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Reward System and Organization Culture Used as

Motivation for The Employees to Perform

MGT 672

Submitted by:

Marjan Farooque

ARM Ridwanul Karim

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Reward System and Organization Culture Used as Motivation for The Employees to

Perform

Motivation:

Motivation is characterized as the procedure that starts, manages, and keeps up objective

arranged practices. Motivation is the reason that makes the people act or behave in a particular

way. Robbins and Judge (2009), defined motivation “as the processes that

account for an individual’s intensity, direction, and persistence of effort

toward attaining a goal.”

Motivation
Motivation

Intensity Direction Persistence

Intensity refers to the amount of mental and physical effort put forth by a

person. Direction is the extent to which an individual determines and

chooses efforts focused on a particular goal. Persistence is the extent to

which the goal-directed effort is put forth over time. There are many theories

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of motivation, including early theories and contemporary theories. Early

theories of motivation include: Abraham Maslow’s hierarchy of needs,

Douglas McGregor theories X and Y, the two factor theory, and McClelland’s

theory of needs.

The most used motivation theory was Abraham Maslow’s hierarchy of

needs. The hierarchy consists of five stages: physiological, safety, social,

esteem, and self-actualization. When one need is satisfied the person moves

on to the next need fulfillment. Therefore, in an organizational motivation

context, when an employee’s basic need is fulfilled the organization need to

find their next level of needs as a motivation (Mcleod, 2014).

Motivated employees on both individual and group level have shown a

better overall outcome on the organization performance by using different

methods of reward system. As of what we have looked into, we have built up

the accompanying assumptions for our paper.

Model 1:

Extrinsic
Rewards
system

Motivation
to perform
Intrinsic

Strong
organization
al culture
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As we can notice from the model, motivation to perform is influenced

by rewards system and strong organizational culture. If the employees get

motivated and perform, organization as a whole benefits from it. Thus, we

developed a number of hypotheses, which are reflecting connections

between described circumstances and their consequences.

Assumption 1: Motivation improves an employee’s performance.

Assumption 2: Motivation’s impact on employee performance is moderated

by reward system.

Assumption 3: Motivation’s impact on employee performance is moderated

by strong organizational culture.

Assumption 4: Strong Organizational Culture can bolster Innovation/productivity.

Assumption 5: High performance culture Employees are more likely to succeed in their job roles

than others.

First the report is going to explain the reward system then we will talk about

organizational culture in second part of the report.

Motivated workers are said to perform better and be more profitable.

Most organizations comprehend that so as to have a successful business,

they should have the capacity to check with roused and upbeat employees,

who will perform their best and who will be prepared to offer the organization

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some assistance with achieving its objectives. Motivating employees to

perform is not a simple undertaking, as it is by all accounts, in light of the

fact that not all workers are motivated by the same reasons. Few employees

are more motivated when they feel that they are picking up something out of

their diligent work, similar to cash, more advantages, or any sort of prize.

Different workers are motivated when they feel their organization and

administration are doing something for their families.

There are two types of rewards: Extrinsic and Intrinsic rewards.

According to Thomas (2009), extrinsic rewards are associated with tangible

rewards. They are normally money related in nature, for example, a rise up

in compensation, and a reward for reaching some quota or limit or paid time

off. In any case, outward remunerates can likewise be as straightforward as

showing signs of improvement office, verbal acclaim, open acknowledgment

or grants, advancements and extra responsibility. Whereas, intrinsic reward

is completely opposite. They are more related with self-esteem, sense of

accomplishment, and with things that motivate employee internally, like

doing something that they love and getting paid for it.

As stated by Thomas (2009), in a learning economy where the best

resource an employee can offer an association is their knowledge,

experience, critical thinking capacity and change-shrewd persona, intrinsic

rewards are especially important to workers. Indeed, Frederick Herzberg,

who is one of the main scholars of workplace motivation, observed intrinsic

rewards to be much more grounded than financial rewards in expanding

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employee motivation. This is not to say that employees won't look for

financial rewards in addition to intrinsic rewards, rather it just implies that

cash is insufficient to amplify motivation in many workers. Individuals need

to feel like their commitments matter.

