Human Resource Management

Group Project
“Study on the Relationship between Reward Management
System and Employee Performance”

Submitted To
Prof. Remya Lathabhavan

Submitted By: -
Aakash Parashar MBA/1101/07

Aditi Bhadouria MBA/1103/07

Prakash Anto MBA/1110/07

Ashutosh Bharre MBA/1116/07

Sridharan MBA/1161/07

Venkat Prabhu MBA/1169/07

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 Table of Contents
CHAPTER ONE ............................................................................................................................. 3
INTRODUCTION ....................................................................................................................... 3
CHAPTER TWO ............................................................................................................................ 5
LITERATURE SURVEY ........................................................................................................... 5
CHAPTER THREE ........................................................................................................................ 8
RESEARCH METHODOLOGY ................................................................................................ 8
3.1 Introduction ........................................................................................................................... 8
3.2 Research Design .................................................................................................................... 8
3.3 Population of the study .......................................................................................................... 8
3.4 Sample Design....................................................................................................................... 8
3.5 Data Collection ...................................................................................................................... 8
3.6 Data Analysis ........................................................................................................................ 9
3.7 Limitations .......................................................................................................................... 12
3.8 Results & Discussion .......................................................................................................... 13
REFERENCES ............................................................................................................................. 14

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 CHAPTER ONE

INTRODUCTION

Businesses increasingly encounter difficulties in order to compete effectively in their operating

industries and gain a sustainable competitive advantage. Employee retention is becoming
increasingly challenging since most firms now”hire people from a variety of nations, races, and
socioeconomic backgrounds.”
Long considered”one of the long-term sustainable competitive advantages, retaining”a bright and
“high-quality employee has become a challenge for firms in the present business climate
(Armstrong, 2013).”
Armstrong (2013) defines a reward system as a programme that shows recognition for successful
workers while simultaneously offering incentives for bad performers to improve their productivity.
Furthermore, compensation programmes have been discovered to be one of the most beneficial
elements in maximizing employee job pleasure and productivity.
In the views of management, an incentive system”is intended to change people' attitudes about
their jobs and the company as a whole. Employees that consistently meet or exceed management's
expectations are rewarded, which serves as a tool for encouraging, recruiting, and maintaining”
outstanding employees.
“The main goal of this research is to look at the relationship between incentive management
systems and employee performance.” According to a literature review of previous studies,
organizations use reward systems and approaches to motivate their employees and improve their
performance.” Organizations may be able to improve or change their reward systems as a result
of this research in order to succeed in today's atmosphere. They could opt to modernize their
incentive systems in order to make them“more efficient and effective. In this study, the efficacy
of employee performance is examined utilizing incentive methods. The effects of reward
management system applications on employee performance are investigated in the second
section.”
We used the quantitative data that we collected from 64 respondents who worked in various
companies which included Infosys, EY, TCS, Wipro,etc. We analyzed the data using JASP
software for factor analysis. Well, it’s quite apparent that “the relationship between reward
management system and employee performance” is directly proportional to each other. With an

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efficient reward system whether intrinsic or extrinsic, increases the employee productivity and
thus their performance. They feel a sense of satisfaction and ownership towards their work.

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 CHAPTER TWO

LITERATURE SURVEY

“Reward Management System”

A “reward management system is the way that an organization” decides how to reward its
employees for what they do, how well they do it, and how well they do it. A reward philosophy,
strategy, and policy guide the process. Agreements are made “in the form of processes, practices,
structures, and procedures that will provide the right pay, benefits, and other rewards.”
“Employee performance is what an employee does or doesn't do” at work, but now it's also about
how well they do their job. Employees' performance could include things like how much work
they do, how well they do it, when they do it, how long it takes them to do it, and how cooperative
they are.

Reward Management System Applications

A tool called the “Reward Management System Tool can give both financial and non-financial
rewards, which are called Extrinsic and Intrinsic Rewards,” to people. Financial rewards include
a raise in salary, bonuses, a perquisite, and more, like that. It's also worth noting that “there are
non-financial rewards like getting a promotion” or getting a title, being given a certificate or getting
a plaque. These are things that don't pay you.

