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HUMAN RESOURCE
MANAGEMENT – a global
and critical perspective (2e)

Chapter 10: Reward Management

Instructor: Jawad Syed, PhD

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Summary of Chapter Contents

• In the news: Reward • Reward communication
management amid • Employment relations and
coronavirus reward management
• Opening Case Study: For • International reward
Indian employees, money isn’t management
everything
• Critical perspective on reward
• Introduction management
• Employee rewards: nature and • Conclusion
purpose
• End of Chapter Case Study:
• Extrinsic vs intrinsic rewards The strategy and practice of
• Base pay rewards in Chinese MNCs
• Benefits plans
• Performance-related reward
plans

In the news: Managing reward and staffing

amid coronavirus: The case of Walmart
• To appreciate and motivate employees who are maintaining stocks of
supplies on shelves amid the coronavirus pandemic, Walmart announced
to pay almost $550 million in bonuses to hourly workers (CNBC, 19 March
2020).
• The retailer has experienced an increase in sales as consumers stock up on
toilet paper, food, hand sanitizer and other products as they get ready to
remain in their residences with increasing COVID-19 cases.
• On a national scale, the demand for grocery delivery services is so
elevated that some clients have to wait for seven days for some items.
• Dan Bartlett, Walmart’s executive vice president of corporate affairs, told
CNBC that the businesses would provide “a mini stimulus package for
Walmart associates” to honour employees for “performing Herculean
efforts.”
• The retailer has over 1.3 million employees in the U.S, and over 2.1 million
employees around the world.
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• Walmart, the biggest grocery store and the biggest private employer in the
USA, said the special bonuses would be over $365 million in total. Part-time
hourly associates will receive a bonus of $150, while full-time hourly
associates will receive a bonus of $300. Every hourly associate in Walmart’s
employ as of March 1 will be eligible, and the bonus will be paid in April.
• The retailer is also speeding up the payout of its upcoming quarterly
bonuses for club, store and supply chain workers. It will pay $180 million of
bonuses a month one month ahead of time in April.
• Walmart will also hire 150,000 new associates through the end of May to
work in clubs, stores, fulfilment centres and distribution centres to maintain
pace with increased demand.
• As the coronavirus outbreak disrupts workplaces and daily routines,
Walmart and a few other companies are experiencing a surge in demand.
Domino’s and Papa John’s said they will hire thousands of pizza makers and
delivery drivers. Amazon said it will hire an additional 100,000 employees to
keep up with a surge in online shopping in the U.S.
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Source: CNBC, March 19, 2020. pymnts.com, March 20, 2020.

Questions
1. What could be the possible reasons for Walmart to
announce special bonuses for its employees amid the
coronavirus outbreak?
2. What other interventions may be considered by Walmart to
manage rewards in the company?
3. Compare reward management at Walmart with reward
management at another organization amid the coronavirus
outbreak. What similarities or differences do you see, and
what could be the possible explanation?

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Opening Case Study: For Indian employees,

money isn’t everything

Questions
1. What could be possible explanation of Indian employees’
preferences of ‘career/status’ and ‘job pleasure/
enjoyment’ over ‘money/higher wages’?
2. To what extent would Pakistani employees’ preferences be
similar or different, and why?
3. If the same choice is given to you, what would be your
individual preference and why?

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Introduction
• Reward management is one of the most
important yet most problematic of all human
resource management (HRM) functions.
• Effective reward system is not an easy task!
• Signs of poor reward mismanagement:
1. Perceived reward inequity (or unfairness);
2. low motivation and effort;
3. low job satisfaction; reduced commitment;
4. higher intention to leave;
5. increased staff turnover;
6. poor ‘engagement’
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Employee rewards: Primary objectives

• Definition of reward: Something given in recognition of service,
effort, or achievement.
• Primary objectives:
1. To attract (or ‘buy’) the right people at the right time for the right
jobs, tasks or roles.
2. To retain the best people by satisfying their work-related needs and
aspirations and recognizing and rewarding their contribution.
3. To develop (or ‘build’) the required workforce capabilities by
recognizing and rewarding employees’ actions to enhance their
knowledge, skill and ability.
4. To motivate employees to contribute to the best of their capability
by recognizing and rewarding high individual and group
contributions towards meeting the organization’s strategic
objectives.

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Employee rewards: Secondary

objectives
1. Needs-fulfilling: the rewards should be of value to in satisfying
their relevant human needs.
2. Equitable or ‘felt-fair’: reward levels should be seen to be both
commensurate with individual contributions and appropriate
in comparison with the reward levels received by others.
3. Legal: rewards should comply with relevant legal
requirements regarding employees’ rights and entitlements,
including standards for mandatory minimu mpay and benefits.
4. Affordable: the rewards allocated, and any associated on-
costs, should fall within the organisation’s financial means.
5. Cost-effective: there should be an appropriate ‘return on
investment’ from total reward outlays.
6. Strategically aligned: the reward system should be configured
so as to support the organisation’s strategic objectives.

