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A STUDY ON STRATEGIC REWARD SYSTEM ON XENON AUTO SPARE PARTS

PRIVATE LIMITED AT COIMBATORE


CHAPTER I
REWARD SYSTEM:
Reward system is concerned with the formulation and implementation of strategies and
policies the purposes of which are to reward people fairly, equitably and consistently in
accordance with their value to the organization and to help the organization to achieve its
strategic goals.
It deals with the design, implementation and maintenance of reward systems (reward
processes, practices and procedures) which aim to meet the needs of both the organization and its
stakeholders.
Reward is special payments for special work. Reward refers to all forms of financial
returns and tangible services and benefit employees receive as a part of an employment
relationship.
Fairness is important in reward allocation process and to retain good employees in the
organization manager must be concerned about fairness and appropriately reward those who
deserve it .
Organizations are interested in reward system for two important reasons. First, the
absolute cost of payments bearing on cost effectiveness depends on organizations to
organizations. Second affect, on employees work attitude and behavior, employee work
effectively, to undertake training and accept additional responsibility (Bratton & Gold, 1999, p.
191,192).
According to our analysis, this author demonstrating reward, in a scenario to influence
employees to work more with greater productivity as well as to reduce cost with effectiveness.
Reward can change the behavior of employees, if employee get the reward he will satisfy with
his job and his behavior is good towards others employees.
He will be loyal to the organization. If he cannot get the good reward with respect to his
job his behavior may be change towards the employees and not loyal to the organization, so the
working condition of office is change this will effect to other employees well.
OBJECTIVES OF REWARD SYSTEM:
There are three main objective of reward system in an organization to attract and retain
competent employees.
It encourages and attracts qualified and competent employees to retain in the
organization.
Reward system is design and managed to improve productivity and control labor costs
through motivation.
Reward system should comply with pay legislation (Bratton & Gold, 1999, p. 192).

TYPES OF REWARDS:
Basically organizational reward is two types include intrinsic rewards and extrinsic
rewards.
Intrinsic rewards are internal to individual and are normally derive from involvement in
certain activities or task it includes achievements, feelings of accomplishment, informal
recognition, job satisfaction, personal growth and status.
Extrinsic rewards are directly controlled and distributed by the organization and are
more tangible than intrinsic rewards it includes formal recognition, incentives benefits, pay
promotion social relationship and work environment.
As far as literature is concerned, organizations mostly used two types of rewards likewise
Intrinsic (non monitory) and extrinsic (monitory). Intrinsic reward is depended to the extrinsic
one. Both play a vital role to motivate employees optimistically to increase efficiency and
effectiveness.
One important aspect of rewards is that they are used to control employees behavior to
the extent to achieve organizations tasks as competently as they can. On account of rewards
employees feels job security, and job satisfaction with them. According to our analysis these are
very important considerations to influence performance of employees as well.
ALTERNATIVE TO REWARD SYSTEM:
There are different alternatives to reward system likewise, pay for knowledge system, group
incentive gain sharing plan, profit sharing, cost saving (Scanlon plan), and cafeteria style
benefits. These all are used to help reward system strategies to make them more gainful.

CRITERIA OF REWARD SYSTEM:


A criterion is very important to maintain a strong base for any system to run it without ambiguity
and bottlenecks. Criteria for reward system give a fair idea about organization internal culture,
philosophy of organization, defines its mission, vision, values as well as its overall road to
success.
Customer satisfaction
Work quality
Problem solving
Work quantity
Setting and achieving objectives
Improving work processes
Attendances
Acquiring new skills

RELATING REWARDS TO PERFORMANCE:


The free enterprise system is based on the premise that rewards should depend on
performance. This performance reward relationship is desirable not only at the organizational
level or corporate level but also at the individual level.
The underlying theory is that employees will be motivated when they believe such
motivation will lead to desired rewards. Unfortunately, many formal rewards provided by
organizations cannot be connected to performance.
Rewards in this category, including paid vacations, insurance plans, and paid holidays,
are almost always determined by organizational membership and seniority rather than by
performance. Other rewards, such as promotion can and should be related to performance.
The primary organizational variable used to reward employees and reinforce performance
is pay. But relating rewards to performance demands that performance be accurately measured,
and this is often not easily accomplished. It also requires discipline to actually relate rewards to
performance.
Another reason is that many union contracts require that certain rewards be based on
totally objective variables, such as seniority. While no successful formula for implementing a
pay for performance program has yet been developed, a number of desirable preconditions have
been identified and generally accepted:

