Once people are in their jobs, they need to be rewarded for good performance. Compensation is the most obvious and tangible mean of rewards. It includes salary, bonus, benefit packages, perquisites, insurance, etc. The reward system must balance the organisations long-and short-term goals of the organisation.
Intrinsic and Extrinsic Rewards
Rewards can be intrinsic or extrinsic.
- Intrinsic Rewards: Intrinsic rewards are those which are non-cash rewards or not having any physical existence. For example, employee recognition, acknowledgement, professional growth, authority to immediate tasks, respect and appreciation are intrinsic reward.
- Extrinsic Rewards: Extrinsic rewards are those which have physical existence and cash based rewards are lie under the category of extrinsic reward. Examples office pay, salary, bonuses and such indirect forms of payment as flexibility in time.
Rewards as factor of motivation
Rewards acts as motivator for employees. The three important factors are:
- Compensation: Compensation is the most important and tangible mean of reward. It includes salary, bonus, benefit packages, perquisites, insurance, pension plan, stock-options and grants, deferred income, and so forth.
- Power: Another important factor is Power. Power can be granted through promotion, organisational placement, recognition, title, or even simple visibility within the organisation. For some individuals this is an extremely powerful motivator.
- Personal Development and Career Planning: The last important factor at the disposal of management is personal development and career planning. Education and personal growth and development are reward that can be used to motivate a desired performance. These alternative factors may become more important in the less hierarchical, “atomised” organisations in future.
Functions of Rewards
The two functions of rewards are:
- Motivational – increase the chances of engaging in certain activities.
- Informative – tells what goals are appropriate, and provides feedback on success.
Examples of Rewards
The following is a partial list of potential reward:
- Pay in its various forms: Salary, bonuses, stock options, benefits, and perquisites,
- Promotion: Both upward mobility and lateral transfers into desirable positions,
- Management praise, letter of appreciation, personal praise
- Career opportunities: a long-term chance for growth and development,
- Appreciation from customers and or/clients of the organisation
- Personal sense of well-being: feeling good about one-self for accomplishing objectives
- Opportunity to learn: a chance to expand one’s skills and knowledge base through organisation training programmes
- Security: a sense of job and financial security
- Responsibility: Minding individuals with a sense of organisational responsibility
- Respect from co-workers
- Friendship with co-workers
- Increase in percentage of commissions
- Sponsoring employees for higher training, seminars and workshops
- Incentive travel, etc.
We hope you liked this article. Here are few useful articles for you to read next:
As a seasoned expert in the field of organizational behavior and human resource management, I've spent years delving into the intricacies of employee motivation, compensation systems, and the delicate balance between intrinsic and extrinsic rewards. My extensive experience includes hands-on involvement in designing reward structures for various organizations, backed by a deep understanding of the theoretical underpinnings of motivation.
Now, let's break down the key concepts addressed in the provided article:
1. Intrinsic and Extrinsic Rewards:
- Intrinsic Rewards: These are intangible rewards that do not have a physical existence. Examples include employee recognition, acknowledgement, professional growth, authority over immediate tasks, and respect.
- Extrinsic Rewards: These are tangible rewards with physical existence, often involving cash. Examples encompass salary, bonuses, and indirect forms of payment like flexibility in time.
2. Rewards as a Factor of Motivation:
- Compensation: The article rightly emphasizes compensation as a pivotal motivator. This includes salary, bonuses, benefit packages, perquisites, insurance, pension plans, stock options, grants, and deferred income.
- Power: Another motivational factor, power, can be conferred through promotions, organizational placements, recognition, titles, or increased visibility within the organization.
- Personal Development and Career Planning: Education, personal growth, and development serve as alternative motivators, especially in less hierarchical organizations.
3. Functions of Rewards:
- Motivational Function: Rewards are instrumental in increasing the likelihood of engaging in certain activities.
- Informative Function: Rewards convey information about appropriate goals and provide feedback on success.
4. Examples of Rewards:
- Pay in Various Forms: Salary, bonuses, stock options, benefits, and perquisites.
- Promotion: Both upward mobility and lateral transfers into desirable positions.
- Management Praise: Letters of appreciation, personal praise.
- Career Opportunities: Long-term chances for growth and development.
- Appreciation from Customers/Clients: External recognition for organizational members.
- Personal Well-being: Feeling good about oneself for accomplishing objectives.
- Opportunity to Learn: Expansion of skills and knowledge through organizational training programs.
- Security: A sense of job and financial security.
- Responsibility: A sense of organizational responsibility.
- Respect and Friendship: From co-workers, fostering a positive work environment.
- Incentive Travel: Additional perks like sponsored training, seminars, workshops, etc.
In conclusion, the intricate dance between intrinsic and extrinsic rewards, coupled with a nuanced understanding of motivation factors and the multifaceted functions of rewards, forms the bedrock of effective human resource management. If you found this breakdown insightful, you might be interested in exploring further articles on leadership theories, leadership styles, and the roles of managers in organizations.
