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DISCUSS THE RELEVANCE OF HRM THEORY FOR HR & BUSINESS MANAGERS IN ORGANISATIONS M OT I V A T I ON & R E W A R D INTRODUCTION The topic “motivation and reward” is considered to be one of the most important parts in the Human Resource Management. It is not only an exciting area of HRM, but also one of the key components in the success of any organization. Every company needs a incentive reward system to retain good staffs and to encourage them to give of their best performance. Thus, a proper reward system plays the vital role in motivating employees as well as achieving goals of the organization. In the following chapters, it divided into three aspects. The first chapter will focus on the theories of the motivation which are widely used in the industrial and organization psychology as well as of organization behavior. It follows by the second chapter which is trying to describe and giving the definition of rewards system in an organization. Moreover, there are some

methods of rewards as well as the standard of performance while people at work are analyzed in this chapter. The last chapter will examine the paying system which is commonly taken by the reality within the company. It also emphasizes the importance of setting the paying system for an organization or a company. 1 Chapter 1 The Motivation Theories When comes to the motivation theories, there are generally three of them which are widely used in the reality and the organization pay systems. They are Maslow’s hierarchy of needs theory, Alderfer’s ERG theory and Herzberg’s Two-Factor theory respectively. In order to assist HR managers design appropriate incentive rewards system, this chapter will analyze these famous motivation theories as follows. 1.1 Maslow’s Hierarchy of Needs Theory Maslow’s hierarchy which is considered to be one of the most important theories is widely used in the reality. In the book, it also explains that peoples who are working will definitely

straggle for one basic thing first such as food, clothes and house, and after they success to gain one of these, they will turns to another needs such as social needs. According to an on-line resources (ACCEL team, 2007), it states that the “Maslow’s Hierarchy of needs”. He divided the needs into 5 parts which are “Physiological Needs, Safety, or Security Needs, Social or Affiliation Needs, Esteem Needs and Self-Actualization Needs”. In the article, it also clearly clarifies all the five Needs that Maslow has given. “Physiological Needs” are the most important hierarchy of needs. It is obvious that workers should gain these things first rather than anything else. “Safety or Security Needs” are behind these basic needs which are also essential because if workers do not feel safe enough, it will influence their working performance. Those who think these are significant are in the reason that everyone is delight to be accepted by other people. With the result of them

getting such needs, they will strive for “Esteem Needs”. The last needs that Maslow has concerned are 2 “Self-Actualization Needs” and that is after the “Esteem Needs”. These kinds of needs are quite different from the others because everyone’s needs may not be the same and they can also change all over people’s life, that is to say a person in different age or the situation changes, his needs may not remain the same. 1.2 Alderfer’s ERG Theory Alderfer (1969, pp.142-75) presented a modified need hierarchy model which condenses Maslow’s five levels of need into only three levels:  Existence needs: refer to material and physiological needs, and are concerned with human existence and survival.  Relatedness needs: refer to social environment, and include belonging, interpersonal relationships, affiliation, and esteem.  Growth needs: refer to the development of potential, and cover self-actualisation and self-esteem. Although the general form of

this theory is probably similar with Maslow’s hierarchy of needs theory, this one has particular suggestion, which is that the emergence of higher needs do not need the prerequisite of the satisfaction of lower needs (Derek Torrington and Laura Hall, 1991, p. 424) And Alderfer suggested more than one need may be activated at the same time. Therefore, Alderfer’s need hierarchy is likely to be more helpful for designing reward system to motivate employees. 3 1.3 Herzberg’s Two-Factor Theory of Motivation Two-factor theory of motivation was suggested by Frederick Herzberg. This theory has extended Maslow’s hierarchy of needs and is more directly applicable to the work situation. Herzberg investigated the question of what people want from their jobs He asked people to describe in detail situations in which they felt exceptionally good or bad about their jobs. Their responses were categorized and classified (Mullins, 2002, p. 430) Herzberg’s Motivation-Hygiene Theory

