For today’s organisations, the problem of how to effectively motivate staff is becoming an increasingly important issue. As a result, businesses are now making frantic efforts to put in place effective rewards system in order to motivate their employees to get the best out of them. Dictionary definitions of reward typically centre on the idea of something given in return for good done; recompense, remuneration, or compensation for services. In line with this, performing certain behaviours becomes a means by which to obtain the reward, so the reward acts as an incentive. In this way, an employee does something in order to the obtain reward (Silverman, 2004).
A reward is defined as something which is given following the occurrence of certain behaviour, with the intention of acknowledging the positive nature of that behaviour, and often with the additional intent of encouraging it to happen again.
According to the Chartered Institute of Personnel and Development (2007), there are certain principles all rewards should follow. These are outlined below.
1. Motivate and reward a high performance culture
2. Promote a close link between performance, reward and recognition
3. Provide timely recognition for individual and team achievement
4. Provide rewards that are valued and meaningful to staff
5. Be fair, applied consistently and transparent
6. Be simple to understand and apply
7. Be clearly communicated to staff
There are basically two forms of reward namely financial (extrinsic) and non-financial (intrinsic) rewards (Axelsson and Bokedal, 2009).
Extrinsic (financial) rewards are rewards which cover the basic needs of income to survive (to pay bills), a feeling of stability and consistency (the job is secure), and recognition (my workplace values my skills).
Bratton and Gold (2007) defines non-financial reward as a non cash award given in recognition of a high level of accomplishment or performance such as customer care or support to colleagues, which is not dependent on achievement of a pre-determined target.
The most significant part of this definition concerns the term ‘non-cash’. It is important to be aware that the concept of non-financial reward does not necessarily mean that the reward provided should have no financial value; it simply means that whatever is given, it should not just be money. There is a wide variety of ways in which non-financial rewards can work in practice.
Schemes range from those that are informal and impromptu to more formal structured schemes. For example, in its most basic form, non-financial rewards may be concerned with acknowledging the efforts of employees by:
- The manager saying thank you
- Declaring the individual employee of the month or year
- Public appreciation of the effort in a team meeting, an organisational newsletter or at a special dinner
Alternatively, the employee may be given the chance to enjoy a present of some kind away from the office. This can be achieved by providing:
- Retail or travel vouchers
- Reserved car space
- Use of recreational facilities
Many non-financial rewards can and do motivate employees to improve their output. One such factor may be the desire to serve people; others may be to improve personal skills or achieve promotion.
REWARD OF EMPLOYEES AT TESCO
In a report by Berry (2007), Tesco chief executive Sir Terry Leahy commented that, the staffs are the main reason so many people choose to shop with Tesco. Therefore it comes as no so price as to the various packages that are available to reward employees for their hard work. Explored below are some of the ways Tesco rewards its employees.
At Tesco, there is the recognition of rewarding employees financially to ensure that their staffs are cared for financially and therefore the company has three successful share schemes to cater for every member of staff regardless of whether the person has been with the company for 3 months or 3 years. The three schemes are explained below.
Shares in Success scheme
To thank members of staff for the success they have brought to the business, Tesco gives free shares to everyone who has worked in the organisation for one year at the end of the financial year (February). The company shares a proportion of its profit amongst the staff, based on salaries. These Tesco shares are held in trust for 5 years, and after that, staffs can take them, tax-free (Tesco, 2009a).
Save As You Earn (SAYE) scheme
Every October, members of staff who have been at Tesco a year get the option to save up to £50 every 4 weeks for either 3 or 5 years and receive a tax-free bonus at the end. Staffs can use the savings and bonus to buy Tesco shares at up to 20% less than the market price, or take the cash.
Buy As You Earn (BAYE) scheme
After three months of working with Tesco, members of staff have the chance to join the BAYE scheme. Employees buy shares at the market price every 4 weeks, saving tax and National Insurance on the salary they use to do this. Employees have the option to start, stop or change the amount they invest at any time. However, should they keep the shares in trust for 5 years, they then get even more tax advantages.
As many organisations are beginning to realise, competitive difference may ultimately be made by non-financial factors. As Gratton notes:
…while motivation is determined by both monetary and non-monetary factors, money has come to play an overly important role in our thinking about the causes of behaviour. In most companies, very limited time and effort are spent on considering non-monetary sources of motivation (Gratton, 2004, p.23).
In agreement to this assertion, Pfeffer (1998) also cautioned that:
People do work for money – but they work even more for meaning in their lives…Companies that ignore this fact are essentially bribing their employees and will pay the price in a lack of loyalty and commitment.
Tesco has therefore in addition to the financial rewards; instituted non-financial rewards for its employees. Two of such rewards are the Staff Privilege card and Leisure time rewards.
Staff Privilege card
To reward employees for their loyalty, after a year working at Tesco, they are given a Privilege card - the staff loyalty card that gives staffs a 10% discount and Club card points on most Tesco products (Tesco, 2009b).
Additionally, eligible staff also has access to exclusive staff discounts with Tesco Personal Finance and Tesco Telecoms.
Leisure time reward
Tesco believes that their staffs work hard so they should be able to make the most of their leisure time. To help with this, the company have negotiated discounts and special offers that are available exclusively to Tesco staff.
There are discounts on theme parks, holidays and gym membership that are available all year round.
