REWARDS – IN AND OUT

  

REWARDS – IN AND OUT

Just like a child being given a chocolate cupcake and a big hug after cleaning her room, rewards and recognition can be powerful tools for employee motivation and performance improvement.

But first lets define Rewards.  Jack Zigon defines rewards as "something than increases the frequency of an employee action". This definition points to an obvious desired outcome of rewards and recognition: to improve performance. This leads to job satisfaction and it comes in different ways and effect the employees accordingly. Motivational dynamics have changed dramatically to reflect new work requirements and changed worker expectation so the organizations are facing the dilemma of intrinsic rewards over extrinsic ones.

EXTRINSIC REWARDS

Extrinsic rewards are concrete rewards that employees can find very motivating, and are provided fairly, strategically, and linked to performance. Extrinsic rewards—usually financial—are 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.

MONETARY REWARDS

Monetary rewards are external and are given to an employee by a representative of the company. Whether it's a paycheck, a bonus, accrued vacation days, a gift card or anything else with a cash value, it is considered monetary. In addition, compensation packages are also considered external monetary rewards. Companies that offer child care, flexible spending accounts, and health insurance and wellness programs provide external rewards to employees. External monetary rewards are tangible and can be assessed a value by the employee.

There are a number of different types of reward programs aimed at both individual and team performance.

1.      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. 

2.      Bonuses

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. 

 

3.      Profit Sharing

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.

4.      Stock Options

Employee stock-option programs give employees the right to buy a specified number of a company's shares at a fixed price for a specified period of time usually around ten years. They are generally authorized by a company's board of directors and approved by its shareholders. The number of options a company can award to employees is usually equal to a certain percentage of the company's shares outstanding.

NON MONETARY REWARDS

Non-monetary external rewards are equally important factors in employee job satisfaction. The advantages of job security, flexible working hours and opportunities for advancement are extremely valuable to employees. Additionally, simple non-monetary rewards can impact an employee's morale and confidence. Praise from a supervisor, receipt of an employee-of-the-month award or the hanging of a blue ribbon on a work desk all instill a sense of pride and accomplishment. The simple act of a manager thanking an employee while shaking his hand can reap monumental benefits on the work front. An employee who feels a sense of accomplishment carries it to his next assignment.

INTRINSIC REWARDS

Intrinsic rewards are ones that come from within the employee. For example, an employee might decide to take on a task outside of his normal duties. It might be because he simply sees a need and wants to help the company, he might want a new job skill or he might want to show management that he is capable of increased responsibility. The benefit to this type of internal reward is that it originates within the employee; he has a great deal of personal satisfaction when he accomplishes the task. The downside to intrinsic rewards are that the employee might take on a new challenge to prove himself, but feel taken advantage of if he must continue the extra duties without recognition. If the employee is not promoted, given a raise or a bonus, he might decide to take his new skills to another company where he is recognized for the skills.

The following are descriptions of the four intrinsic rewards and how workers view them:

v  Sense of meaningfulness: This reward involves the meaningfulness or importance of the purpose you are trying to fulfill. You feel that you have an opportunity to accomplish something of real value—something that matters in the larger scheme of things. You feel that you are on a path that is worth your time and energy, giving you a strong sense of purpose or direction.

v  Sense of choice: You feel free to choose how to accomplish your work—to use your best judgment to select those work activities that make the most sense to you and to perform them in ways that seem appropriate. You feel ownership of your work, believe in the approach you are taking, and feel responsible for making it work.

v  Sense of competence: You feel that you are handling your work activities well—that your performance of these activities meets or exceeds your personal standards, and that you are doing good, high-quality work. You feel a sense of satisfaction, pride, or even artistry in how well you handle these activities.

v  Sense of progress: You are encouraged that your efforts are really accomplishing something. You feel that your work is on track and moving in the right direction. You see convincing signs that things are working out, giving you confidence in the choices you have made and confidence in the future.

Basically, most of today’s workers are asked to self-manage to a significant degree—to use their intelligence and experience to direct their work activities to accomplish important organizational purposes. This is how today’s employees add value—innovating, problem solving and improvising to meet the conditions they encounter to meet customers’ needs.

In turn,the self-management process involves four key steps:  

Ø  Committing to a meaningful purpose

Ø  Choosing the best way of fulfilling that purpose

Ø  Making sure that one is performing work activities competently, and

Ø  Making sure that one is making progress to achieving the purpose.

Each of these steps requires workers to make a judgment—about the meaningfulness of their purpose, the degree of choice they have for doing things the right way, the competence of their performance, and the actual progress being made toward fulfilling the purpose.

These four judgments are the key factors in workers’ assessments of the value and effectiveness of their efforts—and the contribution they are making.

When positive, each of these judgments is accompanied by a positive emotional charge. These positive charges are the intrinsic rewards that employees get from work, ranging in size from quiet satisfaction to an exuberant “Yes!” They are the reinforcements that keep employees actively self-managing and engaged in their work.

DIFFERENCE BETWEEN INTRINSIC REWARDS AND EXTRINSIC REWARDS

·         Intrinsic rewards fulfills employee’s intrinsic factors and are given by making the job contentmore favourable.

·         Extrinsic rewards fulfills employee’s extrinsic factors and are provided by making job contextmore favourable.

External rewards are given to employees from the company, bosses or even co-workers. But employees experience internal rewards, as well, though they come from within. The satisfaction of knowing he has completed a project, achieved a goal or simply applied his best effort to his work is internal rewards that contribute to job satisfaction. External rewards enhance an employee's internal rewards as they validate his own assessment of his self-worth. For example, an employee who prides himself on achieving a goal experiences validation when given a bonus check for his efforts.