Rewards system is an instrument that can be used to motivate

employees to perform and increase their productivity. It seeks to attract and

hold on to efficient employees, encourage good management, employee

relationship and commitment and minimizes tension and conflict as it deals

with all forms of final returns, tangible service and mechanism for good

relationship. In addition, mostly it has been seen that organizational conflicts

arises when employees feel that their benefit are denied or about to be

denied, thus the importance of reward system is to provide a good platform

for equity and fairness.

There are two basic categories of rewards: Compensation rewards and

Non-compensation rewards. Compensation rewards are the different types of

direct remuneration—i.e. employee's pay including variable pay, short and

long term incentives, organization stock awards, and additionally

advancements and rise in salary. It likewise manages indirect compensation,

for example, paid leave, protection, retirement pay and different worker

administrations, regularly alluded to as "advantages" that businesses use to

draw in, perceive, hold and motivate employees to contribute to the

organization’s strategic objectives. Moreover, it investigates adaptable work

courses of action, for example, working from home and strategic scheduling

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that employees may see as advantages and covers the mechanism of

rewards which encourage superior performance from employees, like sales

incentives (Society for Human Resource Management, 2015).

Non-compensation rewards are beneficial factors related to the work situation and well-

being of each employee. Provide adequate resources to do the job. Allowing the people control

over their own activities. Non-compensation rewards can include benefits (including medical or

other insurance), time off, flex time, mentoring programs, tuition assistance, childcare, gym

membership discounts, free or discounted parking and retirement matching. These advantages

impart to employees that their work is esteemed and advance a positive work-life parity. The

thought behind advantages is to assemble a group and emotionally supportive network, which

empowers employees to concentrate on work instead of stress over life (Boundless, 2015).

Under the compensation and non-compensation rewards falls the financial and non-

financial rewards. There are various types of financial and non-financial compensation that

equally motivates the employees to perform efficiently and effectively towards the

organizational goals and to their personal goals as well.

Financial Rewards:

Straight Salary: It is a compensation method where only fixed salary is paid based on

flat hourly, weekly or monthly rate. Salaries on this method is very easy to administer. Salaries

provide control the employees activities and reassignments are less of a problem. Salaries can be

useful when substantial development work is required. On the other hand straight salary method

offers little incentive for better performance. Salary compression usually causes perceptions of

inequity among experienced employees (Business Dictionary, 2015).

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Straight commission: As stated in Business Dictionary (2015), it is a

method where the income is directly linked to the desired results. The

amount received by the employee is an element of his or her execution (and

not of real time worked) reflected in sales volume. This technique is utilized

where the goal is to (1) produce most extreme transient deals income at the

least overhead cost, 2) to employ independent sales-employees instead of

permanent sales staff. This method motivates employees to perform as well

as creates a situation where employees are not as loyal as full time

employees.

Performance Bonuses: It is a type of extra remuneration paid to an

employee or division as a prize for accomplishing particular objectives or

hitting foreordained targets. A performance bonus is compensation beyond

normal wages and is typically honored after an execution evaluation and

examination of ventures finished by the employee over a particular

timeframe (Investopedia, 2015).

According to a research done by Yousaf, Latif, Aslam, and Saddiqui

(2014), among all the financial rewards performance bonus motivates the

employees most as in performance bonus the employees are given a specific

task or goal to fulfil. When the employees know if they fulfil this goal they

are going to be paid extra they start working much harder and put more

effort towards fulfilling that goal. As performance bonus is an extra pay with

including their basic salary it makes the employees more efficient and

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effective towards their job which in return helps the organization to benefit

from it.

Non-Financial Rewards:

Opportunity for promotion: Organizations or the upper level

employers who need to perceive their employees for good work have

numerous motivational tactics available to them. One of the more customary

approaches to remunerate a top employee is to give him/her a promotion.

Promoting from inside of an organization supports assurance and keeps

efficiency high. New employees can see the potential for development. If the

employees feel that there is a potential career path available within their

current organization, they will start working hard towards achieving that

point and this way the organization is less likely to lose promising efficient

and hardworking employees to another organization. Employees are more

likely to get motivated and start taking positive reinforcement of

organizational educational opportunities and training if they know these skills

and knowledge can improve their chances of promotion in the organization

(Greenwood, 2015).

