The Relationships Between Reward Systems Being Implement in the Company and Firm Performance Essay
The Relationships Between Reward Systems Being Implement in the Company and Firm Performance
Understanding what motivates people is necessary at all levels of management. Deci, E., Koestner, R. & Ryan, R.M. (1999) had said that motivation is generally linked to reward, and it is widely recognized that reward management is central to the regulation of the employment relationship. The reward system varies from organization to organization, and comes in various and concrete forms, including monetary or non-monetary, tangible or intangible, and physical or psychological, and these are offered to the employees as compensation for the productive work they execute. According to Jean Christofferson and Bob King (WorldatWork-2006), an effective reward system can serve the strategic purposes of attracting, motivating, and retaining employees to achieve organizational goals. A formalized corporate reward system is necessary because it appeals to capable and skilled employees to fill the available positions in a specific organization. Additionally, such method helps retain employees in the organization, hence maintaining a stable workforce with an acceptable turnover rate.
Lastly, an efficient reward system also motivates employees to perform their responsibilities to the fullest degree of their personal capacities, hence increase the organization’s performance. Every company has its own form of reward system and it often used as a management tool for achieving desired objectives.Therefore, this study intends to examine the relationship between reward system and organization’s performance. It first looks at the theory of the reward system, type of reward system and effect of the reward system on the organization’s performance. It then will focus on the finding of the role of the reward system which we will take a company as an example to make our research successful. We will review the reward system that the company used and from that to determine the role and effectiveness of the reward system.
2.0 Literature Review
Employees don’t work for free. Most businesses are not volunteer services, so it is needed to compensate them in some way for their time and effort. According to Bratton (2007), what used to be called “pay” and then became “remuneration” is today often termed “reward”. It refers to all of the monetary, non-monetary, and psychological payments that an organization provides for its employees. 2.2 Reward
According to Ed. Kevin Hillstrom and Laurie Collier Hillstrom (2002), reward and recognition systems should be considered separately although these terms are often used interchangeably. Employee reward systems refer to programs set up by a company to reward performance and motivate employees on individual and/or group levels. They are normally considered separate from salary but may be monetary in nature or otherwise have a cost to the company (Britton, 1999). While previously considered the domain of large companies, small businesses have also begun employing them as a tool to lure top employees in a competitive job market as well as to increase employee performance. As noted, although employee recognition programs are often combined with reward programs they retain a different purpose altogether.
Recognition programs are generally not monetary in nature though they may have a cost to the company. Examples include awards for attendance, safety, customer service, productivity, honoring separating employees, and outstanding achievements. 2.2.1 Designing a Reward Program
According to Deeprose (1994), the keys to developing a reward program are as follows: * Identification of company or group goals that the reward program will support * Identification of the desired employee performance or behaviors that will reinforce the company’s goals * Determination of key measurements of the performance or behavior, based on the individual or group’s previous achievements * Determination of appropriate rewards
* Communication of program to employees
As Linda Thornburg noted in HR Magazine (1992), “Performance measures in a rewards program have to be linked to an overall business strategy…. Mostreward programs use multiple measures which can include such variables as improved financial performance along with improved customer service, improved customer satisfaction, and reduced defects.”
2.2.2 Types of Reward Programs
There are a number of different types of reward programs aimed at both individual and team performance. a.) Variable pay
Variable pay or pay-for-performance is a compensation program in which a portion of a person’s pay is considered “at risk.” Variable pay can be tied to the performance of the company, the results of a business unit, an individual’s accomplishments, or any combination of these. It can take many forms, including bonus programs, stock options, and one-time awards for significant accomplishments. Some companies choose to pay their employees less than competitors but attempt to motivate and reward employees using a variable pay program instead. According to Shawn Tully in Fortune (1993) “The test of a good pay-for-performance plan is simple: It must motivate managers to produce earnings growth that far exceeds the extra cost of the program. Though employees should be made to stretch, the goals must be within reach.”
Bonus programs have been used in American business for some time. They usually reward individual accomplishment and are frequently used in sales organizations to encourage salespersons to generate additional business or higher profits. They can also be used, however, to recognize group accomplishments. Indeed, increasing numbers of businesses have switched from individual bonus programs to one which rewards contributions to corporate performance at group, departmental, or company-wide levels. (STUFbangkok, 2007)
c.) Profit Sharing
According to Stack (1996), profit-sharing refers to the strategy of creating a pool of monies to be disbursed to employees by taking a stated percentage of a company’s profits. The amount given to an employee is usually equal to a percentage of the employee’s salary and is disbursed after a business closes its books for the year. The benefits can be provided either in actual cash or via contributions to employee’s 401(k) plans. A benefit for a company offering this type of reward is that it can keep fixed costs low. The idea behind profit-sharing is to reward employees for their contributions to a company’s achieved profit goal. It encourages employees to stay put because it is usually structured to reward employees who stay with the company; most profit-sharing programs require an employee to be vested in the program over a number of years before receiving any monies.
