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International Journal of Economics, Commerce and ManagementUnited KingdomVol. VI, Issue 2, February 2018http://ijecm.co.uk/ISSN 2348 0386CONCEPT OF REWARD MANAGEMENT, REWARDSYSTEM AND CORPORATE EFFICIENCYJoycelyn Samatha AnkuDepartment of Marketing, Faculty of Business and Management Studies,Ho Technical University, Ho, [email protected] Kojo AmewugahDepartment of Marketing, Faculty of Business and Management Studies,Ho Technical University, Ho, GhanaMawutor K. GloverDepartment of Agro Enterprise Development, Faculty of Applied Sciences,Ho Technical University, Ho, GhanaAbstractEmployees who make up a company remain the organization’s unique and biggest asset whilst they provide performance, organizations aim to reward them in an equitable manner fairly, unbiased and consistently in accordance with the value they create in the organization.Reward system exists with a specific end goal to motivate employees to work towardsaccomplishing vital objectives which are set by entities. This study clarified the phenomenon ofreward systems and corporate efficiency. It additionally reviewed other research findings in therange of reward systems. It assessed emerging and critical issues that inform reward decisionmaking. It again raised issues for example, the issue of measuring comparability and theconcern of recognition programmes. This study concludes that the reward system plays anessential role in motivating workers to perform innovatively.Keywords: Corporate Efficiency, Motivation, Organisation, Reward Management, RewardSystemLicensed under Creative CommonPage 621
Author(s)INTRODUCTIONReward is generally understood as the total amount of financial and non-financial compensationor total remuneration provided to an employee in return for labour or service rendered at work.Reward, which is at times been described as compensation or remuneration, is possibly themost critical contract term in each paid-work. Brown (2001) points out some positive associationthat exist between rewards and business strategy in the widest sense. This is consistent withthe findings of Rhoades et al. (2001) who argue that the reward strategy is important in terms ofmotivating employees to perform innovatively. While, Cox and Purcell (1995), and Nyandoroand Goremusandu, (2016) report that the actual advantages of a very much plannedorganisational reward strategy lies in its intricate linkages with the business strategy.The influence of reward on employee's performance is in most occasion significantlymisconstrued. The comprehension of this term is critical; this is on account of the incentivescheme given to an employee will impact the conduct and level of engagement to theorganization. Beer (1984), Armstrong (2003), and Nyandoro and Goremusandu, (2016) observethat the coordination of reward systems underpins the accomplishment of competitiveness.According to Babakus et al. (2003), positive employee perceptions on the reward strategyimpacts their disposition towards the organization. This is consistent with the findings ofRhoades et al. (2001) who argue that the reward system assumes a basic part in spurringworkers to perform innovatively. Thus, Nguwi (2013:2), and Nyandoro and Goremusandu,(2016).attest that the best way to ensure the continued viability of companies amidst challengingeconomic environments is to emphasis reward management and organizational performance.This review draws on a broad range of sources in explaining the phenomenon of rewardsystems and corporate efficiency. The study additionally highlights evidence that relatesspecifically to other research findings in the range of reward systems. It assesses emerging andcritical issues that inform reward decision-making. The review again discusses issues forexample, the issue of measuring comparability and the concern of recognition programmes.THE CONCEPT AND DEFINITION OF REWARD MANAGEMENT AND REWARD SYSTEMThe concept and definition of reward managementReward management is defined as “the strategies, policies and processes required to ensurethat the value of people and the contribution they make to achieving organization, departmentaland team goals is recognized and rewarded" (Armstrong 2010:267).According to Armstrong andMurlis, reward management refers to "the process of formulating and implementation ofstrategies and policies that aim to reward people fairly, equitably and constantly in accordancewith their value to the organization. It also deals with the design, implementation andLicensed under Creative CommonPage 622
