The Impact of Competitive Rewards on Employee Performance.

Globalization is conceptualized in such a way that it incorporates competition and modification. Organization that want to strive in the present world of intense competition need to outperform by producing different and unique solution to common organizational issues. There are several external factors that trigger organizations to work harder specially in times of the Covid-19 global crises that the whole world is in together.

The covid-19 pandemic has made business organizations to pay attention to its performance and profitability more than ever, leading to great development, rather advancement in their existing business modules and systems. The worldwide crises have made organizations realize and admit that the Human Resources are indeed the most significant asset they own. Therefore, the main management and performance strategies during the following time have been based on employee’s satisfaction. Several top organizations have been engaged in looking for ways through which they can motivate and increase the performance of its employees through numerous types of HR implications. I believe that competitive reward management system would be a worthy choice made by the HRM departments that would even be effective post-pandemic.

Employers within all types of organizations want to have a productive, creative and a high performing workforce. On the other hand, Employees working in these organizations want their efforts to be recognized, compensated, and rewarded. In simpler words employers and employees working in an organization are in a give and take relationship. Employees give in time effort and determination and in return get recognition, rewards and even promotion. There is a direct link between an organization reward system and the performance of its employees.

 It is a generally agreed viewpoint that rewards have a positive influence on job performance. Various studies also show that reward systems and strategies are used by organizations to motivate its employees and elevate their performance. A recently published article in Journal of Personality and Social Psychology mentions, people who received immediate, frequent rewards for completing small tasks reported more interest and more enjoyment in their work, compared with people who received delayed rewards. (2018)

 If an employee is rewarded for a job done well, the reward will inspire them to work even harder and be more productive in the future. The Expectancy theory by Vroom makes it easier for us to understand the following concept. The expectancy theory of motivation includes three components: expectancy (effort), instrumentality (performance) and valence (reward). The following chart explains the relationship between the three components.

Fig: 1.1 ?

 Organizational reward systems if designed according to the specifications of the employees can serve as a motivation and raise employee’s enthusiasm. Moreover, it helps organizations to reduce turnover rates as employees are retained. Talking about the designing of reward management systems there are various tools that are used in the designing. Precisely the tools include extrinsic and intrinsic rewards, more commonly known as financial and non-financial rewards/incentives. Financial rewards include monthly salaries, allowances, bonuses, commission profit-sharing, and retirement benefits. Non-financial rewards can include job security, job enrichment and enlargement, career growth opportunities, employee recognition and empowerment, flexible working schedule, appreciation, and promotion.

Sustainable business generally known as green business is the one in which along with profitability, environment and society is also valued by the organization equally. it is about using the economic resources in such a way that along with positive personal gains the negative effects on the environment are kept to minimum, valuing the cooperate social responsibility. Organizations can structure their reward systems in such a way that it supports sustainable business strategies. However, rewards are not widely used to achieve sustainability-related goals as many organizations believe that there is no link between the two. most organizations do not implement rewards to complement sustainability-related goals, because most organizations view rewards as the least effective lever of organizational design that can be used to improve sustainability performance.

 However, organizations that successfully implement rewards to achieve their sustainability objectives do so by attaining management-level buy-in, creating goals informed by their sustainability strategy, breaking down those goals into achievable employee level objectives, and then using rewards to encourage the achievement of those objectives. The rewards can be informed of incentives, this can include, pay increase, stock options, compensatory benefits, training opportunities, additional day offs. It is not necessary for incentives to be financial in nature. Companies may benefit from employing a combination of financial and non-financial rewards.

 Organizations such as Shell, TNT, Evonik, SC Johnson, and Siemens provide us with excellent examples of sustainable business models which can be followed and trailed. In the year 2008 Akzo Nobel became the world’s largest paints, coatings and chemicals company with the revenue of approximately 13 billion Euros and almost 55,500 employees. The board of directors had set the strategic goal of bringing the group together around a core purpose of value creation and sustainability. The company’s sustainability goals have stayed in the top three of the Dow Jones Sustainability Index (DJSI) for their business category, reducing its total recordable injury rate to 2 incidents per million hours and delivering change in people development.

  Fig: 1.2

Further discussing the link between rewarding’s and individual performance, The Path-goal Model perfectly explains the relation between employee’s performance and reward systems. The basic concept of the theory states that ‘‘if a worker sees high productivity as a path leading to the attainment of one or more of his personal goals, he will tend to be a high producer. Conversely, if he sees low productivity as a path to the achievement of his goals, he will tend to be low producer. In other words, the employee would be motivated to expend a greater amount of effort in his work if he felt his previous effort had resulted in his receiving rewards’’.

Fig: 1.3

  Establishing an effective reward system within an organization is not an overnight process rather it requires time and dedication from all the stakeholders of the organization. In the following time that we all are in together, it is extremely important for organizations to cultivate a culture of continuous efficiency and improvement conversely this needs to be backed up by suitable level of rewards. Rewarding both teamwork and individual performance is essential to the workplace success. It would not be wrong to say that there is no such phenomena under reward system that one size will fit all and neither this approach should be applied in any organization. A compressive approach should be adopted to reward the employees as this links with employee retention and overall performance. Allen and Kilmann (1998) suggests a combination of extrinsic reward practices including “profit sharing, gain sharing, employment security and comp time” this showed a positive effect between the reward system in the total quality management approach and performance.

