MONEY AS A REWARD

TO EMPLOYEES
OBJECTIVES:

• Understand money as an economic and social

medium of exchange
• Discuss the role of money in motivational Models
• Examine the behavioral considerations in performance appraisals
• Discuss how and why to link pay with performance
• Understand the uses of profit-sharing, gainsharing, and skill-based programs
REWARD SYSTEM

consists of all organizational components involved in allocating compensation and benefits

to employees in exchange for their contribution to the organization including:
• People
• Processes
• Rules
• Procedures
• Decision-making activities
COMPLETE
REWARD
PROGRAM
A COMPLETE
REWARD
SYSTEM
MONEY AS MEANS OF REWARDING EMPLOYEES

• Money is an economic value as a

medium of exchange
• Money is also a social medium of
exchange
• Differences in meaning of money
by gender and culture
• Money is an important motivator
APPLICATION OF MONEY TO MOTIVATIONAL
MODELS
A useful way to think about money as a reward is to apply it to some of the
motivational models. Such as;
 Drives
 Needs
 Equity
EXTRINSIC AND INTRINSIC REWARDS

Money is essentially an extrinsic reward rather than an intrinsic

one, so it is easily administered in behavior modification
programs.
Extrinsic – are external rewards that occur apart from the nature of work , providing no
direct satisfaction at the time the work is performed

Intrinsic – are internal rewards that a person feels when performing a job that has direct and
immediate connection between work and reward
ORGANIZATIONAL BEHAVIOR AND
PERFORMANCE APPRAISAL
Management by Objectives (MBO) – a cyclical process that often consists of four steps as a
way to attain desired performance
 Objective setting
 Action planning
 Periodic reviews
 Annual evaluation
Performance Appraisal – a process of evaluating the performance of employees, sharing that
information with them, and searching for ways to improve their performance
 Allocate resources
 Motivate and reward employees
 Give feedback
 Maintain fair relationships with groups
 Coach and develop employees
 Comply with regulation
Appraisal System
• Part of appraisal system which requires supervisor to assess employees on various aspects
 Productivity
 Behavior
 Personal traits
 Quality of work
 Quantity of output
 Attendance
ECONOMIC INCENTIVE SYSTEMS

• Performance Management – holds that employee performance can be managed and

improved.
• Economic Incentive system - a system that induce a high level of individual, group, or
organizational performance by making an employee’s pay contingent connected with
their performance
Wage incentives • Profit Sharing • Gain Sharing • Skills-Based Pay
Wage incentives – form of merit incentive providing more pay for more production
 Rationale: To increase productivity while
decreasing labor costs per unit of production
 Difficulty: Disruption in the social system may
lead to feelings of inequity and dissatisfaction
ECONOMIC
INCENTIVE
SYSTEMS
Profit Sharing – system that distributes to employees some portion of the profits of the
business
 Aims to recognize mutual interests
 Work better for fast growing, profitable organizations
Gain Sharing – measures improvements, shares the gains with employees on some formula
basis
 Inventory levels
 Labor hours per unit of production
 Usage of materials and supplies
 Quality of finished goods
Skilled-Based Pay – reward individual employee for what they know how to do based on:
 range
 depth
 type of skills