With motivation, others will perform way above the level expected of their intelligence and academic ability. Furthermore, according to bateman and Snell (1999) a highly motivated person will work hard toward achieving performance goals. With adequate ability and understanding of the job such the a person will be highly productive. There are several theories that try to explain motivation and job satisfaction in the workplace. On this chapter we will focus on three very popular theories used in research on pay such as: reinforcement theory Expectancy theory Equity theory.1 reinforcement theory The reinforcement theory of motivation was developed from. Skinner a psychologist from Harvard. According to lussier and Achua (2010) the reinforcement theory.
Organizations expect that their employees will fulfill the tasks assigned to them according to rules established from the organization itself. While, employees expect that the organization will provide them a fair pay for their performance and safe working conditions. However it could be the case that the management of the organization as well as the employees could expect more. How far their expectations could go depends on how ambitious both parties are. These ambitious vary across organizations. For organization to address these expectations an understanding of employee motivation is required (Beer et al, 1984). A motivated employee will be more committed to his work and increase its own performance and in turn the organization's productivity. Snell (1999) says motivation is everything. Without motivation even the most talented people will not deliver to their potential.
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The purpose of employee reward is to ensure the achievement of the organization's strategic objective by retaining the skilled, competent and committed employees. These employees will be attracted and retained in the organization as long as they are fairly rewarded for the value they create and as long as the organization continues motivating them to create value. The success of an organization depends on the quality of its employees. Therefore one a well-managed and attractive reward system php is one important factor that can contribute to improvement of that quality. According to Armstrong (2002) there are several aims of reward systems from organization's point of view. Among them we can mention the following: help attract, retain and motivate high-quality people play a significant part in the communication of the organization's values, performance, standards and expectations encourage behavior that will contribute to the achievement of the organization's objectives underpin organizational change programmes. Except from the organization's point of view, there are also several aims of employee reward from employees' perspective.
Those include: treat them as stakeholders who have the right to be involved in the development of the reward policies that affect them meet their expectations that they will be treated equitably, fairly and consistently be transparent - they should know what the reward policies. Having into consideration the aims of employee reward according to both the employee and the organization's perspective, we can conclude that a successful reward system is the one that aligns the incentive of both parties. This can be achieved if designing such a reward system that will result in added value for the organization, however in turn will remain transparent toward employees and employees will be involved in the development of reward systems. Motivation and reward In the chapter above we mentioned that reward systems are powerful tools to attract employees to organizations and channel their motivation in desired ways. In other words reward systems should keep employees coming to work and motivate them to perform at high levels.
Contingent pay, the term "contingent pay" it is used to describe formal pay schemes that provide payments on the top of base rate due to performance, contribution or skills of an employee. According to Armstrong (2009) contingent pay is either consolidated in the base rate so the pay progresses within a pay range or it is paid as a non-consolidated cash bonus. Employee benefits, employee benefits consists of elements of remuneration additional to the cash pay, like pensions, sick pay, company's cars and they also include provisions that are not strictly remuneration such as annual holidays. Allowances are paid in addition to basic pay for special circumstances and are often subject of negotiation between the employer and employee. Some of the main forms of allowances are location allowances for example for living in the us, overtime payments, working condition allowances, etc.
Although the above mentioned elements constitute the main elements of a reward package, we must mention that different organizations use different combinations of these elements when compensating their employees. These combinations may vary not only across organizations but also across employing units within the organizations. For example in the us 70 percent of payments to employees are in the form of cash, leaving 30 percent in the form of noncash and deferred cash benefits (noe et al, 1994). Also the nature of pay may vary across employing units. A very often asked question is: Are employees of the same hierarchical level within different parts of the organization paid the same? Sometimes organizations decide to pay relatively high rates for the employees of entry level, but giving them a very slow opportunity for pay growth, while other organizations may start with a lower pay rate, but with greater opportunities for promotion and pay growths. Pay decisions are usually part of organization's policies but are often made based on the results of market trends and pay surveys. However we should never forget about the powerful influence of these decisions on the company's effectiveness. 2.3 The aim of reward system from the company and employee perspective.
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To summarize, a reward system can be viewed as a powerful strategic tool for improving the organizational book effectiveness, having into consideration the wide range of factors it influences. 2.2 The elements of reward system. A reward system consists of several elements which are base pay, contingent pay, employee benefits and allowances. Base pay, base pay may be expressed as annual, weekly or improve hourly rate. It is amount of pay that constitutes the rate for the job and it might vary accordingly to the grade of job or level of skills required. Base pay is influenced by internal and external relativities. The internal relativities may be measured by some forms of job evaluations. External relativities are assessed by tracking market rates (Armstrong, 2007). Most organizations use one or more market pay surveys to help determine what other organizations pay specific jobs in making their own pay level decisions (Gerhart et al, 1995).
Depending on how the reward writing systems are developed they contribute in creating a wide variety of organizational cultures. For example, foulke (1991) stated that when people receive relatively high pay they feel as important employees working for a successful company and moreover having a system that allows employees to involve in pay decision produces a participative culture in which employees are more committed. 5) reinforce and Define Structure, reward systems have also an important impact on the structure of an organization. Reward systems also help in defining the organizational structure of an employee, because the level at which performance is measured and rewarded (individual, team, plant, division, business or corporation) draw employee attention to those levels (Heneman, 2002). 6) Cost, reward systems are expensive. For employers, compensation decisions influence their cost of doing business and thus, their ability to sell at competitive price in the product market (Gerhart et al, 1995). Since employee compensation packages represent a large percentage of an organization's operating costs, when designing them, employers should focus on how high they should.
expectation will be that the action in prospect will lead to desired goal or outcome. Therefore, in motivating staff, we must take certain conditions into consideration. These include the fact that we can not develop a general reward package, but we need to learn and understand the individuals and their needs in order to motivate them accordingly. 3) skills and Knowledge, pay systems can motivate not only performance but as well learning and development. According to lawler (1993) individuals are motivated to learn those changes that are rewarded. Thus reward systems that offer promotion tend to encourage individuals to learn those skills that lead to promotion. One important factor that influences the overall culture of the organization is reward system.
Retaining them requires organizations essay to design such rewards for them that will make them feel justly treated when comparing their rewards with those of other people performing the same job but in other organizations. According to lawler and Jenkins (1992) this strategy can be very costly and lead to an intra-organizational inequity if the good performers feel to be rewarded same as the bad performers inside the organization, although they might be fairly treated when compared externally. As result of this situation the better performers may feel dissatisfied, complain and mistrust the organization. As respond to above mentioned situation what a company should do is designing competitive reward systems and basing rewards on performance. This will encourage the better performers to stay with the organization. 2) Motivation of Performance, when managed and designed successfully a reward system can motivate performance. However we have to keep in mind that not all reward packages can motivate a person to perform effectively, because it also depends on the needs of people. According to lawler (1993) people have their own needs and mental maps of how the world is like.
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Print, reference this, published: 23rd March, 2015, reward systems are one of the most prominent and most important features of any organization. Because of the wide ranging impact a reward system has on individual behavior and behavior of organizations, it is very important designing such reward systems that paper will motivate the right performance, attract the right people and create a supportive and good working climate within organization. However it is important to discuss what behavior does a reward system influence. A research on reward system suggests there are six factors which are influenced by reward systems, which in turn influence the organizational effectiveness: 1) Attraction and Retention. According to lawler (1993) organizations that give the most reward tend to attract and retain most people. This happens because high rewards lead to higher job satisfaction and therefore less turnovers. However what organizations are interested in is how to attract and retain the best performers.