There are various ways, approaches or methods employed to reward employees by an organization or management. Rewards management are continuously changing in tandem with the business environment, development in management approach, changes in organization structure, culture and reward system.
Rewards are given in terms of work done; appreciation of the employees contribution to the organization / management; or as a motivation tools utilized by the organization for its own benefit, etcetera. Depending on the situation/circumstances and reason for the rewards, there is no best ways to reward employees. All methods/ways to reward employees have their strength and weaknesses or their pros and cons.
Reward management is concerned with extrinsic and intrinsic rewards. Extrinsic reward comprising salary / wages payments, deferred payments such as pensions have undergone considerable changes in recent years. Intrinsic rewards associated with job satisfaction have grown in importance as delayering and tighter budget have reduced the role played by promotion and pay increase as motivational tools
Research carried out by the Top Pay Unit (1990) revealed the following:
Salary policy is increasingly seen as a tool for bringing about cultural change in organization
Much greater flexibility in salary systems is now required to enable employers to recruit and retain talented staff
Relating pay to performance will increase the responsibilities of line managers, who have to live with the consequences of their recommendations on salaries for their staff.
Paying for performance is one of the ways to reward employees based on extrinsic value over the past years. Personnel Today / Business Intelligence survey found that 67% of UK organization use this method to reward employees and there is overwhelming majority believe that it is an effective reward or one of the best way to reward employees. Even though Personnel Today / Business Intelligence survey were in favor of performance related pay (PRP) there are others who disagree such as Kohn based on the following reasons
i) Rewards undermine interest artificial incentives are no substitute for loving what you do. Bribing people does not produce as high a level of output as arises from those who are driven by intrinsic motivation.
ii) Rewards seeker tends to play it safe: "rewards motivate people to get rewarded" not to take chances or to innovate.
iii) Rewards punish two sides of the same coin. Withholding a reward is as unpleasant as administering a punishment.
iv) Rewards disrupt relationships, in particular, individual rewards militated against team-working and if you reward teams this just moves the competition up a level
Others, proponents of performance related pay dispute that "It's not what you do, it's the way that you do it" that is important. That even with opposition, PRP is on the increase, and it is increasing because it fits the needs of modern, non-bureaucratic, innovative, delayered, competitive organizations. The view is that if managers exercise care in design and implementation, performance related pay (PRP) represents the most appropriate reward system to reward employees.
Profit Related Pay is another reward system applicable to rewarding employees. It is intended to link pay and performance at the organizational level. In sharing the performance of the business success, employees will be more integrated into the business activity. In the UK the scheme works by employees "converting" up to 20% of their pay (subject to an annual ceiling of 4,000) to vary with the organization's ability to meet profit targets in exchange for tax exemption on the converted amount. After a difficult start in 1987, which gave rise to a series of changes which eased the ground rules over the following years, there are now more than 2 million UK employees covered which is a "spectacular growth in PRP" as reported.
Mc Lean however, sees the development of PRP and employee share option schemes as doing nothing for the development of involvement and economic democracy. Rather, she sees them as being part of the "tax avoidance industry".
Proponents of intrinsic rewards opinioned that employment is not just an exchange effort for payment (the so called "wage/work bargain") but an exchange effort for payment and other satisfaction which is work related.
Kohn pointed that it is the management of these intrinsic rewards which offers the only real possibility of obtaining significant growth in employee productivity. Work redesign is a way of increasing the inherent job satisfaction.
The basics of work redesign (job design) as explained by Hackman and Oldham, that is the existence of certain job features ("core job") gives rise to a set of psychological effects ("critical psychological states") which, in turn, lead to desired results ("outcomes"). The aim, therefore, is to incorporate/increase whatever possible the core job dimensions in designing or redesigning jobs.
Based on the pros and cons of the above rewards system, and the proponents and opponents of such systems it can be seen that there is no clear cut best ways to rewards employees. Rewards which can motivate employees, increase their work productivity, loyalty and efficiency are good ways to reward employees.