Introduction to Rewards Management – Meaning and Concept

In the contemporary world, rewards for better performance and success matter more than the actual achievement itself. Indeed, as the global financial crisis showed, rewards were everything for the bankers as they strove for more reckless bets and increasing risk taking. Because of the system of flawed incentives, rewards were seen to the ultimate prize that was greater than the actual process of winning. Hence, rewards management has to be seen in the context of what are proper and just rewards and what are disproportionate rewards.

The point here is that rewards ought to justify the performance and not exceed them. What we mean by this is that it is okay to reward a high performer for his or her stellar performance but not to the point where in the pursuit of rewards, the individual throws caution to the winds and indulges in unethical behavior.

For the present day generation, rewards matter more than the actual performance and this is reflected in their increasing demands from the employers for salary hikes and bonuses.

If not anything else, the millennial generation believes that excessive rewards are their due. Though this is not to say that only this generation behaves that way (this pattern can be seen in the Generation X as well), it is the case that undue emphasis is being placed on the rewards alone as opposed to the fulfillment one gets by getting the job done in a proper manner. If the baby boomer generation taught us anything, it is that doing the job for fulfillment sake is more important than the reward system in place. Of course, it goes without saying that in a world of diminishing resources, everyone is concerned with earning as much money as possible, and hence some of this behavior is indeed justified.

However, the point needs to be made that while rewards are one way to motivate individuals and incentivize good performance, they are not the be all and end all that everyone likes to believe. Hence, a proper reward system in organizations would be aligned with the correct strategic fit between internal motivation and external rewards and only when they are in balance can organizations grow in a healthy manner.

Much has been written about how excessive CEO compensation is hurting the corporate world and hence, the debate over whether CEO’s are being paid excessively is indeed justified in view of the ongoing global economic crisis.

The point here is that a reward system that does not increase the gap between the CEO and the lowest paid worker by more than a ratio of 15:1 is the correct one according to studies done in this field. Hence, all possible efforts must be made to decrease the gap between the lowest paid employee and the highest paid employee. Of course, in practice this might not be possible completely due to entry-level salaries being much lower. Therefore, a way out would be to determine the cap according to each company’s requirements and then pay the employees at all levels accordingly.