Unfortunately, since it is awarded to all employees, it tends to dilute individual contributions. In addition, while profit is important, it is only one of many goals a company may have and is, according to Jack Stack in Inc.(1996), “an accumulation of everything that happens in the business over a given period of time” and is therefore difficult for most employees to connect their actions to. Stack argued that “[employees] have to be able to see the connection between their actions, decisions, and participation, and changes in [a company’s goals].” Like bonuses, profit sharing can eventually be viewed as an entitlement program if the connection between an employee’s actions and his or her reward becomes murky.
1. Financial Reward
There is a wide variety of ways in which a business can offer money (or “financial rewards”) as part of the “pay package”, including: * Salaries: fixed amounts per month or year for performing a role; these are common for most managerial positions (e.g. Accountant, Payroll Manager) * Benefits in kind (“fringe benefits”) – very common in businesses of all kinds; these include staff discounts, contributions to travel costs, staff uniforms etc * Time-rate pay: pay based on time worked; very common in small businesses where employees are paid per hour. * Piece-rate pay: pay per item produced – becoming less common * Commission: payment based on the value of sales achieved. * Other performance-related pay: e.g. bonuses for achieving targets * Shares and options: less common in small businesses, but popular in businesses whose shares are traded on stock markets * Pensions – becoming less common and generous. Small businesses tend not to offer pension benefits.
2. Social Reward
Social Reward is a kind of motivation. It is needed in every organisation most of the time. It has to give it to employee in order to have them accomplish a task or project. It seems like they have a tough time wanting to do something if they feel there is no motivation given for the job or no reward that will come from them completing the job. So employer have to give them a reward as an end result of the efforts of employee given. Social rewards adversely, are more fulfilling to employee’s heart and more beneficial to them in the long run. Social rewards are things such as hugs, a “great work”, a big “thank you” or “I’m proud of you!” and they create a positive self esteem within the individual (Dionna Sanchez, 2011). The more social rewards, the more employee learn what it means to take pride in themselves and their efforts. Employee will start feeling motivated because they feel good about who they are and what they have done, not because of a desire to get something! 3. Physical reward
According to Shirley Better (2008), psychic rewards relates to satisfaction one experiences emotionally and spiritually from holding a favoured
position. When one enjoys his/her business, the success and money are bound to follow, but never quite works in reverse. It consists of entirely subjective evaluations of the work situation. Psychic rewards included bring benefit to the lives of others, the services or products delivered make a positive difference in people’s lives and satisfy a real need, and have the potential of becoming internationally significant. Psychic reward comes from the psyche when you found peacefulness and contentment or when you feel you have done something worthwhile that has helped others can be of great importance in having a life that is fulfilling.
4. Extrinsic reward
According to Kenneth W. Thomas (2009), extrinsic rewards are usually financial term which is the tangible rewards given employees by managers, such as pay raises, bonuses, and benefits. They are called “extrinsic” because they are external to the work itself and other people control their size and whether or not they are granted. In contrast, intrinsic rewards are psychological rewards that employees get from doing meaningful work and performing it well. Extrinsic rewards played a dominant role in earlier eras, when work was generally more routine and bureaucratic, and when complying with rules and procedures was paramount. This work offered workers few intrinsic rewards, so that extrinsic rewards were often the only motivational tools available to organizations. Extrinsic rewards remain significant for workers, of course. Pay is an important consideration for most workers in accepting a job, and unfair pay can be a strong de-motivator. However, after people have taken a job and issues of unfairness have been settled, we find that extrinsic rewards are now less important, as day-to-day motivation is more strongly driven by intrinsic rewards.
5 .Intrinsic reward
According to Kenneth W. Thomas (2009), there are four intrinsic rewards: * Sense of meaningfulness. This reward involves the meaningfulness or importance of the purpose employees are trying to fulfill. Employee will feel them have an opportunity to accomplish something of real value—something that matters in the larger scheme of things. This is on a path that is worth time and energy, giving a strong sense of purpose or direction. * Sense of choice. Employee feel free to choose how to accomplish work—to use best judgment to select those work activities that make the most sense and to perform them in ways that seem appropriate. Employee feel ownership of work, believe in the approach you are taking, and feel responsible for making it work. * Sense of competence. Employee feel that they are handling work activities well—that performance of these activities meets or exceeds personal standards, and that they are doing good, high-quality work. Employees feel a sense of satisfaction, pride, or even artistry in how well you handle these activities. * Sense of progress. Employees are encouraged that efforts are really accomplishing something.
