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Human Resource Management

“Reward Management”

Presented By:

Maen Aloquili

Business Administration

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Introduction

The first purpose of this Essay is to demonstrate an understanding of human resource

management. Nowadays, organisations follow different modern approaches to gain a

competitive advantage. As a result, there are a variety of definitions for Human Resource

Management. (HRM) is a very important issue. It is based upon the human side of

management, and concentrates on employees as vital assets within their firms. According to

Price “human resource management is aimed at recruiting capable, flexible and committed

people, managing and rewarding their performance and developing key competencies.”

(2007: 31) However, in (HRM) most organisations are concerned with satisfying employees,

in order to increase their potential and performance, by selecting and recruiting the right

candidates for the right positions. In doing so, according to Beer et. al., (1985), “human

resource management involves all management decisions and actions that affect the nature of

the relationship between the organisation and employees, its human resource.”

This Essay will evaluate and review the current performance management and reward system

at DIY. It will also Identify and Discuss the possible changes required to the existing

performance and reward procedures at DIY, to achieve its goals and competitive advantage.

In order to reach to the most successful approach in Reward and performance management,

we will demonstrate the aim and importance of both aspects, to help organisations motivate

and satisfy their employees effectively.

Critically review the current performance management and reward system at DIY

Stores

DIY (do-it- yourself) store is a large warehouse organisation in the UK, selling self assembly

furniture, equipments, plumbing and garden tools. DIY is ranked in the top five within its

competitors, and within its market share. Its annual turnover is above £50 million, and its

profit is approximately £1 million annually. They have 250 stores across the United

Kingdom, and employ 12,000 people; they serve more than 1 million customers weekly, DIY

are now trying to make some improvements in performance and reward systems for their

staff, in order to attain efficiency in competitive manner.

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Before starting to review and analyse the case study of DIY stores, it is important to

demonstrate what is meant by performance and reward management, regarding to human

resource management (HRM) in organisations. According to Armstrong (2002: 373)

Performance Management means getting the superior outcome from the individuals and

teams in the organisation. It involves development plans and an agreement of skills,

knowledge, objectives and core competencies. Performance management indicates how

individuals should be rewarded in relation to their performance and their quality of work. On

the other hand Reward Management is concerned with implementation of policies and

procedures. It deals with maintenance of reward system issues, to meet both organisation

objectives and its stakeholders, as it deals with long term strategies in order to reward people

fairly and equitably, regarding their value and performance (Armstrong & Stephens, 2005).

Referring to the case study of performance based pay at (DIY), it is apparent that this

organisation brings a lack of motivation to the managers, who are working below store

manager level, because they promote and reward them without measuring their performance,

as they reward them less effectively for their jobs. The annual survey report (2007) points out

that “55% of employers claim to measure the effectiveness of their reward strategy”. In that

case, some of the managers that don’t have any interest in promotion should be rewarded in

different ways such as provided incentives (bonuses in their salaries). If this problem

continues it will lead to an increase in staff turnover, it will limit the performance from other

employees, as well as affect the trust between employees and their supervisors, which in this

case are their managers. On the whole this will have an effect on the company achieving

goals and objectives. See figure (1)

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Source: By Researcher

The case shows that managers can improve their financial positions throughout promotion

only. By ignoring the other employee’s efforts, rewarding them with limited reward

packages, not involving them in performance based rewards and by not succeeding to

maximise employee’s performance within the group, will lead to dissatisfaction, de-

motivation and a breach in achieving the target they planned for. It will also put the company

in an embarrassing situation. Therefore, Motivation is an important principle, to enhance

people’s behaviour and monitor the direction they take within their jobs. There are two

different types of motivation: (1) Extrinsic motivation, which means what, is done for people

to motivate them, this includes pensions, promotion and pay increases. The other type is (2)

intrinsic motivation, which is based on the quality of the work. This means that when staff do

their job, they can feel that the work is challenging and that they are developing skills and

capabilities. This kind of motivation is powerful and useful, because it is effective long term,

and works for what it is planned for. This doesn’t mean that extrinsic motivation is bad and

intrinsic motivation is good.