Motivators Hygiene Factors achievement, recognition, supervision, company policy, work itself, responsibility, working condition, personal life, advancement, growth security, salary As seen in Table (McKenna, 2006, p. 99), certain characteristics were consistently related to job satisfaction (on the left side of the table) and others to job dissatisfaction (on the right side of the Table). When the people questioned felt good about their work, they tended to attribute achievement, recognition, and responsibility factors to themselves. On the other hand, when they were dissatisfied, they tended to factors such as company policy and administration, supervision, and working conditions. The responses suggest that the opposite of satisfaction is not dissatisfaction, as was traditionally believed. Removing dissatisfying characteristics from a job does not necessarily make the job satisfying (Mullins, 2002, p.431) Herzberg proposed that the opposite of “satisfaction” is “no

satisfaction” and the opposite of “dissatisfaction” 4 is “no dissatisfaction” (McKenna, 2006, p. 99) He characterized the factors which can eliminate job dissatisfaction as hygiene factors. Such as company policy and administration, supervision, and working conditions. When these factors are adequate, people will not be dissatisfied, but neither will they be satisfied. He characterized the factors which can lead to job satisfaction as motivators. Such as achievement, recognition, work itself, responsibility, advancement and growth (Mullins, 2002, p.431) To motivate the employees’ performance, business managers must pay more attention on motivators which can lead to job satisfaction. Chapter 2 Employee Needs & Requires In order to progress and make great achievement in a challenging, changing working environment, employees must strengthen its relationships with the company and their representatives, attach importance to their personal development, and follow a

clear, regular strategy in compliance with the corporate principles as well as the responsibility themselves. Overview, employee needs are from various aspects with sensitive demands, and some main points which conforming to employees’ common requires are as follows (Solvay Sustainable Development, 2007). • Satisfaction & Motivation • Achievement & Recognition • Individual Development • Promotion • Responsibility & Influence 5 First of all, the success or failure of an organization can be determined by its employee satisfaction in a multidimensional perspective. If the company offers employee with satisfaction and follow the concept of incentive, thus the company will indeed beneficial and rapidly developed by the staffs’ enthusiastic working attitude, optimistic working passion, collaborative and ambitious desires, etc. Mainly, employee’s energy, passion and satisfaction consist of three main factors, obverse emotion, positive participation

and creativity (Chinahrd, 2007). Virtually, any staff has the strong desire to make great achievement and work smart for recognition, good compliment as well as excellence. It is important that the employee, no matter what kind of job or service they undertake, is always sensitive to their further development, personal growth, progression and remuneration. Furthermore, promotion is of great importance to employee for its career development and personal growth. People inherently are aggressive, competitive and pushy, anyone who concentrates on their tasks seriously and make endeavourers to contribute themselves to the organization could be definitely evaluated, prized or promotions with rewards according to their different efforts and performances. Chapter 3 Reward System Every company needs a motivational reward system to retain good staff and to encourage them to give of their best performance as well as contribution. Reward is not only an exciting area of HRM, but also one of the

key components in the success of any organization. Armstrong indicates reward as “how people are rewarded in 6 accordance with their value to the organization. It is concerned with both financial and non-financial rewards and embraces philosophies, strategies, policies, plans and processes used by organizations to develop and maintain reward systems” (Armstrong, 2002, p. 3) The definition of reward implies its significant effect on any organization An effective reward system motivates employee to bring actual profits to the organization. Apparently, a winning reward system beneficial both the business and its employees of any organization. It is consists of two basic methods, financial and non-financial rewards. Most companies are looking for more practical ways and offering wide ranges of employee incentive programmes so as to motivate staff as well as reinforce employee retention strategies (Maritz Incentives, 2007). 3.1 Financial Rewards Financial rewards are a based way

to motivate employees to work with following to the objectives of the organization. Financial rewards are closely related with basic pay, bonus pay, performance related pay and so on. Namely, financial rewards used the payment system to reward employee to motivate them in order to achieve the goals of organization. Payment system is also used to motivate employees to perform the objectives of organization. This session the payment system will be discussed how to used them to perform the financial rewards. Payment system is designed through the business strategy of organization. Payment system leads the behaviors of the workers to performance of organization. Worker 7 behaving in compliance with strategy will produce improved organizational performance. Model 1 can show this theory Model 1: Business Strategy Payment System Worker Behaviors Organiz’n Performance (Source: from Lecture Notes) What is the definition of payment system? Brown, 1989 states that “Pay systems are

