Reward Management Summative Assignment
- Understand the business context of reward and the use of reward intelligence.
- Understand key reward principles and the implementation of policies and practices.
- Understand the role of line managers in making reward decisions.
Using your own organization (or one with which you are familiar), investigate the reward environment and produce a written report in which you:
(1) Assess the context of the reward environment and the key perspectives that inform reward decisions. In this section, you should:
- Use an appropriate analysis tool to identify internal and external factors.
- Analyze the particular impact of business drivers and related factors on reward decisions.
- Give examples of different ways of gathering and presenting reward intelligence.
- Assessment Criteria 1.1, 1.2
(2) Demonstrate your understanding of key reward principles and the implementation of reward policies and practices. In this section, you should:
- Evaluate the principle of total rewards and its importance to reward strategy.
- Identify and explain the importance of equity, fairness, consistency, and transparency in terms of how they should underpin reward policies and practices. You may illustrate your understanding of these key principles by referring to topical reward matters.
- Assess the contribution of both extrinsic and intrinsic rewards in improving employee contribution and sustained organizational performance. Refer to academic research and the literature in this area and illustrate with examples of good practice.
- Explain the manner in which reward policy initiatives and practices are implemented in your chosen organization.
- Assessment Criteria 2.1, 2.2, 2.3, 3.2
(3) Demonstrate your understanding of the role of line managers in making reward decisions. In this section, you should:
- Explain the various ways line managers contribute to reward decision-making.
- Assessment Criteria 3.1
- 1.1 Assess the context of the reward environment and key perspectives that inform reward decisions
- 1.2 Explain the most appropriate ways in which reward intelligence can be gathered and presented.
- 2.1 Evaluate the principle of total rewards and its importance to reward strategy.
- 2.2 Explain the significance of equity, fairness, consistency, and transparency as they affect reward policies and practices.
- 2.3 Explain how policy initiatives and practices are implemented.
- 3.1 Explain the various ways in which line managers contribute to reward decision making.
- 3.2 Assess the contribution of extrinsic and intrinsic rewards in improving employee contribution and sustained organizational performance.
Evidence to be Produced
- A written report of approximately 3300 words in total.
- You should relate academic concepts, theories and professional practice to the way organizations operate, in a critical and informed way, and with reference to key texts, articles, and other publications and by using organizational examples for illustration.
- All reference sources should be acknowledged correctly and a bibliography provided where appropriate (these should be excluded from the word count).
Sample Paper Preview
1.0 Reward Environment
Reward is a positive value given by the organization to the employees for appreciation of the work against the provided organization’s standard of employment by the managers and leader. The goal of rewarding employees is motivation and it is offered in various ways such as financial terms, promotion, and other ways.
1.1 Internal and external factors that influence rewarding systems
1.11 External FactorsDifferent tools of analysis can be used to identify external factors influence reward decisions. PESTEL analysis influence business performance, which influences the decisions of rewards. The labor market is one of the external factors that influence reward decisions in an organization. According to Watson (2013), the labor market is an area that employers hire the labor force and the employees’ search for employment. Jobs are commonly characterized by good working conditions, high salaries, good career prospects, and employment stability in the primary labor market. In contrast, in the secondary labor market, poor working conditions, high turnover, low salaries, and lack of prospects characterize the jobs. Therefore, an organization needs to evaluate its position in the industry and the labor market in which its employees are recruited. For instance, when the position of the organization is high in its industry or labor market, the level of compensation and reward policies should be relatively high than its competitors. Having higher compensation levels is vital in the labor market since of reduces the level of turnover, attracts talented employees, and increases the performance of the employees. Competition is another external factor that influences the reward choices of the organization. The number of organizations operating in the same industry or labor market contributes significantly to the employees’ pay level. In a competitive level, the organization is obliged to have higher compensation and reward packages its competitors to attract talent and retain its employees. To attain this aspect, the organization uses a benchmark to choose the type of rewards based on the rewards that the competitors offer to its employees (Kinnie, Hutchinson, et al, 2005). Various managers also assert that the government is another factor that influences reward decisions. The government is responsible for various legislations that govern employees’ compensation. Therefore, when the organization is determining its choices of reward, it must consider the regulations provided by the government. Moreover, the level of government assistance that an organization gets determines the level of compensation for its employees.
