2. Literature Review
2.6. The Value of Reward Programmes
Factors such as knowledge work, corporate governance, executive pay and performance, globalization and the increased importance of employing the most talented people all contribute to the complex design of reward programmes (Gross &
Friedman, 2004).
Mulvey and Ledford (2002) define reward programmes as “powerful management tools for attracting, motivating, and retaining employees.” Yiamiis, Loannis and Nikolaost (2009) state that reward programmes are considered to be important tools not only for the motivation of employees, but also for driving skills growth and
developing an organisation’s culture. They further state that reward programmes must be suitable in the management style of any organisation and must support preferred behaviours and culture.
Regardless of whether the reward is monetary or non-monetary, according to Abendschein (2004), high quality employees would be attracted to such
organisations, and have an aspiration to stay longer with an organisation when reward and recognition programmes are used.
According to Kerr-Phillips and Thomas (2009), the impact of cultural and language diversity, affirmative action and income level gaps and education, need to be dealt with effectively by South African organisations, managers and leaders. South African organisations need to take initiatives and modify their existing reward programmes to
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account for changes in employee demographics and preferences. Therefore motivational strategies for employees, including monetary and non-monetary rewards, must address the areas of interest and areas of uncertainty in the current workforce population.
According to Furnham (2005), it does not matter what individuals are paid, if they believe, that they are not justly paid, they become demotivated. Furnham (2006) writes that business psychologists cite at least three reasons why money is more likely to cause dissatisfaction than satisfaction:
No clear correlation exists between pay and performance
Comparative salary leads to pay satisfaction not necessarily absolute salary
Lifestyle gains maybe more attractive than financial rewards
Galbraith (1977) theorises, in trying to develop the perfect reward programme, that there are no perfect reward programmes that would be effective for all types’ of individuals. Galbraith (1977) states that organisations must design reward programmes to eliminate the goal limitations to job performance because they cannot rely upon the planned and impulsive selection of the behaviour which will produce the best effective job performance. For this reason, reward programmes are connected to organisational design.
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Galbraith (1977) argues that integration and correct fit is required among the reward policy, individuals, responsibilities, structure, and the information structure. Galbraith describes the Star Model highlighted in Figure 5 below and its five components:
strategy, structure, processes, rewards, and people. Galbraith’s Star Model describes the integration of the five components and its importance in affecting employee behaviour. Galbraith (1977) reiterates that organisations should attempt to match individual personality and job requirements to gain the wanted performance.
Galbraith (1977) defines the theory of reward systems as being that there is no one best approach but that any approach is not similarly effective under all conditions. In designing a reward programme, the preferred behaviour is based on the
responsibilities involved. The reward programme is related to the preferred behaviour.
Figure 5: Galbraith’s Star Model
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In relation to reward, like Herzberg, Galbraith (1977) utilised the terms extrinsic and intrinsic rewards. Galbraith refers to extrinsic reward as, “artificially added”, while intrinsic is referred to as, “natural consequence”. The rewards delivered to
employees must meet or exceed the expectancy levels of the beneficiaries. Galbraith (1977) argues individuals will always desire more of the same even though the
individual is fulfilled with a reward.
Attracting the right employees to contribute to the organisations objective is important. As such, reward programmes are aimed to be used to motivate and individuals to contribute to the organisation’s growth.
Patricia and Jay (2000a) state that individuals work for more than just monetary remuneration, these individuals are also looking for an organisation which has a vision of where it is going and how it plans to get there, they want to get growth in acquiring skills and competencies that prepare them to add value. Therefore, tailored combinations of monetary and non-monetary rewards are important to providing a complete reward package to an individual.
Employers and designers of reward programmes, sometimes have varying definitions of what constitutes value (Hiles, 2009). It is with that in mind that Hiles (2009) recommended that organisations go beyond the economic value and consider the full list of possible sources of value that can be offered. The following are
considered:
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Knowledge of the worth of the reward package
Effectively designed defaults
Ease of understanding
Information about programmes
Easy to use and compliant
Low cost
Streamlined choice
Consistent with individual observations of a positive organisation brand
2.6.1. Implications
The literature highlights that there is major value in developing, designing and utilising reward programmes. These programmes are considered to be significant tools for motivating employees. However for the reward programme to be effective, it must suite the management style of any organisation and must support the desired behaviours and culture of the organisation. Furthermore, the literature states that these programmes must be modified and tailored to suite the individual needs, demographics and preferences. By developing a programme that has the correct consistency of monetary and non-monetary reward elements or intrinsic and extrinsic reward elements, organisations could be able to motivate their people as well as keep costs down.
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