MG480Summative Essay If”it’s not what you pay, it’s the way you pay it,” then should employer alsoconsider other aspects of compensation, such as commitment, communication,relationships, timing and trust, for example? CourseCode:MG480CandidateNumber:81336WordCount: 1455SeminarTeacher:Dr Jonathan Booth Rewardsystem has become an essential subject of fierce debates among differentscholars in recent decades since reward system management can help to attracttalented employees and retain them by stimulating to achieve goals and performwell (Danish, Khan, Shahid, Raza, Humayon, 2015). Managing employeecompensation is highly significant because it can affect key outcomes such as employeecontribution, attitudes and behaviours, job satisfaction, attraction, cooperationand performance (Gerhart & Milkovich, 1992: 1). Moreover, scholars ofmanagement have also taken an interest in intrinsic rewards, arguing that such non-financialmechanisms tend to increase the employees’ feeling of recognition andachievement while motivating them for further advancement and growth (Kohn,1993). However, despite over 50 years of organisational research that has an irrefutableevidence that employees are motivated by more than monetary rewards alone, manyspecialists, HR-managers and top managers overall continue to rely on financialcompensation mechanisms (Silverman, 2004), and “in most companies, insufficienttime and effort are spent on considering non-monetary sources of motivation”(Gratton, 2004). Although organisations increasingly need to consider rewardsmore broadly, as they are likely to be in a much better position to reinforcepsychological contract and prevent the breach, organisations have to be carefulwith implementation non-monetary rewards mechanisms in order to align with theculture of the organisation (Silverman, 2004). This essay will review maintheories of rewards and motivation (Maslow,1954; Herzberg, 1966; Deci, 1975),strengths of intrinsic rewards (Giancola, 2014; Kohn, 1993, Reif, 1975) andconcerns that should be taken into account before bringing theory to practice (Silverman,2004).
Before examiningstrengths and concerns of this issue, it would be fair to define extrinsic andintrinsic rewards and appeal to main theories. During the last decades, therehave been formulated two strategies for efficient work behaviour, despite somedifferences by Abraham Maslow (1954), Frederick Herzberg (1966), and Edward Deci(1975). The first strategy appeals to the extent that employees are motivatedby tangible rewards like salary/ wage, bonuses, job security, and promotion(Reif, 1975). However, according to Pfeffer (1998), people work not only formonetary stimulus but also for meaning in their life (non-cash award), such asrelationships with boss and peers, commitment, a feeling of trust amongcolleagues. Thus, the second strategy comes from the assumption that employeesare generally motivated by intrinsic rewards, also known as job motivators thatcan be thought of as internal thoughts and feeling of self-esteem, commitmentand self-sufficiency, trust and feedback (Reif, 1975; Silverman, 2004). Inother words, an intrinsic reward is an outcome that gives an individualpersonal satisfaction and positively valued experience from well-done work(Stumpf, Tymon, Favorito, Smith, 2013).
Althoughaccording to the recent survey of Society of Human Resource Management (SHRM),HR-managers and leaders underestimate the value of intrinsic rewards and do notgive intrinsic motivational matters a high priority in their work agenda, thereare some crucial points that they might also play a vital role in the organizationalprocess. First of all, non-financial awards are likely to enhance employees’motivation much stronger than financial rewards (Herzberg, 1968). People aregenerally more willing to achieve company’s goals when they face openrelationships with the boss and colleagues, clear messages from the top thatare appropriate to the organization’s vision, culture and mission, accurate deadlinesand, importantly when employees can trust to managers and peers. This can beproved by the several surveys that were conducted by respected organizations.
In2009 Sibson Consulting Rewards of Work study conducted a survey among more than2,000 employees from all parts of the world and more than 25 industries. Accordingto the survey job responsibility and feedback, as well as affiliation (e.g.,organisational support, trust in management) were the most important drivingforces (Giancola, 2014). In addition to this study, in 2009 consulting companyMcKinsey & Company Study Motivating People under the project “Gettingbeyond the Money” surveyed 1,047 executives, managers and employees from allregions and most sectors and found that opportunity to lead projects or taskforces, as a part of work commitment, motivated more than the highest-rated financialincentives – base pay increases, cash bonuses and stock options (Giancola,2014).