Sense of accomplishment (empowerment): Employee

participation in decision making improves adequacy and development and in

the meanwhile it upgrades employee motivation and trust in the

organization. An equivalent chance of cooperation in decision making can be

compelling in giving employees a feeling of pride and sense of

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accomplishment. When the employees are empowered to take action, it

gives them the ownership of their job. The empowerment helps them to

assume liability of their job and effect of their performance on the

organization. This motivates them and increases their self-esteem.

Organizations can persuade the employee by giving opportunities to seek

after their own particular considerations by outlining employee inclusion

projects like participative administration and quality circles. The participative

administration will permit the employee to share their considerations at one

stage and take an interest in joint decision making. In quality circles, less

than ten employees meet with their administrator to talk about and discuss

about control quality issues. This will create a strong sense of

accomplishment and at last increase the employee motivation level and job

satisfaction (Yousaf, Latif, Aslam, and Saddiqui, 2014).

The motivation of the employee to voice their thoughts is expanded

when given a chance to share their point of view in the organizations

decision making. An equivalent involvement and commitment in decision

making can create group viability and results in a better decision. The

working places which demonstrate positive gathering for equal participation

in decision making are less confrontational, more useful and empowering of

other staff (Yousaf, Latif, Aslam, and Saddiqui, 2014).

Opportunity for career development (personal development): If

there is a lack of opportunity for personal growth in an organization it

negatively affects motivation and performance. If the employees get the

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chance for adapting so as to build up their professions aptitudes, advances

and skills fundamental for execution change and advancement, they will feel

esteemed and inspired. Motivation is goal-oriented behavior. As per this idea

employees can be inspired if their desires concerning the objective

achievement are connected with the particular activities with respect to

administration. Hence, employee motivation will increase with the realization

that the course of action will not only lead to accomplishment of goals but

yet brings about more noteworthy chances for their advancements. The

procurement of chances for learning and development of the organization

can motivate the employee. Organizations give careful consideration on

developing their employees and upgrading their motivational viewpoints like

self-esteem and self-actualization. Thus, they can achieve the most positive

performance. Level with open doors for professional success and "equitable"

payment framework and training can increase the motivation of employees

(Yousaf, Latif, Aslam, and Saddiqui, 2014).

There is a positive relationship between employee motivation and

training. The training procedure motivates the employee to enhance

performance because of numerous reasons. Motivation is a goal oriented

behavior. In this way, when employee wishes or desires are adjusted to the

objective achievement, they are roused to put forth a strong effort.

Employees expect advancements, acknowledgments and career

development. Training so as to prepare helps them with aptitudes,

advancements and information for satisfying their improvement needs. The

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advantages that the employees anticipate for themselves are satisfied via

training and advancement (Yousaf, Latif, Aslam, and Saddiqui, 2014).

Recognition: The motivation behind a recognition plan is to say

"thank you" or "well done." Nearly 90 percent of organizations offer some

type of recognition system. The organization can perceive their workers for

length of service, remarkable execution, deals execution, inventive

recommendations, wellbeing, or participation, and in addition commending

their retirement. The rewards that accompany these recognition include

plaques or certificates, organization logo stock, gift certificates, adornments,

office embellishments, household items, recreational things, and gadgets—

and even a night or two as a visitor in a hotel. These grants are intended to

fortify employee practices that bolster and support the organization's central

goal. Honors like these can plainly exhibit that the organization appreciate

and value their employees and their work endeavors (Sturman & Ford,

2011).

A key advantage of these recognitions is that they can create a lasting

memorable experience. Not only does the employee have the award itself,

but that individual has sentiments of pride from getting a plaque, enduring

sentiments of thankfulness or accomplishment by having a trophy, or

affectionate recollections mixed by photographs from a unique get-away.

Often, the emotional connection of a physical recognition is much stronger

than what you'd get from receiving an equivalent amount of money. For

instance, a trophy that that announces an employee's outstanding service

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may cost just $20, however the enthusiastic effect of accepting a trophy is

far more noteworthy than that of essentially getting a $20 bill. The trophy

presentation can be something that the employees always remember

(Sturman & Ford, 2011).