They feel that work is on track and moving in the right direction. Employees see convincing signs that things are working out, giving them confidence in the choices they have made and confidence in the future. The intrinsic rewards are also a relatively healthy and sustainable source of motivation for employees. There is little chance of burnout with this form of motivation. Workers with high reward levels experience more positive feelings and fewer negative ones on the job. Their job satisfaction is higher, they report fewer stress symptoms, and are more likely to feel that they are developing professionally. The intrinsic rewards are also a relatively healthy and sustainable source of motivation for employees. There is little chance of burnout with this form of motivation. Workers with high reward levels experience more positive feelings and fewer negative ones on the job. Their job satisfaction is higher, they report fewer stress symptoms, and are more likely to feel that they are developing professionally. 2.2.3 Journal
Based on our research, in the journal of Performance Based Incentive Plans, Rakesh K. Sarin and Robert L. Winkler (1980) had stated that incentive plans are an integral part of management control since incentives as measures of recognition of performance are significant motivating factors for corporate executives. The basic idea is to state empirically verifiable conditions on the decision maker’s preferences that imply some particular form of the incentive function. Rakesh and Robert had show how an incentive plan can be devised when incentive compensation to managers is based on their actual performance on some predetermined criteria.
They had proved that reward system had effect the organization performance. Ruth Wageman and George (1997) also prove the importance of reward system on group behaviour and performance. They had developed a model that predicts that task and reward interdependence will interact to increase performance, and present results of a laboratory experiment that confirms their prediction. The last result suggests caution in interpreting the efficacy of changes in the design of work. Such changes, if unaccompanied by changes in the design of the reward system, are likely to appear successful in terms of observed cooperation.
This point also can be view through Joseph E. Coombs and K. Matthew Gilley (2005) in the journal of Stakeholder Management as a Predictor of CEO Compensation: Main Effects and Interactions with Financial test the effects of stakeholder management on CEOs’ salaries, bonuses, stock options, and total compensation. They had examined the extent to which the interaction of stakeholder management and financial performance determines compensation. They found that stakeholder management typically reduces the rewards CEOs may get for increasing levels of financial performance. In tandem, these results indicate that CEOs may jeopardize their personal wealth by pursuing stakeholder-related initiatives.
Besides, Geoffrey B. Sprinkle (2000) had reported the results of an experiment that examines how incentive-based compensation contracts compare to flat-wage compensation contracts in motivating individual learning and performance. The results suggest that incentives enhance performance and the rate of improvement in performance by increasing both: (1) the amount of time participants devoted to the task, and (2) participants’ analysis and use of information. Collectively, the results suggest that incentives induce individuals to work longer and smarter, thereby increasing the likelihood that they will develop and use the innovative strategies frequently required to perform well in complex judgment tasks and learning situations.
Furthermore, in Top Management Team Compensation: The Missing Link between CEO Pay and Firm Performance. Mason A. Carpenter and Wm. Gerard Sanders (2002) discuss the relationship between CEO and top management team (TMT) member compensation, and explore the implications of TMT pay for firm
performance. In support of their theorizing, they found CEO pay to be related to TMT pay; TMT compensation, in turn, predicted performance when aligned with shareholder interests and internal contingencies. Moreover, the effect of CEO pay on future firm performance was dependent on top team pay. John Bishop (1987) also examines individual’s relative wage depends on his/her productivity relative to others doing the same job. The wage response to relative productivity and training costs was weaker in small labour markets, suggesting that wages do not fully respond to performance because of the firm specificity of job performance differentials.
For the journal title An Empirical Investigation of an Incentive Plan that Includes Nonfinancial Performance Measures, Rajiv D. Banker, Gordon Potter and Dhinu Srinivasan (2000) had suggests that because current nonfinancial measures are better predictors of long-term financial performance than current financial measures, they help refocus managers on the long-term aspects of their actions.
However, little empirical evidence is available on the relation between nonfinancial measures and financial performance, and even less is known about performance impacts of incorporating nonfinancial measures in incentive contracts. Luis R. Gomez-Meji (1992) also had mention that the effectiveness in strategy implementation at the corporate level depends significantly on the existence of a match between compensation strategies and diversification strategies. If different compensation strategies are needed for the effective implementation of diversification strategies, then it follows that systematic matching of compensation and diversification strategies will have a positive impact on firm performance.
The issue of relationship between reward system and organization performance also can be seen in the journal of Contrast Effects in Performance Evaluation and Reward Practices, John M. Ivancevich (1983) had mention that the supervisor’s evaluation of subordinate performance is an extremely important task in organizations. These evaluations often are used to make pay, promotion, training, lay-off, and transfer decisions. Despite the crucial role of performance evaluations, there still is limited understanding of the kinds of information supervisors’ use in reaching performance judgments. However, it is known that supervisors do not use all available information about subordinate to make judgment.
Besides, for the journal of Pay Dispersion and Workforce Performance: Moderating Effect of Incentive and Interdependence, Jason D. Shaw, Nina Gupta and John E. Delery (2002) had examine for the study predicts that pay dispersion will be associated with higher levels of workforce performance when accompanied by formal individual incentive systems and independent work, while pay compression is desirable in the absence of individual incentive systems and when work is interdependent.
