Question.4)How is the function of Reward Management
being applied/used/effectively used/ by the organised sector and other
organisations in Indian context? Explain with suitable examples, and base your
answer on the credible studies and findings available in this regard. Give
proper references and details wherefrom you draw your answers.
Ans :
Introduction
The reward system emphasizes a core facet of the employment relationship: it
The reward system emphasizes a core facet of the employment relationship: it
constitutes an economic exchange or relationship. Global
forces impact on pay systems.
Changes in reward systems mirror changes in work design
and organizations, and the
emphasis on individual performance.
The nature of reward management
The nature of reward management
There are two types of rewards: Extrinsic and Intrinsic
Pay or reward strategy is a plan and actions pertaining
to the mix of direct & indirect pay.
Objectives of reward system are to attract and retain high
performing employees, maximize employee performance, and satisfy legal
standards.
All reward systems contain two elements that are in contradiction with each other: cooperation and tensions and conflict between employer and employee.
A model of reward management
Reward model contains five basic elements: strategic, reward objectives, reward options, reward techniques, and reward competitiveness.
Strategic perspective focuses on reward choices which support strategic goals.
Reward objectives emphasize the linkage between a reward system and human behaviour. The psychological contract emphasizes the importance of reward management.
All reward systems contain two elements that are in contradiction with each other: cooperation and tensions and conflict between employer and employee.
A model of reward management
Reward model contains five basic elements: strategic, reward objectives, reward options, reward techniques, and reward competitiveness.
Strategic perspective focuses on reward choices which support strategic goals.
Reward objectives emphasize the linkage between a reward system and human behaviour. The psychological contract emphasizes the importance of reward management.
- Reward
options for the organization include: base pay, performance pay, and
indirect pay (benefits).
- 2.
Reward techniques examined include job analysis, job evaluation and
performance appraisal. These techniques are used to achieve,
internal equity, which refers to the pay relationships among jobs within
a single organization.
- 3.
Reward competitiveness refers to comparisons between the organization’s
pay and that of its strategic competitors. External competitiveness
depends upon, in part, labour market and product markets conditions and
management’s strategy.
Reward management is about the design, implementation,
maintenance, communication and
evolution of reward processes which help organizations to
improve performance and
achieve their objectives.
Reward processes are based on reward philosophies and
strategies and contain
arrangements in the shape of policies and strategies and
contain arrangements in the shape
of policies, guiding principles, practices, structures
and procedures which are devised and
managed to provide and maintain appropriate types and
levels of pay, benefits and other
forms of reward. This constitutes the financial reward
aspect of the process which
incorporates processes and procedures for tracking market
rates, measuring job values,
designing and maintaining pay structures, paying for
performance, competence and skill,
and providing employee benefits. However, reward
management is not just about money. It
is also concerned with those non-financial rewards which
provide intrinsic or extrinsic motivation.
The key issues facing reward management are:
- How
to ensure that reward management strategies support the achievement of the
organization’s business strategies and satisfy the needs and aspirations
of employees for security, stability and career development?
- How
to achieve internal equity and external competitiveness?
- How
to respond to a fragmenting pay market and maintain a reasonably coherent
pay structure?
- How
to concentrate on rewarding for output and maintain, indeed enhance
quality standards?
- How
can we reward individual performance and contribution and promote
teamwork?
- How
to introduce sophisticated performance management process and ensure that
- managers
are committed and have the skills required to get the best out of them?
- How
can we give high rewards to high achievers and motivate the core of the
employees upon whom we ultimately have to rely?
- How
to achieve consistency in managing reward processes and provide for the
flexibility needed in ever-changing circumstances?
- How
can we devolve power to the line managers to manage their own reward
processes and retain sufficient control to ensure that corporate policies
are implemented?
- How
to continue to provide motivation for those who have reached the top of
their pay range and maintain the integrity of the grading system and
contain costs?
- How
to introduce more powerful pay-for-performance schemes and ensure to get
value of money from them?
- How
to deliver the message that improved performance brings increased reward
and cap bonus earnings to cater for windfall situations or a particularly
loose incentive scheme?
