1. REWARD MANAGEMENT
HRM
WK 6
Dr. Shohail Choudhury
Dr. Shohail Choudhury

2. REWARD
 Strategies and policies to reward people
fairly, equitably and consistently in
accordance with the value of the
organisation.
 Ensure that organisation can attract,
retain, and motivate competent and
committed employees.
 Reward is related to Motivation.
Dr. Shohail Choudhury

3. MOTIVATION
 The mental process of choosing desired
outcomes, deciding how to go about them,
assessing whether the likelihood of success
warrants the amount of effort that will be
necessary, and setting in motion the
required behaviours.
 Intrinsic motivation: arises from the factors
and processes within the individual.
 Extrinsic motivation: influenced by others.
Dr. Shohail Choudhury

4. THEORIES OF MOTIVATION
 Content theories: What motivates people?
 Maslow’s need theory
 Herzberg’s two-factor theory
 Process theories: How are people
motivated?
 Expectancy theory
 Goal theory
Dr. Shohail Choudhury

5. NEED THEORY
 Abraham Maslow (1954) argued that human
beings have five innate needs, which he
suggested could be arranged in a hierarchy of
relative pre-potency.
 Each level of need is dominant until satisfied.
 Only then next level need become a motivating
factor.
 Self-actualisation : the ultimate human goal.
Dr. Shohail Choudhury

6. Maslow’s Hierarchy of Needs
Self For growth and fulfilment of
-Actualisation personal potential
For independence, recognition,
Esteem needs status and respect from others
For relationships, affection,
Love/Social belonging
For security, order,
Safety needs predictability, freedom
from threat
Physiological needs:
Dr. Shohail Choudhury
For food, shelter, sleep

7.  The hierarchy underpins that people can be
motivated at work by
Reward which offer satisfaction of their higher
order needs.
 Social belonging (teamwork,
collaboration)
 Esteem (Competence, achievement,
status, respect)
 Self-actualisation (Challenge, personal
development, fulfilment)
Dr. Shohail Choudhury

8. Two FACTOR Theory
 Frederick Herzberg (1966) identified two
basic need categories of individuals at
work.
 The need to avoid unpleasantness:
 Fair treatment in compensation
 Working conditions and administrative
practice.
 The need to develop in one’s occupation
 Advancement
 Recognition, responsibility, achievement.
Dr. Shohail Choudhury

9.  The need to avoid unpleasantness:
 Hygiene factors
 Minimise dissatisfaction and poor job
performance
 But little ability to motivate the
individual to higher levels of job
satisfaction or extra performance.
 Essentially extrinsic rewards
 Offers satisfaction for lower level needs
Dr. Shohail Choudhury

10.  The need to develop in one’s occupation
 Motivator factors
 Motivating individual to more positive
attitudes, effort and performance
 Essentially intrinsic rewards
 Factors inherent in the work itself
 Offering psychological satisfaction of
higher-level needs
Dr. Shohail Choudhury

11.  “A satisfied worker is not necessarily a high
producer, and high producer is not
necessarily a satisfied worker” (Armstrong 2003).
 ‘Dissatisfaction arises from environment
factors: satisfaction can only arise from the
job’ : Herzberg.
 Herzberg’s work focused on
 Job design
 Job enrichment (upgrading the
challenge)
Dr. Shohail Choudhury

12. McClelland – Achievement Motivation Theory
 David McClelland identified four main need-
based motives:
 Achievement
 Power
 Affiliation
 Avoidance
 Total Reward Concept recognises a reward
system offering both extrinsic and intrinsic
rewards.
Dr. Shohail Choudhury

13. REWARD
 All of the monetary, non-monetary and psychological payments that an
organisation provides for its employees in exchange for the work they
perform. (Bratton & Gold 2007)
 ACTIVITY (10 mins)
 What intrinsic satisfactions and rewards do you value
in your own job?
 Why do you work?
 What do you get out of your work that you most
value?
 What would you miss if you didn’t work?
Try putting each of these satisfactions into (a) Maslow’s
categories of needs and (b) Herzberg’s two factors.
Dr. Shohail Choudhury

14. PROCESS THEORIES
 Vroom-expectancy Theory
F=VXE
Force or strength of motivation to do
Valence = Strength of the individual’s
preference for outcome y.
Expectancy = Individual’s perception of the
likelihood that doing x will result in
outcome y.
Dr. Shohail Choudhury

15. Vroom’s model helps to explain why
performance incentives and rewards work
most effectively when:
 The link between effort and reward is
clear
 Intended results and goals are made
clear
 The reward is perceived to be worth the
effort
Dr. Shohail Choudhury

16. GOAL THEORY
Locke (cited in Mullins 2007):
Goal setting is more appropriately viewed as a
motivational technique rather than as a
formal theory of motivation.
People performance in jobs is related to
 The difficulty of their goals,
 The extent of their commitment to them
 The degree of feedback they receive on
their performance
Dr. Shohail Choudhury

17. REWARD SYSTEMS
Key objectives:
 Recruiting and retaining quality labour
 Motivating individual and team
performance
 Supporting organisational culture
 Supporting flexibility
Dr. Shohail Choudhury

18. COMPONENTS OF REWARD SYSTEM
 Direct or base pay
 Performance or variable pay:
 Payment by results (PBR)
 Performance related pay (PRP)
 Organisation performance pay : profit-sharing
scheme
 Indirect pay or benefits: Non case items or services.
 Deferred pay as pension
 Legal entitlements : sick pay, maternity pay,
maternity/paternity leave, annual leave.
 Fringe benefits: company cars, housing assistance,
medical insurance.
Dr. Shohail Choudhury

19. TOTAL REWARD CONCEPT
 Monetary payments are not most effective.
Quality of
working life
Skill
Challenge
development
in the job
Basic Pay
Overtime Career
Work life Benefits Opportunity
Bonus
balance Total
Remuneration
Profit sharing
Recognition Empowerment
Flexibility
Dr. Shohail Choudhury

20. BASIC PAY
 Salary and Wage system
Wages Salaries
Blue collar workers White collar workers
Short term job Long term tenure
Paid weekly Paid monthly
Premium rates for Overtime not usually paid
overtime
Based on weekly or hourly Related to seniority,
rate qualifications,
performance, progression
Dr. Shohail Choudhury

21. SALARY SYSTEMS
 A Grade structure: Hierarchy of levels
 A pay structure: defining pay ranges for each
grade, allowing scope for pay progression for
length of service or performance.
 Grade structure: Promotions and Transfers.
 Differentials: between pay ranges should
recognise increases in job value.
 The range should be wide enough.
 There should be overlap between two levels.
 Progression: fixed increments linked to age or
length of service.
Dr. Shohail Choudhury

22. WAGE SYSTEMS
 A Basic rate; plus
 Overtime premium rates
 Shift pay at premium rates for unusual or
socially disruptive hours
 Compensatory payments for abnormal
working conditions (danger, wet, dirt
money)
 Allowances (London living)
 Merit or Length of service bonuses
 Payment by results bonuses and incentives.
Dr. Shohail Choudhury

23. PERFORMANCE PAY
 Effective performance pay should
 Clear targets and standards of
performance
 Easy formulae to calculate rewards
 Rewards should be significant enough t
make effort (10% of basic salary?)
 Rewards related to performance
indicators which people can control
 Lengthy time lag between performance
and reward
Dr. Shohail Choudhury