For many decades, management has concerned itself towards understanding the act of getting work done and the people involved in these acts. From the 1890s when Frederick Taylor attempts at regaining direct control of labour process to the present, the structure, processes and people of organisation has been study continuously. Several scholars have study these acts from different perspective and dimensions and the organisation rewards systems and retentions practise is one of this dimension towards understanding why people do what the organisation requires them to do.
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The organisation is composed of people. People are the central core of organizational behaviour since the organisation itself does not behave but the people in it. Brook (2006, p.2) argues that organisation behaviour is simply the behaviour of people in organisation context with a focus on individual and group processes and actions. As employees in the organisation, people are often made to fit into an expressed standardized form of personality to reflect such firm. This employee needs to be motivated to do what the firm requires of them. “Individuals are the basic building material around which an organisation functions” (Brook 2006, p.14). Every individual has a unique perception of what is going on around them. People are motivated and satisfied in different ways and they have different expectations. Staff Motivation is very crucial for an organisation to be successful. Since people are motivated by different variables, it is therefore essential to understand those factors that increase people’s motivation at work. In the light of this, reward system is critical to employee motivation.
Reward system is used as a tool to help the firm effects its people towards achieving its strategic goals. Rollinson (2008, p 15) explained the levels of organisational behaviour. He states that at the individual level, “the focus is on matters such as values, attitude, beliefs, aptitudes, intelligence and motivation that influence how people behave as individuals”. While, employee contributes such things as making sufficient effort, offering skills and knowledge, having a concern for quality, and being flexible (Cornway and Briner 2005, p.37). “The organization in return provides such things as promotion, training, pay, respect, and feedback” (Ibid, p. 37). Massey (1996) argues that “among the payment system that have become more popular are broad-banded ones which ostensibly support cultural change by aligning contribution and competence of individuals with the requirement of the organisation” (Thorpe 2000, p. 30).
However, on the one hand, the employee is conversant of the reward system and will look at the total value proposition being offered by the organisation if that is compelling enough to keep him/her in the organisation. On the other hand, employee turnover is often costly for the organisation therefore the organisation will want to keep the employee in the company for as long as possible. Therefore, employee retention has a direct correlation with higher productivity and organisation performance; as such retention strategy that functions is a part of the ways the company sustains its industry competitiveness. Likewise, the employee seeks to get the best values for services rendered for the organisation, this service are rewarded with tangible and intangible rewards. Rousseau (1990, p. 393) explains that the contents have also been defined as an employee’s expectations of what the employee feels she or he owes and is owed in turn by the organization, and according to Parks, Kidder, and Gallagher (1998: 725) as what employees expect to give or contribute and what it is that employees expect to receive in return-their entitlements (Cornway and Briner 2005, p.37). In the light of this, total reward system is central to an organisation capacity to retain its employee.
The nexus of reward system, employee retention and organisation primary goal of profitability necessitates the importance of competitive compensation for employee. Although financial rewards is arguably not the number one motivator of people, but if the company is completely out of line with what obtains in the industry, it will lose good candidates during the recruiting process and employee after they have been hired. Therefore, it is essential to fairly compensate employee because of the effect of employee reward on organisation performance. This explains why effective reward management is very important for organisation. According to Armstrong (2007, p.3) “reward management deals with the strategies, policies and processes require to ensure that the contribution of people to the organisation is recognized by both financial and non-financial means”.
In this regard, when reward schemes and retention practises are necessary for organisation strategic performance, the integration of context specific reward system and organisation retention practises are crucial. As much as the desire to work is a factor of several motivational causes, the context of work is important factor that influence both the desire to work and human motivation. One of the most important factors in this context is understanding the psychological contract which makes the individuals receive benefits and therefore feel indebted and obliged to reciprocate (Cornwayl and Briner 2005, p.57). “It is important to note that the contents of the psychological contract are not what employees actually give and get from their employer, but rather the contents are the implicit and explicit promises around this exchange” (Ibid, p.37).
As an individual, we all have our unique differences that make us different from others. In any organization, these unique characteristics are often understood as ‘diversity in workplace’. Most organisations nowadays aim to make workplace diversity a positive constructive thing for every one involves. Mary Jo Hatch citing Robert Axelrod and Michael Cohen suggest how organization can harness complexities to produce new structures and strategies appropriate for complex environments (2006, p. 332). They ‘prescribed three qualities of complex adaptive systems that managers should cultivate in their organization: variation, interaction and selection.’ [1] (Ibid, p.332). Although, diversity management in an organisation has received considerable attention in organisation studies, it has only acknowledge peoples differences so as to identify effective strategies for dealing with these difference in order to achieve stated organisation goals and objectives.