1.12 Internal factorsThe organizational cost is one of the major factors that influence the reward strategic decisions of the organization. Keegan, Huemann, and Turner (2012) points out that the cost of the organization in relation to the revenue that it gets from the profits determines its choice to improve rewards for its employees. Increased costs and low revenue generation within the organization make the organization to find ways of cutting the costs through the reduction of reward packages. In contrast, increased revenues will lead to higher compensation levels and the introduction of other reward policies in the organization to motivate the employees. The type and level of jobs within the organization is also a determining factor in reward decisions. Bolden (2016) asserts that different job positions should be rewarded differently since their level of performance differ. The reward policies for higher positions in the organizations should be relatively higher to enhance performance and motivation. Employees constitute another vital internal factor that influences the choice of reward in an organization. According to Çalişkan (2010), organizations improve reward strategies to prevent turnover due to the competition. Organizations that fail to have good reward policies lose the employees to their competitors. Therefore, employees are among the highest determinants of reward decisions in an organization.
1.2 Impact of business drivers on reward decisionsBusiness drivers have different effects on the reward decisions and determine the success of the business. Developing the processes of human resources to deal with the drivers is vital in maintaining high performance in the organization. Defining the organization’s goals and objectives play an important role in top management since it enables the human resource to align the organizational departments effectively in order to design efficient reward systems. Keegan, Huemann, and Turner (2012) note that the awareness of employees and their alignment with the strategic goals of the organization motivates and push employees to work hard. Business drivers also influence the investment of the organization on employees to increase efficiency. The quality of talents in the organization is the most valuable asset in the organization they maintain the performance of the organization. Therefore, the level of reward is vital in ensuring top talent is retained in the organization. The development of reward strategy entails ensuring vertical arrangement between the business strategy and reward strategy. As such, the reward strategy has particularly be responsible of the organizational goals and be planned to support their accomplishment. Hsieh and Chen (2011) also suggest that the reward strategy should be responsible of the organizational business drivers. The reward strategy of the organization should be developed in a manner that aims to support the business drivers. According to Daley (2012), the integration of the reward strategy with the human resource strategy is advantageous since it ensures connection of the reward practices with the HR strategy. Thus, it is important to identify integrating practices such as training, reward, competency-based processes that influence recruitment, pay structures, and performance management that plan the career paths. Specifically, it is vital to evaluate the way that reward practices can support the retention and recruitment of high-quality employees, learning and development and talent management.
1.3 Gathering and Presenting Reward IntelligenceReward intelligence is essential in developing effective reward strategies in an organization. Gathering and presenting reward intelligence is essential since it provides a human resource with accurate data to be used to make critical decisions in reward policies and practices. One of the main techniques of gathering reward intelligence is through exit interviews. This occurs when the human resource or the manager has a meeting with an employee(s) leaving the workplace. This method is critical because it helps the organization to establish a pattern within the company in terms of compensation and reward systems. It is also effective because the sample size interviewed is small, which helps the organization to obtain adequate information. However, relying on exit interviews can be ineffective because the employees may provide inaccurate or incomplete reasons for leaving the workplace. Another method that can be used to gather reward intelligence is identifying the employees’ absence. This involves monitoring the absence of employees such as failing to come to work due to sickness. Assessing the reasons why employees fail to come to work can be an effective method to understand the contribution of reward systems towards the trend. Huang and Ning (2013) assert that the lack of good reward systems can lead many employees to fail to come to work and use sickness as an excuse. Therefore, organizational management and human resource should be keen to monitor the sickness absence of employees since it can provide insightful information about the company’s reward system. However, the employee’s absence can be misleading since it is not always an indicator of poor rewards in the organization. It is possible that the absence of employees due to sickness is seasonal such as flu. Attitude, salary, and reward surveys are used to collect information and present reward intelligence in an organization. According to Schlechter Hung, and Bussin (2014), attitude is usually the confidential surveys conducted yearly on all the employees. Surveys are essential because they enable employees to vent their grievances about the operations of the organization. The management can acquire important information about the reward systems of the organization through the surveys because it samples the entire organization. Moreover, since they are conducted annually, they can monitor the changes in the attitude of the employees. The confidentiality of the surveys is a major advantage of attitude surveys because the identity of the employees is not disclosed. Retention figures can also be used to collect and present reward intelligence in an organization. This is the data of the employees that have left the organization. It is vital in offering reward knowledge because of the factors that contribute to the ability of an organization to retain employees is reward systems. These figures can be used to adjust and improve the current rewards to increase employee retention. However, this source can be inaccurate because rewards are not the only factors that make employees to leave work. Moreover, recruitment difficulties can be used to gather reward intelligence. The type of rewards that an organization offers can affect its ability to recruit skilled employees in the labor market. This enables the organization to understand the competitor’s reward systems during interviews; hence, enabling the company to change its reward system (Cerasoli, Nicklin, and Ford, 2014).