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Extrinsic and intrinsic rewards and

motivation
• Extrinsic rewards arise from factors associated with but external to the job
that the employee does.
– financial rewards
– developmental rewards
– social rewards.
• Intrinsic rewards arise from the content of the job itself, including the
interest and challenge that it provides
• ‘Process’ theories of work motivation support incentive-based reward
systems. These theories include agency theory, reinforcement theory,
expectancy theory, goal-setting theory, and equity theory,
• Cognitive evaluation theory posits that people are much more likely to act
first and only evaluate, rationalise, and ascribe meaning and motive to
what they have done after the event. This theory focuses on competence
and autonomy while examining how intrinsic motivation is affected by
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Base Pay
• Foundational or ‘fixed’ component of
remuneration
• Two broad approaches to building base pay:
– Job-based pay;
– Person-based pay
• Point factor method

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Job-based versus person-based pay

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Point Factor Analysis

• Point factor analysis (PFA) is a systemic method for determining a
relative score for a job. Jobs can then be banded into grades, and
the grades used to determine pay.
• Jobs are broken down into factors such as “knowledge required”. A
set of closed questions in each factor break down to detail such as
“level of education”. The responses to these questions are given a
score and totaled for each factor. Each factor is given a weight, and
this affects the contribution made to the overall total score by that
factor. Factors can be weighted according to their significance to the
organization, and this allows the pay scheme to be linked to the
organization’s strategy.
• A critical factor in job evaluation is that it is the role that is
assessed, not the person doing it. Job evaluation can be performed
on roles not recruited for yet. This means that the score should be
both unrelated to the person doing the job and perceived as fair.

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Benefits plan
• Voluntary benefits
– include a wide range of rewards such as discount loans, housing
or mortgage subsidies, product or service discounts, company
cars and/or free parking, self-education expenses
• Flexible benefits
• The content of benefits packages may be either ‘fixed’ or
‘flexible.’
– Differences in age, family responsibilities, financial
circumstances, and lifestyle preferences mean that different
employees will have different benefit needs, and the needs of
any one employee may change considerably over time

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Performance-related reward plans:

Individual performance plans
• Merit pay plans
• Merit increments
• Merit bonus
• Payment by results
• Piece rate
• Commissions
• Goal-based bonus plans

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Performance-related reward plans:

Collective short-term performance plans
• Most collective incentive plans fall into one of three
plan types:
– profit-sharing: employees receive bonuses tied directly to
the company's overall profitability.
– gain-sharing: bonuses are more closely tied to the
performance of specific employees or groups of
employees.
– goal-sharing: payment for performance is linked to specific
criteria being met

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Performance-related reward plans:

Collective long-term performance plans

• Although employee share plans come in a wide

variety of forms, most fall into one of three main
types:
– share grant plans: these give employees the right to
acquire or receive shares once certain criteria are
attained, like working for a defined number of years or
meeting performance targets.
– share purchase plans: give employees the right to
purchase company shares, usually at a discount.
– option plans: equity compensation granted by
companies to their employees and executives.
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• Undermine intrinsic interest in the job

• Motivate people to pursue the reward
rather than do a good job
Criticism of • Are instruments of behavioural
manipulation and punishment
performance- • Rupture cooperative work
related relationships
rewards • Ignore or mask the reasons underlying
work problems
• Discourage sensible risk-taking

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Critical Thinking 10.2

Pay variability
• The term ‘pay variability’ refers to the degree to
which pay outcomes for any given job or any
given set of job-holders will vary by performance
rather than being fixed or guaranteed (Gerhart
and Rynes, 2003).
Questions
1 Is it better for an organisation to have a high or a
low level of pay variability?
2 How might the appropriateness of high variability
differ according to the social and cultural context?
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Taking a critical perspective on reward

management
• A critical approach requires to both question
assumptions about what employees may find
rewarding and motivating and also to seek to
interpret reward management from a multi-
stakeholder (or ‘pluralist’) perspective
• A critical approach moves away from the ‘unitarist’
or ‘managerialist’ assumption that the only relevant
stakeholder interest is that of the employer, and that
employees are merely ‘human resource’ objects

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Reward communication
• Creating and maintaining employees’
understanding and acceptance of the way in which
they are rewarded
• Challenging
• Does not necessarily equal to reward openness

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Employment relations and

reward management
• Importance of contextual factors
– the nature of the relevant product and labour
markets
– sociocultural norms and standards
– the nature of government intervention and
regulation
– the contours of the prevailing employment
relations system

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International reward
management
• Cross-border differences - three main groups of employees
– Host country nationals (HCNs) hired to work in the Multinational
Corporation’s operations in the host country;
– Home country employees sent abroad (that is, ‘expatriated’) for periods of
time to manage or work in operations in host countries;
– Employees from other countries – third country nationals (TCNs) – hired to
work in either the home or host country operations.
• Possible approaches to rewards:
– 1) the home-based or ‘balance sheet’ approach;
– 2) the host-based or ‘going rate’ approach;
– 3) the region-based approach.

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Summary
• Reward management is a complicated process
• Types and approaches of reward management
• International reward management
• The options and challenges involved in the
application of theories, concepts and practices
related to reward

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End of Chapter Case Study: The strategy

and practice of rewards in Chinese MNCs
Questions
1. Do you think that the ‘dual’ approach to international
reward management preferred by Chinese MNCs is
sustainable over the longer term as Chinese firms become
progressively more integrated into the global economy?
2. If Chinese MNCs are to make greater use of HCNs in their
staffing, how might they best modify their reward
practices to support this change?
3. As China consolidates its position as an economic
superpower, how might the reward practices preferred by
Chinese MNCs influence trends in international reward
management?

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Further Reading
• Armstrong, M. and Brown, D. (2006) Strategic Reward.
How Organisations Add Value Through Reward. London:
Kogan Page.
• Armstrong, M. and Murlis, H. (2007) Reward
Management. A Handbook of Remuneration Strategy
and Practice (5th edn). London: Kogan Page & Hay Group.
• Gerhart, B. and Rynes, S. (2003) Compensation. Theory,
Evidence, and Strategic Implications. London: Sage.

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