Problem discussion
The crux of this study lies in the association between reward schemes, retention practise and corporate performance. In most organisations, apart from the fact that the company often wants more from its employee, they tends to concern with only finding the right skilled employees, retaining them and attracting employee. As a result of this, a lot of organisation falls into the common problems of simply managing the reward system from the perspective of employee motivation without considering context specific total reward system and if this match organisation employee retention capacity.
Gautam and Batra (2007, p.6) states that the behavioural aspects of organisation are akin to the human psychology. All organizations are unique and different and each has its own distinct cultures. They have value system of their own which get formed over a period of time, through a mix of the societal value system’s influences, imperatives of the organisational technology, size and other variables and the individual styles, beliefs and attitudes of all members, particularly the top management, whose perception have the most influence (Gautam and Batra 2007, p. 5). Depending on the leadership styles of the organisation, it may focus on people, or task focused, or profit focused or a complete focus on people, task and profit. It may be formally or informally structured. Whether or not people enjoy being in an organization would depend on whether or not their very system matches with those of the organization.
The study examine the benefits of reward schemes to reduce staff turnover and associated cost in a dynamic context of the organisation and the primary implications on business performance. The collectivities of people in a firm make the organisation a social phenomenon. “While, initially, organizations are view as rationally designed systems, it is now accepted that organization are historically constituted social activities collectivities embedded in their environments” (Scout 1987 in Tsoukas and Knudsen, 2003 p.10).
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Therefore, this study investigates the leveraging of reward system so that it can be use effectively to drive the way employee approach work from context specific perspective. The study further shows how rewards can drive employee passion for work and contributes to enhancing team cohesion, cooperation and productivity. Compensation and benefits reinforced employee desire to work towards the organisation strategic objectives. For the individual, the current trends are in the areas such as skilled related progression and performance appraisal linked to merit pay. For the groups, new schemes are being designed that focus on team performance, related to such things as measured day rates or other group outputs (Thorpe, p. 30). Generally, there is a correlation between employee loves of the work his doing and employee willingness to stay for as long as possible in a firm.
Research Questions
Following from the above research problem, this dissertation addresses three research questions:
One, how does a firm determines the type of reward scheme that would be best for its employee? According Armstrong (2007, p. 4), a reward systems is based on a well articulated philosophy that are consistent with the value of the organization and help to enact them. It revolved on the firm investing on human capital and expectation of reasonable return from the employee. This question is set to answer how a reward scheme of a firm can be made to fit the organisation sets of believe and guiding principles since the organisation context in which the individual operates influence the employee performance output.
Two, to what extent does a reward scheme improve firm retention capacity? The ability of a firm to retain its staff is directly linked to the kind of reward packages it offers its staff. In other words, the relationship between organisation performances is directly correlated with its reward packages and human resource retention. Therefore, reward scheme have a significant impact on organisation retention capacity. This question is explored further in the dissertation.
Three, how can a firm leverage non-monetary reward as an effective driver for staff motivation? It has been established that salary (monetary rewards) is not the number one motivator of an employee. Compensation and benefits should cover other aspects of non-monetary rewards which are specific to each individual as this will impact employee motivation and therefore boost the firm retention capacity. Compensation does not just come from salary, it can be from commissions, bonuses, building financial rewards based on company performance. Gilley et al (2009, p.144) note that if employees do not believe that their employer is committed to their well-being, they are less likely to be engaged and committed to the organization; moreover, they are more likely to leave that employer. The ability of a firm to leverage non-monetary reward is exploits further in the dissertation.
Literature review
The workforce of any organisation represents the organisation most valued assets. The talents of the people in an organisation are essential and often regarded as a key strategy in maintaining a competitive advantage (Phillips and Edwards, 2009). As such organisations understand the need to maintain these talents through rewards system designed and developed to keep the workforce, build a cohesive team, lower staff turnover and customise retention strategies. Therefore, organisations have, over the years, learned that employee retention strategies constitute one of the main aspects of sustaining its competitiveness. It is the one thing that all organisation shares and organisation success is highly dependent on skills, knowledge and experiences of its workforce no matter the size of the organisation. It has impact on human productivity and employee work and motivation with consequential impacts on the organisation performance.
The importance of employee-retention to any organisation necessitates that the management builds robust employee-retention practices which may take difference patterns depending on the organisation circumstances. There is a profound connection between a motivated employee and productivity and profitability. There is the realization that workplace is changing and things are happening differently in a way that the organisation must ensure and maximise it employee retention practices. Scholars have suggested that an effective human resource management strategy should balance the cost of replacing the employee who leaves against the cost of those who stay (Sheridan, 1992 citing Abelson & Baysinger, 1984; Boudreau & Berger, 1985). Barkman et al (1992) submits that new employee job performance was significantly related to their retention rates. McEvoy and Cascio (1987) also indicated that an organisation strong performer tend to have lower turnover rates than weaker performers during particular calendar period.