the mechanism driving this pay progression and more general pay up rating. In broad terms such systems have tended to be founded on two basic and enduring principles time and performance”. Payment system has four types which are time rate based, payment by results, performance related pay and pay and share ownership. Nowadays performance related pay (PRP) is used widely in many organizations and companies in the UK or USA. Here PRP is discussed in detail. According to Mick Marchington and Adrian Wilkinson indicate that “These schemes base pay on an assessment of the individual’s 8 job performance”. “They provide ‘individuals with financial rewards in the form of increase to basic pay or cash bonuses which are linked to an assessment of performance usually in relation to agreed objectives” (Armstrong, 1999). The scheme PRP is to attempt to motivate employees to improve individual and organizational performance and create a new performance-based culture. The scheme

PRP is employed to the payment system of waiters and waitresses in the restaurant. These employees with basic pay are awarded the cash bonuses which are according to an assessment of employees’ performance by the satisfaction of customers. Thus, the waiters and waitresses are motivated to improve performance, in a result the objectives of the restaurant is achieved. From this example, it is easily seen that not only the scheme PRP can motivate employees to improve performance, but also can encourages line managers to see the process of objective-setting as part of their approach to managing their department or unit. That is why the scheme PRP is employed in private sectors and public sectors in these recent years. Apart from this scheme PRP, there are other three types of the payment systems which are time rate based, and payment by results and pay and share ownership. Time rate-based payment systems is a way to pay salary to staff according to the time (hourly, weekly, monthly and

yearly) of the working. Although the Time rate-based payment system is easy to understand and is cheap to administer, it is expensive with people bunching at top of grades. Another way is Payment by result (PBR) that is to give salary to employee by assessment of the result of work. PBR can motivate employee work effectively, but there are many disadvantages. For example, expensiveness to set up and managed and emphasize on quantity over quality. The other way is pay and share ownership that sharing stock with companies to motivate 9 employee to work effectively. The big problem of the payment system is that the employee could control over the organization. Because there are a lot of problems with the other three payment system I have discussed above, therefore recently in many companies and organization, PRP is used as financial rewards 3.2 Non-financial Rewards Armstrong notes in his book, both the financial and non-financial rewards are of great importance in the reward

system for motivating employees. They are first all identified by the employer, whereas the role of non-financial rewards may particularly emphasize on the aspect of attracting and retaining employees. Moreover, Armstrong still mentioned that there are five essential areas that the employees’ needs may be achieved by non-financial rewards, including achievement, recognition, responsibility, influence and personal growth. Additionally, they are adapted to different types of staff as motivational tools while at works (Armstrong, 2002). 3.21 Achievement and Recognition Employees working in an organization are always willing to be recognized by their senior officers. They are hard-working, struggling even expecting more achievement of themselves. Firstly, achievement and recognition are applied to all employees according to Armstrong’s explanation. Employees should be rewarded and receive recognition in accordance with their works had been done, especially when they finish 10 a

difficult task. Furthermore, reward should be awarded to the staff without if they make any financial loss to the organization (Helium, 2007). Recognition is another important part of non-financial rewards. It allows managers and employees to have the responsibility and contribution both they made to the organization. Recognition programmes imply employees to recognize their positions, circumstances within the company (Helium, 2007). Like Maslow’s motivation theories explained, recognition makes people have more self-confidence and the more people receive recognitions, the more they will obtain for status, appreciation and respect. Thus, recognition programmes is appropriate to the Esteem needs of Maslow’s theories. Meanwhile, achievement is likely adapting to Maslow’s motivation theories in Self-actualization needs. Any one who is successful at present will continue to realize his potential and self-development. 3.22 Responsibility Responsibility of employees is a vital force

