Human resource Managment

Table of contents

1. Introduction

2. What is employee reward system

3. Total monetary reward system and why it is not efficient in today’s economic context

4. Total reward system and how to implement it effectively in the current austere economy

5. Conclusion

Introduction (Arman’s)

Compensation of employees has always been a disputed topic. If salary is considered as a fixed indicator, then the payment of the premium can only be provided in the document defining the labor relations in the given enterprise. Moreover, the amount of encouragement and the conditions for its receipt are established independently by the organization. Therefore, the reward system causes a lot of controversy, both among accountants and employees themselves. The accrual of bonuses most often depends on the quality of the employee’s work, his contribution to the production process or the professional achievements themselves. Each company establishes its own criteria and rates of reward system. But in any case, the employer determines the need to pay a premium based only on the results obtained by the employee. Proceeding from this, it must be said that it is impossible to reward the employee just for the fact that they have a higher education or a certain specialty. The wave of recent research demonstrating that reward influences attention in healthy humans raises the critical question of whether reward can improve attention in neglect. (Anon, 2011)

What is employee reward system?

Employee reward system is a program initiate by companies to encourage or motivate employees on individual and group by rewarding them (Armstrong, 2002). Generally, these rewards are separated from basic wage and may be monetary in nature or in other form in which somewhat incur some kind of cost to the company.

Total Monetary Reward System and why it is not as efficient in today’s economic context?

Total monetary reward system is described as financial resources available that used by employer to attract, motivate and retain their talents, such as base pay, bonuses, pension plans and the like (Merchant and van der Steede 2008). Although, its intention is mainly to obtain employees’ desired behaviour and work towards the organisations’ objectives collectively, however such system shows lack of communication or support strategic business priorities as it does not truly value the importance of communication between management and employees, thus such systems appear to be inflexible and are not reflective of business results (Dierdorff & Surface, 2008). Moreover, monetary rewards are perceived as a form of ‘compensation’ instead of rewards as monetary reward is only a tacit acknowledgement of employees’ contribution and such rewards may only feasible for organizations with strong financial support, otherwise it may not be ideal.

As of today, the working environment is edging towards globalization, recruiting and retaining talented employees have become increasingly challenging for organizations, as a globalized working environment condition allows workers expose to wider work opportunities around the world thus monetary rewards may not necessary be the only appeal to potential employees (Rosenblatt, 2011). Hence, these days having a reward system which offers employees various different rewards is crucial for companies to secure their potential employees and retain them for the long run.

Total Reward System and how to implement in effectively in the current austere economy?

Total reward system (TRS) encompasses the combination of various different rewards, which includes monetary, non-monetary, extrinsic and intrinsic rewards, TRS have been developed in recent years offering different rewards structures (O’Neal, S 1998). According the Towers Perrin model of total reward, TRS is a matrix of total reward system with four quadrants. The upper two quadrants – pay and benefits – represent transactional or tangible rewards (see table 1).

Table 1 WorldatWork (2000)

These are financial in nature and are essential to recruit and retain staff but can be easily copied by competitors. By contrast, the relational or intangible non-financial rewards represented in the lower two quadrants cannot be imitated, these can create both human capital and human process advantage. They are essential in enhancing the value of the upper two quadrants. The real power comes when organizations combine relational and transactional rewards (Thompson, P 2002). The model also makes a useful distinction between individual and group rewards, particularly in the latter case.

As shown in table 1, compensation, benefits, work environment, recognition and development are the keys components that form the foundation of TRS, however the strategic choices of implementation are equally important as it will determine the effectiveness of TRS in organizations (Brown, D 2001). We as a group concluded it is crucial for organizations to go through 4 specific phases as follow in order to implement TRS effectively.

Phase 1 Assessment (Jill’s)

For achieve efficiency reward system, the first step is to evaluate the insufficient of the existing reward system. For effectively implement this phase, the project team of evaluation must take responsibility for a lengthy series of tasks, including conducting focus groups, industry benchmark surveys, reward strategies examine and employees’ attitudes toward reward system.

1. Conducting focus groups:

The project can use focus groups as the way to gather information about the reward system. The team should consist of employees, line managers, of each department in the company who can represent the interest of his colleagues, even the expert of human resource management hired outside for solve the problem. The focus group through gather information and feedback about reward system to mention the good way to solve the problem and every member in this group encouraged to comments the disadvantage of the current reward system. In addition, because the point of reward from managers and employees will differ because of the different status and treatment, therefore the focus group should always divide to two parts, manager groups and employee groups and comparison with each other.

2. Industry benchmark surveys.

Industry benchmark survey is another way to gather information about the reward system. This way is to investigate other successful organization’s reward system use benchmark survey and finally can get the information to make sure these practices could be useful or not. And the reward system characteristics from other companies wrote in the reward strategy can help us improve more ways of own reward system. Like how the reward support company’s total purpose, the incident condition of reward, the result of the different standpoint of employers in the practice of reward, and so on.