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Although, as Taylor notes, this is a field where there is no best practises (2002, p. 3), managers must device the best initiative necessary so that they can understand the main employee turnover drivers that affect each group and to respond appropriately. Madsen et al state that “retention involves the preservation of changes adopted by a firm” (2003, p.175), hence organisation success depends to a large extent what sets it workforce apart from its competitors. The workforce basically is an instrument of organisation competitive advantage. The people in an organisation should be able to create something valuable to the marketplace, something rare – something unique that sets the organisation apart (Cable 2007, p. 5-6) from its rivals. And this unique advantage must not be easy for competitor to copy so as to enable a sustained competitive advantage (Ibid, p. 5-6). Michael Porter submits that a company can outperform its rival only if it can establish a difference that it can preserve (2000, p. 62). It must deliver greater value to customer or create comparable value at a lower cost (Ibid, p. 62) and employee talents are critical to achieving this. Therefore, there is a need for organisations to ensure that these talents are maintained and retained for as long as possible.
Despite the realization of the importance of organisation employee retention practises and significant amount of literatures on the subject (for example Van den Broek 1997, Armstrong 2002, 2007, Perkings and White 2008, Langley 2008, Shields 2007, Bratton 2007) there have been few studies that attempt to match organisation rewards schemes to its retention practices. In essence, there has been dearth of study on the ways in which context specific total reward system match organisation employee retention capacity. Although there have been several studies on organisation reward management, most of these studies have focus on employee motivation through the reward schemes offered by the organisation. For example, vroom’s expectancy theory of motivation, Miner’s (1994) role motivation theory, McClelland’s (1987) human motivation theory looked at the aspect of reward schemes as the major basis of workers motivation. This study will go beyond this, and look at the aspect of how individual creativity and desire to work is a major motivational factor for employee performance. Therefore, given the importance of reward schemes and employee retention and motivation in general, this study comes at a vital time.
Although, Maslow hierarchy of needs attempts to cover those aspects of motivation that are not necessarily driven by rewards, it does not identify the motivational area that gives the individual much greater source of job satisfaction. Maslow pointed out in his research that people are motivated by unfilled needs and as such peoples are motivated to do things because of the simple reason of meeting their unfilled needs. Herzberg’s (1968) first identifies recognition as a much greater source of job satisfaction. The aspect of the motivation in the design of payment schemes relies largely on psychological theories that place great emphasis on rational behaviour. Specifically, the employer offers a range of rewards in order to manipulates the employee and obtain their maximum commitment towards meeting the organisation target (Thorpe 2000, p. 32-33). The reality of the modern work environment is that the employer often satisfies the physiological needs (through monetary rewards), safety needs (through employee benefits programmes i.e., health insurance) and of course the social needs are met at the work place. The fourth need, which is the esteem need remains the biggest unfilled need in the workplace. This underpinned the reason why employee tends to cherish recognition, which represents a much greater source of job satisfaction than monetary rewards. When a reward system is based on monetary benefits, it presupposes that everybody work for economic benefits.
Armstrong (2007, p.3) contends that “reward management deals with the strategies, policies and process required to ensure that the contribution of people to the organisation is recognised by both financial and non-financial means”. Michael Porter stated that “developing a competitive strategy is developing a broad formula of how a business is going to compete, what its goal should be, and policies would be needed to carry out those goals” (Porter 1980, p. 11). The three important aspects in the formulation of a remuneration strategy and the design of a remuneration system are motivation, the organisation perspectives on how best it can control the business and organisation objectives (Thorpe 2000, p. 32-33). In this sense, the reward system of an organisation is a critical aspect of sustaining its industry competitiveness. The organisation can offer monetary reward and non monetary rewards such as prestige and recognition for good ideas and work done. As such reward management is about the design implementation and maintenance of reward systems (reward processes, practises and procedures) which aim to meet the need of both the organisation and its stakeholders (Armstrong 2007, p.3).
