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Lesson 4

The document discusses the importance of integrating financial and non-financial rewards within a performance management system to motivate employees. It outlines internal factors such as organizational culture, business type, technology, and employee characteristics, as well as external factors like globalization, demographics, and employment legislation that influence reward systems. Additionally, it categorizes rewards into monetary (e.g., pay, commissions) and non-monetary (e.g., recognition, growth opportunities).

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Jannat Batool
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15 views2 pages

Lesson 4

The document discusses the importance of integrating financial and non-financial rewards within a performance management system to motivate employees. It outlines internal factors such as organizational culture, business type, technology, and employee characteristics, as well as external factors like globalization, demographics, and employment legislation that influence reward systems. Additionally, it categorizes rewards into monetary (e.g., pay, commissions) and non-monetary (e.g., recognition, growth opportunities).

Uploaded by

Jannat Batool
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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Performance Management –HRM613

Lesson 4

Reward Systems
Performance management system can play an important role in establishing a reward system in
which all reward elements are linked together and treated as an integrated and coherent whole.
These reward elements comprise of financial and non-financial rewards.

Rewards are developed in order to keep employees motivated for improved performance.
Therefore, these cannot be established in an isolation, rather should be context based. For the
development of effective reward system following are the contextual factors which should be
considered:

Internal factors:
Reward system is highly affected by the characteristics of the organization with regard to its
purpose, products/services, processes, industry and, culture most significantly.
The internal environment consists of the organization’s culture and its business, technology and
people.

- Organizational Culture:
The most important aspect of culture that needs to be taken into account is the core values of the
organization. Values are expressed in beliefs as to what is best for the organization and what sort
of behavior is desirable. These values affect the PMS by determining the criteria to be used in
reviewing performance and rewarding people for their contribution.

- Business of the organization:


The business of the organization like manufacturing VS service, profit VS non-profit and public
VS private highly affects the mechanism of PMS. All these distinct features tell the variation in
criteria used to manage, administer, evaluate and reward the employee performance. For example
piece-rate pay plans are used in manufacturing sector, skill-based are preferable in service
industry, public organizations are more tend to offer fixed salaries etc.

- Technology:
Introduction of new technology results into considerable system & procedural level changes
requiring different skills, new methods of working and consequently variety of rewards. This
change inculcates a variation in the overall PMS to meet the requirements of all such changes.

- Organizational People:
Organizational people in terms of their knowledge, skills, attitude (KSAs) requires customized
guidance, motivation, monitoring, rewards, appreciation etc. therefore, a comprehensive reward
system is desired to meet all the varying needs of the organizational people.

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Performance Management –HRM613

External factors:
The components of external environment including competitive pressure, globalization, and
changes in demographics and employment legislations impact the reward system of an
organization.
- Globalization:
Globalization has introduced the geographical movement of human resource and to acquire the
human capital regardless of any geographical boundaries. Therefore, while dealing with this
diverse workforce, developed rewards system should include the varying needs of diverse
workforce as well as the regional conditions like inflation rates, hardships of the locality, security
situation etc.
- Demographic patterns:
Demographics like age patterns, gender based clusters, overall education and skills, physical
fitness etc influence the reward practices including pensions, medical allowances, flexible timing,
family assistance etc.
- Employment legislations:
Government and other regulatory bodies have the authority to implement the policies regarding,
minimum wage rates and financial assistance to employees through different allowances,

Types of rewards:
All these factors contribute in developing organizational rewards which are mainly of two types;
monetary rewards and non-monetary rewards.

Monetary rewards:
Monetary rewards include:
 Basic pay
 Contingency pay
 Commission
 Incentives
 Pension
 Gratuity

Non-monetary rewards:
This type of rewards comprises of:
 Recognition
 Employment security
 Challenging work
 Growth opportunities
 Personal relationship at work
 Autonomy

For the detailed description of the content, consult the material referred in the given Bibliography.

Bibliography:

Armstrong, M., & Stephens, T. (2005). A handbook of employee reward management and
practice: Kogan Page Publishers.

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