Job Security: Job security gives employees a greatly required feeling

of structure. Individuals need to know their employment is accessible for

whatever length of time that they wish to hold it. At the point when

employee stability declines, fulfillment and performance levels additionally

take a hit. Therefore, to motivate the employees to perform better

organizations need to show that they have a security towards their job. They

can provide work contracts to long time employees as well as new

employees according to their performance to gain their confidence and trust

towards the organization and in return get efficient and effective

performance from the employees (Woods, 2015).

According to research done by Yousaf, Latif, Aslam, and Saddiqui

(2014), among all the types of rewards non-financial rewards tend to

motivate employees most as the employees feel more motivated when they

see their work is being appreciated and recognized in front of the whole

organization. They feel a sense of accomplishment which they wouldn’t have

felt if given financial reward like performance bonus because financial

rewards don’t last forever but appreciation or any kind of award stays

forever.

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Organizational Culture and Performance

Todays’ business world is being governed by many forces. These forces determine how a

particular organization will be performing in a certain environment. Professionals and

researchers had been working really hard to understand the factors that drives performance of an

organization. Assuming all inputs like industry condition, economic climate, investment

capability, stability of a market and level of technological competence in a competition is fixed,

what can be changed to gain competitive advantage over the competitor. Is it the marketing

strategy, brand management? Or is it the skill of the sales force? Does it have anything to do

with creativity and productivity of the employees? Or is it the leadership that makes the

difference. Well, all of them are correct. The key to perform better is actually is in the hands of

the organizations. Regardless of the nature or type of an organization, every organization have

something in common. That is the organizational culture and Human Resource specialists had

been claiming this for some time now that Organizations Culture is the key to drive performance.

Organizational Culture

Culture is the abstract phenomena that governs how a group of people will live their life

like. It consists of how they speak, what their values and beliefs are, what sort of behavior they

generally accept and expect, and the composition of ideologies that drive them. The way they

react and shows behavior toward something without thinking is because of the influence of the

culture they live in. This culture is fostered over many past generations and carefully carried by

the present members so that they can pass it onto the next generation. It is an ever evolving,

fascinating feature of human society that researchers still trying to fathom its depth.
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In an organization, people come together to achieve a common goal and they also bring

elements from the society they are from to form a separate type of culture. This is known as

organizational culture. Over the years, organizational culture been defined by many researchers

in many different ways. Like organizational culture is the set of common set of values, norms

and beliefs that makes the people behave in a certain way that they do (Schein, 2011). According

to Hofstede (1980) organizational culture is the shared values, beliefs and practices that

distinguishes one organization from another. Martin & Siehl (1983) compared organizational

culture with glue. They said organization culture is the adhesive that holds an organization

together and it has 3 components (core values, process of communication and strategies to

reinforce content). Denison (1990) indicated that organizational culture as the primary

assumptions, beliefs that serves as a basis for an organization’s management system. Some

described organizational culture as the summation of peoples’ behavior in an organization and

the interpretation of that behavior (Schneider, 1997). Some other described it as an informal,

abstract way that binds people in an organization and that determines what each other think

about themselves (Wagner, 2005). So we can say that organizational culture is something that

includes everyone in an organization, determined by the people of the organization and their

past, includes internal rituals/symbols/ethics/values/assumptions, abstract and difficult to change.

Research shows that there are seven primary characteristics that expresses the principle of

organizational culture the best. Those are:

 Innovation and risk taking: Does the organization encourage risk taking and demands for

innovation in high/low frequency?

 Attention to detail: Does the organization ask for precise, detailed style of work?

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 Outcome Orientation: Is the management outcome oriented rather than way/technique to

achieve that outcome?

 People Orientation: Is the management bothered about effect of outcome on the people

within the organization?

 Team Orientation: What sort of work style the management promotes most –

individualism or team achievements?

 Aggressiveness: Do the management demand assertiveness and high competence?

 Stability: Do the organization emphasize on the steady way of doing things?

These characteristics shows that organizational culture actually determines the attitude of

the organizations people. When a person starts working with a group of people he will start

learning what is expected from him. He will learn how the rest of the people are behaving and he

will shape himself along with that. So that’s why people coming from different walks of life

behaves similarly within an organization. It is because that sort of behavior is asked from him by

the management. There are two types of organizational culture that exists in an organization.

One is dominant culture, which is shared by the majority of the people. This is the culture where

organizations values, norms and beliefs are shared broadly. The other one is the sub culture,

smaller groups of people share a smaller set of culture across departments or geolocations of that

organization.

