Role Of Rewards On Employees Performance

Published Date: 02 Nov 2017

Abstract:

Every company needs a strategic reward system for employees that focus on these four key areas: compensation, benefits, recognition and appreciation. Surveys have been conducted in NetSol Technologies, Ozi Technologies, Systems Limited for this article. This research only covers the initial stages of the role of rewards on employee’s performance and what managers could do to boost up their employees to bring about a successful result. The study shows that there are many things that should take into account while enhancing the morale of the employees and make them intact with their work to get maximum results in the favor of the organization.

Introduction:

Rewards are something which an employee or worker gets when he or she delivers the desired results by the organization or rewards are kind of incentives given to them in order to boast up their morale in order to achieve objectives which are in the favor of the organization.

Rewards are the building blocks of an organization. Rewards work as an injection when injected into a worker they are automatically boasted towards achieving their maximum working capability. Employees are the ones’ which make an organization. As car without wheels cannot move so is the situation of organizations.

Rewards are of many types given to employees at certain occasions to appraise their performance.

There are many types of rewards ranging from:

Extrinsic rewards

Intrinsic rewards

Financial rewards

Non-financial rewards

Financial rewards:

Financial rewards refer to the tangible form of recognition and thus serving as indirect motivators, as long as people expect further achievements will produce worth-while rewards.

Non-Financial rewards:

Non-financial rewards are those rewards that are not in monetary term rather they depend upon praise and recognition of the higher authorities. Non-financial rewards are the perfect motivators for an employee’s which keep them on their toes to give their best.

Intrinsic rewards:

Intrinsic rewards are rewards that deal with the satisfaction of an employee who is performing the job in an organization, referring to the job satisfaction and increasing the performance through certain rewards.

Extrinsic rewards:

Extrinsic rewards are those rewards which one gets from different types of benefits in his or her work, referring to praise, recognition infront of others from supervisors and other higher authority.

Discussion:

IT is a sector which has flourished a lot in Pakistan as well as all over the world. A software house is a business whose key product is software. Every company needs a deliberate reward system for employees that encompasses these four areas: compensation, benefits, recognition and appreciation.

Employee performance

Benefits

Compensation

Recognition

Appreciation

The methodology for this article is research based. Articles of different researchers have been studied including Wong, Ladkin (2008), Gungor (2011), Saeed (2009) and many more.Surveys have been conducted of different software houses of Pakistan including NetSol Technologies, Ozi Technologies and Systems Limited. This research will help the managers to understand that in the long-term how to maintain the level of employee performance in an organization.

Managers are always in pursue of finding ways which can motivate the employee’s, which can increase their productivity and in turn can enhance the effectiveness of an organization. An organization can only excel when all the parts are in a proper shape meaning everyone is satisfied with their positions, means of work, working conditions and the environment in which they are working. Employees are the building blocks of an organization without which an organization is just like a body without soul. Managers know what they want from the employee’s and to get that from the employee’s what should be given to them.

In a working place or working environment managers know that rewards play a vital role in digging out best from the employee. As managers are always looking for making the company to flourish they know there should be a driving force which will keep the employee’s on their toes every time, which are the rewards. Managers should give certain types of rewards on certain occasions to make employee’s feel that their work is acknowledged and they are the core part of the particular organization. This research will help the managers to understand that what kind of rewards or incentives should be given to the employee’s to enhance their performance. Further this research will identify the core benefits of the rewards, which will help in boosting up the performance of the employees.

Gungor (2011) rewards are of two types intrinsic or extrinsic. Intrinsic rewards are rewards that deal with the satisfaction of an employee who is performing the job in an organization, referring to the job satisfaction through certain rewards. While extrinsic rewards are those rewards which one gets from different types of benefits in his or her

work? They play the role of enhancing the performance of an employee. These rewards are of certain types such as job promotion, security and other fringe benefits.

Extrinsic rewards are a broader term which comprises of further reward categories which are salary, allowance, bonuses, pay increments. While intrinsic rewards comprises of free trips, recognition, praise and recommendations. Promotion, freedom on the job is also the types of rewards which play their vital part in enhancing employee’s performance. . Salary or increased basic salary is a good motivator in nourishing employee’s performance. Allowance is other fringe benefits which are given to the worker along with salary. Allowances can be of many types, it can take form of travelling allowance or daily allowance. Recognition and trips come under intrinsic rewards. To recognize a worker verbally or non- verbally motivates him to devote his/her full concentration towards the work. There intrinsic rewards also have a strong linkage with the worker’s performance.

Bonus is another type of reward which keeps the employees on their toes. Bonus plays the role of catalyst in an employee’s performance. Bonus is a type of reward which is given on particular occasion by the employer to its employees. Bonus also makes sure that an employee is fully concentrated towards his/her work. Promotion is somewhat which is always being welcomed by the employees. They are always keen to being promoted. Promotion is a factor which can keep the employees intact with their work and can bring out the best form the employees. Promotion is a type of reward which can enhance the capability of worker.