2.0 Reward Principles and Implementation of Reward policies and practices
2.1 Principles of Total RewardThe concept of total reward involves all the efforts that an employer or organization uses to motivate, recruit, and retain employees. According to Cho and Perry (2012), total reward is guided by five major principles. Compensation: This entails the various means that employees earn money in an organization. It includes the basic salary but there are other aspects that can be considered into the pay system such as incentive pay both for short and long-term. Another principle is recognition. This involves appreciating the employees’ hard work and dedication in the workplace. Work-life balance: This concept involves giving the employees an opportunity to attend to their personal responsibilities and objectives. Employers can develop programs to help their employees to balance their work life such as offering childcare subsidy and counseling sessions. Benefits: These are additional to compensations and include paid vacation, sick leave, pension program, and social security. Professional development is another important principle that includes a wide range of learning and advancement opportunities such as tuition reimbursement. Lack of development in an organization contributes to employee leaving their work; hence, it is vital to ensure continuous development (Cameron and Green, 2015).
2.2 Importance of Equity, Fairness, Consistency and TransparencyAn effective reward management is achieved through development and implementation of policies, practices, and strategies founded on a principle of equity, fairness, consistency, and transparency. According to Cho and Perry (2012), a fair reward system functions in Accordance with the philosophies of procedural and distributive justice. It is important to promote fairness in the reward system since it increases the commitment of all employees; hence, increasing their ability to achieve the organizational objectives. It also ensures that knowledge is shared among all the employees, which increases their performance. Equity is another important element in reward management. It is attained by ensuring the practice of rewarding is done aptly to other people within the organization. Equitable reward process and strategy ensures relativity between occupations is determined objectively and provides compensation equally for the work done. A consistent perspective to the practice and strategy of reward is vital on organizational and personal performance. The reward management system should make decisions in a manner that they do not keep varying. Ensuring that the decisions are similar for people and situations improves employees’ confidence and performance. Moreover, Cameron and Green (2015) note that transparency is a vital aspect of the reward system. This is when employees understand the functioning of the rewarding process and how the process influences them. Employees are given an opportunity to contribute to the policies and practices of the reward system. It facilitates employee engagement; hence, enabling the organization to understand the needs of the employees.
2.3 Extrinsic and Intrinsic RewardsThere are two types of motivation which include intrinsic motivation and extrinsic motivation. Intrinsic motivation refers to the motivation that it achieved through work and it arises from within the individual. In contrast, extrinsic motivation entails sources of motivation that occurs from the external environment, which include rewards such as increased compensation, promotion, recognition, and praise among others. These motivators have significant influence on the organizational performance. Cerasoli Nicklin (2014) asserts that extrinsic motivation has immediate and powerful impact on the organization, but mostly it is short-term. On the other hand, intrinsic motivators have deeper and a lasting influence on the performance of the organization since they are inherent in employees and not inflicted externally. It is important to understand that despite their difference in the degree of impact, both motivators play crucial role in the reward system and performance.
2.4 Policy Initiatives and PracticesDuring the process of implementing reward policy initiatives and practices in the organization, it is important to consider a number of things. It is essential to focus on the organizational context (Cerasoli Nicklin, 2014). In this case, the reward management should establish the strategic approach that the organization desires rather than the best practice in the market. This enables the organization to adopt an approach that suits its philosophy and goals. Defining the reward policy initiatives formally is another important aspect since it establishes a foundation for planning and communication. The provided initiatives should be subject to change since an effective reward strategy should engage all stakeholders in the organization. Another important aspect in the process of implementing reward initiative policy is to manage the balance. This involves evaluating all the organization elements to ensure that the initiatives are effective and will make a difference. The organization reward management department should determine the priorities of the organization before deciding on the best reward strategy. Moreover, it is important to keep the practice simple to ensure effective implementation. Making the process complicated can hinder communication and affect its effectiveness in achieving its objectives. Another vital aspect of this process is thinking about the implementation of the initiatives. When planning a reward initiative, it is important to think about how it will be implemented, possible challenges, and how they will be mitigated. Additionally, this involves evaluating how people will react to avoid resistance that can lead to failure.