Performance

Generally, in a business organization performance refers to how the organization and its’

people are doing in its mission to attain the goals. Performance can be varied to financial or non-

financial measures or it can be hybrid of the both. ROI, ROE, stock price, profit, sales turnover,

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overhead cost reduction of a plan etc can be examples of financial performance. On the other

hand, image of the organization, awareness of the brand, public relations, employee retention and

motivation can be examples of non-financial performance of the organization and its’ employees.

Two organizations operating in the same industry, serving the same market may perform

differently. The reason is their individual performance. It’s because of the performance for which

two companies will experience two different outcomes in the same period of time, one being

good and other being bad. Performance is an important issue for any organization be it profit or

non-profit organization. We can look at performance from two different perspective- individual

employee/member performance and overall organizational performance. The employee

performance may depend on numbers of factors like compatibility of the person, experience,

knowledge on specific field, motivation of the person, benefits and rewards the person is

receiving from the organization and so on. Overall organization performance can be dictated by

the industry climate, the market share, image of the organization, past record or history of

organization, leadership practice in the organization etc. But both of them can be influenced by a

strong medium that is unavoidable in any organization – the organization’s culture. This is such a

strong phenomenon in the business that researchers and managers are trying to understand it

more and more so that the output (performance) can be manipulated.

The link between organizational culture and performance:

Many scholars have found positive relationship between organizational culture and

performance. Profit is the ultimate outcome an organization seeks and this is the result of

individual efforts that employee put in together. Stewart (2007) stated that, the work culture

determines the outcome for an organization and the strongest element of the work culture is

its’ member belief and attitude toward work. People make up the culture and it carries through

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them. If an organizations values contain such belief that ‘if it’s not broken don’t fix it’ the

employees performance will reflect this value. On the other hand, if the culture has such a

component that states that ‘hard work is rewarded here’, the employees will act in favor of that

belief.

Strength wise organizational culture can be either strong or weak. When organizations’

core beliefs and assumptions are both deeply believed and extensively shared then it can be

assumed that that culture is a strong culture. More people accepting core values of an

organization indicates the strength of their commitment to these values. Strong culture creates

an environment in an organization so that management can control the members’ behavior

because it leads to employee cohesiveness and loyalty. A weak culture is just the opposite

when values are weak and employees feel like loosely connected to each other and with the

organization and its goals. According to the text book by Robbins, S. P., & Judge, T. A. (2010)

there are four types of culture based on competing values. Those are collaborative and

cohesive clan, adaptable adhocracy, controlled and consistent hierarchy and customer focused

market. This Competing Values Framework was proposed by Quinn and Rorbaugh (1983).

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Clan is more flexible than others and the do not put much emphasis on structure. People

are motivated by common goals and shared belief. These type of organization often act like a

family and the leaders are often take up the role of a guardian. Adhocracy enjoys more

flexibility than the clans. They have greater freedom because they adapt to swiftly changing

business environment. Their market response is fast and quickly changes shape to answer calls

from the market. Innovation and fast reaction is key to success here and dynamic entrepreneurs

are examples of leaders of this kind. Hierarchy are the classical bureaucratic organization that

follows strict chain of command rules. It is very structured and workflow & communication is

very controlled. They usually have strict guidelines for every aspect of an organization and the

leaders are usually the chief coordinators. Market organizations are those who also like to

impose heavy control but does so by looking outward. They are driven by result and market

responsive. In a market culture organization value flows between people and stakeholder with

minimal cost and delay. Studies found that, clan based cultures specializes in job attitudes and

loyalty. It means if the leaders demand to go the extra mile from the employees of clan culture

organization, they will probably do that out of self-obligation. Clan culture organization

functions like a family so retention rate is high. The study also shows that, innovation is high in

market culture and so is the financial outcomes. Since market culture is highly market responsive

and functions with high competency it demands such performance from its’ members.

Denison (1990) came up with a model that explains cultural traits of an organization. In

his study he connected management practices with organizational norms and beliefs. He

proposed that organizations’ performance is the function of beliefs held by the members of that

organization. He also stated that strength of those values and beliefs are the actual predictor of

performance of that organization. (Denison & Mishra, 1995)

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Denison’s culture model is based on four cultural traits. Each trait has several indexes.