Employee Task Performance

It has been said by “Yazıcı,, (2008), that the effectiveness of an organization's performance and
reward management” affects morale and productivity. The performance and reward systems of
many businesses were actually encouraging people to do things that were not good for the business.
It's also true that the "path-goal model" is very good at explaining how the “reward system and
employee performance work together. The idea says that if a worker sees high productivity as a
way to reach one or more of his personal goals, he will be” more likely to be a high-producing
person. “If he sees low productivity as a way to reach his goals, he will be more likely to be a low-
“productivity person, too. It would make the employee more likely to put in more effort if he
thought that his previous work had paid off.

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So-called social cognitive theory says that if you get a reward for meeting a high standard, you
may be more motivated.
“Dewhurst, Guthridge, and Mohr, (2009) say that a good reward system is important for both high
and low” achievers to be motivated. This is because rewards make high-performers more satisfied
with their jobs, and they make low-performers more excited to work. The reward systems may be
different in different businesses because of the personalities, backgrounds, and preferences of the
people who work there. All reward systems, however, have the same goal: to motivate employees
to keep improving, grow personally, and work professionally.

Another study, by Shields and associates (2015), says “that any reward system should be made to
meet the needs and preferences of employees”. Some people want money, but others want
promotion, appreciation, more responsibility, training, and “other types of non-monetary rewards.
An effective reward system should be flexible and include both monetary and non-monetary
rewards to meet the” needs of everyone who works for the company.
For the backing of our research project, we gather information from certain studies conducted
previously on similar topics.
Organizations can use reward management systems to get high-potential employees and keep them
around. This leads to higher levels of performance for the company, said by Barber and Bretz in
their research study conducted in 2000.
“On the other hand, it is important to spend money on employee development to improve the skills
and abilities of employees and“ the company as a whole. People also act better when their
employers invest in them, says social exchange theory. Organizational incentives are what
employees are motivated by, and employees who are prosocial make a lot of effort to help the
company.
“According to Steers and Porter (1987), work motivation is a factor that helps employees stay and”
act the way they do. Theory about motivation was put together by Porter and Miles (1974) in
another study. They put theories about motivation “into three groups: job (degree of autonomy),
individual (need for achievement), and work environment“ (e.g. how much space there is) (e.g.,
rewards).
There was a study done by Yang (2008) that looked into individual performance, and the results
of the study showed that we can't really check individual performance. Even so, he said that if you

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can see how well your employees are doing, you can use direct bonuses or relationship contracts
to motivate them.
According to Bishop (1987), people who recognize and reward their employees' good work make
them more productive than those who does not.

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 CHAPTER THREE

RESEARCH METHODOLOGY

3.1 Introduction
This chapter focuses on research methodology that was used in the study. It provides a detailed
description of the research approach adopted in this study. Research design, target population,
research instruments, data collection and analysis methods used are presented in the subsequent
sections.

3.2 Research Design

Research design is a framework or blueprint for conducting the marketing research project. It
details the procedures necessary for obtaining the information needed to structure or solve
marketing research problems. Descriptive Research design was adopted for the study. Descriptive
research involves gathering data that describe events and then organize, tabulate, depict, and
describe the data collection. It often uses visual aids such as graphs and charts to aid the reader in
understanding the data distribution and therefore offering a better clarification.

3.3 Population of the study

The population of our study included People who are currently employed or have a history of work
experience in an organization.

3.4 Sample Design

There was no defined sample frame and the data was collected by the convenient method of
sampling using a questionnaire filled by the subjects at their comfort.

3.5 Data Collection

Data is collected through a questionnaire. Questionnaire included questions about their age, work
experience, job designation and industry. It also included 16 questions that aim to understand their
perspectives on financial rewards, non-financial rewards and the intrinsic rewards. It also has
questions that try to understand the performance of the employee.

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Form can be accessed through the link : https://forms.gle/pQ7Gdx5UoLZj4Gu16
We have followed non-Probabilistic convenience sampling to collect data. Form is floated to
individuals and their responses are recorded.

3.6 Data Analysis

The data collected Ordinal or Interval scales to measurements to study affect different pre-defined
factors on the employee Job performance. Inferential statistics was used to analyze this data.
Confirmatory Factor Analysis and Multiple Linear Regression analysis was applied in this study
to reveal relationships among the different factors and the performance of the employees.