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Act Stand arise and

apply new system Review and look

for alternatives

Check

Check results Check wider effects

Do

Gather information Analyse information

Plan

Identify

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We can use them both in different roles, and in different situations. This just depends on what

the company are aiming for in their strategy (Armstrong & Stephens, 2005). Therefore,

successful motivation will guide the employees to perform efficiently, to reach organisation

goals and to fulfil their needs. There seems to be some equal pay policy issues regarding the

case study of (DIY) and their preferences between different employees and managers inside

the company. It is clear from the case study that one group of people receive more generous

incentives and promotions than others. It is also clear that these preferences can lead to the

loss of cooperation between employees and managers, which will influence company

performance overall, and will create tension inside the organisation, which may result in a

higher staff turnover. See figure (2)

As a result of equity, it has to be obvious to all staff and workers who are involved in this

process. Adams (1963) comes up with a theory on equity which means “efforts and rewards

and other similar 'give and take' issues at work respectively 'inputs' and 'outputs’. Inputs are

what we give or put into our work. Outputs are everything we take out in return. These terms

help emphasise what people put into their work, including many factors besides working

hours, and what people receive from their work including many things aside from money.”

This theory concludes that employees will put less into their job, if they are not equally

treated comparing to other people, and it will create another kind of de-motivation to the job

(Businessballs.com, 2007).

Last but not least, it has been noticed from the case that, Performance Related Pay system

(PRP) in (DIYs) does not work properly, because of these reasons: it limits the store

managers, and doesn’t give them any time to concentrate on other jobs; moreover, managers

do not concern themselves with the corporate performance in achieving targets, and

increasing customer satisfaction. In addition, Performance Related Pay system (PRP) relies

on meeting a specific target without linking these targets with the actual overall performance

of employees.

Promoting managers and other employees to store manager, is not an effective way to

encourage all staff to do their jobs effectively. It is also not possible, because there is limited

availability to promote people, especially when we are talking about DIY stores, as there are

250 stores across the country; this means the store doesn’t have a wide range of branches to

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cover this promotion. According to Randle (1996) “it is right and proper for people to be

rewarded in accordance with their contribution.” On the other hand, the case study outlined

that the disciplinary measure tool has been used in order to reach a specific target; this tool in

management terms is not a modern way, as it forces people to do their jobs under threat.

Therefore, this way is not the right direction to motivate people; they may only motivate

themselves to avoid punishment. So, by giving the employees a clear vision and the right

direction, it will help them to achieve their target, and will create a healthy environment.

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Figure (2)

Source: Herzberg, F. (1966) “Work and the Nature of Man”, Cleveland: World Publishing

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MAINTENANCE FACTORS

Salary

Job safety

Working situation

Level and quality

Intelligence of achievement

Recognition

Responsibility

GROWTH FACTORS

The Satisfier

JOB Fulfilment

The Dissatisfies

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Identify and discuss the changes you would make to the existing performance

management and reward procedures

As we discussed in the first section of this Essay, the current reward and performance system

in the company doesn’t comply with what the company seeks. Therefore, the change has to

be in place within the organisation structure, and company performance management and

reward procedure, in order to improve its strategic plans in the long run. As a result the

change is vital in this company.

The new structure and view of the performance and reward procedures will concentrate on

different aspects and factors, such as Competency-Related Pay (CRP), Total Reward,

Performance Appraisal and training and development. Thus, this will help to make the

essential changes recommended to the company, and turn business performance around,

making it dynamic and strategic. Competency-Related Pay (CRP) can be defined as

“paying for the development and application of Essential skills, behaviour, and actions,

which support high levels in the individual, team, and organisation performance.”(Armstrong

cited in Neathey, Reillys& IES, 2003)

It can be argued that Competency -Related Pay has two main ways to link competencies with

reward “Job Focused Process” which uses competencies to evaluate different tasks and jobs

in the organisation, and “People Focused process” this will link individual pay with level of

competencies, such as bonuses and pay increases (Neathey, Reillys& IES, 2003). The studies

show that 75% of organisations use competency related pay in their framework, which is

used in performance, and encourages competency progress. On the other hand 60% of

organisations have used the same approach, to decide how they will distribute and split all

pay rises into pay shares. (CIPD, 2010)

As a result, paying for the competencies means the company is looking to move forward onto

the next step, as pay based on competencies will prevent over stress in the PRP system,

regarding to case of (DIY). The above system will encourage employees to work and achieve

organisation goals in a flexible way. The benefits from Competency – Related Pay are: apply

the equity into and play the role of fairness in all employees, build the cooperation and

communication with all the staff in the company, establish a project team to build up the

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process, as this will create cross culture inside the organisation, which will bring a healthy

environment to the organisation. Competency related pay is used in many organisations.

