Reward Managment

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  • 1. REWARD MANAGEMENT HRM WK 6 Dr. Shohail Choudhury Dr. Shohail Choudhury
  • 2. REWARD Strategies and policies to reward people fairly, equitably and consistently in accordance with the value of the organisation. Ensure that organisation can attract, retain, and motivate competent and committed employees. Reward is related to Motivation. Dr. Shohail Choudhury
  • 3. MOTIVATION The mental process of choosing desired outcomes, deciding how to go about them, assessing whether the likelihood of success warrants the amount of effort that will be necessary, and setting in motion the required behaviours. Intrinsic motivation: arises from the factors and processes within the individual. Extrinsic motivation: influenced by others. Dr. Shohail Choudhury
  • 4. THEORIES OF MOTIVATION Content theories: What motivates people?  Maslow’s need theory  Herzberg’s two-factor theory Process theories: How are people motivated?  Expectancy theory  Goal theory Dr. Shohail Choudhury
  • 5. NEED THEORY Abraham Maslow (1954) argued that human beings have five innate needs, which he suggested could be arranged in a hierarchy of relative pre-potency. Each level of need is dominant until satisfied. Only then next level need become a motivating factor. Self-actualisation : the ultimate human goal. Dr. Shohail Choudhury
  • 6. Maslow’s Hierarchy of Needs Self For growth and fulfilment of -Actualisation personal potential For independence, recognition, Esteem needs status and respect from others For relationships, affection, Love/Social belonging For security, order, Safety needs predictability, freedom from threat Physiological needs: Dr. Shohail Choudhury For food, shelter, sleep
  • 7.  The hierarchy underpins that people can be motivated at work byReward which offer satisfaction of their higher order needs.  Social belonging (teamwork, collaboration)  Esteem (Competence, achievement, status, respect)  Self-actualisation (Challenge, personal development, fulfilment) Dr. Shohail Choudhury
  • 8. Two FACTOR Theory Frederick Herzberg (1966) identified two basic need categories of individuals at work. The need to avoid unpleasantness:  Fair treatment in compensation  Working conditions and administrative practice. The need to develop in one’s occupation  Advancement  Recognition, responsibility, achievement. Dr. Shohail Choudhury
  • 9.  The need to avoid unpleasantness:  Hygiene factors  Minimise dissatisfaction and poor job performance  But little ability to motivate the individual to higher levels of job satisfaction or extra performance.  Essentially extrinsic rewards  Offers satisfaction for lower level needs Dr. Shohail Choudhury
  • 10.  The need to develop in one’s occupation  Motivator factors  Motivating individual to more positive attitudes, effort and performance  Essentially intrinsic rewards  Factors inherent in the work itself  Offering psychological satisfaction of higher-level needs Dr. Shohail Choudhury
  • 11.  “A satisfied worker is not necessarily a high producer, and high producer is not necessarily a satisfied worker” (Armstrong 2003). ‘Dissatisfaction arises from environment factors: satisfaction can only arise from the job’ : Herzberg. Herzberg’s work focused on  Job design  Job enrichment (upgrading the challenge) Dr. Shohail Choudhury
  • 12. McClelland – Achievement Motivation Theory David McClelland identified four main need- based motives:  Achievement  Power  Affiliation  Avoidance Total Reward Concept recognises a reward system offering both extrinsic and intrinsic rewards. Dr. Shohail Choudhury
  • 13. REWARD All of the monetary, non-monetary and psychological payments that an organisation provides for its employees in exchange for the work they perform. (Bratton & Gold 2007) ACTIVITY (10 mins)  What intrinsic satisfactions and rewards do you value in your own job?  Why do you work?  What do you get out of your work that you most value?  What would you miss if you didn’t work? Try putting each of these satisfactions into (a) Maslow’s categories of needs and (b) Herzberg’s two factors. Dr. Shohail Choudhury
  • 14. PROCESS THEORIES Vroom-expectancy Theory F=VXEForce or strength of motivation to doValence = Strength of the individual’s preference for outcome y.Expectancy = Individual’s perception of the likelihood that doing x will result in outcome y. Dr. Shohail Choudhury
  • 15. Vroom’s model helps to explain why performance incentives and rewards work most effectively when:  The link between effort and reward is clear  Intended results and goals are made clear  The reward is perceived to be worth the effort Dr. Shohail Choudhury
  • 16. GOAL THEORYLocke (cited in Mullins 2007):Goal setting is more appropriately viewed as a motivational technique rather than as a formal theory of motivation.People performance in jobs is related to  The difficulty of their goals,  The extent of their commitment to them  The degree of feedback they receive on their performance Dr. Shohail Choudhury
  • 17. REWARD SYSTEMSKey objectives:  Recruiting and retaining quality labour  Motivating individual and team performance  Supporting organisational culture  Supporting flexibility Dr. Shohail Choudhury
  • 18. COMPONENTS OF REWARD SYSTEM Direct or base pay Performance or variable pay:  Payment by results (PBR)  Performance related pay (PRP)  Organisation performance pay : profit-sharing scheme Indirect pay or benefits: Non case items or services.  Deferred pay as pension  Legal entitlements : sick pay, maternity pay, maternity/paternity leave, annual leave.  Fringe benefits: company cars, housing assistance, medical insurance. Dr. Shohail Choudhury
  • 19. TOTAL REWARD CONCEPT Monetary payments are not most effective. Quality of working life Skill Challenge development in the job Basic Pay Overtime Career Work life Benefits Opportunity Bonus balance Total Remuneration Profit sharing Recognition Empowerment Flexibility Dr. Shohail Choudhury
  • 20. BASIC PAY Salary and Wage system Wages Salaries Blue collar workers White collar workers Short term job Long term tenure Paid weekly Paid monthly Premium rates for Overtime not usually paid overtime Based on weekly or hourly Related to seniority, rate qualifications, performance, progression Dr. Shohail Choudhury
  • 21. SALARY SYSTEMS A Grade structure: Hierarchy of levels A pay structure: defining pay ranges for each grade, allowing scope for pay progression for length of service or performance. Grade structure: Promotions and Transfers.  Differentials: between pay ranges should recognise increases in job value.  The range should be wide enough.  There should be overlap between two levels. Progression: fixed increments linked to age or length of service. Dr. Shohail Choudhury
  • 22. WAGE SYSTEMS A Basic rate; plus Overtime premium rates Shift pay at premium rates for unusual or socially disruptive hours Compensatory payments for abnormal working conditions (danger, wet, dirt money) Allowances (London living) Merit or Length of service bonuses Payment by results bonuses and incentives. Dr. Shohail Choudhury
  • 23. PERFORMANCE PAY Effective performance pay should  Clear targets and standards of performance  Easy formulae to calculate rewards  Rewards should be significant enough t make effort (10% of basic salary?)  Rewards related to performance indicators which people can control  Lengthy time lag between performance and reward Dr. Shohail Choudhury