increased productivity. Long-term rewards are awarded to employees who have been performing well. Such an employee will become loyal to his or her organization and it reduces employee performance. Long term rewards include being made partner, or cash benefits that mature after many years of service or at retirement. These rewards are very strategic for retaining the best human resources (Yokoyama, 2010).

Every organization’s reward system should focus on these major areas; compensation (salaries, perdiems, bonus, commuter allowance etc), benefits, recognition and appreciation (Sarvadi, 2010). Benefits such as car loans, medical covers, club membership, ample office space, parking slots and company cars are ways of rewarding and employees do note the types of benefit that their organization offers. Recognition and appreciation are another integral component of a winning strategic reward system. Recognition is to acknowledge someone before their peers for desired behaviour or even for accomplishments achieved, actions taken or having a positive attitude. Appreciation on the other hand centers on showing gratitude to an employee for his or her action. Such rewards help employees to gauge their performance and know whether they are doing good or bad (Sarvadi, 2010).

Performance bonuses are nowadays on the rise in many organizations because managers want to link performance to reward. (Block & Lagasse, 1997). Companies use cash bonuses to reward their employees' performance during the year under appraisal. But there is also the unspoken expectation that these bonuses will be a factor in motivating employees' performance next year as well. Employees who receive a large bonus will likely want to get it next year too. On the other hand, employees who receive a miserly bonus and it reflects how the company assessed their performance, might consider improving next year (Finkle, 2011).