Motivation: Reward system and the role of compensation
HUMAN RESOURCE MANAGEMENT
“Motivation: Reward system and the role of compensation”
Student: Anton Skobelev, IBS-855
Teacher: Kartashova L.
The design and management of reward systems present the general manager
with one of the most difficult HRM tasks. This HRM policy area contains
the greatest contradictions between the promise of theory and the
reality of implementation. Consequently, organizations sometimes go
through cycles of innovation and hope as reward systems are developed,
followed by disillusionment as these reward systems fail to deliver.
Rewards and employee satisfaction
Gaining an employee’s satisfaction with the rewards given is not a
simple matter. Rather, it is a function of several factors that
organizations must learn to manage:
1. The individual’s satisfaction with rewards is, in part, related to
what is expected and how much is received. Feelings of satisfaction or
dissatisfaction arise when individuals compare their input - job
skills, education, effort, and performance - to output - the mix of
extrinsic and intrinsic rewards they receive.
2. Employee satisfaction is also affected by comparisons with other
people in similar jobs and organizations. In effect, employees compare
their own input/output ratio with that of others. People vary
considerably in how they weigh various inputs in that comparison. They
tend to weigh their strong points more heavily, such as certain skills
or a recent incident of effective performance. Individuals also tend to
overrate their own performance compared with the rating they receive
from their supervisors. The problem of unrealistic self-rating exists
partly because supervisors in most organizations do not communicate a
candid evaluation of their subordinates’ performance to them. Such
candid communication to subordinates, unless done skillfully, seriously
risks damaging their self-esteem. The bigger dilemma, however, is that
failure by managers to communicate a candid appraisal of performance
makes it difficult for employees to develop a realistic view of their
own performance, thus increasing the possibility of dissatisfaction
with the pay they are receiving.
3. Employees often misperceive the rewards of others; their misperception
can cause the employees to become dissatisfied. Evidence shows that
individuals tend to overestimate the pay of fellow workers doing
similar jobs and to underestimate their performance (a defense of self-
esteem-building mechanism). Misperceptions of the performance and
rewards of others also occur because organizations do not generally
make available accurate information about the salary or performance of
others.
4. Finally, overall satisfaction results from a mix of rewards rather
than from any single reward. The evidence suggests that intrinsic
rewards and extrinsic rewards are both important and that they cannot
be directly substituted for each other. Employees who are paid well for
repetitious, boring work will be dissatisfied with the lack of
intrinsic rewards, just as employees paid poorly for interesting,
challenging work may be dissatisfied with extrinsic rewards.
Rewards and motivation
From the organization’s point of view, rewards are intended to motivate
certain behaviors. But under what conditions will rewards actually
motivate employees? To be useful, rewards must be seen as timely and
tied to effective performance.
One theory suggests that the following conditions are necessary for
employee motivation.
1. Employees must believe effective performance (or certain specified
behavior) will lead to certain rewards. For example, attaining certain
results will lead to a bonus or approval from others.
2. Employees must feel that the rewards offered are attractive. Some
employees may desire promotions because they seek power, but others may
want a fringe benefit, such as a pension, because they are older and
want retirement security.
3. Employees must believe a certain level of individual effort will lead
to achieving the corporation’s standards of performance.
As indicated, motivation to exert effort is triggered by the prospect
of desired rewards: money, recognition, promotion, and so forth. If
effort leads to performance and performance leads to desired rewards,
the employee is satisfied and motivated to perform again.
As mentioned above, rewards fall into two categories: extrinsic and
intrinsic. Extrinsic rewards come from the organization as money,
perquisites, or promotions or from supervisors and coworkers as
recognition. Intrinsic rewards accrue from performing the task itself,
and may include the satisfaction of accomplishment or a sense of
influence. The process of work and the individual’s response to it
provide the intrinsic rewards. But the organization seeking to increase
intrinsic rewards must provide a work environment that allows these
satisfactions to occur; therefore, more organizations are redesigning
work and delegating responsibility to enhance employee involvement.
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