One of the companies who used this system is Volvo Group (UK). Before they were using

this new approach, they adapted performance related pay (PRP). Because this approach

doesn’t work well, and it gives them limited incentives to improve; they decided to choose a

new system that will help them to improve and maintain the issues that occurred and make

corrections. Competency -Related Pay enters into an organisation to give flexibility,

encourage people to do jobs efficiently, and help companies gain a wide range of experience.

Total Reward system is a mixture of elements and components that brings everything into

one benefit package. Such as: learning and development, experience, positive environment,

and employment relationship. Total reward is based on “all employees” equitably and their

engagement in their jobs. It consists of tangible rewards and non- tangible rewards, which

means in other words, (non financial rewards). Tangible rewards include transactional

rewards between employers and employees, such as bonuses, pensions, pay rise and other

benefits.

On the other hand, intangible reward which is (non financial rewards) includes benefits such

as career opportunities, experience, training and development. Relating total reward in the

(DIY) case study; the purpose of total reward is to maximise positive job engagement,

powerful motivation, organisation commitment and employees empowerments. It can be

argued that the total reward system could be a tool that creates an environment that enhances

motivation and performance in the workplace. To sum everything up, total reward is a

holistic approach that meets individual needs, brings new and talented people into the

workforce, and enhances employment relationships. See figure (3). Below are the

components of the total reward system that any company can benefit from in the future, and it

will add value in terms of business strategy.

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Figure (3)

Source: Achievement awards group, (2007) Available from:

http://corp.awards.co.za:8000/what_we_do/enterprise_solutions/total_rewards.html

Furthermore, the use of Performance Appraisal schemes help to review and examine the

finical rewards in the organisation and its an helpful tool for development and motivation for

employees therefore, the company in such circumstances as (DIY) have to initiate and

illustrate new appraisal techniques and connect them with incentive reward systems.

According to CIPD (2010), “performance appraisal one of the range of tools that can be used

to manage performance because it is most usually carried out by line managers rather than

HR professionals. So, it is important to understand that, performance appraisal contributes to

the overall aims of performance management.”

As a result it is recommended to involve performance appraisal into the firm because it will

help to give a feedback to the individual’s performance, planning for future promotion and

provide a clear vision on how the salary will be distributed between employees. Finally,

Ndunuju (2009) point out, “to make performance appraisal successful tool in the organisation

the goals must be set as “ SMART” this means that the goals must be Specific, Measurable,

Attainable, Realistic and with a Time Frame. Individual goals must be associated with

corporate organizational goals. Employee self-evaluation must be included in the assessment

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Conclusion

This study shed some lights in details about the performance and reward system that has

been used in DIY stores. Then it discussed and identified the recommended changes that

help to improve performance and reward procedures and systems in the company. By

discussing the application of key areas of HR practice that regards to reward and performance

schemes, we found the company has some issues in strategic planning to develop existing

employees more than to recruit new employees because they are well trained and they have

the experience to achieve successfully, this itself will save money and time. Moreover, the

company more focused in promotion by position that will prevent people to give their effort

in the job and meeting the targets on time.

As a part of human resource strategy is seeking for more employees to carry out active jobs

and new jobs have been required by taking in account age, performance and qualifications, in

order to meet the ordinary levels of the customer demand and sales, enhance the efficiency

and create suitable team-work environment. Therefore, depends on the skills, performance,

and well trained of motivated people to drive the Company’s recovery and deliver the

maximum quality of better performance. Changes in the environment of the company has

bring new opportunities and challenges for DIY stores, and the employees and managers

performance being asked to turn out away from usual defined job descriptions in order to

achieve the company objectives.

At the end, we can see that performance and reward strategy is not appropriate to the size and

type of the firm. For that reason as we mentioned before in this essay we outlined some

suggestion changes that might help to improve and develop its way on rewarding people

equally and create an team spirit to accomplish strategic goals and adding value in long term

manner.

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