International Journal of Economics, Commerce and Management, United Kingdommaintenance of reward processes and practices that are geared towards the improvement oforganizational, team and individual performance" (Armstrong and Murlis (2004:3)).On the basisof the foregoing definitions reward management could be characterized as a motivational toolemployed in recognizing employees on the endeavours added to the organisation. It thereforeimplies reward could be traded as compensation or remuneration or unequivocal cost of labour.Schneider (1987) argued that reward management is focused on employee and the value theycreate in the organization.Armstrong (2010) points out that reward management is concerned with the design,implementation and maintenance of reward systems (interrelated reward processes, practicesand procedures) which focus on satisfying the necessities of both the organisation and itsstakeholders, and to operate fairly, equitably and consistently. These systems cover measuresfor evaluating the importance of jobs through job evaluation and market pricing, the design andmanagement of grade and pay structures, performance management processes, schemes forrewarding and recognising people according to their individual performance or contributionand/or team or organisational performance, and the provision of employee benefits. It must beemphasised that reward management is not only about pay and employee benefits. It is equallyconcerned with non-financial rewards such as recognition, learning and developmentopportunities and increased job iningandcontrollingworkercompensation, remuneration and all other benefits for the employees. Reward managementintends to make and proficiently work a reward structure for an organisation. Reward structurefor the most part comprises of pay policy and practices, salary and payroll administration, totalreward, minimum wage, executive pay and team reward. Reward framework exists with aspecific end goal to motivate employees to work towards accomplishing strategic goals whichare set by entities (Armstrong and Murlis2007).Armstrong (2010:8) points out that in order for anorganisation to accomplish an exceptionally committed business condition and its overallbusiness objective, a reward strategy must be created to guarantee that the commitmentindividuals make to accomplishing organisational or group objectives are valued, recognisedand rewarded .The concept and definition of reward systemsAccording to Armstrong (2010: 268), “reward systems consist of the interrelated processes andpractices which combine to ensure that reward management is carried out effectively to thebenefit of the organization and the people who work there.” Reward systems are based on thereward strategy; which runs from the business strategy, for instance to gain competitiveLicensed under Creative CommonPage 623
Author(s)advantage, and the human resource (HR) strategy, which is impacted by the business strategyyet in addition impacts it. The HR strategy may, for instance, focus on resourcing however itought to be likewise concerned with fulfilling the necessities of employees as well as those ofthe business. All parts of strategy are influenced by the environment. Reward strategiescoordinate the advancement and operation of reward practices and processes, and furthermoreshape the reward policies, which in turn influence reward practices, processes and procedures(Armstrong 2010: 270).Nelson and Peter (2005) expressed "You get what you reward". They added that, areward system is the world's most noteworthy management principle. According to Svensson,(2001) in the event that the organization rewards a specific sort of employee behaviour good orbad that is the thing that the organization will get a greater amount of. Jaghult, (2005)points outthat each current organization has some type of reward system, regardless of whether it isoutspoken or not, it exists. Kaplan and Atkinson, (1998) point out rewards come in two distincttypes. It can either be in a type of incentive motivation or personal growth motivation. Theprevious is the kind that originates from within the individual, an inclination, being glad oversomething, feeling content and happy about something that you have done. The last is the typethat is conveyed to you by someone else or an organization and is the one that will hold ourfocus through this study. Besides, extraneous rewards can be fiscal or non-fiscal.Jaghult,(2005) points out that the monetary aspect is typically a variable remuneration,isolated from the salary, it is received as a result for exceptional performance or as anencouragement and it can either be independently based or group based. The conditions toacquire this reward ought to be set ahead of time and the execution should be quantifiable.According to Ax et al.(2005) there exists a number of reason for a reward system, oneextremely basic is to motivate employees to perform better, yet additionally to keep theemployees. Merchant ( 2007) points out for a reward system to be ideally motivational, thereward ought to fulfill a number of criteria; have esteem, be large enough to have effect, bereasonable, be timely, the effect should be durable and lastly the rewards ought to be costefficient.Purpose of reward systemA study by Svensson,( 2001) points out that a reward system puts together employees’ realself-interests with the organization's objectives and gives three kinds of management controlbenefits, informational, motivational and personnel related. To begin with rewards should catchthe employee’s attention and at the same time brings up to date update for the individual incharge of what results should be completed in different working areas. Organizations useLicensed under Creative CommonPage 624
