Principles of Reward and its importance to Organisational Culture and Performance
Rewarding job performance is an important aspect of motivating employees, generally with motivations coming as both intrinsic and extrinsic motivators. Intrinsic reward approaches focus on the psychological benefits that a person will likely gain from an undertaking, such as satisfaction, self-esteem, acclamation, and a sense of belonging. Extrinsic rewards are external and could contain financial remuneration, bonuses, advancements, advantages, and other monetary or non-monetary enticements (CIPD 2021). An exemplary implementation of effective extrinsic and intrinsic rewards is evident at Leia Inc., a digital video platform based in the United States (Kapur, 2022). Leia Inc. offers competitive compensation packages and new benefits to attract and retain key personnel in the industry. In addition to these tangible rewards, the company also offers its employees intangible rewards, such as ownership structures and a welcoming culture that supports their personal goals.
The Total Reward approach is another reward principle used to manage pay, benefits, recognition and other non-financial elements. This approach aims to build a performance and reward culture that supports organisational goals while addressing the needs of a diverse workforce (Wren, 2016). For example, the John Lewis Partnership applies this by offering 45,000 employees a share of company profits each year. Alongside profit-sharing, it provides traditional elements such as fair pay, good working conditions, and benefits. The company also fosters employee participation in decision-making, engagement, and development through its ‘Partnership Council’ (Baral & Baral, 2019).
Equity, consistency, and transparency in the reward system are critical to a company’s culture and performance management. Fair and transparent rewards foster contentment and dedication, as employees feel their contributions are genuinely valued. Aligning rewards with effort and outcomes ensures employees see that their work is fairly compensated. Consistency in compensation also fosters trust and teamwork among employees, leading to further headway in achievement (Wren, 2020). Moreover, clarity in rewards can help create a beneficial workplace culture for staff since their exertions are acknowledged, and their hard work is not being exploited. Transparency likewise ensures that rewards are allocated justifiably among all personnel and incites workers to work towards long-term goals.