Saeed (2009) develops a comprehensive relationship between the intrinsic and extrinsic rewards with performance of the employees. Saeed, (2009) uses various techniques to determine the relationship between the rewards and the employee motivation and employee performance. The data in this research was collected mainly through questionnaires and it was analyzed through Descriptive Statistics, Multiple Regressions, Kendall’s tau-b, Pearson Correlation, Scatter plot Matrix and all the findings were tested at 0.05 level of significance. Saeed, (2009) there is a significant and profound direct and positive relationship with the intrinsic/ extrinsic reward with the employee motivation and performance. And if the rewards of the employees were to be altered then there will be a related change in the employees work and performance. Hence, the better the reward is, the better the employees productivity and performance are.

The basic motive of the research is to make managers to be able to understand the needs of employee’s (rewards/incentives) and the issues that managers might face while enhancing the capabilities of employees through awarding certain rewards.This study will help managers to understand that how can they boost up the productivity of the employees and help them to understand the advantages of the rewards given to employees.

Wong, Ladkin (2008) in their research tried to find out the relationship between employee creativity (which in terms can enhances the performance) and job related motivators. Now in order to manage creativity there are certain steps or points which can be helpful. Evaluation is the first point in this regard. Work-focused evaluation must be there. In accordance with the evaluation there should be immediate feedback. Then there is reward- creativity point and this will be fostered when employees know that when there is creative effort there will be rewards or vice versa. Questionnaire technique was used to gather information from the employees. The sample for the research were s the employees of the hotel. The independent variables were Employee wage, risk taking factor and incentives and rewards. The independent variable was creativity. It was found out that there was a strong relationship between the variables. Good wages were highly valued by the employees. Mean value scored higher than the average of 5 meaning that employees were creative. Culture, courage, commitment and change were the additional factors. Thus a positive correlation existed between rewards and performance.

Zakaria, Hussain, Sawal, Noordin & zakaria Z (2011) in their research paper put their effort to carry out or know about the relationship between the independent variable which is reward practice and the dependent variable which is employee performance at Toyota 3S centre in Kedah. Reward practice is very much essential and effective as an incentive motivator towards achieving organizational overall performance. The employees performing well and coming out with exceptional work effort are praised by the top management. Rewards and recognitions boast up the morale of the employees and they try to put extra effort in the work. A questionnaire technique was used to carry out the findings of the research. A set of 82 questionnaires was distributed among the employees at Toyota 3S centre Kedah. There was a positive relationship between the worker’s performance and rewards practices. The employees at the Toyota 3S centre said that rewards are the motivational force which pushes them to work more efficiently and effectively.

Cordero, Walsh & Kirchhoff (2005) in their research tried to find out does incentives boast up the morale of employee’s. Financial incentives are given to motivate the employee’s along with different dimensions such as (quality, productivity) and (innovative and customized products)". For the purpose of to carry out the research a study was needed. Independent variables in the research were financial rewards/incentives and intrinsically motivating jobs while the dependent variable was the performance of the employees. From the results it was concluded that there is a strong relationship between financial incentives and performance. And intrinsically motivating job factors also lead to high ends of employee performance. .

Bishop’s (1987) contribution on this page was that wage of employee mostly depends on productivity related to the employees doing this job. In the starting the wages were influenced by the training but later on wages are influenced by productivity at small level. Wages directly affects the performance of the employee, if a person hired in any office having one year training having same wage as a person who is having two years experience so this affects the performance of a person who is having more experience and having less wage rate. Dependent variable is performance of employee, and performance measures which are used there are self-reported, perceptual and relative. Bishop expresses that there are two kinds of rewards which affects the performance of any employee. Project-based rewards they are having negative effect where as outcome-based rewards they are having positive effect on performance of any employee. There are two major findings of the paper. Organization should implement or try to find out different ways to evaluate effort of team members.

Ewing (1996) has added in the literature that there is a strong relation between performance and pay. Increase and decrease in pay effects the performance of the employee. This research provides new empirical evidence. The main focus of the researcher is on the person who worked on performance-based pay. On focusing many other ways that controlled over the factors (personal, institutional, firm-specific and demographic factors) that effects wage finding is that a worker who works on performance based pay earns handsome amount of pay.

Bryson, Buraimo, Simmons(2010), wants to tell us about an experiment that shows if you appoint an employee on contract and on fix salary there are very less chances that an employee can work hard more than he is working and there will be a risk of poor performance of the employee because there will be no chance in future that he will be rewarded by giving more salary for his good performance and if the worker or employees is treated with good handsome salary his/her performance towards the organization will automatically increase. Dependent variable is work performance. There are two clear performance-enhancing effects. The first is career concerns which includes that an employee tries to perform well today hoping that his/her future is secured in a manner that his/her salary position is secured and the second independent variable is worker sorting effect.The finding here shows that if a person has chance to increase salary in future he will show good performance.

