REWARD SYSTEMS AND
EMPLOYEE PRODUCTIVITY
Sharon Liz Varghese
Shibin K S
Reward management defined
Reward management deals with the strategies, policies and processes
required to ensure that the value of people and the contribution they make
to achieving organizational, departmental and team goals is recognized and
rewarded. It is about the design, implementation and maintenance of
reward systems (interrelated reward processes, practices and procedures)
which aim to satisfy the needs of both the organization and its stakeholders
and to operate fairly, equitably and consistently.
But it should be emphasized that reward management is not just about pay
and employee benefits. It is equally concerned with non-financial rewards
such as recognition, learning and development opportunities and increased
job responsibility.
Aims of reward management
The aim of reward management are:
Reward people according to the value they create
Align reward practices with business goals and with employee values and
needs
Reward the right things to convey the right message about what is
important in terms of behaviour and outcome
Help to attract and retain the high quality people the organisation needs
Motivate the people and obtain their engagement and commitment
Develop a high performance culture
The reward system
A reward system consists of the interrelated processes and practices
which combine to ensure that reward management is carried out
effectively to the benefit of the organization and the people who work
there. It consists of six major elements:
1.
base pay management
2.
contingent pay
3.
employee benefits
4.
non-financial rewards
5.
performance management
6.
total rewards.
These elements are interconnected and contain various sub-elements
as set out in Figure 1.1. They flow from the business and reward
strategies as influenced by the organizations context and combine to
achieve performance and reward objectives.
DESIGNING A REWARD PROGRAM
The keys to developing a reward program are as follows:
Identification of company or group goals that the reward program will
support
Identification of the desired employee performance or behaviors that will
reinforce the company's goals
Determination of key measurements of the performance or behavior, based
on the individual or group's previous achievements
Determination of appropriate rewards
Communication of program to employee
What is the link between
performance and rewards?
Basic + DA + Benefits + Incentives + Bonuses
JOB
INFLATION
HOUSE RENT
PERFORMANCE
Whom to reward- individual or the
group
There are certain reward that aim at rewarding the individual.
Eg: Sales person
But there can also be rewards that given for the team.
Eg: Cochin Refinery.
HOW DOES IT TAKE PLACE?
Standard set : 7 million metric tons per annum
Reward when youve achieved over and above the target.
divide the group of people to direct contributors(operations), indirect contributors and
administrators. And you allocate a percentage like 60%, 30% and 10% respectively to
each group of people
Contextual factors affecting reward
Internal context
The characteristic features of the internal context are as follows.
The organizations culture
Organizational culture consists of shared values, norms and assumptions which
influence the way people act and the way things get done. In reward
management, the most important aspects of culture that need to be taken into
account are the core values of the organization which express beliefs about what
sort of behaviour is desirable. Reward practices should fit in with and support the
culture and they can help to reshape it.
Organization type
The degree to which the organization is bureaucratic will affect reward practice.
Contextual factors affecting reward
cont.
The organizations business or sector
The business or sector of the organization for example manufacturing, financial
services, retail services, transport, media, public sector services, not-for-profit
services or education will govern its core values. It will influence the type of
people it employs and the degree to which it is subject to turbulence and change.
All these factors will affect reward strategy and practice.
Work environment
The ways in which work is managed and carried out will influence pay structure
and the use of contingent pay. The introduction of new technology may result in
considerable changes to systems and processes. Different skills are required, new
methods of working and therefore reward are developed. The result may be an
extension of the skills base of the organization and its employees, including
multiskilling.
External context
The following aspects of the external context may affect reward management
policies.
Globalization
Rates of pay in the marketplace
Globalization requires organizations to move people, ideas, products and
information around the world to meet local needs. Traditionally, discussions of
international reward strategies and practices have tended to focus on an elite of
expatriate workers, sourced from headquarters locations and rewarded in isolation
from local country staff.
The external environment exerts considerable influence on rates of pay and pay
reviews within organizations. Market or going rate levels and movements have to be
taken into account by organizations if they want their pay to be competitive. Some
organizations are affected by national agreements with trade unions.
The economy
The economy, whether it is in a boom or bust mode, will inevitably affect reward
policy and practice. A recession increases the attention organizations pay to getting
value for money and reduces the amounts that can be distributed in the form of
base and contingent pay and the scale of benefits provision.
Employee Productivity
Employee Productivity
Productivity means the amount of products or services produced with
the resources used
Productivity = Quantity of products or services produced
Amount of resources used
Productivity varies with the amount of production relative to the
amount of resources used.
Ways to Increase Productivity
Increase output using the same or a lesser amount of resource.
Reduce amount of resource used while keeping output constant or
increasing it.
Use more resource as long as output increases at a greater rate.
Decrease output as long as resource use decreases at a greater rate.
Labor Productivity
For some firms, production labor (touch labor) represents a very small part
of the firms total costs
For other firms, particularly service firms, direct labor cost remains a
significant cost and the need to improve labor productivity is still a serious
concern
Variables Affecting Labor Productivity
Physical work environment
Technology, equipment, materials, lighting, layout
Product quality
Defects, scrap, rework
Employee job performance
Employee ability, motivation
Employee Job Performance
Motivation is perhaps the most complex variable in the productivity equation.
Only unsatisfied needs are motivators.
Maslow identified five basic needs: physiological, safety, social, esteem, and
self-fulfillment.
The higher level needs (social, esteem, and self-fulfillment) might hold the
most promise for motivating.
If productivity is seen as a way to fulfill needs, higher productivity is
likely to result.
Labor Standards
A labor standard is the number of worker-minutes required to complete an
element, operation, or product under ordinary operating conditions.
Ordinary operating conditions refer to a hypothetical average situation ..
average or typical worker, material, machinery, environment, etc.
Labor standards are used in:
Cost estimation
Pricing of products and services
Incentive pay systems
Capacity planning
Production scheduling
Focus on employee productivity
Advantages
High production rates
Low wage rates
Low skill requirements
Disadvantages
High turnover, absenteeism, tardiness, grievances, sickness,
and sabotage
Low production quality at times