Trust in system
Absence of performance constraints
Trained supervisors and managers
Good measurement systems
Ability to pay
Clear distinction among cost of living, seniority, and merit
Well communicated total pay policy
Flexible reward schedule
The performances relating to rewards are very important to link. It is used, to
increase employees morale optimistically. It also enhances confidence level and job satisfaction
because of feeling of job security.
On important implication of it is that employees performance can be measured
continuously which forces employees to work harder and harder to perform better and also
increase organizations productivity positively.
Above mentioned points also give a fair idea to employees that how organization system is
working with rewards relating to their performance pattern which reduces bottlenecks and
ambiguity to all levels.

REWARD SYSTEM:
Xenon Auto Spare Parts Pvt Limited system is willing to use top managerial expertise because
of its superior brand image in the market. Customers are happy to buy its beverage products as
well as competitors are also conscious to bench mark its managerial competencies. Xenon Auto
Spare Parts Pvt Limited rewarding system to employee is excellent as they are caring with
excellent rewarding parameters just to retain, motivate and influence employees towards
organizational goals with their best potential utilization. They are rewarding relating with
employees performance in a way to increase productivity and effectiveness.
They are using in directly different motivational aspects like Maslows hierarchy of needs, ERG
theory and two factor theory of Hurtz Berg. But more importantly they are not specifically using
one of them; they just relate their main concepts with their reward system to define it properly.

MAIN PARAMETERS USED AS A BASE OF REWARD SYSTEM

Inflation rate factor


Market potential (what of individuals worth according to his/her expertise, job
experience etc.)
Matching with his/her presence career path
Personal development of an individual
Sales rewards

Supporting practices

Safety
Re-creational activities
Training and development
Individual goal setting

So all above parameters are used by Xenon Auto Spare Parts Pvt Limited to make their reward
system practices well in the market, object is to make their employees feel comfort, satisfied,
motivated towards achievement of organizational tasks, competent to perform to the extent to
attain organizational mission and vision terminologies and compete with outside rivals
successfully. Because the system believes that if employees are loyal to the organization then
they perform better to the way to overcome any competitive goal with accordance to desired
results with remarkable customer satisfaction.

Because quality is the whole mark for Xenon Auto Spare Parts Pvt Limited as customers
demands high quality with greater innovation in tastes. Customers tastes and preferences are no
doubt change dynamically; competition is increasing day by day, so all such things demands
greater performance of employees and Xenon Auto Spare Parts Pvt Limited human resource
system is very conscious to overcome this challenge by effective rewarding of both monitory and
non-monitory.

According to our study, which we conducted in our previous semesters form internal employees
of the higher system more love to have non monitory rewards like wise. Achievement, Feelings
of accomplishment, Informal recognition, Personal growth, Status, while lower system are more
thirsty to have rewards like incentives, bonuses i.e. have more curiosity to take cash rewards.
Maslows theory can be best define social, self esteem and self actualization stage employees
have inquisitiveness to take intrinsic rewards while other ones physiological, safety needs
employees are more attracted by cash rewards of any kind.

More importantly, Xenon Auto Spare Parts Pvt Limited system design superbly their reward
system, just for the sake to overcome employees thirst, mean to say sometimes employees only
work hard when they are being rewarded but Xenon Auto Spare Parts Pvt Limited reward system
is distributed by a mixture of both rewards monitory and non monitory that is one employee
some times get intrinsic rewards in terms of appreciation, status and sometimes extrinsic one. So,
outstanding managerial expertises are involved to equalize system to perform better.

Criteria of rewarding employees:


They are using different techniques to define their reward criteria to work according to define
standards of organization. System is developed by doing great market search so as to compete
rivals to the way to satisfy their internal employees more than that to get more profitability and
customer loyalty.
Grade jump
Designation change
Special assignments (inter departmental transfer)
Financial aspects
Grade jump and designation change
Training and development
Personal development of an individual
Career grooming
They make close collaborative or communication system with employees so as to fetch
information on the part of their problems to satisfy them all to increases their efficiency and
effectiveness. Because need and wants of employees are changing day by day to satisfy
meaningful needs and wants are very important in the behalf of organization so as to use best
potential of both physical and mental competencies is very important. Thats why defining
criteria of rewarding them have a significant importance for the mutual benefits of both
employees and organization. Rewards have greater importance and effectiveness in Pakistani
cultures, because people have more demand of them.