International Journal of Economics, Commerce and Management, United Kingdomreward systems to emphasize which parameters their employees should apply the additionaleffort on by incorporating them in their reward programme. Merchant, (2007) stresses thatindividuals in some cases require an incentive to perform tasks well.Organizations give rewards for a wide range of reasons e.g. to enhance recruitment andretention by offering a compensation package that is competitive on the market. According toSvensson, (2001) reward systems refer essentially to things that employees value. It is essentialto remember that a reward system can contain both positive and negative rewards. Thenegative rewards frequently observed as punishments. Cases of positive rewards would beautonomy, power, salary increases, bonuses and some negative rewards would be obstructionin work from superiors, zero salary increase, and no promotion.Different parts of a reward systemWhile developing a reward system there are certain criteria to consider, and generally these areconsidered in most outspoken reward systems. A reward can be either an "add-on", implyingthat the employee has a typical compensation, and the reward. Organizations have, similarly aspeople, diverse life-stages, and depending on where the company is right now it has distinctivenecessities and this influences the reward system, expecting to create goal.What goals the organization have in respects of gainfulness and development, are theparameters you measure to check whether a reward ought to be paid or not. This more oftenthan not requires a break-down of the goals, making them less demanding to quantify and morereasonable for the employees, and there you additionally need to demonstrate to them how theirbehaviour influences the measured goals and parameters.Here the incentive system turns into a tool for management control and the choice ofwhich goals you measure is imperative, since these are the ones the employees will put theiremphasis on. Once in a while a fiscal reward is given in view of individual or on departmentalperformance, despite the fact that the organization has losses. According to Jaghult, (2005) thiscan be avoided by including a limit prerequisite for the entire organization, which at that pointshould be satisfied before a bonus can be paid out in any departments. Factors, for example,when and how the reward ought to be paid out and if there ought to be a roof (a higher point ofconfinement of the reward-sum) are things that dependably ought to be determined whileplanning the system.MonetaryMerchant,(2007) points out that money related reward systems is not the only type of reward,and it is not really the best one, yet its use is common to the point that it merits special mention.Licensed under Creative CommonPage 625
Author(s)According to Svensson, (2001), generally speaking individuals value cash and in this waymaking money essential type of reward. Money related reward systems can be put into threefundamental classes: performance-based salary increases, short -term incentive plans, and longterm incentive plans. The last two rewards are basic on managerial levels and are frequentlyconnected to performance during a specific time period. Samuelsson,(1999) points out the firstis regularly thought to be the best motivational factor of all.According to Merchant, (2007) every organisation gives pay increment to employees atall organisational levels. This is ordinarily a little bit of an employee’s salary, but has anoteworthy value because of its long term perspective .Short-term incentives in some form arehowever usually utilized as a part of organisation. A cash bonus is normally based onperformance measured on a time period ofone year or less. An organisation basically utilizes avariable pay in order to differentiate it among the employees, with the goal that the bestemployees will be remunerated.Svensson,(2001) argues that by perceiving the worker's commitments to theorganisation makes it less demanding for the organisation to support brilliant performance. Theemployees welcome the likelihood of getting a reward for their performance. Utilizing a variablepay can likewise be a benefit for the organisation regarding risk-sharing. This implies theexpense for remuneration fluctuates more with organisation performance when the totalcompensation is partly variable, influencing the cost to be lower when no benefit is made andwhen there is a benefit this can be shared with the employees.Merchant, (2007) points out that rewards based on performance measures over timeperiods above one year are long –term incentive rewards. By utilizing this, an organisation canreward employees for their remarkable work performance