What Makes Rewards Systems Effective? Term Paper

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Reward Systems

Purpose of the discussion ics that will be discussed

Definition of Reward Systems and expectancy theory

Reward Systems that are Effective in business

Internal and External Rewards

Short-Term/Long-Term Rewards

Reward Systems for teams

Reward Systems and Organizational Performance

Reward systems that are Effective in education.

Reward systems for teachers and administrators

Reward systems for students

Reward Systems play a pivotal role in the world that we live in. Reward systems are used in many different facets including; the business world, the educational system and in the disciplining of children. The purpose of this discussion is to explain what makes rewards systems effective. Our discussion will examine effective reward systems in business, and the educational system. Let's begin by defining reward systems and the expectancy theory.

Definition of Reward Systems and Expectancy Theory

The use of reward systems is directly correlated to the expectancy theory. The expectancy theory asserts that there are three major variables that will determine an individual's motivation to perform.(1) First, the individual must perceive that there is a relationship between one's own effort and one's subsequent job performance. This is referred to as expectancy. Second, the individual must perceive that job performance will subsequently lead to outcomes such as a pay raise, a sense of accomplishment, and recognition. This is referred to as instrumentality, and there is a separate instrumentality perception for each outcome. Third, the individual must find desirable or attractive outcomes that might occur. This is referred to as valence, and there is a separate valence for each outcome." (Heneman and Young 1991)

Once an organization understands this theory of expectancy they can create policies that will meet these expectancy needs. These policies are often referred to as reward systems or incentive programs. These programs are designed to encourage the employee or the student to perform at his or her best. Reward systems are an essential part of the business world because they increase productivity and contribute to the profitability of the firm.

Reward Systems that are effective in Business

Internal and External Rewards

According to a book entitled "The Dynamics of Interpersonal Behavior" reward systems in the workplace are used to increase productivity within the organization. The book explains that effective reward systems that are used within the business world include both external and internal rewards. Zaleznik (1964) asserts that,

On the one hand, there are the external rewards of pay, job status, job security, opportunity for advancement, interesting work, and recognition from management available from the formal organization. On the other hand, there are the internal rewards of friendship, liking, respect, support, and the opportunity to fill a socially needed role available from the work group itself." Zaleznik (1964)

Effective reward systems are able to combine both external and internal reward systems. In doing this employees are able to perform their task with an understanding that the rewards that they will receive will benefit them materially and psychologically.

Short-Term/Long-Term Rewards

Another book entitled "Contemporary Career development" asserts that there are other factors behind the use of reward systems in the workplace. The author explains that organizations not only use reward systems to increase productivity and performance, but also to urge potential employees to join the organization and to reinforce organizational structure. (Morrison 1991) The author points out that most companies use short-term reward systems for employees.

Morrison (1991) explains that while short-term reward systems are effective, lomg term reward system are usually more beneficial to the overall business strategy and employees. The author explains that effective reward systems "consider the interrelationships among the pattern of organizational career paths; requisite human resource inputs in terms of skills, attitudes, training, and career stages; and organizational life cycles in order to develop the appropriate fit between the reward system and career development system for meeting both short- and long-term organizational objectives."(Morison 1991)

Reward Systems for teams

An article published in the journal, Human Resources, asserts that reward systems can also be instrumental in establishing strong work teams within a company. Effective reward systems for teams are effective when they are comprehensive in their measurement and rewarding of team performances. (Schneier and Shaw 1995) The article asserts that some companies attempt to change their reward systems to be geared towards teams, while others stick with the reward systems that have worked for individual employees. However, the article asserts that, "Measurement and reward systems among companies that report highly successful experiences with teams achieve what they believe is an appropriate balance between individual and team performance measurement and reward by:

emphasizing the importance of teams through formal and informal recognition of successful teams; Rewarding individuals who are effective team contributors through job and team assignments and promotions; and Continuing to base individuals' salaries on their own contributions to team and individual efforts.

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"(Schneier and Shaw 1995)

Reward Systems and Organizational Performance study published in the Journal of Business Strategies designed to find the link between strategy, rewards and organizational performance, asserts that an effective reward system should be used to motivate employee performances that are consistent with the organization's strategy. The effective award system will also draw and keep employees with the skills, knowledge, and abilities needed to realize the organizations strategic goals, and produce a supportive structure and culture. (Allen and Helms 2002)

The results of the study concerning reward systems and performance found that the most effective reward systems were, 1) an individual-based performance system in which pay increases, bonuses and promotions are based on the accomplishment of individual goals, (2) employee stock ownership, and (3) regular expressions of appreciation by managers/leaders to employees such as praise or "pats on the back" to acknowledge the accomplishment of strategic goals. The use of both monetary (performance rewards such as raises and bonuses) and non-monetary rewards (promotions, stock and recognition) logically bolster both the extrinsic and intrinsic motivation of employees to innovate and achieve a differentiated product or service. Because the product differentiation strategy stresses tailoring the product or services to the customer who is willing to pay a higher price for the service, we would expect individual and/or company incentives or rewards based on sales growth to be particularly effective. Likewise, a differentiation strategy hinges on the ability of the organization to innovate to provide unique products or services. A reward system that recognizes and rewards individuals for developing new ideas and innovations would logically support this sort of strategy. We suspect having both individual-based performance systems as well as an employee stock ownership plan would encourage employees to achieve both short-term and long-term goals. The reward of regular expressions of appreciation by managers or leaders to employees would also be important as a mechanism to recognize employees who provide excellent or exceptional customer service." (Allen and Helms 2002)

As you can see there are a myriad of reward systems are effective in the business world. The challenge that organizations face is finding reward systems that also coincide with the overall strategy of the company. Organizations must have a way of evaluating these programs and abandoning any reward system that is not effective. Indeed, reward systems are essential to employee motivation and company productivity.

Reward Systems in education

Reward Systems for teachers and administrators

Reward systems have long been used in classrooms to encourage students to do well in their studies. An article in the Journal Educational and Psychological Consultation, explains that although reward systems are most often associated with the business world, these systems can also be used in the educational system. (Illback and Zins, 1995) explains that the educational system is a structure that is essential to the community and must be treated as such. The authors assert that using effective reward systems within the educational system could prove to be of benefit for the entire community.

The article asserts that some of the most effective ways to use reward systems is through merit pay. The authors point out that very few school districts pay teachers according to their performance, instead they are paid based on the number of years that thy have been teaching. The article also insists that another effective award system is giving teacher's status as master teachers to boost self-esteem. The authors also suggest the affirming words are an effective tool in rewarding teachers for their performances. Finally the article concedes that The greatest difficulty with reward systems in education is defining the criteria and performance indicators of excellence. Given the lack of an adequate data base in the professional literature to govern educational practices, it becomes highly subjective as to what behaviors represent quality teaching and administrative services. Nonetheless, some districts have established evaluative systems that discriminate among groups of teachers, and that allow peer review committees to select educators who engage in a high level of service."(Illback and Zins, 1995)

An article entitled "Catalysts for Learning: Recognition and Reward Programs in the Public Schools" explains that reward systems can be used to fashion the behavior of school personnel so that they can better aid students in the educational….....

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