However, pay system has also been linked to organisation strategic dimension (Thorpe 2000, p. 37). As a consequence pay system may be changed as a reaction to isolate and possibly unrelated problems, or used to tackle organisation difficulties which they could never really have much hope of solving (Ibid, p. 37). In actual fact, an organisation compensation plans may be a unique programme which essentially is to improve retention across the organisation. In this regard, some bonuses may be flat across spectra in the organisation. In a similar way that hierarchy is discounted in postmodern organisation, so also should some aspect of organisation compensation plans. As stated by David Boje and Robert Dennehy (2000, p.16), “postmodern narrative emphasizes the network organization, with flat lines, horizontal coordination, and temporary relations between vendors, customers, and workers. Increasingly, postmodern organisation continues to underrate the traditional management notion of instrumental rationality to canvass knowledge pluralism that admits multiple forms of approach and reason in the organisation”. In a postmodern organisation hierarch is given way to a very fragmented, temporary and responsive network obliterates all organizational boundaries (2000, p.16).
Therefore such organisation should provide bonuses such as paid vacation plus expenses; and offer days-off and provide some travel cash irrespective of hierarchy in organisation.
Reward system therefore is designed to encourage people to put their idea forwards, reward the good ideas and do not punish the idea that does not work out. The reward schemes are important ways of improving organisation effectiveness which they see as encouraging performance through increasing the effectiveness of individual (Thorpe 2000, p. 30) The “designing, developing, and implementing an organization-wide performance management process links performance to the organization’s strategic goals and objectives, constituent needs and expectations, and employee compensation and rewards”(Gilley et al 2009, p.113). Organisation remuneration system are increasing being focus on the importance of liking individual performance to organisation strategic goal. Thorpe (2000, p. 30) observed that there is attempt to translate and transmit market based organisation goals into personalised performance objectives criteria whilst at the same time preserving the integrity of coherent grading structures. The individuals are beginning to be rewarded for the success of the organisation as a whole and their contribution to it. Giddens (1984) argues that employees are sometimes able to use skill to influence the activity and purpose of pay system management; they are, at the same time constrained by the particular rules of the pay structure and bonuses schemes under which they work (Thorpe 2000, p. 36). The organization must ensure its strategy co-aligns with its remuneration system so as to ensure the employees are oriented towards achieving the organisation strategic objectives.
The key to getting employee to work harder, smarter and be more productive is employee engagement. Engagement is a combination of motivation, dedication and a sense of belonging. Engaged employee are enthusiastic, care about what they do, sense of purpose in their work and feel valued. Hence, employee participation is linked to satisfaction and performance (Wilkinson et al 2010, p.3). Participation as Wilkinson et al have observed could encompass myriad mechanisms that employers introduce in order to provide information to their staff or to offer them the chance to engage in joint problem-solving groups or use their skills/discretion at work via job enrichment programmes. It could as well relate to trade union representation through joint consultative committees and collective bargaining or to legislation designed to provide channels for employee representatives to engage in some form of joint decision making with employers (Ibid, p.3). Thus, the ability of a company to take a holistic perspective requires an understanding of how different problems and issues are connected with each other, how they influence each other and what effect one solution in a particular area would have on other areas” (Bonn 2001, p. 64).
Thorpe notes that there are currently increasing body of evidence that shows how under various conditions, pay linked to performance does not in fact improve performance but may reduces it (2000, p. 32). This largely depends on the kind of employment contract the employee has with its employer. Basically we can differentiate between two different aspects when we talk about retention. There are employee that are in transactional employment relationships, that means that these employees work on short term tasks, and these employees would need to be retained in the short term but not necessary in the long-term, on the other hand we might have those that forms the core part of the organisation. This employees work on more strategic and goals of the company, and such person needs to be retained on the longer term. Such employees have relational employment contracts with the organisation and are mainly the core of performance payment system. Rousseau & Schalk, (2000) states that “the implicit contract between employee and employer is referred to as a ‘psychological contract,’ and represents ‘an individual’s interpretation of (a) an exchange of promises that is (b) mutually agreed on and voluntarily made (c) between two or more parties”. This forms the basis of the social exchange theory. It posits that all social relationships essentially consist of exchanges of both economic (e.g. money, materials) and social resources (e.g. respect, love, support) (Blau 1964 cited in Cornway and Briner 2005, p.57). “Individuals seek out and remain in social exchanges for many reasons, not least because of the incentives available for doing so” (Ibid, p. 57).
The amount of compensation and the duties and responsibilities an employee has to perform for that amount of compensation is always stated in the employment contract. “The contents of the psychological contract refer broadly to an employee’s perceptions of the contributions they promise to give to their employer and what they believe the organization promises in return” (Cornway and Briner 2005, p.57). Pay happens to be one of the most important elements of the modern firm. In fact, this is what compensates drives, motivates and rewards employee for the work they do (Tropman 2001, p. 1). The employer normally meets the minimum employment standard such as minimum wage, minimum provision, hour of work maximum and minimum notice of days for termination minimum wage, minimum provision, hour of work maximum and minimum notice of days for termination and these are often stated in the contract. “A central aspect of the definition is therefore reciprocity, or the idea that the employee makes some form of contribution ‘in return’ for something back from the organization” (Cornway and Briner 2005, p. 38).