Reliability Tests

To test if our dataset was suitable for factor analysis we performed 2 tests- KMO Bartlett’s test of
sphericity.
KMO is a test of sampling adequacy conducted to examine the strength of the partial correlation
(how the factors explain each other) between the variables. KMO values closer to 1.0 are
considered ideal while values less than 0.5 are unacceptable. The result of the KMO test for our
dataset resulted in a value of 0.757 which suggests that it is in the acceptable range and data is
suited for factor analysis
Bartlett’s test of Sphericity is used to test the null hypothesis that the correlation matrix is an
identity matrix. An identity correlation matrix means your variables are unrelated and not ideal for
factor analysis. As the value of this test is below 0.001, the null hypothesis is rejected and we can
say there is a significant correlation between the variables to club them into fewer factors.

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Confirmatory Factor Analysis
Post verification of sampling adequacy and suitability of data for factor analysis substantiated by
the KMO test and Bartlett’s test of sphericity, a confirmatory factor analysis model was done using
JASP and the model plot and results of the analysis were found to be as below.

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The questionnaire consisted of 16 items which were to be grouped under 4 factors, to understand
and infer the effect of each of the items on their corresponding factors. The loading of the items
on each of the factors were used to compute the factor metrics for the regression model
Furthermore, Item NF2 was identified to be insignificant and was subsequently dropped from the
regression model. The factors are explained as below:

Factor 1 - Financial Rewards

Factor 2 - Non-Financial Rewards
Factor 3 - Intrinsic Rewards
Factor 4 - Job Performance

The weighted average of the items were calculated based on the loading and grouped into the
factors mentioned above and a regression model was constructed. The results of which are as
below.

CF- Financial Rewards

CNF- Nonfinancial Rewards
CIR- Intrinsic rewards

Dependent variable - Job performance

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From the results of the regression analysis, we can see that the model of the independent variables
accounts for only 22.08% of the variance in the dependent variable job performance according to
the adjusted R squared value. However the F significance of 0.000431067 suggests that the model
is fairly robust and that variables’ coefficients are more significant than a model with no variables.
But in terms of the actual variables, it can be concluded that only Non Financial rewards have a
significant effect on the Job Performance as substantiated by the CFA analysis will shows that Non
Financial Rewards have a loading of 0.55 on Job Performance as opposed to Finanical rewards
and Intrinsic rewards which only have loadings of 0.44 and 0.31 respectively which implies that
they are insignificant.

3.7 Limitations
 The sample size was small due to the limited amount of time
 Need to target employees from a specific sector so that data is more representative and
provides more insights. As employees from various different sectors can have varying
attitudes towards the various factors
 Time constraints
 Limited resources
 No absolute way to measure Job performance. Employees themselves were scaling their
job performance
 The sample contained people who were freshers as well

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3.8 Results & Discussion
From the results, it can be seen that only Non Financial rewards have a significant effect on job
performance however, previous studies cited in the literature review suggest that there exists a
significant relationship between the other two factors, financial rewards, and intrinsic rewards, and
job performance as well which lead us to propose the limitations of the model of this study. Since
the sample was not representative of the population and not pertaining to a single organization or
sector it may further skew the responses.
So, we come to the conclusion that this study needs to be reiterated with a properly defined target
population and a larger sample size. That will help us understand the implications non-financial
rewards, Intrinsic rewards, and Financial rewards have on job performance for that specific sector.
Following this, proper systems and methods can be used to improve the job performance of the
people in that sector. The factors that lead to higher job performance can be focused upon, and the
factor that may be being neglected can be improved upon. This will help in improving the overall
job performance of that sector.

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References:
Yulia Emelianova Impact of Reward System on Employee Performance: A Case Study of Normet
Ltd. (n.d.). Retrieved March 19, 2022, from
https://www.theseus.fi/bitstream/handle/10024/170113/Impact%20of%20Reward%20System%20
on%20Employee%20Performance.pdf?sequence=2&isAllowed=yoretical

Güngör, P. (2011a). The Relationship between Reward Management System and Employee
Performance with the Mediating Role of Motivation: A Quantitative Study on Global Banks.
Procedia - Social and Behavioral Sciences, 24, 1510–1520.
https://doi.org/10.1016/j.sbspro.2011.09.029

Armstrong, M. (2003), ‘‘Employee Reward’’, 3rd ed., London :CIPD.

Bishop, J. (1987), ‘‘The Recognition and Reward of Employee Performance’’, Journal of Labor
Economics, 5(4), p.2.

Yazıcı, N. K., ‘‘The Effect Of Reward System Applications On Employee Performance In Service
Sector’’, (2008),Marmara University, Institute of Social Sciences, Master Thesis.

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