Rajesh K. Aggarwal and Andrew A. Samwick (2003) also had showed that top management incentives vary by responsibility. For divisional executives, the pay-divisional performance sensitivity is positive and increasing in the precision of divisional performance and the pay-firm performance sensitivity is decreasing in the precision of divisional performance. These results support principal-agent models with multiple signals of managerial effort. As summary, all the experts had considered that reward system had playing the main role of affecting the organization performance.
3.0 Objectives of the Study
Our study is all about the relationships between reward systems being implement in the company and firm performance. Here we have underline four objectives that can aid us to achieve what we want in this study. The first objective is to determine the background and nature of business being operated by the company. It is important to know what kind of company interviewed to help us understand about the company. From this objective we can learn a brief history, type of business as well as nature of the business. Secondly is to understand the reward system being practiced by the company. There are few types of reward system namely extrinsic rewards and intrinsic rewards. What type of this reward system being applied by company? Other matters include in this objective are person who design the system, the target group of the reward system and processes and procedures involve in the implementation of system. By study this objective we should get a clear picture of the nature of company reward system.
The next objective is know the employees’ thinking regarding the reward system being practice by the company. Since the employees are the major part of the target group of reward system, we want to assess how employees perceived the reward system of their company. To achieve this objective, we will study what kind reward being given to them and their perception/feeling to the reward. By receive respond from employees, we can indirectly evaluate the effectiveness of the reward system. The company also can use the respond to enhance or improve their system. The last objective we want to achieve is to study the effectiveness of the reward system being implementing by the company.
We want to know what tools or methods company use to evaluate the effectiveness of reward system. In other word we can say that how company measure the effectiveness of reward system. Does the effectiveness of reward system congruence with company planning and objective? And how reward system being practiced would enhance the company performance. All these will cover by the last objective.
To accomplish the objectives stated, investigation will be conducted by collecting data’s from interviews and internet search.
1. Background Reading
Because we were not very familiar with the industry the company belongs to, we access the website of Padiberas Nasional Berhad (BERNAS) to get the big picture of the company.
At 22nd November 2011 (Tuesday), we carried out face to face interview at Padiberas Nasional Berhad (BERNAS) aims to get an in-depth understanding of company background and objective. We did some discussions with Human Resource Manager, Mr. Yahya Salleh. We asked him about the ways that the company measure performance and how they reward their employees. The most important part is on the reward system. This interview is done around two hours and 30 minutes. Besides that, we also got the data for the company by using telephone communication while we need some more data after the interview.
3. Internet search
Besides the methods that have been mentioned above, we have also obtained information from the Padiberas Nasional Berhad (BERNAS) website through internet. The website provided us with the roughly introduction of the Padiberas Nasional Berhad (BERNAS) and the product available in the company. Besides that, we also do some reading and studies on journal and articles about the reward system and get the relevant technical and professional knowledge used for our project through the search engine goggle and yahoo. It makes us fully understand and helped us a lot in creating interview questions.
1. To know the background and nature of business being operated by the company Padiberas Nasional Berhad (BERNAS) came into being with the taking over of Lembaga Padi dan Beras Negara’s (LPN) role as the custodian of Malaysian paddy and rice industry when the latter was privatized in January 1996. BERNAS continued to perform an important role in the national paddy and rice industry and also assumed all social and commercial obligations previously undertaken by LPN. These include conserving, maintaining and managing the National Paddy/Rice Stockpile, representing the government on the management and disbursement of subsidies to paddy farmers, managing the Bumiputera Rice Miller scheme, purchasing paddy from farmers at guaranteed minimum price and acting as the buyer of last resort.
In return, BERNAS was given the responsibility to be the sole importer of rice into Malaysia till 2010, with the option for renewal for another five years, subject to approval. On 25 August 1997, BERNAS was listed on the Kuala Lumpur Stock Exchange main board, marking a historical significance. BERNAS has continued to evolve through the integration of its supply chain with existing players at the international level of wholesaling, farming, processing and supplying. While the history of BERNAS may have been short, it inherited a long, vital heritage from its forerunner Lembaga Padi dan Beras Negara (LPN). And while retaining its social obligations, BERNAS now pays greater attention to its commercial operations and efficiency without compromising on its responsibilities in safeguarding national interests.
Padiberas Nasional Berhad (BERNAS) is a company listed on the Main Market of Bursa Malaysia. As the nation’s partner in the domestic paddy and rice industry, BERNAS and its group of companies are involved in the procurement and processing of paddy; as well as the importation, warehousing, distribution and marketing of rice in Malaysia. BERNAS controls about 24% of the paddy market and 45% of the local rice demand in 2010. To increase their presence along the entire industry supply chain, the BERNAS Group of companies is now involved in seed and farming activities, international rice joint venture, as well as rice complementary businesses. Besides, BERNAS obligation also include maintenance of the nation’s rice stockpile, acting as the buyer of last resort for paddy farmers, managing the Bumiputera Rice Millers Scheme and the distribution of Paddy Price Subsidies to farmers on behalf of the Government.