in any successful business. If the employees have greater responsibilities, they must work smart and contribute completely. For instance, they have more freedom to design their performance goals and the methods as well as standards how they achieve their job objective. Owing to the greater responsibilities, some new and challenging tasks will be voluntary accepted by the staffs. It proves that responsibility can motivate the willingness of employees’ working performance, and this would be associated with Herzberg’s two-factor theory of motivation (Tom and Adrian, 2006, p. 127) 11 3.23 Influence & Personal Growth Influence concerns with employees’ performance and contribution in the work. Suppose that when the staff accomplishes a wide range of new and more challenging tasks individually, thus they should have obvious influence on recognitions, acceptances and respects. It suits for Maslow’s motivation theory of Esteem needs What is more, due to these complicated new

tasks, employees’ personal growth will develop rapidly so that it has the agreement on employees self-actualization needs which identified by Maslow’s motivation theory. CONCLUSION To conclude, what it is mentioned above is trying to explain the closely relationship between motivation and reward system. Indeed, motivating employees by means of financial factors is an important role in the management process. However, on no account can managers ignore the non-financial reward such as improving the working environment and achieving personal goals. It is clarified in the article that the rewards system should be divided into two aspects and each one including several methods for the business managers to incentive the employees. If an organization has a proper method to motivating employees and also includes a good paying system, it is obvious that the organization will be greatly benefited and be propitious to its further development. It is a fact that the topic of organizational

management is a practical subject, in particular, the fields of motivation and rewards. In the real life, different organization 12 adopts a variety of payment system to motivate staff and achieve the goals of them. Although this essay has analyzed the relationship between the motivation and reward system as well as some appropriate approaches, business managers should combine its organizational environment with the practical circumstances to design reward system and motivate employees. 13 References Books: Alderfer, C. P (1969) “An empirical test of a new theory of human needs”, Oranisational Behaviour and Human Performance, Vol. 4, pp 142-75 Armstrong, M. (2002) Employee Reward 3rd ed, London: Chartered Institution of Personnel and Development. Brown, W. (1989) “Managing Remuneration”, in K Sisson ed, Personnel Management in Britain, Oxford: Blackwell. Derek, Torrington. and Laura, Hall (1991) Personnel Management: A New Approach 2nd ed., London: Prentice Hall

MaKenna, E. (2006) Business psychology and organisational behaviour: a student’ s handbook. 4th ed, New York: Psychology Press Mick, Marchington. and Adrian, Wilkinson (2002) People Management and Development: Human Resource Management at Work. 2nd ed, Cromwell Press: Trowbridge, Wiltshire. Mick, Marchington. and Adrian, Wilkinson (2007) Human Resource Management at Work: People Management and Development. 3rd ed, London: Chartered Institute of Personnel and Development. Mullins, L. J (2002) Management and Organizational Behaviour, London: Financial Times. Tom, Redman. and Adrian, Wilkinson (2006) Contemporary Human Resource Management: Text and Cases. 2nd ed, Financial Times: Prentice Hall Torrington, D. and Hall, L (1991) Personnel Management: A New Approach, London: Prentice Hall. 14 Websites: ACCEL team (2007), Employee Motivation: Maslow’s Hierarchy of Needs [online], updated 29th October 2007, <http://www.accel-teamcom/maslow /maslow nds 02html> (accessed 18/

Nov/ 2007) Chinahrd (2007), Employees in the Organization: What does employee needs expect satisfaction? [online], updated 2nd February 2007, <http://www.chinahrdnet/zhi sk/jt pageasp?articleid=120539> (accessed 18/ Nov/ 2007) Helium (2007), Business, Human Resources: Best ways to reward employees [online], updated 11th November 2007, <http://www.heliumcom/tm/545276/employees-vital-force-successful> (accessed 18/ Nov/ 2007) Maritz Incentives (2007), Employee Motivation Program: Ways to Motivate Employees [online], updated 3rd November 2007, <http://www.maritzincentivescom/employee motivation programhtml> (accessed 18/ Nov/ 2007) Solvay Sustainable Development (2007), Making Progress, Employees and organization: Context [online], updated 14th November 2007, <http://www.solvayhsecom/makingprogress/employeesandorganization/0,,30388-2-0 ,00.htm> (accessed by 18/ Nov/ 2007) 15