Reward System Design for Our Organization a

Overview

A fair financial reward system is immensely important for any organization and we are thus planning to not only adopt a reward system which is based on merit and performance but which is also inherently fair. After discussing the five important components of the new design, we shall discuss how a reward system can be fair as well.

Following are five important components of the 'Reward System' which we need to consider for designing a new reward system for our company.

• Direct Compensation: Direct compensation is generally considered the basic pay that employees get in return to their service. These may include direct wages, overtime, penalty rates, holiday and long service leave, training, meals, payroll tax etc. This is indeed the basic component of the reward system and can be considered a foundation for all other incentives. Whatever the wage system is, it should be attractive enough for employees to satisfy their basic needs.
• Indirect Compensation: Apart from basic salary, other benefits must also form a critical part of the reward system that we need to have in our company. The basic wage or pay is the main component of compensation, but fringe benefits and cash and non-cash benefits have also become crucial in the overall employee package and may heavily influence the employee performance. Increase in other benefits also helps employees in those countries in which there are high personal tax rates. The policy of bonuses, sharing of profits and even allotting shares are new ways of rewarding employees for their better performance. On one level the basic pay and benefits help sustain employee performance and on the next level extra performance based incentives help employees perform better. In addition to the basic and direct compensation we can also offer additional non-cash rewards (e.g. dinners, holidays, discounts, etc.) contributing to ongoing performance and productivity.
• Meaningful Work: Working atmosphere and the challenging work can have a considerable impact on employee morale and performance. Managers at our organizations are concerned with factors such as individuals' awareness about the work situation and systems as they influence learning and performance. Organization's social norms and values that support learning, experimentation and challenges can have a positive impact on an individual's performance. Training is generally acknowledged as an important 'vehicle' for improving the work environment. It is generally considered that training is also seen as an investment rather than just 'a regular program' activity. If better trained employees are then empowered then they can make a huge difference in the company. The concepts of ownership and empowerment cannot be ignored and compensation cannot simply be considered an only element for performance regulation. Employees must be empowered to take action based on the basis of their understanding of different situations and scenarios within the organization. This empowerment will develop their problem solving skill and they will become a part of the big picture. Whether employees are working individually or they are part of the cross-functional teams, we should give employees the freedom and responsibility of making independent decisions. In order to win the trust of employees we must show reliance and confidence in our employees and their decisions. Good organizations support the culture of experimentation and making mistakes and thus promote innovation and empowered culture.
• Long-term Career Opportunities: Over the years, we have largely focused on promotion within rather than across departments. Thus finance staff may be recruited at base level, and eventually rise through the various available supervisory levels in that department. Whilst it is argued that this instills occupational depth and provides substantial experience, it may also fail to make use of employees' broader skills. Today, the concept of career planning or guiding employees to achieve their personal goal has also gained tremendous importance. The future needs can only be met if the company has talent and it hones the talents of its employees to prepare them for future responsibilities by carrying out proper development activities. So, it's not just about having

Parts of this document are hidden; this excerpt focuses on the core elements of reward system design and related organizational performance considerations.

Sources used in this document

Risher, H. (July-August 1999). Merit Pay Can Be a Hard Sell. Public Management. Taylor, C. (2002). Focus on Talent; Zoom In: Transferring Part of the Responsibility for Talent Retention from HR to Operations, to Leaders, Is a Cultural Shift. It's Likely That HR Will Gladly Share Ownership. Here's How Sprint Did It, T&D. Nourayi, Mahmoud M.; Daroca, Frank P., Performance evaluation and measurement issues. Journal of Managerial Issues, 1996.

Cite this Document

APA 7th Edition; MLA 9th Edition; Chicago 17th Edition