MOHR (MAN 2112) ASSESSMENT 2: ONLINE EXAM

NAME: NEENU SANTHOSH (6556595) QUESTIONS CHOSEN: 3 AND 6

QUESTION 3: Explain the strategic role of different types of rewards in managing the
performance and work attitudes of employees, why is Total Reward a strategic HR tool?
Rewards are defined as ‘all of the employer’s available tools, that may be used to attract, retain,
motivate and satisfy employees’ (Wilkinson et al, 2017, p.159), to critically maintain and enhance
employee productivity while ensuring that the right candidates are attracted to; and hired within an
organisation. There are six categories of rewards as shown in the table below.

Type of Examples Benefits Drawbacks

Reward
Financial  Salary and  Supports Taylor’s Scientific  Money may not motivate
wages management theory which assumes everyone
that employees are ‘money  Interpersonal conflict between
motivated’ employer wanting to minimise
 Higher pay increases loyalty (and labour costs and employee
thus retention) and productivity, wanting best possible pay
which leads to lower labour costs,
making up for the high costs of
compensation (US Department of
Commerce, 2015)
Non-  Recognition  Benefits and work-life balance  Herzberg (1959) claims good
Financial (ex: awards) reduce stress on employees, pay is a ‘hygiene factor’,if
 Career improving productivity absent, could lead to
development  Career development opportunities dissatisfaction or ‘cognitive
 Benefits and push employees to work harder and dissonance’ stated by Evans et
work-life learn new skills for personal al. (1978) which could develop
balance development which may benefit the unfavourable feelings towards
organisation too, inducing creativity work and the organisation
and innovation by strengthening their  Additional expenses; may not be
internal talent pool valued by employees
Direct  Work  This is anything directly related to  Employees that are extremely
conditions work, as employees feel a sense of loyal to the company may not
being treated fairly for the work they care about direct rewards but
do- preventing any misbehaviour rather indirect rewards to help
such as anger and hostility if the improve work-life balance
working conditions are not
safe/overtime is not paid
Indirect  Services  Benefits such as these keep  Employees may not use these;
offered (ex: employees happy and healthy, and indirect benefits may not
free gym improves their mood at work as it apply/benefit their lifestyle
membership) implies care and appreciation choices (ex: if someone dislikes
gyms)
Extrinsic  Job security  Tangible rewards can be assessed by  If employees do not possess
(ex: through employees, retaining qualified intrinsic rewards, they may feel
fixed employees within the organisation; if a sense of hatred towards work,
contracts/sal rewards are not competitive, the reducing productivity and
aries) issue can be identified loyalty
Intrinsic  Job  This supports the job characteristics  This does not guarantee
satisfaction theory (Hackman & Oldman, 1975) motivation, i.e. if job security is
(ex: which intrinsically motivates missing, employees may not
accomplishm employees to enhance work to full potential because of
ent meaningfulness at work, preventing the threat of losing a job
work-life spillover

The benefits are triple fold:

The economical and legal perspective: This approach view rewards for employees in a monetary
sense, i.e., as a labour cost; a transaction made for the value-added services from the employees at an
organisation. It reduces hiring costs through higher retention, as higher pay offered to employees
increases pay competitiveness; providing higher external equity compared to competitors, using
compensation as an attraction tool. Moreover, through compliance with the equal pay act (1970), and
providing equal pay to both genders, as well as equal compensation above minimum wage/industry
average (ex: McDonald’s pays its employees hourly wages of £7.10 as opposed to industry average of
£5.72) to prevent penalties issued by HMRC (ACAS, 2020). Moreover, the evidence of equal pay
using the equity theory is suggested by Greenberg (1990) where failure to provide an explanation
during pay cuts- perceived as an injustice by employees results in property-deviant organisational-
targeted misbehaviour as 8% of employees steal (when opposed to only 4.5% employees stealing
when an explanation is provided).

The psychological perspective:  This argues that reward schemes are essential in order to fulfil
‘physiological’ needs for employees in Maslow’s hierarchy of needs, acting as an incentive for better
employee satisfaction through increased work motivation. By garnering non-financial/extrinsic
rewards, a strong ‘communityship’ culture is built, where employees associate this, with a better work
environment (Mintzberg, 2009, p.140).