For future, Padiberas Nasional Berhad (BERNAS) had planned to own at least 40% of local paddy market. For now, BERNAS only owned 30% of paddy market. The rest of 70% owned by others companies. So, BERNAS had a strategy plan by running a programme named ‘Program Rakan Ladang’. Program Rakan Ladang (PRL) was launched in 2008 to intensify BERNAS’ involvement in rice farming projects. The programme is a strategic pact between BERNAS, Government agencies and farmers in enhancing cooperation in order to improve yield and quality of the paddy produced, thereby increasing their income and indirectly contributing towards the Government’s aspiration of achieving a higher self-development. PRL has incorporated socially responsible investment measures such as environmental protection, responsible farm practices and deployment of Good Agriculture Practice (GAP) techniques for farmers. PRL also involves the farming community in all aspects of management, business and operations to ensure the farming community’s welfare and livelihoods are not compromised.
More than 55% of the local paddy comes from the granary areas in Kedah and Perlis, where farmers face many challenges including limited funding and infrastructure, poverty and old age. Through coordinated effort, PRL helps to improve farmers’ income by promoting efficiency in the supply chain, productivity and harvest quality. Farmers are exposed to the latest technology and sustainability programmes as well as given financial assistance of up to 100% without interest for planting costs. Their paddy channeled to BERNAS is priced according to competitive market value. As participants of PRL they also enjoy other benefits and incentives along with the opportunity to perform umrah and ziarah. To date, a total of 48,000 farmers have benefited from the PRL programme nationwide.
2. To understand the reward system being practice by the company.
Below are those rewards being practice in BERNAS:
Bonus: the bonus amount will be given based on performance of employees which measure with ‘Sistem Penilaian Prestasi’ (SPP). Every year in December, head of every department will fill up SPP form through online for every staff under him/her. The performance of every staff will give based on percentages. Higher percentages will get more bonuses in the year. After the head of department fill up the form, he/she will email to boss in Kuala Lumpur to check out. The bonus will be given on January of next year. Employees also will get open school day bonus and New Year bonus, but those bonus amounts will be deducted if their performance is bad. Staff with discipline problems also will not get any bonus. Medical treatments: Every employee can claim for medical treatment costs. There are four types of medical treatment cost can be claim.
The first one is outpatient treatment. This only can be claim up to RM3000 per year. Secondly is inpatient treatment which can be claim up to RM 35,000 per year. Dental and eyes treatments are allocated up to RM 500 and RM 300 per year for each employee. All the medical treatments area allowable for employee he/herself and immediate family (parent). * Gratuity: Amount of gratuity will based on years of the employee had work in the company. Employee can only get gratuity when he/she retired at the 55 years old. For those retired employees who work in BERNAS more than 10 years, he/ she will get gratuity amount will be 2% of last salary divide by years’ work in the company. For those pension employees who work in BERNAS less than 10 years, he/she will get gratuity amount will be 1.8% of last salary divide by years’ work in the company.
* Promotion: There are two types, one is upgrade and another is promotion. Both upgrade and promotion can take place either non-executive (NE) or executive (E) Upgrade means the position of employee will upgrade in the same group. Promotion is means the position of employee will upgrade to another group. For example, non-executive 1(NE1) to non-executive 4(NE4) is considering as one group, non-executive 5(NE5) is considering as one group, and non-executive 6(NE6) is considering as one group. So, if employee’s position moves from non-executive 1 to non-executive 4, then this is upgrade. If the position is from non-executive 5 to non-executive 6, then this is promotion. An employee only can get promotion when recommended made by head of department and send the list to Human Resource department to choose.
* Competition of 5’S’: This 5S is consist of uses a list of five Japanese words which are seiri, seiton, seiso, seiketsu and shitsuke which mean sorting (seiri), straight tening or setting in order/stabilize (seiton), sweeping or shining or cleanliness/systematic cleaning (seiso), standardizing (seiketsu) and sustaining the discipline or self-discipline (shitsuke). This competition will be held between BERNAS’ branch. The branch win for this competition will get a prize based on category such as money. This programme only conducts for once in two years.
* Competition of SGA (Small Group Activity): Every group will be assign a project and need to present it in front of jury who come from the company staff itself. The group who present the best idea to help BERNAS gain profit or improve company operation will get award. * Allowances for vehicle: This allowance only provide for senior manager and above position. 1 km equal to RM 0.75 to be claim. * Others allowances: Which include allowances for food, overtime, daily and courses (such as training courses) * Allowances for attend external courses: These allowances will include hotel fees, fly, transportation and etc. The courses only can be related to rice or paddy, and need to get approved from company. * Discharge umrah
* Loan for vehicle and house
* Allowances Cola: For those employees always exposed to dust.