to boost the organisation’s long-termvalue. According to Samuelsson, (1999) examples of these can be stock-option programmes,restricted stock plans or a reward that is placed in a 'bonus- bank' that changes based on resultand keeps running over several years.A research conducted by Kaplan and Atkinson, (1998) found that a stock-optionprogramme generally allows one to purchase stocks in the future, however at the present price.This is an attractive method for rewarding a manager in view of the fact that the manager wouldwant the value of the stock to increase and in this manner work harder on the long-term goalsand commitments as opposed to concentrating on short –term profits. Another preferredstandpoint with this type of reward is, since the manager does not yet own the stock, he or shewill in any case be taking risks with higher payoffs than they might had in the event that theyofficially possessed them. There does, notwithstanding, exist one awesome weakness howeverwith the stock-option programme. A manager does not have enough control over the value.Licensed under Creative CommonPage 626
International Journal of Economics, Commerce and Management, United KingdomExcessively, a number of external and non-responsive components impact the value, making itless appealing as an incentive.According to Merchant, (2007) an exceptionally well known sort of long-term incentive issome type of a confined stock plan. This reward refers to shares given as a bonus to employee,in any case, they can only be sold after a time period. After for example one year, the employeewill have the capacity to offer one fifth of the offers, following two years he or she will have thecapacity to offer two-fifths and following three years, three-fifths and so forth this is an approachto retain competence within the organization, not to motivate employees, since if they decide toend their work before the fifth year, they will lose the rest of the parts. A few firms take this muchfurther by pulling back the shares one already received.Non-monetaryAccording to Jagult, (2005) when one receives a thank you from one’s manager or getsappreciation from one’s colleagues are the two cases of non-monetary rewards. Armstrong,1993points out that monetary rewards are often considered to be short-termed, and not leadingto a long-term commitment which is typically what you need from your employees. Toaccomplish enduring motivation for the employees the organization must focus on both themonetary as well as the non-monetary motivators, with a specific end goal to give the bestblend.Individual-based vs. group-based rewardsAccording to Merchant, (2007), for a group reward to give direct incentive impact, the employeeto whom the rewards are promised needs to trust that they can impact the performance onwhich the rewards depend on to a significant extent. Accomplishing something as a componentof the group normally strengthens the ties between colleagues. In any case, in the event thatsomebody has been part of the group without contributing in the same way as the rest, normallyleads to great dissatisfaction among the rest, and informs employees that they get rewardswithout input. In many projects and organizations, it is not possible to carry out a task withoutanyone else however the task completing process is a process though the organisation, drawingin a wide range of individuals. In these cases a group based reward is best since everybody has"pulled their weight", in spite of the fact that it is difficult to see the individual effect.Individual-based rewards normally leads to sub-optimization (Jaghult 2005). Whenpresenting an individual-based reward system employees, tend to focus on their ownperformance rather than the organization's performance as a whole. Approaching colleaguesand managers for help is suddenly something you think twice about as you may need to share aLicensed under Creative CommonPage 627
Author(s)future reward if you do. This prompts tasks fulfilled with an alright result, rather than a betterresult that might had sprung from a cooperation with colleagues more competent to the task orparts of the task, thus suboptimization. In any case, an individual-based reward makes the bestmotivation and greater incentives for the individual.According to Jaghult, (2005) increasing the responsibility regarding an employeenormally has a tendency to also increase motivation. This in light of the fact that increasedresponsibility makes the employee feel more valued and skillful. At the point when in a group,individuals gain from each other, making increasingly positive actions, and furthermore getsmore effective. Compensating a group suing a monetary reward, frequently makes an intrinsicreward for the group-members, as they feel fulfilled having a place with a group that hasperformed something phenomenal. Samuelsson (1999) points out there is additionally aplausibility to consolidate these two sorts of rewards. According to Kaplan and Atkinson(1998)this should be possible by basing