Before exploring the reward system, it is essential to consider defining reward. A reward can be defined as any form of gratification that an employee gains from his or her employment with an employer.
The reward is a dynamic instrument. It not only creates opportunities for the fulfilment of motivational needs but also enhances the intensity of motivation.
This means employee motivation doubles every time he/she is suitably rewarded. Enhanced motivation leads to higher performance, which in turn leads to higher compensation.
According to White & Klein, “Reward can be defined as something that is perceived as beneficial or advantageous to a particular actor’s interests.”
According to Miller and Steinberg, “A reward can be defined as any positively perceived physical, economic or social consequence.”
A reward system refers to the procedures, rules, and standards associated with the allocation of benefits and compensation to employees.
Since rewards are so important to employee behaviour, reward systems become critical to employee performance and organizational success. The organization may have the latest technology, well-thought-out strategic plans, detailed job descriptions, and comprehensive training programs. Still, unless the people are rewarded for their performance-related behaviours, the “up-front” variables (technology plans and so on) or the rules that govern their behaviour have little impact.
In other words, going back to Skinner’s original conception, the antecedent cues (technology, plans, and the like) have the power to control or provide rules for behaviour only if there are reinforcing consequences.
As one behavioural management consultant points out:
A company is always perfectly designed to produce what it is producing. If it has quality problems, cost problems, and productivity problems, then the behaviours associated with those undesirable outcomes are being reinforced.
This is not conjecture. This is the hard, cold reality of human behaviour. The challenge for management is to understand this behavioural reality, eliminate the reinforcers for the undesirable behaviours, and, more oil importantly and effectively, reward the desirable behaviour.
Thus, organizational reward systems become the key, often overlooked, factor in bringing about improved performance and success.
When anyone mentions organizational reward systems, money comes to mind quickly. Monetary reward systems do play a dominant role.
However, as organizations in recent years have become leaner and more efficient, monetary rewards have become very limited and are increasingly unavailable.
More and more interest is now being given to non-financial rewards. Both monetary and non-financial rewards can be used to manage employee behaviour for performance improvement.
Pay is an unquestionably important form of reward. However, it is not the only way in which organizations can reward their people.
In addition to money, forms or recognition to identify and reward outstanding performance can be vital, but too often overlooked, part of the organizational reward system.
When people are asked what motivates them, money is always prominently featured on their list.
However, both formal organizational recognization and social recognition used systematically by supervisors and managers are very important to their people and their day-to-day behaviours and performance effectiveness.
For example, there is considerable research evidence that social recognition (informal acknowledgement, attention, praise, approval, or genuine appreciation for work well done) has a significant impact on performance at all levels and types of organizations.