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MGMT2030 > Reward Management > Flashcards

Reward Management Flashcards

1
Q

What is reward management?

A
  • Rewarding employees for their contribution to organisational effectiveness, and in particular, to attract, retain and motivate high performers at the lowest cost
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2
Q

What is a reward?

A
  • A reward may be anything tangible or intangible than an organisations offers to its employees in exchange for their potential or actual work contribution
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3
Q

What is remuneration?

A
  • Remuneration refers to tangible rewards
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4
Q

What are the components of remuneration?

A
  • Base Pay
  • Performance based pay
  • Benefits
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5
Q

Overall what is base pay?

A
  • Fixed, time based
  • Pay for position
    • Relative job ‘size’
    • Market rates
  • Pay for personal ‘capacity’
    • Expereince/seniroity
    • Competencies (KSAs)
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6
Q

What are benefits?

A
  • Superannuation
  • Health care & other personal insurance
  • Leave & career benefits
  • Other financial/fringe benefits
  • Other non-financial benefits
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7
Q

What are relevant motivational theories in reward management?

A
  • Equity theory
  • Expectancy theory
  • Organisational Justice
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8
Q

What is equity theory?

A
  • Making assessments about whether inputs are matched with the outputs
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9
Q

What are the outcomes of equity theory?

A
  • My outcomes/My inputs Others outcomes/Others inputs = Feeling of over-reward inequity
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10
Q

What do feeling of under-reward inequality lead to in equity theory?

A
  • Diminished motivation/performance/membership/commitment
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11
Q

What are perceived inputs and outcomes in equity theory?

A
  • Perceived inputs
    • Knowledge, skills, ability, qualifications, experience, age, seniority, loyalty, effort, time, performance, responsibility
  • Perceived outcomes
    • Pay, benefits, recognition, status, achievement, satisfaction, security
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12
Q

What is expectancy theory?

A
  • Tells us why/when performance pay schemes can demotivate

- Multiplicative! Need all three

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13
Q

What are the elements of expectancy theory?

A
  • Reward Valence
    • Is it worth it?
    • Value in the reward
  • Reward Instrumentality
    • Will they deliver
  • Reward Expectancy
    • Can I do it?
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14
Q

What is organisational justice theory?

A
  • aka Felt-Fairness
  • Perceptions
    • Procedural Justice
    • Interactional Justice
    • Distributive Justice
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15
Q

What are procedural justice perceptions in organisational justice theory?

A
  • Perceived fairness of employment decision making processes (e.g. job evaluation)
  • How am i treated by the decision makers?
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16
Q

What are the basic requirements for procedural justice in organisational justice theory?

A
  • Same standards consistently applied
  • Judgement based on evidence
  • Fair hearing/voice
  • Adequate notice
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17
Q

What are interactional justice perceptions in organisational justice theory?

A
  • Perceived fairness of interpersonal/emotional relationships
  • Am I treated with dignity and respect in my daily work relationships
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18
Q

What are distributive justice perceptions in organisational justice theory?

A
  • Equity Theory
  • Perceived fairness of employment outcomes (including rewards/pay received)
  • Am I adequately rewarded for what I contribute?
  • How do I compare with those I like to compare myself with?
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19
Q

What are the guiding principles from motivational theory in regard to reward management?

A
  • Manage perceptions of work inputs, reward outcomes and comparisons (equity theory)
  • Reward valency: Limited budget means payouts are often too small to adequately differentiate between high and low performer (expectancy theory)
  • Employees respond well to fairness (organisational justice, psychological contract)
  • Performance needs to be measured validly and reliability in order for perforamcen based rewards to be felt fair (organisational justice, psychological contract)
  • Expectancy - ensure employees have the self efficacy to meet performance target (expectancy theory)
  • Deliver on the rewards promised (Expectancy theory - instrumentality)
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20
Q

What is internal and external equity important for?

A
  • Critical for attraction and retention
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21
Q

What is internal equity in reward management?

A
  • Concerned with the equitable distribution of pay within organisations
  • Processes and techniques to determine the relative value/worth of jobs within the organisation are fair, equitable and without gender bias=
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22
Q

What is external equity in reward management?

A
  • Concerned with paying ‘competitive’ labour market rates

- Wage efficiency theory suggests retention and attraction are outmodes of paying above the market rate

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23
Q

What is base pay?

A
  • The foundational and generally largest component of total renumeration
  • ‘Fixed’ or ‘guaranteed’ portion of pay
  • Time based wage or salary
  • Often used as a basis to determine other components
24
Q

What are the variants of base pay?

A
  • Job based or position-based pay
  • Person based
    • Skill based
    • Competency based
25
Q

What are base pay structures?

A
  • Represent the architecture of the base pay system
26
Q

What are the main functions of base pay structures?

A
    1. Specify categories or classifications to which particular jobs are assigned
    1. Specify a pay range for each category or classification
    1. Establish the criteria and mechanisms for progression within the pay range
      - Service (tenure)
      - Performance
      - Promotion
27
Q

What is the structure of job based/position based pay?

