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.
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