The reward system of an organisation is also indirectly connected to the marketing strategies such organisation. In this regard, there is a nexus between knowledge retention, perception of customers, marketing strategy and an organisation performance. Some employee knowledge are very critical to the organisation that there retention will have effect on customers perception and therefore organisation performance. Advertisement can reflect the type of employee and their expertise in an organisation. This will show the prevalence of ‘best brains’ in such organisation and this will have a trickling effect of the overall performance. This will ensure an integration of learning and development in employee compensation plans to improve employee retention. As Harrison conceives of the purpose of learning and development, she states that “the primary purpose of learning and development as an organisational process is to aid collective progress through the collaborative and expert simulation and facilitation of learning and knowledge that supports business goals, develop individual potential, and respect and build on diversity” (Harrison 2005, p. 7). The development of individual potentials therefore is at the core of reward system.
This is manifested through re-skilling of the individual or group of employees as a result of the company adopting systemic approach to learning and development ensure the employee are able to deliver according to the current trends and developments in their area of expertise. This will eventually reflects in the organisation workforce as many of its workers/employees will become high-flyers in their fields. Systemic learning and development boost individual morals through identifying his/her relative importance to the overall strategic goals of the company thereby making an employee feel a sense of belonging, identity and security. Thus increasing the moral of each employee having realised and accept a strong sense of purpose towards the achievement of the organisation strategic goals. This is essential as it will raise the commitment levels of the employees (and also the skills) which are needed by any high-performing organisation. In essence, employee sense of purpose to the organisation bridges the world of learning (training) and with the world of actions (goals) that the systemic approach to learning and development covers.
Learning and development is therefore a great reward for employee. A systemic learning and development process ensures a comprehensive training process that analyses, design, develop, implement and evaluate the training programmes of an organisation before, during and after implementation of the training programmes. Skills training, leadership trainings and continual education are all great benefits. This kind of inclusive reward benefits are all important in a modern organisation that aims to be successful and ranked among top competitors. A postmodern organisation will help its employees to chart career plans and offer payments for advance education. As Harrison conceives of the purpose of learning and development, she states that “the primary purpose of learning and development as an organisational process is to aid collective progress through the collaborative and expert simulation and facilitation of learning and knowledge that supports business goals, develop individual potential, and respect and build on diversity” (Harrison 2005, p. 7).
Although, there are likely to be stipulations on what type of programme the employee can receive money towards or require commitment of an employment, this represent a reward system that incorporates learning and development of the workers. It also encourages ideas to be shared across the organisation hierarchy as employee will like to contribute new knowledge towards realizing organisation strategic objectives. Mary Jo Hatch (2006 p. 131) notes that the traditional management idea of collective rationality in any organisation is gradually given way to one that encourages integration rather than hierarchy, centralization and control. In giving recognition to the relationships between all segments of the organisation, the approach of systemic learning and development will help integrate the entire development programmes in the organisation systems. The organisation systems interact with each other. Social and emotional development dynamics of the employee influences his/her behaviour and the ability to work towards achieving organisational goals. It shaped the way employees interact with each other’s within the organisation likewise; it forms the foundation of employee sense of belonging and identity in such organisation. In her contention, Harrison observed that ‘in using learning to meet organisational ends, we are intervening in the process that goes to the heart of human identity. Thus, the individual will not use that process to benefits the organisation except and unless they believe it will also benefits them’ (Harrison 2005, p. 7).
Methodology
The research will be based on a post-positivist approach. Post-positivist is a follow up to positivism which holds that the best approach to knowledge is through the scientific method organised in a clear and generally acceptable way. The main idea of positivist stems from its thesis of the unity of science (Hempel 1969, Kolakowski 1968, p. 178 in Lee 1991, p. 343). As a result of the limitation of the positivist perspective mainly its difficulty in most human settings to find regularities and laws that do not vary across local context, the post-positivist tradition emerged. Post-positivism works on the belief that perspectives are value-laden, but that this does not necessarily negate the positivist approach, it merely means that multiple approaches to the evidence must be taken.
For example, in this project it is more than possible that two different employees will have very different views and very different answers to the same question. Positivism would demand that one or both of these views is shown to be wrong, because it is not possible under positivism to have two different truths. However, post-positivism allows the researcher to accept that both perspectives are valid without having to make a definitive ‘right or wrong’ judgement
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