A
  • Narrow job grades (range overlap)
28
Q

What are the evaluation techniques of job based/position based pay?

A
  • Market surveys and/or job evaluation
  • Market surveys
    • Finding out what other companies are paying similar positions
  • Job evalution
    • Focus on internal equity
29
Q

What are the modes of pay progression in job based/position based pay?

A

Seniority and/or ‘merit’ based increments & promotion

30
Q

What are the pros of position based reward systems?

A
  • Allows direct comparison with external labour market
  • Provides a formula for fair pay based on an equality norm
  • Tend to be supported by unions more than person based
    • Allows maintenance of common pay standards
31
Q

What are the cons of position based reward systems?

A
  • No direct incentive to improve individual contrition of performance
    • Purses promotion rather than skill enhancement
  • Narrow grades tend to reinforce hirearchy
  • Can be incompatible with task interdepence and teamwork
  • Often too inflexible to accommodate rapid changes in tech, work processes, market conditions
32
Q

What is the structure of skill based pay?

A

Broad grades/job families

33
Q

What are the evaluation techniques of skill based pay?

A

Skill assessment

34
Q

What are the modes of pay progression in skill based pay?

A

Skill sets

35
Q

What kinds of person based pay systems are there?

A
  • Skill-based pay

* Competency-based/related pay

36
Q

What is the structure of Competency-based/related pay?

A

Broadbands

37
Q

What are the evaluation techniques of Competency-based/related pay?

A

Competency assessment

38
Q

What are the modes of pay progression in Competency-based/related pay?

A

Competency zones/levels

39
Q

What are the pros of person based reward systems?

A
  • Facilitate systematic organisational learning + continuous improvement
  • Encourages employees to develop skills in line with organsitons changing needs
  • Facilitates functional flexibility
  • i.e. more appropriate for highly dynamic organisations
  • Conducive for multiskilling and teamwork
40
Q

What are the cons of person based reward systems?

A
  • Administratively complex

- Often associated with increased training costs

41
Q

When should performance based reward be used?

A
  • Only when performance can be validly and reliably measured/when performance is desired to be improved
  • Incentives
42
Q

What was Alfir Kohn’s critique?

A
  • Incentives only motivate employees to get the reward (e.g. corporate fraud)
    • Because of content validity problem in performance assessment?
  • Incentives undermine interest in the job
  • Incentives punish: Withholding of a reward is tantamount to punishment
  • Incentives rupture co-operative work relationships
  • Incentives ignore underlying reasons for work problems
  • Incentives discourage risk taking
43
Q

What is a performance related reward?

A
  • A performance related reward plan is one where part or all of employee reward/pay is based directly and explicitly on employees’ assessed work behaviour and/or measured results
44
Q

What is true of performance related rewards?

A
  • Reward can be Cash or Equity based:
    • Short term incentives
    • Long term incentives
    • Individual incentives
    • Group incentives
    • Broad-based/organisational incentives
45
Q

What is the process of applying individual performance related rewards?

A
  • Use performance grades or performance scores, or goal achievements to determine:
  • Merit increments
  • Merit bonuses
46
Q

What are merit increments?

A
  • Award consolidated into base pay, a permanent pay rise
  • BUT this is likely to result in the Annuity Problem
    • No Guarantee than increased base pay will result in increased performance in subsequent periods
47
Q

What are merit bonuses?

A

One time award and lump sum

48
Q

How is the size of an individual performance related reward determined?

A
  • Straight increments

* Merit Matrix

49
Q

What are the issues with a straight increments system?

A
  • Penalises those employees who are outstanding performers but have lower base pay
  • Privileges seniority over merit
  • Inflates fixed labour costs
  • Can demotivate people below salary range midpoint
50
Q

What are the issues with a merit matrix system?

A

May demotivate exceptional performers

51
Q

What are the critical issues and challenges of individual performance related rewards?

A
  • Inconsistent empirical support for performance improvements
  • Providing cost effective rewards that optimise employee motiations
  • The size of the reward can be often too small to have motivational effects on performance
  • It is easier to reward results than to reward behaviours
  • Result based incentives can encourage gaming the system
  • Can conflict with the objectives of other HR processes, especially L&D which can often be overshadowed by the reward system
52
Q

What are the options for cash based group based pay for performance?

A
  • Team incentives
  • Profit sharing
  • Gain sharing
53
Q

What are team incentives?

A
  • Cash rewards based on the achievement of team-based performance targets
    • e.g. meeting project specifications, deadlines, budget
54
Q

What is profit sharing?

A
  • Typically involves a formal arrangement under which bonus payments additions to base pay are made to some or all employees on a regular basis, based on a formula which links the size of the total bonus pool to some measure of organisational profitability
  • e.g. a % of profits is distributed at regular intervals
  • Improve commitment, but how much can a low level employee really affect profitability?
55
Q

What is gain sharing?

A
  • Reward employees for improvements in business divisions or organisational productivity
  • e.g. improvements in payroll expenses as a % of revenue

MGMT2030 (9 decks)

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