Words of wisdom ‘Organizations would be far less effective systems than they actually are if economic rewards were the only, or even the principal, means of motivation available.’

‘There is no such thing as a good pay system; there is only a series of bad ones. The trick is to choose the least bad one.’

The Nature of Reward Management Reward refers to all of the monetary, non-monetary and psychological payments that an organization provides for its employees in exchange for the work they perform.

Reward (or compensation) management is a core facet of the employment relationship.

An organization can provide two types of reward: extrinsic and intrinsic.

The mix of extrinsic and intrinsic rewards provided by the employer is termed the reward system, the monetary or economic element of the reward system is termed the pay system.

Why Reward Systems?The only way employees will fulfill your dream is to share in the dream. Reward systems are the mechanisms that make this happen. "However, reward systems are much more than just bonus plans and stock options. While they often include both of these incentives, they can also include awards and other recognition, promotions, reassignment, non-monetary bonuses (e.g., vacations), or a simple thank-you."5 "The journey is the reward," says Steve Jobs.

You Get What You RewardThe greatest management principle is that the things that get rewarded get done. "You get more of the behavior you reward. You don't get what you hope for, wish for or beg for. You get what you reward."7

When your employees do hit the target and meet a stretch standard you set for them, reward them immediately. Never stall. By doing this, you help employees directly connect the reward with behavior and higher performance they've attained.4 "Fail to reward the right behavior and you will most likely get the wrong results.

Strategic Reward SystemsPay for PerformanceReward Systems consist of the following elements: Financial Rewards – Compensation

1. Base Salary2. Pay Incentives3. Employee Benefits

Non-financial Rewards1. Intrinsic Rewards – centers on the work itself2. Praise, recognition, time off and other rewards given to the employee by peers or superiors.

Reward Systems in most cases should be consistent with other HR systems. The Reward System is a key driver of:

1. HR Strategy 2. Business Strategy3. Organization Culture

Reward objectives

Any organizational reward system has three behavioural objectives:

1. membership behaviour to recruit and retain a sufficient number of qualified workers

2. task behaviour to motivate employees to perform to the fullest extent of their capabilities

3. compliance behaviour to encourage employees to follow workplace rules and undertake special behaviours beneficial to the organizations without direct supervision or instructions.

Paradox and Reward

There are some fallacies and inconsistencies inherent in reward systems.

Fostering commitment via variable pay may be undermined if reward is not paid due to the company’s poor financial performance.

Performance-related pay is open to subjectivity and inconsistency, and can create tensions which undermine workers’ intrinsic motivation.

All may result in a breach of the psychological contract, weakening employee commitment.

Reward practices are dictated by perceptions of power between labour and management. Pay systems will change according to their effectiveness in the effort-wage relationship with the balance of power.