All of the employees in BERNAS are involve in the implementation process. They can get the rewards in the reward system as long as their performances are under evaluated. BERNAS had their own systematic procedures to evaluate employees’ performance by using Sistem Penilaian Prestasi (SPP) and give
them reward based on it.
3. To understand the employees’ perception on the reward system being implemented. So far, those employees in BERNAS are satisfied with the reward system being practice in this company. They just unsatisfied with the promotion reward because need to recommend by head of department only can be upgrade. This is unfair to those talent employees but do not have good relationship with head of department. There are many rewards being given to employees which include financial and non-financial. Mostly of the rewards are financial which consists of bonus, claim for medical treatment costs, allowances and etc. Non-financial reward consists of promotion. For problematic employees who unsatisfied with wages and working condition terms, BERNAS will have a meeting with trade union to discuss the problem of employee and solve the problem.
If the problem consist of discipline of employees, BERNAS will let the disciplinary associations which under the Human Resource department to solve it. The employees who have the discipline problem need to show a letter which contains reasonable reason to discipline association. If the discipline association does not accept the reason given by the employee, they will develop a group of tribunal which consists of jury to judge the employee. If the problem interferes criminal, BERNAS will give report to police to solve it. BERNAS HR department also has appointed industries relation officer who respond to complain being lodge and perform probe pertaining the complaint.
4. To study effectiveness of the reward system being implemented by the company. Company evaluates the effectiveness of the reward system being practiced by the company through the numbers of compliant and critics receive from employees. The more compliant and critics company receives, this means that many employees dissatisfied with the reward system and it is not effective. BERNAS also will always discuss with trade union about the reward system and improved it. Reward system can let employees more enthusiastic when working, more proactive, responsible and felt that they are important to company. Employees will work harder and give optimal performance to company for the purpose of getting more rewards. At the same time, the company’s performance will increase because the profit of company was increase.
In the journal of Performance Based Incentive Plans, Rakesh K. Sarin and Robert L. Winkler (1980) say that incentive plans are an integral part of management control since incentives as measures of recognition of performance are significant motivating factors for corporate executives. For BERNAS Company, their managers use various types of incentive plans such as bonus, gratuity, promotion, medical treatment and etc to motivate their employees for better performance. These types of rewards are material in influence employees output. Result shows us rewards system has contributed a significant portion in employees’ performance. Besides, in the journal of Contrast Effects in Performance Evaluation and Reward Practices, John M. Ivancevich (1983) had mention that the supervisor’s evaluation of subordinate performance is an extremely important task in organizations.
These evaluations often are used to make pay, promotion, training, lay-off, and transfer decisions. For BERNAS Company, they used supervisor to evaluate subordinate performance. In order to evaluate employees’ performance, supervisors used Sistem Penilaian Prestasi’ (SPP). This form is then fill in by head of department through online in every year end and send to boss in headquarter in Kuala Lumpur. Furthermore, Ruth Wageman and George (1997) also prove the importance of reward system by examine in the journal Incentives and cooperation: the joint effects of task and reward interdependence on group performance that the joint affects of task interdependence and reward interdependence on group behaviour and performance.
In BERNAS Company, Human Resource Manager told us that after rewards had given to employees, employees performance output have significantly increase especially for group performance during the interview session with us. Lastly, in the Journal of The Effect of Incentive Contracts on Learning and Performance by Geoffrey B. Sprinkle (2000) reports the results of an experiment that examines how incentive-based compensation contracts compare to flat-wage compensation contracts in motivating individual learning and performance.
The results suggest that incentives enhance performance and the rate of improvement in performance by increasing in the amount of time participants devoted to the task and participants’ analysis and use of information. In BERNAS Company, as mentioned in above statement, employees’ performance is linked to reward system. By providing incentive based compensation contracts, employees in BERNAS Company are willing to give more time to participant in the company. In order to get award, employees are willing to do participate in doing more analysis and searching for information in the competition of project which is Small Group Activity (SGA).
In completing our group project, we are facing several limitations that slow down the process of our assignment. At the beginning of the project, we are asked to interview a company based on the research of reward system in the company. However, the lack of cooperation of the first company that we had chosen had slow down the progress of our project as the company can’t give us the confirmation about the interview session with them. This had make us had a time limit in finding another company to accept our interview. Secondly, it is difficult to gather all the group members to take part in the interview due to the crash of exam time and the interview session.
Based on this, we just have three representatives to conduct the interview with the person in charge of the company. Probability of unrecorded some important information is higher as the information is recorded based on the understanding of the group member taking part in the interview. There have a risk that the information recorded is incomplete and bias if misunderstanding and communication barriers are existed. Furthermore, the interview is conducted through face to face method, so we are uncertain with the accuracy and the realistic of the information provided by the company. If the information provided by the company can’t reveal the real situation of the reward system that had implemented, there is a risk that our research is bias and inaccurate.