the total reward on group performance, and theindividuals’ shares of this reward on individual performance.Performance measures and goal settingThe connection between performance and rewards are the goals set and the performancemeasured as opposed to these goals. There are two types of measures, financial andnonfinancial, although both are normally used, the financial reward is the most well-known. Anorganization needs to comprehend what runs their returns in order to deal with the factorsresponsible for their creation. Monetary measures, for example, return on investment, have atendency to be short-term which makes them partially suboptimized.According to Kaplan and Atkinson (1998), the nonfinancial measures, for example,quality on the other hand, could be utilized by the organization for long-run financialperformance. Financial measures are still nonetheless, vital since they connect with theessential goal of organisations’ profit. A performance measures purpose is to both influence theemployees focus on what is vital, yet additionally to have the capacity to see and respond whensomething is not right: One method for associating the non-monetary measures and goals withthe monetary.THE CONCEPT OF MOTIVATIONAlongside perception, personality, attitudes and learning, motivation is critical in understandingbehaviour. Luthans (1998) declares that motivation ought not be thought of as the mainclarification of behavior, since it associates with and acts in conjunction with other mediatingprocesses and with the environment. Luthans contends that, similar to the other cognitiveLicensed under Creative CommonPage 628
International Journal of Economics, Commerce and Management, United Kingdomprocess, motivation cannot be seen. All that can be seen is behaviour, and this should not belikened with causes of behavior. While perceiving the key role of motivation, Evans (1986)states that many recent theories of organizational behaviour find it imperative for the field toreemphasize behavior.Definitions of motivation abound. One thing these definitions have in common is theincorporation of words, for example, "want","wishes", "point", "goals", "needs", and"incentives". Luthans (1998) defines motivation as, "a process that starts with a physiologicaldeficiency or need that activates a behaviour or a drive that is aimed at a goal incentive".Consequently, the way to understanding the process of motivation lies in the significanceof, and relationship among, needs, drives, and incentives. With respect to this, Minner, Ebrahimiand Watchel (1995) express that in a system sense, motivation comprises of these threeinteracting and interdependent elements, i.e., needs, drives, and incentives. A motive is areason for accomplishing something. Motivation is concerned with the factors that influenceindividuals to behave in certain ways. The three components of motivation as recorded byArnold et al. (1991) are:Direction: What a person is trying to do.Effort: How hard a person is tryingPersistence: How long a person keeps on tryingTypes of motivationThe types of motivation as originally identified by Herzberg et al. (1957) include the following:Intrinsic Motivation:- The self-generated factors that impact individuals to behave in a specificway or to move in a specific direction. These factors include responsibility (feeling that the workis imperative and having control over one's own resources), autonomy (flexibility to act), scopeto use and develop skills and abilities, interesting and challenging work and opportunities forprogression. Extrinsic Motivation:- What is done to or for individuals to motivate them? Thisincorporates rewards, for example, increased pay, verbal appreciation or promotion andpunishment, for example, disciplinary action, withholding pay, or criticism. Extrinsic motivatorscan have an immediate and powerful impact, yet it may not really last long.Motivation TheoriesInstrumentality theoryThis theory expresses that rewards or punishments serve as the means for guaranteeing thatindividuals behave or act in desired ways. 'Instrumentality' is the believe that in the event thatwe do one thing it will prompt another. It assumes that an individual will be motivated to work ifLicensed under Creative CommonPage 629
Author(s)rewards and punishments are tied directly to his or her performance, hence the awards aredependent upon effective performance. Instrumentality theory has its roots in Taylorism, i.e. thescientific management methods of Taylor (1911).Taylor noted that it is incomprehensible, through any long period of time, to get labourersto work substantially harder than the average men around them unless they are guaranteed alarge and permanent increase in their pay. Motivation utilizing this approach has been, and stillis, generally embraced and can be successful in a few conditions. However, it is basedexclusively on a system of external control and fails to perceive various other human needs.Content theoryThis theory focuses on the substance of