When an individual knows that he will be rewarded for his performance he performs better, being rewarded provides them with the motivation to do well. Individual rewards hold their own significance as the individual effort over a project or task of the employee is reorganized. Moreover, it leads to the creation of an internal competitive business environment as all employees want to outperform by positively competing with the coworkers and gain praise along with being rewarded leading to the overall organizational motivation and enthusiasm being high. It helps the management to recognize the high performance who might be offered promotions. Bratton and Gold (2012) highlight the fact that performance-based pay systems tie pay to employee’s outputs. These outputs might contain positive contributions from the individual or team, thus providing the basis for different types of pay systems.

Further talking about team-based reward systems it is important to know that team performance is a critical element of organizational success. Dematteo et al., (1998) found that applying rewards to teams assumes that team rewards will do something qualitatively different than individual rewards. It may be easier and less complex for a manager to evaluate a team’s performance as opposed to individual performance. Group incentives encourages a sense of cooperation and responsibility as the group members know that the overall success relies on equal individual contribution. Kramar and Syed (2012) identified that group rewards or incentives are more likely to yield a collaborative approach to performance and thus be more effective in reaching your shared goals.

It is difficult and time-consuming process for organizations to find the right blend of tangible and intangible rewards to adequately motivate and retain its employees. A strategic reward system should be designed and applied to organizations in such a way that it supports the business goals and objectives along with long term business success.

 Googles Reward System.

Under Google’s Reward Program Google mixes science with psychology to find out what employees really want from their reward programs. Google’s compensation program is called ‘pay-for- performance’. It mainly focuses on providing reward for strong performance as well as trainings to overcoming weaknesses for underperformers. It emphasizes on employee development through on the job learning, training through classes by higher officials, frequent departmental meetings and lectures of famous personnel. The average Google employee generates more than $1 million in revenue each year. This helps Google leverage its workforce productivity, which in turn enhances employee morale.

The current statistics on google shows that google has nearly 135,300 Employees around the globe. They believe that Googlers deserved programs tailored to their preferences, not just because a technique or strategy proved successful at other companies didn’t automatically mean it would be effective at Google. For around approximately 18 months, the compensation group at Google was on a mission: to create a variety of reward and recognition programs that met the specific needs of its workforce. Gathering and analyzing information, it administered surveys, held focus groups, conducted academic research, perused U.S studies, and interviewed and observed employees. The company figured out what turned employees on and off in terms of rewards and recognition. Finally, they introduced 4 types of programs:

1.     Spot bonus Program: It allows managers to award any employee who served on their project teams with a larger monetary award of their choice or noncash recognition, such as dinner for two. 

2.     No name program: It was designed for executives to recognize teams for outstanding performance with group awards, ranging from team celebrations to team trips. Bringing the first two into closer reach for employees was the result of a laborious fact-finding mission.

3.     Peer Bonus:  It is whereby they can nominate their peers for $175 rewards, this have been modified based on the compensation group’s findings.

4.     Kudos: It is a peer-to- peer recognition program that lets employees send online thank-you notes to co-workers without going through an approval process that has accessibility through many devices. ? Employees keep accumulating the kudos and then convert it to financial or non-financial rewards from the “Rewards catalog”.

Conclusion and Recommendation:

To conclude I would like to say that, A reward system should be designed in such a way that it meets the requirement of the modern times we all live in. it needs to be relevant to the current need and expectations of the employees and there should always be a choice for employees to get their reward contracts redesigned according to the need of time. (Providing an employee with travel opportunity once a year would have been of zero value during the time of current pandemic.)  Conveying a message that employees are valued within the organization and that their performance and commitment matters fosters a positive environment where morale, motivation and ultimately performance is high. Valued within the organization and that their performance and commitment matters fosters a positive environment where morale, motivation and ultimately performance is high.

 References

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https://hbr.org/2016/05/recognizing-employees-is-the-simplest-way-to-improve-morale.html

 Maharjan, P. (2018, February 15) Expectancy Theory of Motivation. Businesstopia. https://www.businesstopia.net/human-resource/expectancy-theory-motivation.

 New Research Suggests Frequent Rewards Can Improve Motivation, Performance at Work. (2018, June 23) BioSpace.

https://www.biospace.com/article/new-research-suggests-frequent-rewards-can-improve-motivation-performance-at-work/#:~:text=According%20to%20a%20recent%20study,compared%20with%20people%20who%20received

 Futrell, C. M. (1975) Salesman’s Reward Systems: A Comparative Approach, Journal of Academy of Marketing Science, 3(4), pp.328-346.

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 Zaidi, M.A. & Kreutzer, I. Business Role Focus Area. World Business Council for Sustainable Development. https://wbcsdservers.org/wbcsdpublications/cd_files/datas/capacity_building/people_matter/pdf/PeopleMatterReward.pdf

 Bratton, J. & Gold, J. (2012) Human Resource Management: Theory and Practice, 5th edition. New York: Palgrave Macmillan.

 Dematteo, J.S., Eby, L.T & Sundstrum, E. (1998) Team-Based Rewards: current empirical evidence and directions for further research’, Research in organizational behaviour, 20, pp. 141-183. ResearchGate.

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Approach, 1st edition. New York: Palgrave Macmillan.

 Sherif, A. (2018, April 11) Google rewarding programmes. SlideShare. https://www.slideshare.net/AmrSherif4/google-rewarding-programmes-93598261