What is the Rewards Management..

Reward management is concerned with the formulation and implementations of strategies and policies that aim to reward people fairly, equitably and consistently in accordance with their value to the organization.

Reward management consists of analyzing and controlling employee remuneration, and all of the other benefits for the employees. Reward management aims to create and efficiently operate a reward structure for an organization. Reward structure usually consists of pay policy and practices, salary and payroll administration, total reward, minimum wage, executive pay and team reward. 

 

Reward system usually means the financial reward on organization gives its employees in return for their labour.The term rewards system, not only includes material rewards, but also non-material rewards. The components of a reward system consist of financial rewards (basic and performance pay) and employee benefits, which together comprise total remuneration. They also include non-financial rewards (holiday trips, moving to large office, recognition, promotion, praise, achievement responsibility and personal growth) and in many case a system of performance management. Pay arrangements are central to the cultural initiative as they are the most tangible expression of the working relationship between employer and employee. Many papers examine the role of organizational culture that is, the demand for monitoring compensation. Such investigations conclude that organizational culture places a significant role in determining the level of economic demands. Recent researches on industrial unrest indicate that reward criteria of the organisations both financial and non-financial rewards have tremendous influence upon the employees and employers performance.

Reward is a broad construct that can include ‘anything an employee may value and desire that an employer is able or willing to offer in exchange for employee contribution’. A conceptual distinction can be made between the three main constituents of reward–type, system, and criterion. (Henderson 1989, p.2) Chiang, Flora F.T. ; Birtch, Thomas A (2006) An empirical examination of reward preferences within and across national settings. Management International Review

Reward type refers to the nature of the reward itself (e.g., financial and non-financial; extrinsic and intrinsic). Financial rewards include direct (e.g., basic salary) and indirect (i.e., benefits and services) as well as incentive (e.g., variable pay) and non-incentive (e.g., fixed pay) categories. Non-financial rewards, on the other hand, do not benefit employees in a monetary sense and consist of both extrinsic and intrinsic rewards. Extrinsic non-financial rewards are tangible rewards attached to the job and are given and controlled by a firm. Examples include employment security, promotion, status, relationships, and work conditions. By contrast, intrinsic rewards accrue from performing the task itself and are self-reinforcing. Job challenge, variety, and sense of achievement are good examples of this category.

Reward system represents the method or mechanism (e.g., seniority-based, performance-based) by which organizations determine employee reward outcomes (e.g., pay increases). Systems can be either performance or non-performance oriented. Where performance-oriented reward systems compensate employees based on how well they perform on the job, non-performance systems compensate employees based on a different set of criteria, such as seniority/years of service, and skills/competencies. Reward criterion then, refers to the basis of allocation (i.e., individual or group) used to determine the reward.

        

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History

Reward management is a popular management topic. Reward management was developed on the basis of  psychologistis behavioral research. Psychologists started studying behavior in the early 1900s one of the first psychologists to study behavior was Sigmund Freud and his work was called the    Psychoanalytic Theory.  Many other behavioral psychologists improved and added onto his work. With the improvements in the behavioral research and theories, psychologists started looking at how people reacted to rewards and what motivated them to do what they were doing, and as a result of this, psychologists started creating motivational theories, which is very closely affiliated with reward management.

Defining motivation as "the degree to which an individual wants and choose to engage in certain specific behaviours", to which Vroom (quoted in Mitchell, 1982) adds that performance = ability x motivation. To have an efficient Reward System then, is mandatory that employees know exactly what their task is, have the skills to do it, have the necessary motivation and work in an environment allowing the transformation of intended actions into an actual behaviour. From the company point of view instead, an effective performance appraisal has to be present, in order to let motivation be a major contributor to the rewarded performance.

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