Providing an effective reward system

Managers often use rewards to reinforce employee behavior that they want to continue. A reward is a work outcome of positive value to the individual. Organizations are rich in rewards for people whose performance accomplishments help meet organizational objectives. People receive rewards in one of the following two ways:

· Extrinsic rewards are externally administered. They are valued outcomes given to someone by another person, typically a supervisor or higher level manager. Common workplace examples are pay bonuses, promotions, time off, special assignments, office fixtures, awards, verbal praise, and so on. In all cases, the motivational stimulus of extrinsic rewards originates outside the individual.

· Intrinsic rewards are self-administered. Think of the “natural high” a person may experience after completing a job. That person feels good because she has a feeling of competency, personal development, and self-control over her work. In contrast to extrinsic rewards, the motivational stimulus of intrinsic rewards is internal and doesn't depend on the actions of other people.

To motivate behavior, the organization needs to provide an effective reward system. An effective reward system has four elements:

· Rewards need to satisfy the basic needs of all employees.

· Rewards need to be included in the system and be comparable to ones offered by a competitive organization in the same area.

· Rewards need to be available to people in the same positions and be distributed fairly and equitably.

· The overall reward system needs to be multifaceted. Because all people are different, managers must provide a range of rewards—pay, time off, recognition, or promotion. In addition, managers should provide several different ways to earn these rewards.

This last point is worth noting. With the widely developing trend toward empowerment in American industry, many employees and employers are beginning to view traditional pay systems as inadequate. In a traditional system, people are paid according to the positions they hold, not the contributions they make. As organizations adopt approaches built upon teams, customer satisfaction, and empowerment, workers need to be paid differently. Many companies have already responded by designing numerous pay plans, designed by employee design teams, which base rewards on skill levels.

Rewards demonstrate to employees that their behavior is appropriate and should be repeated. If employees don't feel that their work is valued, their motivation will decline.