- How
to operate enterprise-wide bonus scheme and ensure that they increase
motivation and commitment?
- How
to reward people for their outputs and their inputs?
- How
to operate job evaluation schemes as a means of allocating and controlling
gradings in a formal hierarchy and cater for the role flexibility which is
increasingly required in the organization?
Key Reward Management Trends
Following are the key reward management trend in today’s
scenario.
- Greater
sensitivity to sector and functional market practice to enable more
effective market positioning to help with attracting and retaining high
caliber employees.
- The
implementation of increasingly focused performance awards starting at the
top and working down through organizations as performance orientation
increases.
- Pay
increases linked to market worth and individual or team performance-not
service and/or cost of living.
- More
attention given to achievement or success-oriented individual bonuses
rather than payment increases in base pay.
- A
move towards team pay as the importance of teamwork increases.
- More
flexible pay structures based on job families and using broader pay bands
or pay curves.
- More
integrated pay structures covering all categories of employees.
- A
growing linkage between pay practice and training and development
initiatives through the design and implementation of skills and competency
based pay processes which reward the acquisition and use of new skills and
behaviors.
- The
development of integrated performance management systems with the emphasis
on coaching development, motivation and recognition through the
identification of opportunities to succeed.
- A
search for simpler and more flexible approaches to job evaluation which
enable a move away from the control of uniformity to the management of
diversity. This will make use of techniques such as job family modeling
and computer assisted job evaluation.
- Increased
awareness of the need to treat job measurement as a process for managing
relativities which, as necessary, has to adapt to new organizational
environments and much greater role flexibility and can no longer be
applied rigidly as a system for preserving existing hierarchies.
- More
emphasis on the choice of benefits and ‘clean cash’ rather than a
multiplicity of perquisites.
- Greater
creativity and sensitivity in benefit practice.
Purpose and Aim
The purpose of a pay structure is to provide a fair and
consistent basis for motivating and
rewarding employees.
The aim is to further the objectives of the organization
by having a logically designed
framework within which internally equitable and extremely
competitive reward policies can
be implemented, although the difficulty of reconciling
often conflicting requirements for
equity and competitiveness has to be recognized.
The structure should help in the management of
relativities and enable the organization to
recognize and reward people appropriately according to
their job role size, performance,
contribution, skill and competence. It should be possible
to communicate with the aid of the
structure the pay opportunities available to all
employees.
The pay structure should also help the organization to
control the implementation of pay
policies and budgets.
Criteria for Pay Structures
Pay structure should:
- Be
appropriate to the characteristic and needs of the organization: its
culture, size and complexity, the degree to which it is subjected to
change and the type and level of the people employed.
- Be
flexible in response to internal and external pressures, especially those
related to market rates and skills shortages.
- Facilitate
operational and role flexibility so that employees can be moved around the
organization between jobs of slightly different sizes without the need to
reflect that size variation by changing rates of pay.
- Give
scope for rewarding high level performance and significant contributions
while still providing appropriate rewards and recognition for the
effective and reliable core employees who form majority in most
organizations.
- Facilitate
rewards for performance and achievement.
- Help
to ensure that consistent decisions are made on pay in relation to job
size, contribution, skill and competence.
- Clarify
pay opportunities, development pathways and career ladders.
- Be
constructed logically and clearly so that the basis upon which they
operate can readily be communicated to employees.
- Enable
the organization to exercise control over the implementation of pay
policies and budgets.
Reward management has an important part to play in the
development of cultures in which
individuals and teams take responsibility for continuous
improvement. It affects
organizational performance because of the impact it has
on people’s expectations as to how
they will be rewarded
Organization must reward employees because in return,
they are looking for certain kind of
behavior; they need competent individuals who agree to
work with a high level of
performance and loyalty. Individual employees, in return
for their commitment, expect
certain extrinsic rewards in the form of salary,
promotion, fringe benefits, perquisites,
bonuses or stock options. Individuals also seek intrinsic
rewards such as feelings of
competence, achievement, responsibility, significance,
influence, personal growth, and
meaningful contribution. Employees judge the adequacy of
their exchange with the
organization by assessing both set of rewards.
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