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Reward Systems

This is an excerpt from Human Resource Management in Sport and Recreation 3rd Edition by Packianathan Chelladurai & Shannon Kerwin.

Learning Objectives

After reading this chapter, you will be able to

• explain the purposes of rewards in an organization,
• describe the various types of rewards in an organization,
• explain the various bases or criteria by which rewards can be distributed, and
• understand how various criteria and various rewards can be mixed to create a reward system that addresses individual differences.

As noted in chapter 13, one of the purposes of performance appraisal is administrative - specifically, to facilitate personnel decisions about salary, wages, merit pay, promotion, and similar rewards. Volunteers, of course, work for intrinsic rewards (see chapter 2), and paid workers may also seek and receive intrinsic rewards. At the same time, paid workers, by definition, work for the material resources provided by their jobs. Thus, it is critical to understand the realm of reward systems in organizations. Accordingly, this chapter describes the purposes, types, bases, and mixes of rewards. It also highlights some ways in which rewards can be matched with individual preferences and how the work schedule itself can be used as a reward.

Although intrinsic rewards and extrinsic rewards can both be motivational, there is an important distinction between the two. As discussed in chapter 8, intrinsic rewards are largely a function of job content. Organizations and their managers may seek to enhance the intrinsic appeal of a job by following the prescriptions of Hackman and Oldham and of Herzberg (see chapter 10) for redesigning jobs. However, it is individuals themselves who derive and administer intrinsic rewards. To the extent that intrinsic rewards reside in the job itself and are administered by workers, the organization has less control over them than it has over extrinsic rewards, such as pay and bonuses. Therefore, this chapter focuses, for the most part, on extrinsic rewards.

Purposes of Reward Systems

Let us begin with a description of the purposes of reward systems in organizations. These purposes have been explained from different perspectives (e.g., Belcourt, Sherman, Bohlander, and Snell 2002; De Cenzo and Robbins 2002; Entrekin and Scott-Ladd 2014; Lawler 1987; Schuler and Jackson 1996), which are collated and described in the following subsections.

Attracting and Retaining Good Employees

Every organization is engaged in competition with other organizations (in the same business or in other businesses) for recruiting and retaining productive employees. For instance, two professional sport organizations may be seeking good candidates for front-office jobs; similarly, two fitness clubs may be in need of a good accountant, or two university athletics departments may need to hire lawyers to direct their compliance units.

The managers in these contexts must remember that the potential candidates are employable in different kinds of organizations. For instance, an accountant may find a lucrative job with a construction company, a law firm, a hospital, or a university. Similarly, a lawyer can find employment at other universities or in other kinds of organizations. Therefore, a sport organization must ensure that its reward structure at least matches the market rate if it wants to recruit and retain good employees. In order to be effective, then, a reward system must be competitive with those of other firms seeking a particular kind of competency and talent, and, ultimately, it must be more attractive to prospective candidates.

Viewpoint

Whilst we must reward people to ensure that we can compete effectively in the appropriate employment markets, the way we do [so] should reflect our particular organization. It is the culture and values that define the brand, and rewardsshould reflect these, not blindly follow the market. So I strongly advocate an approach of "best fit," not "best practice." (Rose 2014, p. 12)

Reducing Absenteeism

According to Lawler (1987), organizations can design reward systems to reduce absenteeism by linking bonuses and other perks to levels of attendance. This strategy is particularly useful in compensating for low job content and poor working conditions that cannot be improved. For example, as explained in chapter 8, some jobs in facility management may be simple and routine and, therefore, may lack motivational properties. Thus, individuals in those jobs are susceptible to absenteeism. The facility manager may attempt to reduce such absenteeism by linking certain rewards to attendance. For example, the manager may set a policy of giving a monetary bonus or extra days of paid leave for perfect or near-perfect attendance.

Types of Rewards

The types of rewards available in organizations can be described in terms of the following dimensions: intrinsic and extrinsic rewards, financial and nonfinancial rewards, career rewards and social rewards, direct and nondirect rewards, performance-based and membership-based rewards, and work schedules as rewards (De Cenzo and Robbins 2002; Schuler and Jackson 1996). Let us examine each dimension in some detail.

Work Schedules as Rewards

An organization can use strategies related to work schedules that employees may perceive as rewards and that may not entail additional expenditures by the organization. Here we discuss four of these strategies: shorter work week, staggered daily schedule, flextime, and telecommuting.