Those are:

At the center of the model there is beliefs and assumptions. The four cultural trait spring around

the core beliefs and assumptions

Mission: long term objective of the organization. This trait consists indexes like Strategic

Direction & Intent, Goals & Objectives and Vision. This part indicates are the employees aligned

with company’s mission and vision? Is their personal goal aligned with organizational goal? Do

they fully understand the direction the company is going and do they agree with it? A successful

organization will always have clear mission and vision. They will also make sure the employees

are fully communicated on this agenda and their commitment is there with organizations mission

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and vision. If organization changes direction of their mission/vision, the culture has to adjust

along with that.

Adaptability: Organization’s responsiveness toward the market. The indexes are creating

change, customer focus and organizational learning. This trait asks questions like do the

members have the intent to improve the way they work? Are they customer focused? Is the

organization share knowledge across departments/divisions? Do they give innovation and risk

taking any chance? A successful organization will always be customer focus. They will learn

what market is demanding and answer quickly with innovation. Sometimes they will go the extra

mile by taking risk.

Involvement: Developing sense of ownership and competence among the members. The

indexes are Empowerment, Team Orientation and Capability Development. This trait indicates

towards issues like are the employees feeling like they are part of the organization? Do they

work with ownership? Does the organization promote team orientation and team achievement?

Are employee capabilities are developing? An effective organization who asks for higher

performance from their employees will give the employees the feeling that they are empowered.

They will develop a culture around team where everyone is equally accountable for achieving the

desired goal. Every employee will feel like they are directly connected to the ultimate

achievement.

Consistency: Strength of the core values of the organization that is also highly

consistent. The indexes are Core Values, Agreement and Coordination & Integration. This trait

of the organization refers to whether the leaders are strong role models for conveying the values?

How well and effectively the members coordinate and reach to an agreement in times of critical

issues? A high performing successful organization is always well coordinated and well

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integrated. Companies that can react quickly among the diverse views of members and reach to

an optimal decision is always a step ahead than others.

All of these traits are available in all sorts of organization. The performance of that

organization will be determined how high they score among these traits and what is the mix they

use to achieve their goal. Organizations that score high in adaptability and involvement are

known to be flexible. They are known to be quickly responsive to environment and serve their

customers with innovation and speed. Organizations that score high in mission and consistency

are known to be more stable. They have set of rules that the go by and known to be efficient and

financially profitable. On the other spectrum, organizations that score high in adaptability and

mission assumed to have external focus. They observe the market closely and react accordingly.

As a result, they obtain a steady growth as they satisfy the present market demand and also keep

predicting the future. Organizations that score high in involvement and consistency are known to

have internal focus. They align their processes and people to achieve operational excellence,

high quality and high employee satisfaction.

Conclusion:

At the end it can be said that the aim of this paper was to explore the

reward system and organization culture, that affect the motivation of the employee

performance in an organization. Motivating employees has a positive effect

on the overall organization. There are different ways to motivate employees,

from extrinsic to intrinsic rewards and strong organizational culture.

Managers should find the perfect balance to create the best motivation

technique that will benefit the employees and the organization as a whole.

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There are two types of rewards financial and non-financial, which

equally motivates the employees to perform well and give their best to boost

up the organizational benefit. Among the financial rewards falls the straight

salary, straight commission and performance bonus. Performance bonus

tends to motivate the employees most as it includes extra financial reward

with basic salary. Moving on to the non-financial rewards there are

opportunity for promotion, career development, sense of accomplishment,

job security and recognition. Among all the factors recognition plays the

most important role in motivating the employees. Employees feel more

motivated to perform well when they see that their work is being recognized

and appreciated by the organization.

As far as organization’s profitability is concerned it is the function of how all units of that

organization is performing to attain their respective goals matters. Units’ goals can be achieved

when their members perform accordingly. Their performance is dependent on the competency to

perform the job and their job attitude. So when management is concerned about the performance

of an organization they should look inside what is shaping the attitude of the members toward

their jobs. Organizational culture should be scrutinized and emphasized when leaders want to

drive superior performance out of the members of the organization. Unfortunately,

organizational culture is an underrated topic of human resource practices but it deserves more

attention if organizations want to develop a high performance workforce.

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