1. ESSENTIALS OFESSENTIALS OF
REWARD MANAGEMENTREWARD MANAGEMENT

2. Definition:Definition:
 “Reward Management is concerned with
the formulation and
implementation of strategies and
policies that aim to reward people
fairly, equitably and consistently in
accordance with their value to the
organization”

3. CHARACTERISTICSCHARACTERISTICS
1. REWARD MANAGEMENT AND PEOPLE:
-- is concerned with people
-- employees are rewarded for their efforts skills & contribution.
2. A STAKEHOLDER APPROACH:
-- purpose of HRM is to meet needs of all stakeholders in the business
(e(e), customers, suppliers, management and the shareholders)
3. INTEGRATED REWARD MANAGEMENT: it consist of related
set of activities that impact on all aspects of business and HRM
4. STRATEGIC REWARD MANAGEMENT: ultimately a way of
thinking that one can apply to any reward issue arising in the
organization, to see one can create the value
5. EVIDENCE-BASED REWARD MANAGEMENT:
--- its based on fact rather than opinion
--- on understanding rather than assumptions

4. THE REWARD MANAGEMENTTHE REWARD MANAGEMENT
FRAMEWORKFRAMEWORK
 Reward management is a complex
process with many interconnecting
elements and under-pinning concepts.

5. AIMS OF REWARDAIMS OF REWARD
MANAGEMENTMANAGEMENT
 support the achievement of business goals
through high performance;
 develop and support the organization’s
culture;
 define what is important in terms of
behaviors and outcomes;
 reward people according to the value they
create;
 reward people according to what the
organization values;

6.  align reward practices with employee need;
 help to attract and remain the high- quality
people the organization need;
 win the engagement of people.

7. ACHIEVING THE AIMS INACHIEVING THE AIMS IN
GENERALGENERAL
1. Reward philosophy:
The philosophy of reward management
recognizes that if HRM is about investing in
human capital from which a reasonable return
is required,
then it is proper to reward people
differentially according to their contribution.
2. Distributive justice:
It refers to how rewards are provided to
people. They should feel that they have been
treated justly i.e. they receive what was
promised

8. 3.Procedural justice:
It is referred to the ways in which managerial
decisions are made and reward policies are put
into practice.
4. Fairness:
It operates in accordance with the principles of
distributive and procedural justice.
5. Equity:
Equity is achieved when people are rewarded
appropriately in relation to others within the
organization.

9. 6. Consistency:
Decisions on pay do not vary arbitrarily- without
due cause- between different people or at different
times.
7. Transparency:
It exists when people understand how reward
processes function and how they are affected by
them.
8. Strategic alignment:
It ensures that reward initiatives are planned by
reference to the requirements of the business
strategy and are designed to support the
achievement of business goals.

10. 9. Contextual and culture fit:
the design of the reward process should be
governed by the context (characteristics of
organization) and the organization’s culture(its
values and behavior).
10. Performance and reward:
11. Segmentation: different segments of
workforce and individuals at different cadre are
motivated differently

11. ACHIEVING THE SPECIFIC AIMSACHIEVING THE SPECIFIC AIMS
1. Support the achievement of business goals and
high performance
2. Support and develop the organization’s culture
3. Define the right behaviours and outcomes
4. Reward people according to the value they
create and the organization values
5. Align reward practices with employee need
6. Help to attract and retain high- quality people
7. Win the engagement of people
8. Factors influencing the achievement of the aims

12. Contextual factorsContextual factors
Internal context:
The organization’s culture the shared values, norms &
assumptions that influence the people act and the way things get done
The organization’s business eg. Manufacturing, financial
services, retail, transport, educational, etc. govern the ethos & core value
Work environment the way work is organized, managed and
carried out influences the pay structure
People people’s occupations may affect their wants and needs. Reward
strategies & policies should take account of the different needs of people and this
may mean segmenting rewards to meet those individual needs
Business strategy determines where reward should go (reward
strategies). Integrating reward and business
Political and social climate organizational politics & social
factors such affect how the organization functions & the approach to reward
management it adopts

13. External context
Globalization international reward strategies, expatriate workers, local
country staff would decide the reward system
Rates of pay in the market place the external
environment exerts a major influence on rates of pay
The economy whether a boom or a bust mode will inevitably affect
reward policy & practice
Societal factors views about reward held in society at large may
affect internal reward policies

14. FUNDAMENTAL CONCEPTSFUNDAMENTAL CONCEPTS
The following fundamental concepts influence the aims of
Reward Management, reward strategy and how people are
valued:
1. The resourse based view:
 It includes the range of resources in an organization,
including Human Resources that creates competitive
advantage.
 The role of Reward Management is to contribute to the
acquisition and retention of such people.