The managerial perspective: This reinforces the notion that rewards are an internal factor and are
used as a means to gain a competitive advantage  Anconca et al (2007) states that successful leaders
possess four capabilities, including one being ‘sensemaking’ to ensure leaders being aware of the
context of operation and what is going on around them, allowing leaders to decide on the most
appropriate balance between financial and non-financial rewards to use. For instance, Herb Kelleher
of Southwest Airlines used non-financial motivation such as recognition, by even remembering his
employees’ names and having one-to-one conversations with them about any personal/work issues
(Forbes, 2020)- creating a highly motivated workforce that loved their jobs. Another characteristic,
‘visioning and inventing’ can be exemplified by setting rewards that are aspirational, for employees to
climb up the career ladder (ex: higher positions having higher pay), for employees to work towards
incremental pay using the ‘goal setting’ theory. Higher pay is seen to elicit desired behaviour,
improve performance and productivity for the organisation, thus reducing labour costs, while
challenging employees to hit targets and encourage learning and development of skills.
A total rewards system combines all six types of rewards: Financial, non-financial, intrinsic,
extrinsic, direct and indirect rewards to create a strategic HR system that finds the equilibrium
between employee compensatory expectations and organisational costs (See table below). This
justifies McDonald’s success in managing 205,000 employees worldwide (Statista, 2020), by
following a total reward system to achieve its main HR goal- to have the most productive and efficient
employees. It does so by paying its employees 24.1% above the industry average (PayScale, 2020), by
using financial rewards as an attraction tool to achieve external equity against competitors. However,
the hourly payment scheme can cause employees to slow down service to work longer to try and gain
more pay by causing ‘service sabotage’ (Harris and Ogbonna, 2002).
 These can be fixed; (salaries for managers/wages
for workers), or variable short-term compensation,
and overtime pay. McDirect stock purchase plan
also incentivises employees as a long-term
approach helping McDonald’s gain additional
capital. 3 pay rises, along with franchises from
April 2016 was established for competitiveness.  and access to McDonald’s university
The non-financial rewards are
tangible and extrinsic as employees
are provided on-the-job training,
with flexible work hours, career
development opportunities such as
the trainee manager graduate scheme
courses, as well as job security
through minimum guaranteed hours
every week.

The indirect financial rewards are composed of McDonald’s implements recognition

incentives by deferring incomes such as medical through award schemes like the
insurance, and a pension scheme. ‘President’s Award’. 

Source: McDonald’s UK (2020)

Furthermore, internal equity is achieved using performance-related pay policies (PRP). This is
assessed by promoting employees based on their performance over the year, by conducting two
appraisals annually (McDonalds, 2020), while motivating employees to keep performing their best
(CIPD, 2017). This acts as positive reinforcement as stated by the reinforcement theory (Skinner,
1938), as compensation is based on contingency, i.e. rewards such as promotion occur when
employees perform well in the performance review, stimulating the behaviour to increase the
frequency of desired behaviour (e.g. such as continuing to beat targets). Strong compensation
packages are powerful incentives and are used in many high-performing organisations because of
their ‘incentive value’ that encourages desirable behaviour by reinforcing effort. This is especially
true when there are clear, objective and measurable links between rewards and desired performance
outcomes (Wilkinson et al, 2017, p.168), giving organisations a sustainable competitive advantage by
creating a high-performance workforce system.

However, it can also act as a ‘negative punishment’ for other employees who may not be promoted,
instilling competition and promoting ‘political deviance’, a misbehaviour typology (Robinson and
Bennett, 1955) through gossip and jealousy.

In summation, it is essential for managers to understand that a great reward system by itself cannot
retain, motivate or satisfy employees by itself. To increase the ‘engagement value proposition’,
managers should assess aspects such as culture along with what employees seek; a ‘great company’
with extensive social networks and brand image such as McDonald’s being awarded top employer
many times, explaining its success. They are not cash cows and are not dependent on only financial
rewards. It is the role of leaders and managers to identify the distinctive needs of each employee and
establish strategies accordingly, and such capabilities require extensive training for a strategic HR
rewards system.

QUESTION 2: (____WORDS)