From the above, it can be seen that the reward scheme of Tesco is tailored to suit each category of employees based on the duration they have worked at the company. Thus, there are rewards for employees who have worked at Tesco for three months and also rewards for those who have been there for three years. Despite the varying degree of rewards, it ensures fairness; for example, all three month employees are entitled to join the BAYE scheme.
It is also worth mentioning that, the way non-financial reward schemes are set up has a significant effect on its future success. In particular, this relates to its scope. As the Incomes Data Services (2002) report contends, the more inclusive the scheme the greater the likelihood is that it will be perceived by employees as being far.
ARGUMENTS “FOR” AND “AGAINST” CHIEF EXECUTIVES RECEIVING LARGE BONUSES EVEN IF THE ORGANISATION THAT THEY HAVE LED HAS UNDERPERFORMED
The chief executive is the most important role in the management of an organisation (McNamara, 2012). The definition of "chief executive" depends on whether a business is a corporation or not, that is, whether it has a board of directors or not. In an organisation that has a board of directors, the "chief executive" is the singular organisational position that is primarily responsible to carry out the strategic plans and policies as established by the board of directors. In this case, the chief executive reports to the board of directors. In a form of business that is usually without a board of directors (sole proprietorship and partnership), the "chief executive" is the singular organisational position (other than partnerships) that sets the direction and oversees the operations of an organisation.
There is no standardised list of the major functions and responsibilities carried out by position of chief executive officer (McNamara, 2012). The following list is one perspective and includes the major functions typically addressed by job descriptions of chief executive officers.
1. Board Administration and Support
Supports operations and administration of Board by advising and informing Board members, interfacing between Board and staff, and supporting Board's evaluation of chief executive
2. Program, Product and Service Delivery
Oversees design, marketing, promotion, delivery and quality of programs, products and services
3. Financial, Tax, Risk and Facilities Management
Recommends yearly budget for Board approval and prudently manages organisation's resources within those budget guidelines according to current laws and regulations
4. Human Resource Management
Effectively manages the human resources of the organisation according to authorised personnel policies and procedures that fully conform to current laws and regulations
5. Community and Public Relations
Assures the organisation and its mission, programs, products and services are consistently presented in strong, positive image to relevant stakeholders
6. Fundraising (non-profit-specific)
Oversees fundraising planning and implementation, including identifying resource requirements, researching funding sources, establishing strategies to approach funders, submitting proposals and administrating fundraising records and documentation.
In my opinion, chief executives of should still receive large bonuses even in situations where the organisation they are oversee has underperformed. This is because, chief executives are at the top of the organisation and in most cases it is through their hard work that an organisation was able to begin operations. Such efforts should be rewarded despite the performance of the company. By giving them the bonuses, I believe the chief executive will be motivated to overcome the challenges and bring success back to the organisation. Additionally, considering the skills and qualifications required to occupy such a position coupled with the responsibilities associated with the position such as those outlined above, chief executives deserve to receive bonuses due them at all times. Even though the business has underperformed, they still carry huge pressure in terms of the decision making process of the company compared to employees lower down the hierarchy of the organisation.
On the other hand, there are some reasons that may be considered as to why chief executives should not receive their bonuses once a company has underperformed.
Chief executives should not be paid the bonuses owing to the fact that, the employees are those who would later be left with the responsibility of carrying out the activities to revive the company once again. Secondly, chief executives usually earn huge salaries in comparison to their employees for years, and it will therefore not make a big difference to them if they were not paid the bonuses in an underperforming year. Lastly, the organisation may have underperformed as a result of poor decisions made by the chief executive, inefficient leadership style or inability to fulfil their responsibilities. In such situations, the chief executive is not worth gaining any bonuses.
CONCLUSION
I believe competitive, simple and sustainable staff rewards help to build trust and loyalty amongst employees and assist with hiring and retention. There is the need therefore for employers to ensure that their reward systems are effective in order to get the best out of their staff at the workplace.
In line with the ethos of total reward, organisations increasingly need to consider reward more broadly. Those whose reward strategies are able to strike a balance between extrinsic (non-financial) and intrinsic (financial) reward will be in a much better position to reinforce the psychological contract they have with their employees, and make the whole experience more positive for all those involved (Silverman, 2004). Where organisations are able to gain a thorough understanding of their employees’ expectations in return for their hard work, organisations are able to determine how their reward strategies can help to deliver what is really needed. In other words, the right total rewards system comprising a blend of monetary and nonmonetary rewards offered to employees can generate valuable business results (Heneman, 2007).
Employee rewards programs are motivational for employees, and it provides employers with the opportunity to say ‘Thank you…job well done’ to their employees and the entire organisation. It not only feels good, it is the right thing to do.
REFERENCES
Bratton, J., and Gold, J. (2007). Human resource management: Theory and practice. 4th ed. Basingstoke, Hampshire, UK: Palgrave Macmillan.
Chartered Institute of Personnel and Development (2007) Reward Management Annual survey report 2007 [online]. Available from: http://www.cipd.co.uk/NR/rdonlyres/08FE4AE7-7DD5-4185-9070-F34225A6EB0C/0/rewmansr0107.pdf [Accessed 6 April 2012].
Gratton, L. (2004) More than money. People Management. January, p.23.
Incomes Data Services (2002) Employee Recognition Schemes. IDS Studies Plus.
McNamara, C. (2012) Overview of Role of Chief Executive [online]. Available from: http://managementhelp.org/chiefexecutives/index.htm [Accessed 6 April 2012].
Pfeffer, J. (1998) Six dangerous myths about pay. Harvard Business Review. May-June.