We also need to observe the action and behaviour of the managements and employees as the interview alone is not enough to make us understand of the whole system. Besides that, the interview is conducted between our group member and the representative of the company, there is a tendency that the representative will provide information that ‘look good’ and may not reveal the real situation. Therefore, there is a risk that the information gather is not enough to represent the whole implementation of reward system. Last but not least, having research on the reward system alone is not enough as reward system had an interrelationship with control system and performance evaluation. But in our research, we only examine the reward system of Padiberas Nasional Berhad (BERNAS) and this make the links or coordination between the systems is unable to determine. Hence, it cause our findings is incomplete and limited.
Expand the scope of the current system to increase opportunities, as well as provide multiple awards across divisions, team efforts, and career milestones. Most of current reward system for Padiberas Nasional Berhad (BERNAS) emphasized on individual performance rather than group performance. Expand the scope of the current system to increase opportunities, as well as provide multiple awards across divisions, team efforts, and career milestones. It might be better if group rewards are given. Each member is motivated to do better at the same time. They feel a sense of cooperation and friendship among other members of the team. This will also teach the employee that his individual effort is actually a part of accomplishing his team’s goal. On a larger scale, he is able to feel a sense of belongingness to the company and a sense of responsibility in accomplishing company goals.
a.) Always link the achievement to the mission and goals of the organization. To be more effective in their reward system, when planning a reward system, Padiberas Nasional Berhad (BERNAS) manager should first establish the performance measures or standards. In doing so, the manager must make sure that the reward systems are consistent with the company goals. Manager must also take into consideration the employee demographics. Performance standards should be well-defined and must be challenging but still achievable. For a reward system to be effective there should be a clearly established connection between the rewards and the job performance. This means that employees should understand that better/more performance means more rewards in the end. When he has seen this connection, he feels that the expected result of his action happened because of his own efforts. This then makes him feel confident of his abilities and so he feels reinforced
b.)Be creative in the methods of recognition and reward to include more symbolism and power rewards. Recognition means acknowledging someone for specific accomplishments achieved, actions taken or attitudes exemplified through their behavior. Appreciation on the other carries definition on expressing gratitude to someone for his or her actions. Showing appreciation to employees by acknowledging excellent performance and the kind of behavior manager want to encourage is best done through simple expressions and statements. Currently, Padiberas Nasional Berhad (BERNAS) is rewarding their employees in traditional ways. Manager should be creative and cater elements of surprise in delivering recognition and appreciation.
For example, sending a personal note or stop by the employee’s desk to convey appreciation. Another approach is combine recognition and appreciation in the form of a public statement of thanks in front of the employee’s co-workers or team, citing specific examples of what they have done that has positively impacted the organization.
c.)The Human resources department for each branch should review all annual performance evaluations and merit pay recommendations to ensure consistency and integrity. Currently, the evaluation of performances for Padiberas Nasional Berhad (BERNAS) is done thru online and is filled by the department manager and send to head office without review by it own human resources department. d.) Offer more incentives for excellent performance.
The reward system for Padiberas Nasional Berhad (BERNAS) should be changed to offer more incentives for excellence in performance and to place less emphasis on traditional research. Currently, Padiberas Nasional Berhad (BERNAS) is only offer bonus to employees whose perform well in their job. e.) Giving more on extrinsic reward.
Giving of extrinsic rewards such as increase in the salary or a new office space motivates employees to perform better. However, extrinsic rewards may
lose their value over time. Employees will later on think that these extrinsic rewards are automatic payoffs for their performance. Thus, the balance between intrinsic and extrinsic reward is crucial. When employees feel like this, they will no longer feel motivated by such rewards. Moreover they will lose their intrinsic motivation as what push them to work are the things they get. It is suggested that to prevent this from happening, managers need to have a mixture of extrinsic and intrinsic rewards. While giving material things for rewards, it is also good if manager boost his self esteem by telling him how valuable his individual contribution is to the achievement of the company goals.
f.)Institutionalize positive feedback into the organization’s culture, so supervisors and peers, especially, are cognitive of the accomplishments of others, even if it does not always result in success. Feedback is an information about reactions to a product, a person’s performance of a task. Manager should always collect feedback from employees as well as supervisors, clerk, and general staff. Currently, Padiberas Nasional Berhad (BERNAS) is only received feedback when only problems are happened. Manager should time to time collect feedback by using questionnaire and interview. g.)Acknowledge achievers in a personalized, timely manner that is shared with peers. h.)Formulate a recognition team that represents all divisions of the organization to monitor and upgrade the program as cultural values change.