Shorter Work Week

A sport organization may adopt a scheme in which the traditional five-day work week is shortened to three or four days, during which the employee is expected to put in the same total hours as in a traditional work week. For example, if an employee in the ticketing department worked 8 hours per day for a regular five-day work week, he or she would work a total of 40 hours (8 × 5). In a four-day work week, that employee would work 10 hours per day to reach the same total of 40 hours for the week (10 × 4). In this scheme, the expense to the organization does not change; that is, employees are not paid any more or less than in a standard work week.

Even so, the organization earns the goodwill of employees who are more satisfied with their work schedules and more motivated to perform well. Some studies have shown that shorter work weeks resulted in less absenteeism and fewer requests for time off for personal reasons (Saal and Knight 1995; Schuler and Jackson 1996). From the employees' perspective, the shorter work week offers more leisure time and decreases commuting time.

On the downside, working longer hours each day may mean lower productivity at the end of the day. For example, an exercise leader is likely to be more tired and less effective in the last two hours of work in a four-day work week than in a five-day work week. Furthermore, the scheme may not benefit everybody in the organization. For instance, working mothers and fathers may find that the longer hours each day hinder their child-rearing and child-minding activities. Another problem is that the good feelings about the shorter work week may not last for long as one gets used to the routine. In addition, employees may have reservations about a shorter work week if the employer fixes and dictates the number of days and the number of hours of work. Therefore, sport managers may consider allowing their employees to choose the work week that best suits them.

Staggered Daily Schedule

A staggered daily schedule involves variations in the times that employees report to work and leave work. This approach requires that every worker put in a certain number of hours per day but allows those hours to be staggered. That is, some workers may be allowed to report to work earlier and leave earlier (e.g., one hour earlier), and others may come to work later and leave later. Employees may also be rotated every week (or over any fixed period of time) through the various schedules, thus creating variety. Workers may enjoy changing schedules instead of sticking to a permanent daily schedule. However, it is important for managers to discuss preference for scheduling with employees to determine if they like or dislike variation in scheduling as a source of reward.

Another benefit of the staggered daily schedule is that the manager can tailor it to suit the needs and preferences of individual workers. If possible, the manager may give employees a choice of daily schedule. Reporting early and leaving early may be attractive to some employees, whereas reporting late and leaving late may be attractive to others. This approach, however, creates more work for management because it is necessary to keep track of the schedules for individual workers and monitor their adherence to their chosen schedules.

Flextime

Flextime is a scheme that originated in Germany, where it is called Gleitzeit, meaning "gliding time" (French 2003). In this system, the manager expects an individual to work a given number of hours each week but permits the person to choose, within limits, when to work those hours. Usually, the plan includes a given number of core hours (i.e., from four to six hours, such as from 10 a.m. to 4 p.m.) with a flexibility band surrounding the core. In some cases, one can accumulate extra hours and take a day off at the end of the month. One is expected to finish the given jobs, and the scheme emphasizes paying for productivity rather than for attendance.

Some research has shown that this arrangement reduces employee tardiness, decreases absenteeism, reduces job fatigue, and increases loyalty (Saal and Knight 1988). The scheme would be helpful to individuals who manage both career and family roles. On a daily basis, the employee has complete control over scheduling the portion of work hours that fall outside of the specified core hours. Although employees may enjoy having such flexibility in their work schedule, managers must note that they cannot effectively direct their employees outside of the core time. It may even be difficult to evaluate their performances outside of the core time given that managers will have less face-to-face time to observe performance.

Telecommuting

Telecommuting involves working from home and connecting with the office via phone, Skype, or other technology to handle such matters as meetings, conference calls, and budget discussions. This practice is becoming more commonplace as a method to reward employees by providing flexibility in "work space." Such opportunities save organizations money by reducing office space and equipment requirements even as they provide self-motivated, independent employees with the freedom to conduct work in their own space and perhaps on their own schedule (Goodman 2013).

However, the use of telecommuting opportunities as rewards for employees must be handled with caution. Potential risks include distractions, overwork due to the workday's informal structure, and lack of strong organizational culture due to reduced face time between employees (Goodman 2013). Thus, managers must be strategic in how they set up and offer telecommuting opportunities in their reward structure, and they must ensure proper assessment of employees to determine who is a good fit for this type of reward.

Learn more about Human Resource Management in Sport and Recreation, Third Edition.

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