The link of performance objectives with the organization

Mission

Goals

Head of
Department
Organizational goals Unit office

Locations PGM

Key result areas Functional heads

Direct reports

Performance objectives supervisors

Employees

Performance Standards:
According to our practical analysis, we came to know that Xenon Auto Spare Parts Pvt Limited
International is using better linkage of mission and vision to its organizations functions as well.
As above diagram clearly explain how they managed all in a way to get best appropriate results.
As they have developed a fine system to involve employees in decision making just to make
them company loyal and responsible.

First goals are developed at higher level, then head of departments make their ones, then unit
office, next comes locations PGM, then functional heads then direct reports are being
formulated, supervisors take part and at the end employees also formulate their goals. All these
exceptional policies make Xenon Auto Spare Parts Pvt Limited International best out of its
competitors. At functional level, human resource, accounts, distribution, and sales & system all
have to develop their own goals according to their departments philosophy.

All done at four basic steps, like wise:

Goal setting
Monthly review
Mid year review
Final review

First all goal are formulated according to above diagram, from organizational level to employees,
then monthly review has taken place in it only checking of goals implementations is going on.
Monthly review is at inter departmental level, here no change can be offered as well as no record
can be made but at goal setting both change and record can be happened. Mid year stage comes
with re alignment of goals as well as new policies ways can be designed to achieve
organizational goals. At the end, final review comes in, in this step check and balance takes
place, actual achievement can be matched with defined are standard one so as to measure out
comes or results.

Here after getting results, if organizations see optimistic results with greater productivity, then
they analyze its true reasons so as to reward those ones who have done extraordinary yearly base
performance. All those will have to be rewarded by organization with their defined rewards like,
salary increment, grade jump and designation change (promotions).

Ranges of Pay System & Performance:

Based upon grades


Survey of top five companies
Inflation rate
Individuals market worth & expertise
Exceptional performance EP :

Contributions significantly exceed the stated objective (s) in terms of quality, quantity and
timeliness.

Successful performance SP :

Contributions meet and sometimes exceed the objective (s), which are based on challenging
goals.

Developing performance DP :

Contributions meet some / most but not all of the objective (s) and performance improvement
is necessary.

No Performance NP :

Contributions frequently do not meet the stated objective (s).

Performance requires monitoring and substantial direction from the manager.

Basically their pay system is highly linked with performance, firstly Xenon Auto Spare Parts
Pvt Limited system prefers grade for defining pay. They prefer to do research by conducting
survey of top five companies, in this step they conduct minimum three year pay ranges of
those companies and take average of them. Then they decided their pay system with
accordance to their system grades. Inflation rate has to be considered each year at any cost no
matter of an individuals performance increase or not.
Types of Rewards of Xenon Auto Spare Parts Pvt Limited

Yearly Basis:

Employee salary increment


Grade Jump
Designation change
Annual incentive Plan (AIP) (for business performance, but fixed)
Personal Progress report (PPR) (Annual Appraisal)

Monthly Basis:

Making the move (MTM, sales target achieve)


Monthly turn hall (extraordinary performance)

Quarterly Basis:

Employee of the Quarter (EOQ, non sales)


Sales Dangle context
Gold Context

Nomination Criteria for EOQ:

Employees being nominated by the supervisor should meet the following criteria

Nominees for the quarter must have a permanent status.


Employee should be disciplined; has no disciplinary action taken against him/her in the
past year or so.
Employee should have a good attendance record.
Employee should have no marked absent and should be punctual.
Employee takes responsibility for his/her actions.
Employee owns the results achieved by him/her.
Employee completes most of the tasks assigned to him/her (as per their objective and
goals).

All the rewards are combined to form Xenon Auto Spare Parts Pvt Limited Internationals
reward system system to the extent to work well. Human resources department have developed a
great system by distributing rewards among yearly, quarterly, and monthly basis. All above
mentioned rewards really influence employees to satisfy their needs and wants to larger scale.
Xenon Auto Spare Parts Pvt Limited have developed systematic system with number of steps to
be followed; these limitations make their employees so disciplined and competent which help
them to produce more with contrast to their rivals.