Not only that but, besides, non-financial rewards can offer a more in-depthand longer lasting impact on motivation than more financial rewards(Silverman,2004). There is no evidence for the assumption that giving peoplemore money will encourage them to work better or even, in the long term, morework (Kohn, 1993). Therefore, financial incentives buy temporary compliance andcannot predict the harm over the long term, as opposed to a useful feedback,social support and trust that can help to avoid difficulties and form moreexplicit focus on strategic business goals and values (ibid, 1993). A senseof fulfilment, trust, engagement, empowerment and growth not only stimulatesemployees to work well but also have an influence on job satisfaction andwell-being, as well as on an intention to stay with the company duringorganizational change programs (Stumpf et al.
, 2013). Intrinsic rewards andappreciations have a link with outcomes expected because of employees’ jobsatisfaction (Danish et al., 2015). In organizations with such a reward systememployees who are appreciated by intrinsic awards motivated positively for the prosperityof the company for them, as well as perform well according to their jobdescription (ibid, 2015). In addition to this, open relationships, trust,commitment reduce possibilities for severe competition and increase the levelof cooperation and interest as opposed to financial reward mechanisms, that, inmost cases, may collapse relationships between supervisors and subordinatesand, therefore, organizational excellence (Kohn, 1993). Regarding retentiontalented people, organisations can reinforce affective relations betweenemployer and employee to binds the two more closely together and make theindividual more likely to stay and harder for rival companies to compete(Silverman, 2004). Thus, the system of intrinsic awards can determine someproblems in advance, such as effective collaboration, sense of powerless andburnout employee by using different types of incentives. However,implementation of non-monetary rewards requires taking into account someconcerns that can affect an organisation’s competitive advantage.
The mostsignificant point is how such incentives align with organisational culture.Non-financial rewards have to seem congruent to the mores, culture, values oforganisation (Silverman, 2004). For example, conservative companies with strictrules and norms are likely to reject American style of management with moreflexible rules and values. Personality and job characteristic also take part inimplementation, while one type of incentives works with particular individual,other- does not. For instance, IT-specialists, engineers, accountants, as wellas introverts – professions and personal trait that do not require or prefersocial interactions and high level of commitment, they are not extremelyinterested in intrinsic rewards, as opposed to bank tellers, social workers andextroverts, who are dependent on social inclusion with colleagues, departments,trust, empowerment, commitment and timing. Managers should think not only aboutcultural and personal fit but also about the time and economic situation whenthey decide to implement the mechanisms. Non-financial rewards should bechecked regularly and updated where appropriate to ensure that they are still useful(Silverman, 2004). Intrinsic rewards are not always sufficient over thelonger-term because time dictates new demands and an old scheme might becomeuninteresting for employees, although they are likely to feel good at themoment.
In relation to the economy, Tahmincioglu (2004) suggests that economicenvironment influences the effectiveness of non-financial reward schemes. In atime of downsizing and restructuring, for example, such mechanisms may not beeffective in motivating and can lead to adverse consequences while in a time ofeconomic arise these methods may show the opposite effect and be beneficial foremployer and employee (Tahmincioglu, 2004). To conclude, this essay has attempted to provide abrief summary of the literature and theories relating to the managing employeecompensation system, and it seems that empirical studies on this issue are somewhatmixed and hotly debated. In addition to this, empirical research is generallylacking the optimal combination of intrinsic and extrinsic rewards that can beuseful for HR-managers to implement such methods of awards in their workpractice. Designing the jobs with intrinsic rewards, such as commitment,communication, relationships, timing and trust may motivate employees to workbetter, improve job satisfaction and well-being, reduce stress and absenteeism, alongwith the most significant acceptance and return with the group. It can be beneficial not only for employees but alsofor employers by developing a competitive advantage in recruitment, retainingand rewarding employees while intrinsic rewards are a relatively inexpensiveand powerful motivator (Giancola, 2014). However, managers should focus both onadvantages of non-monetary incentives and on circumstances, such asorganizational culture, time, th economic situation in order to predict thepotential risk of backfire. Reference: Danish, R.
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