3.1 Role of Line Managers in Making Reward DecisionsLine managers have a very essential role to play in the everyday operations and management of people. They ensure that human resource policies are implemented effectively within the organization. Nielsen and Nielsen (2011) note that line managers are most important when an organization is undergoing a process change in human resource activities involving line management. According to Purcell and Hutchinson (2007), many reward policies and practices are designed without taking account of the significant role of line managers. The participation of the line managers in the formulation and implementation of reward strategy and their vital role in the communication of the strategy usually goes unnoticed. However, Manzoor (2012) shows that there is a strong relationship between satisfaction and commitment of employees and their rewards and the role of the line managers in creating the relationship. Line managers’ involvement in n reward policies in an organization is mostly concerned with financial and non-financial rewards. In all organizations, the role of line managers in the operation of performance-related compensation is critical for effective implementation (Danish and Usman, 2010). The line manager is tasked to set and describe the level of performance and the required behavior communicate decisions to the employees, clarify the objective of the plan, defend any decision made between standards of performance and make decisions on evaluations. However, managers experience numerous challenges in this process. According to Armstrong (2010), line managers frequently experience challenge differentiating their various roles. They are likely to lack ownership of the result when the ultimate decision is taken out of their hands and find the process as wastage of time. Moreover, many plans adopt a forced distribution technique to restrict the number of awards that are above average as well as controlling the costs. Line managers in various organizations are not good at carrying out an assessment or they find it hard to have conversations that do not have a breakthrough and in some instances, they lack skills or adequate training. In such situations, the system becomes divided due to development of allegations of lack of transparency or unfairness in the operations of the organizations. According to a research conducted by Buller and McEvoy (2012) using line managers revealed that most of the managers acknowledge the concepts of performance-related compensation, offer a fair foundation for determination of pay, reward high performance, and sharing its viewpoint on possible ways to improve motivation. Further research by Daley (2012) shown that significant improvements could be made in the skills and ability of the line managers by ensuring effective selection and training. This enhances transparency, consistency, and fairness in the structure of the reward. As such, line managers can provide financial rewards in the organization by offering employees with special bonuses for an excellent performance. These bonuses include promotions on merit, honorariums, and ad hoc bonuses. This is because line managers spend more time with employees than some of the organizational leadership; hence, they can understand the employees that are doing well in their work. The size of the rewards is different, but the importance of the performance is high on both the organization and employee. It is vital for the line managers to participate in giving employees positive feedback since it indicates their observation on employee improvement and consequently increasing their motivation to work. However, the various reward strategies in organizations are subject to regulations, which limit the discretion of the line managers. For instance, the amount of reward may be limited to a certain percentage, may require to be approved by a higher manager, or may only be given by a specific staff. Such elements may influence the performance of organizational departments. When line managers take part in the reward policies, it reduces the aspect of divisiveness in the organization and increases the motivation of the employees (Bamberger, Biron, and Meshoulam, 2014). Another important influence of the role managers in financial reward is developing the salaries of employees. Similar to bonuses, salaries give the line managers the opportunity to make a representative gesticulation to the overall leadership of the organization. This is effective in increasing the performance employees since line managers understand the personal needs of the employees and it facilitates fair compensation for all employees. Most of the organizations that do not engage line managers in the process of setting employee salaries experience performance issues because they fail to understand the personal need of the employees. Line managers give the leadership of the organization recommendations on the pay that can increase the motivation of the employees. Line managers are essential in providing non-financial rewards in the organization. According to Armstrong (2010), non-monetary rewards are very important in increasing the motivation of employees. Similar to monetary rewards such as bonuses, they provide line managers with an opportunity to give employees positive feedback. Giving employees non-financial rewards is important since it creates a better bond between employees and the organization. This is because it shows that the organization understands its efforts. Line managers are crucial in providing such rewards because they understand the needs of employees; hence, the need to be involved in the reward strategy. Some of the main non-financial rewards offered by line managers include vouchers or a bottle of wine. Line managers also organize various schemes such as employee of the month as a way of acknowledging and rewarding individual and/or team success. Overall, line managers play a key role in the administration of rewards, thus it is important for the reward policy and practices to recognize this role. The degree to which the responsibility of rewards should be delegated to the line managers is a decision of the policy (Lepper and Greene, 2015). Devolving the reward policies to the line managers is important, but it is crucial to ensure that other guidelines for the reward policy are followed to ensure consistency in decision making by line managers across the organization. This may include the level of decision the managers can make, how to achieve consistency, and the available guidance in decision-making. Moreover, to ensure that line managers make effective and consistency reward decisions, it is important for the organization to provide training. According to Shields, Brown, et al (2015), training line managers is vital since it enhances their capacity to exercise judgments of reward and review the performance of employees.
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