Houlfort, Koestner, Joussemet, Nantel-Vivier,Lekes (2002) make their paper on doing research that how rewards change the behavior of students , and if this effect is long term or not this question should be answered. Performance contingent rewards are given when one has performed an activity well, surpassing a certain criterion or matching a standard of excellence. The issue they are solving or discussing there is undermining effect of performance-contingent rewards and this was tested on the university students as well as elementary school children. This test shows that performance contingent rewards are having very strong effect on student’s perceived autonomy but perceived competence did not had any effect by the performance based contingent reward.

Morton (1998) contribution on this paper was "what is the effect of the bonuses on the performance of the employee’s". Here the researcher took a firm named Taiwanese manufacturing firm; this firm traditionally gives bonus to their employee’s at different occasion. There they take two groups one enjoys the facility of bonus and other’s are not .There is a significance difference in the performance of those employee’s who enjoyed this bonus. There is also a relation between compensation, profit and productivity growth. There is improvement in the performance of employee’s and for this reason there is also productive growth. Two finding are there of this paper first one Bonus system in manufacturing industry and second one is some test and casual hypothesis about the relationship of the bonus, employment and productivity.

Zenger (1992) the author develops a very effective explanation for common observations in this paper. He said that performance is based on compensation contracts reward extreme performance. Independent variables are pay and salary, which affects the performance of the employee from time to time. Pay differences based on completely on performance of the employees although restricting outcome based incentive differences to limits costs of evaluation, the worker should perform for gain. The findings also suggested that when benefits are given in return for performance, the costs are usually lower. On the other hand, low performers get their pay-for-performance forfeited.

Allen, S Richard. Helms, M Marilyn (2002) there research tells us about the relationship of rewards practice, firm performance and organizational strategies. We find some of initial evidences which supports the different types of reward practices and they tells us more keenly about generic strategies and high level of organizational performance. The high authorities adopt the organizational strategies and the purpose for that is to increase the production of the organization. Increasing in their salaries, giving them different bonuses, and also they adopted different techniques and strategies. This literature tells us about the conceptual relationship of organizational strategies and the reward system and firm performance, they are havening strong relation with each other.

Ajila and Abiola (2004) Organizations focus on how reward systems can ensure or increase the alignment of individual interests with organizational goals. We have to believe that performance depends on reward systems and it is widely accepted by many researchers.

Companies are not alike nor their

employee recognition programs are. Here is an overview of common benefits and compensations provided:

Different companies offers a different benefit packages including Healthcare, premium coverage for employees, Provident Fund, Life Insurance, paid childbirth or adoption leave, unlimited sick days, Day care centre facility for toddlers, Job Security, Performance excellence awards, paid vacation and holidays.

They offer childcare reimbursement, travel assistance, and reimbursement of gym fees. Other perks include paying paramount attention to the needs of employees, and conducting timely surveys to measure employee satisfaction. This helps to classify areas where the company is doing well for the employees as well as areas which need to be considered. Few of them are described below:

Base Salary – Paying market competitive salary.

Allowances –The opportunity to supplement salary through additional pay elements that are either standard or discretionary.

Annual Incentives – Rewarding excellence! Financial incentives to recognize outstanding performance.

Recognition and Bonus – Having strong sense of teamwork and it may not take away recognition of individual contributions. Financial and non-financial rewards should be part of corporate culture.

Health and Welfare – Competitive medical, prescription, dental, vision, life, and disability insurance plans help focus on employee’s family’s wellness.

Career Development – Encourage and support employee to participate in different activities and work on different projects that helps them advance their career.

Issues:

"Age is an issue of mind over matter. If you don’t mind, it doesn’t matter" – Mark Twain

"But it matters with benefit plans!" – Brent Delveaux

It is a reality that we are an aging population. When it is about benefit plans, an aging population generates serious problems for benefit plan. Many benefits, such as life insurance and long term disability should have an age limit and benefits should terminate when that age is reached. Because healthcare costs rises with age so many of employees would like to keep working and not retire because they have frequent medical claims which they cannot afford.

This thing will affect every employee at certain point of life. No one wants an employee to suffer from financial crisis. But company cannot afford this.

The continuation of benefit coverage is corporate policy and this needs to be communicated to employee at hiring time and should be written into employment agreement.

For protecting employees and company from un pleasant surprises a policy has to be made in advance.

Conclusion:

The study shows that there are many things that should take into account while enhancing the morale of the employees and make them intact with their work to get maximum results in the favor of the organization. Company should always know about the process as to when to give rewards and in what quantity to the employees which can make the employees dedicated to the work. They should always play with the reward strategy and the psyche of the employees like how to make employees grounded towards their work. Additionally a they should always know what type of rewards should be given to a particular employee and time and condition should be taken into consideration regarding the rewards policy.They should use an effective reward system which will give different incentives or rewards to employee in different stages of management to keep them motivated. The main purpose of the research beholds in the fact that it explores the rewarding techniques practiced to increase the work performance of the employees and thus resulting high productivity for the organization.