motivation. It expresses that motivation is basicallyabout making a move to fulfill needs and distinguishes the primary needs that impact behaviour.Maslow (1954) discussed Needs theory, and in his two-factor model, Herzberg (1957) recordedneeds which he termed 'satisfiers'. These theories are explained as follows: Maslow's Hierarchyof Needs in which Maslow (1957) recommended that there are five noteworthy need categorieswhich apply to individuals, beginning from the fundamental physiological needs and leadingthrough a hierarchy of safety, social and esteem needs to the need for self-fulfillment, the mostelevated need of all. Maslow's hierarchy is as follows:Physiological: The need for oxygen, food, water and sex.Safety: The need for protection against danger and the deprivation of physiological needs.Social: The need for love, affection and acceptance as belonging to a group.Esteem: The need to have a stable, firmly based, high evaluation of oneself (self esteem) andto have the respect of others (prestige).Self-fulfillment (self-actualization): The need to develop potentialities and skills, to become whatone believes one is capable of becoming. Maslow’s theory of motivation states that when alower need is satisfied, the next highest becomes dormant and the individual’s attention isturned to satisfying this higher need.The lower need still exist, regardless of whether temporarily dormant as motivators, andpeople constantly come back to already fulfilled needs. One of the implications of Maslow'stheory is that the higher-order needs for esteem and self-fulfillment give the best impetus tomotivation - they grow in strength when they are fulfilled, while the lower needs decline instrength on fulfillment.In any case, the employments individuals do will not really fulfill their needs, particularlywhen they are routine or de-skilled. The basis of this theory is the belief that an unsatisfied needLicensed under Creative CommonPage 630
International Journal of Economics, Commerce and Management, United Kingdomcreates pressure and a condition of disequilibrium. To reestablish the balance, a goal that willfulfill the need is identified and a behaviour is subsequently motivated by unsatisfied needs.Herzberg’s two-factor modelThe two-factor model of satisfiers and dissatisfiers was developed by Herzberg et al. (1957)after an investigation into the sources of job satisfaction and dissatisfaction of accountants andengineers. The key implications of this research, according to Herzberg are that the needs ofemployees are put into two groups. One group revolves around the need to develop in one'soccupation as a source of personal growth.The second group works as an essential base to the first and is related with fairtreatment in compensation, supervision, working conditions and managerial practices. Thesatisfaction of the needs of the second group does not motivate the person to high levels of jobsatisfaction and to additional performance on the job. Keeping in mind the end goal to fulfill thissecond group of needs the prevention of dissatisfaction and poor job performance must beensured. On the other hand, Herzberg's two-factor model has been scrutinized in light of thefact that no attempt was made to measure the relationship between satisfaction andperformance. Notwithstanding, Herzberg had tremendous impact on the job enrichmentmovement, which tried to design jobs in a way that will maximize the chances to acquire intrinsicsatisfaction from work and along these lines enhance the quality of working life. His emphasison the difference between intrinsic and extrinsic motivation is additionally imperative.Motivation and moneyMoney, as pay or some other kind of compensation, is the most evident extrinsic reward.Financial incentives motivate individuals, particularly, for those individuals who are emphaticallymotivated by money and whose desires are that they will receive a financial reward that arehigh. In any case, less confident employees may not react to incentives that they do not hope toachieve. Multiplicities of factors are involved in performance improvements and many of thosefactors are interdependent.Jacques (1961) emphasized the need for such systems to be seen as being fair andequitable. At the end of the day, the reward should be clearly related to effort or level ofresponsibility and individuals should not get less money that they deserve compared with theirfellow workers.However the use of money as a compensation package is to use it to fulfill the needs ofthe employee. Some employers however go beyond the mere offer of just money as a meansLicensed under Creative CommonPage 631
Author(s)for remuneration and offer packages, for example, housing facility, cars, security allowancesa
Organizations give rewards for a wide range of reasons e.g. to enhance recruitment and retention by offering a compensation package that is competitive on the market. According to Svensson, (2001) reward systems refer essentially to things that employees value. It is essential