15. 2. Human capital Management:
 The concept of Human capital is often associated with
the resource based view.
 Human capital Management is an integrated effort to
manage and develop Human capabilities to achieve
significantly higher levels of performance.

16. 3. Human process advantage:
 Boxall (1999) notes that a distinction should be made
between Human Process Advantage ( difficult to
imitate, highly evolved processes within a firm) and
Human Capital Advantage (follows from employing
people with competitively valuable knowledge and skills)
4. Motivation Theory:
 Motivation Theory explains how motivation works and the
factors that determine its strength.
 A distinction is made between extrinsic and intrinsic
motivation. Extrinsic motivation occurs when things are
done to or for people to motivate them.

17. The 5 categories of motivation theories:
1. Instrumentality Theory:
 Instrumentality is the belief that if we do one thing
it will lead to another.
 Theory states that people only work for money, It
assumes that people will be motivated to work if
rewards and penalties are tied directly to their
performance.

18. 2. CONTENT (NEEDS) THEORY:2. CONTENT (NEEDS) THEORY:
This theory focuses on the content of motivation in
the shape of needs. Level of satisfaction.
It provides guidance on what needs should be
satisfied by the reward system if motivation is to
occur.
The basis of content theory is the belief that an
unsatisfied need creates tension and a state of
disequilibrium.
The main contributors to needs theory were
Alderfer (1972), Mc clelland (1961), and Maslow
(1954).

19. 3. PROCESS THEORY:3. PROCESS THEORY:
Three main theories under Process
Theory are:
1. Expectancy Theory
2. Goal Theory
3. Equity Theory
4. Cognitive Evaluation
 Expectancy Theory proposes that a person will
decide to behave or act in a certain way because they
are motivated to select a specific behaviour over other
behaviors due to what they expect the result of that
selected behavior.

20.  Goal Theory states that Motivation and Performance are
higher when individuals are set specific goals, when goals
are difficult but accepted, and when there is feedback on
Performance.
 Equity theory is a theory that attempts to explain
relational satisfaction in terms of perceptions of fair/unfair
distributions of resources within interpersonal
relationships.
 Cognitive Evaluation Theory as advised by DECI and
RYAN argues that placing strong emphasis on monetary
rewards decreases people’s interest in the work itself.
In other words, extrinsic rewards erode intrinsic interest.

21. 4. Principal Agent Theory:
 Also known as Agency Theory, Principal Agent theory is
based on the supposition that the separation between the
owners (the principals) & the agents (the managers) means
that the principals may not have complete control over their
agents.
 The agents thus act in a way which conflicts with what the
principal wants
 Thus it is desirable to provide “incentive alignment” ie paying
for measurable results.

22. 5. Psychological contract :
 The unwritten expectations that employees and
employers have about the nature of their work
relationships.
 A psychological contract represents the mutual beliefs,
perceptions, and informal obligations between an
employer and an employee. It sets the dynamics for the
relationship and defines the detailed practicality of the
work to be done.
 an implicit set of obligations and expectations
concerning what the individual and the organization
expect to give to and receive from each other.

23. Pay level Concepts:Pay level Concepts:
Effective Reward Management
The criteria for judging the effectiveness of a reward
management system is the extent to which it:
 is fit for purpose — the contribution it makes to achieving
organizational objectives and recognizing the needs and wants of
stakeholders;
 is appropriate — fits the culture and context of the
organization;
 is designed in accord with what is generally regarded as good
practice in the particular context of the organization, subject to
the requirement that it must be appropriate;
 functions in line with well-defined guiding principles, which
include the need to achieve fairness, equity, consistency and
transparency in operating the reward system;
 includes processes for valuing and grading jobs and rewarding
people according to their performance or contribution that are
properly conceived and function well;

24.  makes a significant impact on performance through
performance management or contributions to high-
performance working;
 has produced an attractive employee-value
proposition;
 provides rewards that attract and retain people and
enlist their engagement;
 maintains competitive and equitable rates of pay;
 incorporates successfully a total rewards approach;
 manages reward processes carefully and obtains value
for money;
 provides for the evaluation of reward processes and
taking corrective action as necessary;
 communicates to all concerned how the reward system
operates and how it affects them;

25. Effective Reward in the BestEffective Reward in the Best
Performing FirmsPerforming Firms
The best-performing firms view their reward
programmes differently from the lower-
performing organizations:
Top firms are more likely to use rewards as tools to
engage people in improving business performance.
These firms make greater efforts than others to
communicate their plans and to measure reward
plan effectiveness.
They are more likely than the rest to link rewards
to their organization's business strategies.