For the recommendation of the limitation that our group had faced, sound recorder is needed as this can decrease the risk of some important information to be unrecorded. Sound recorder also can help our group member discuss together and analyse what information had been given by the representative of the company. Besides that, since the interview session alone is not enough for us to understand d whole reward system for the company, so maybe we can have an observation on the action and behaviour of the management team and employees. This definitely can help a lot in our research as observation can give us a real situation of the company. Lastly, reward system are limited to some of the areas, so research on control system and performance evaluation should also be carried out to get
a overall view of the reward system that had implemented by the company.
As a conclusion, we found that individual performance evaluation plays a crucial role in an organization. To improve the effectiveness of the reward system, company should design a reward system that includes team-based reward and individual-based reward. For example, for the jobs that need a huge of effort the reward system can be based on team-based reward while for the individual job performed, individual based reward will be more suitable. Besides that, to let the employees fully aspire with the reward system that is promoted in the company.
The most important thing is to motivate the employees and goal congruency. By this way, the employees will know who to act to gain reward that can fulfil their satisfaction with the company. As the company environment is keep changing due to internal and external force factors, the reward system must also be always up-to-date. This means that the reward system must be work in a flexibly way. Maybe apply the reward system that mixture of extrinsic and intrinsic reward. For example, Padiberas Nasional Berhad (BERNAS) can either promoted with the higher position as non-financial reward to the best employee or he employee can choose to be rewarded for higher pay as financial reward. Other type of non-financial reward is giving a chance to enjoy 3 days and 2 nights stay in the resort with their family. By this way, employees will strive to work harder to achieve the target set and this indirectly increases the performance of the company. Lastly, we have successful to achieve our objectives of carry out this study. In the end, we able to get the better understanding about the different types of reward system and its effect to a company.
Baker, R. W. (1997). Journal of Organizational Behavior. Incentives and Cooperation: The Joint Effects of Task and Reward Interdependence on Group , 139-158. Better, S. (2008). A primer on theory and strategies for social change. Bishop, J. (1987). Journal of Labor Economics. The Recognition and Reward of Employee Performance , S36-S56. Bratton, J. &. (2007). Human resource management: Theory and practice. Britton, P. B. (1999). Rewards of Work .
Deeprose, D. (1994). How to Recognize and Reward Employees . Ed. Kevin Hillstrom, L. C. (2002). Employee Reward and Recognition Systems . Gilley, J. E. (2005). Strategic Management Journal. Stakeholder Management as a Predictor of CEO Compensation: Main Effects and Interactions , 827-840. Gomez-Mejia, L. R. (1992). Strategic Management Journal. Structure and Process of Diversification, Compensation Strategy, and Firm Performance , 381-397. Ivancevich, J. M. (1983). The Academy of Management Journal.
Contrast Effects in Performance Evaluation and Reward Practices , 465-476. Jason D. Shaw, N. G. (2002). Strategic Management Journal. Pay Dispersion and Workforce Performance: Moderating Effects of Incentives and , 491-512. Rajiv D. Banker, G. P. (2000). The Accounting Review. An Empirical Investigation of an Incentive Plan That Includes Nonfinancial Performance , 65-92. Samwick, R. K. (2003). The Journal of Finance. Performance Incentives within Firms: The Effect of Managerial ResponsibilityAuthor , 1613-1649. Sanders, M. A. (2002). Strategic Management Journal. Top Management Team Compensation: The Missing Link between CEO Pay and Firm , 367-375. Sprinkle, G. B. (2000). The Accounting Review. The Effect of Incentive Contracts on Learning and Performance , 299-326. Stack, J. (1996). The Problem with Profit Sharing .
Thomas, K. W. (2009). Intrinsic Motivation at Work: What Really Drives Employee Engagement . Thornburg, L. (1992). Pay for Performance: What You Should Know . Tully, S. (1993). Your Paycheck Gets Exciting .
Winkler, R. K. (1980). Management Science. Performance-Based Incentive Plans , 1131-1144.
1) Could you briefly elaborate the history of the company. 2) Could you explain to us the nature of business being operated by the company. 3)
Could you tell us the strategy planning of the company 4) Could you tell us the reward system being practiced by the company 5) Could you let us know who involved in the implementation process, is there any systematic procedures being followed. 6) From your perspective, how do you feel about the employees’ perception on the reward system being practiced by the company? 7) What kind of the reward being given to employees (in term of financial or non-financial)? 8) How to handle the problematic (not performing) employees? 9) How the company evaluate the effectiveness of the reward system being practiced by the company? 10) How the reward system being implemented by the company could enhance the firm’s performance?
Pictures during Interview
Padiberas Nasional Berhad (BERNAS) Attendance Card
Non-financial rewards Representative of the company
University/College: University of Arkansas System
Type of paper: Thesis/Dissertation Chapter
Date: 12 April 2016
We will write a custom essay sample on The Relationships Between Reward Systems Being Implement in the Company and Firm Performance
for only $16.38 $12.9/page