3. The attitude of employees to the reward.

The survey of employee attitude to reward will reflect the contradiction of reward system in the company, as we know, the reward will often trigger different emotions to the employees who get the reward and even to his colleagues. For himself, the same reward for a long time or stationary time every year will impact his working enthusiasm, like the year-end bonus, will make people only work hard on the end of the year. And on the other way, different rewards in the same department can lead jealousy, also not good for the company development. A common way to investigate this is Pay satisfaction questionnaire, which can help the HR manager to measure attitudes toward base-pay levels, pay raises, rewards structures and administration. And the tool mainly attention to basic wage, therefore it is necessary to add problem about they attitude to non-monetary rewards.

Phase 2 Design (Max’s)

After the assessment is completed, organizations must decide what kind of reward system to offer their employees. This usually consist of compensation, benefits, personal and professional development and work environment.

The first step is a monetary compensation consisting of pay level, pay increase and pay incentives (Gerhart and Rynes,2003). Pay level can be divided into skill-based pay (job qualification only) and broadbanding (involves everything related to job). Broadbanding provides more flexibility but at the same time significantly increase labor costs. Pay increase can be divided into merit-pay system (performance pay) and promotion pay (wide range of evaluation). Pay incentives are forged in the form of stock and cash bonuses and focuses more on employees’ productivity rather than performance rating.

Benefits is the next step of reward system design. Organizations must provide flexible benefits plan so employee feel more satisfied in their options. For example, retirement benefits are less likely to satisfy young employees compared to elder one. Also, companies must clearly announce benefits plan so employees would be fully aware of benefits plan and its perks.

Personal and professional development is the next stage of reward system design. It includes career development, training and performance management.

Work environment consist of job design, recognition, and work/life balance. Job design include the psychological characteristic (perception). Based on studies by Hackman and Lawler (1983), positive perception have a beneficial effect on job performance. Recognition is a nonfinancial reward which could help employees to keep constantly motivated in the workforce. Work/life balance consist of flexible work schedule and compressed weekend.

Companies should decide upon themselves which components are more important and prioritize them to enhance organisational performance.

Phase 3 Execution

After the design of the TRS is done, the next phase of the implementation process will be ‘Execution’, which means setting the system in place. First, the system must fulfill the following criteria, 1. All staffs must be included in the program or companies may face the risk for discrimination lawsuit. 2. Top management must fully support implementing such system as it is a large-scale intervention. 3. Decide employees’ criteria measurement for receiving each reward. 4. Strong project management skill (Heneman, 2007). Next, companies can apply the school of thought on when to implement the TRS, such as Lead VS Leg, if company view their TRS as a lead system then company will have made the plan operational before launching the new business strategy, if company view TRS as Leg system then company will have to make new plan operational after employees have carried out the new business strategy (Ledford & R. Heneman, 2000; R. Heneman, DeSimone, Dooley, & Jones, 2002). After which, to explain TRS to the employees by making as much information about the system as possible available to the employees and provide interactive conversation through company’s intranet, such as how the system is funded, will technology involve in process, will company outsource some aspects of the execution etc (R. Heneman, Mulvey, & LeBlanc, 2002). Now, company will need to prepare to handle employees’ concern about the system, therefore it is very important that a company’s TRS is adhere to employment law in order to show its legitimacy and the company’s commitment to a successful execution (Folger & Konovsky, 1989).

Phase 4 Evaluation (Arman’s)

Likely the foremost usually reviewed section of total rewards realization is analysis. In this phase, the project team match the actual results of the dead total rewards methods against the desirable results. The expectation is that be managing this analysis, you can show prime management that the company’s investment in its total rewards system has paid off. Of course, conducting an evaluation can be unnerving if you fear that the selected reward strategies are in fact not delivering as anticipated (Corby, White, & Stanworth, 2005). To get the foremost from the analysis phase, stimulate your project team to determine the outcomes of the performed total rewards system and to expound the findings properly.

Measuring the Outcomes

To solve which outcomes of your total rewards system to live, revisit the system’s objectives and then take into account that knowledge sources can provide the data you wish to estimate those outcomes. For example, if the new rewards program was supposed to boost worker gratification, the project team will determine this outcome through workforce surveys. “Outcomes and Data Sources” shows samples of the types of outcomes you will need to measure and therefore the sources that might generate the info you wish.

However, TRS may face its challenges and likely to fail if the organizations’ commitment does not have the support of the managers (CIPD, 2018). The potential challenges include, all rewards may not able to meet everyone’s needs as some rewards may be easier to provide than others, employees could be confused with too many choices of rewards, employees may get complacent with rewards can feel entitled to it overtime, employers may be tempted to shift from fixed pay to lower cost benefits then cynicism may occur and employees may see TRS just a cost-cutting strategy (CIPD, 2018).

Conclusion

Bibliography

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