Non-financial Rewards effect on Organizational strategy
IMPLICATIONS OF NON-FINANCIAL REWARDS ON DRIVING ORGANIZATIONAL STRATEGY AT THE COMMUNICATIONS AUTHORITY OF KENYA (CAK)
A major challenge in an organization is motivating its employees to become efficient with their tasks and how to encourage the workforce to become competitive in an inevitably uncertain and dynamic environment. Thus, to uphold a higher level of productivity, the organization must run an effective strategy to motivate its employees. For this reason, there are managers in several organizations who see a reward system as an imperative factor that can influence its employee’s behavior.
These involve intrinsic and extrinsic motivation. Intrinsic motivation is driven by a natural sense of accomplishment; such as professional growth and personal achievement. Extrinsic motivation, on the other hand, is a tangible reward; and unlike an intrinsic reward system, the extrinsic reward can be identified as materials that can motivate its employees, such as salary and bonuses.
The objective of this study is to evaluate the impact of non-financial rewards on driving organizational strategy at the Communications Authority of Kenya (CA). Moreover, this study assumes that the use of non-financial rewards can retain employees in the organization.
1.1 Background of the Problem
The core objective of any business enterprise is to generate consistent and sustainable profits. All the internal functions must be aligned with this objective. Human resource management plays a critical role in harnessing skills and expertise needed to convert resources to finished goods and services.
The managers recruit and train the employees so that they meet individual and organizational goals for optimal performance. Doing so requires the application of strategies that keep the employees motivated to perform. Lack of motivation is detrimental to a firm since it leads to stagnation in performance and it’s the cause of high turnover rates.
As such, a Human Resource Management (HRM) department is mandated to ensure that a firm’s production capacity is optimal to ensure that performance is high by designing and implementing strategic human resource approaches. One of the main strategies that human resource managers can apply is a reward system (Irshad 2016).
Zani et al. (2011) asserted that most of the successful public enterprises achieve better results and an increase in employee engagement by associating rewards directly to job performance. The strategy is not only applicable to sales personnel but to all levels and functions of a business. However, success of the reward system is guaranteed if proper implementation is observed.
Instituting a reward-based organizational culture may seem to be a short-term vision, but most successful managers claim that it’s an impeccable instrument for attaining success. A reward system unlocks employee capability, retains and motivates performers, and consequently generates higher revenues (Zani et al. 2011). Other benefits associated with a reward system include clear alignment of employee’s career path, a focus on development and growth, an increase in employee engagement and strategic decision making, and low turnover.
According to a research done by Giga Information Group on the impact of reward system to job performance, the researchers found out that retention improves by 27% when a firm exercises a reward system culture (Richard, 2010).
Like all strategic initiatives, a reward-based performance system requires comprehensive planning and flexibility. It should also integrate with HRM, the goal of the firm, and performance measurement. Since there hasn’t been identified a customized approach, managers should tailor the reward system to the current HRM processes and uniqueness of the firm. The approach is not just about setting up a framework and workers acting upon it.
Emotional and psychological realities have to be set up by asking the right questions and linking them to the human side of the incentives. While some employees are motivated by financial rewards, others get motivated through non-financial rewards (Lawler 2011).
According to Mowday et. al. (2013), some important questions that HRM should ask before deciding to apply a reward system is: “Are the tasks that people are taking moving the organization forward? Are the managers engaged with the employees throughout the year to make sure they carry out, and, achieve their objectives? Are individuals delivering against what is expected? Who is and who isn’t?
Are you objectively ensuring that bonuses, salary increases, and promotions are given to those high-performing individuals that you can’t afford losing?” These questions are paramount as they enable the managers to design a program that fits the needs of the firm; either a financial or non-financial reward system. Moreover, the employees should have full trust with the management in fairly administering the scheme and possess the needed skills and abilities to improve performance.
A reward system is in the form of financial or non-financial incentives. Financial incentives lead to extrinsic motivation whereas non-financial incentives generate an intrinsic motivation. It is crucial for managers to understand the difference between the two reward systems to determine the one that suits an organization. A financial reward system is tangible and usually involves the practice of provision of bonuses, commissions, and other monetary incentives to appraise employees for a job well done. The rewards are also given when an employee attains a certain target (Karwowski, 2014).
Economic volatility has seen many firms try to find ways to supplement financial rewards by concentrating on the non-financial rewards. Richard (2010) defined nonfinancial rewards as those not consisting of an employee’s salary. Often, workers tend to feel unappreciated by their firms due to layoffs, stressful working conditions, and increasing demands leading to their disengagement.
Employees can perform optimally if they feel valued, appreciated, plus a sense of job security. As such, non-financial incentives are programs that address these needs. The common non-financial incentives are reward, recognition, provision of career advancement opportunities, job security, and flexibility. The perceived importance of non-financial rewards differs across employee levels and it’s up to the HRM to establish what is appealing to the different groups.
For example, a fast growing firm may focus on work environment but a slow growing firm can focus on career growth and development. Investing in employees by appreciating them in diverse creative ways is a critical strategic approach that managers can apply in instituting a non-financial reward system. It is for this reason that non-financial reward system formed the basis of the study by focusing on the Communications Authority of Kenya (CA).
Just like other large organizations, CA faces the challenge of maintaining the motivation and productivity of its employees as it tries to upgrade its performance. The organization has previously applied both the financial and non-financial rewards. It therefore drives the question of the implications that non-financial rewards have had in facilitating the implementation of the firm’s strategic goals.
1.2 Statement of the Problem
The challenge of most organizations is establishment of an efficient rewards systems aimed driving the strategy of the firm. One of the affected firms is Communications Authority of Kenya (CA). According to Murray et al. (2014), it is imperative for managers to keep track of the needs of employees to match the expectations of the organization towards productivity.
Most employees tend to underpin the impact of non-tangible rewards and seek satisfaction in tangible or extrinsic rewards. Thus, firms should involve employees in creating nonfinancial incentives, and ensure they understand each employee level and expectations for better results. According to a study done by Zani et al. (2011), the results stipulated that non-financial rewards such as recognition, praise, and kudos from the employers or the organization had a greater impact on the employee’s behavior and motivation towards their jobs.
Moreover, according to Westover & Taylor (2010), intrinsic rewards provide a clear view towards job satisfaction. Within their study, they had a wave of respondents towards non-financial rewards related to job satisfaction. In that case, it was determined that non-financial rewards have a greater value than providing tangible rewards to the employees.
However, the context of wages and bonuses is an important factor for employees and can continue to function within the organization. In the case of a research by Griffin and Moorehed (2014), the author asserted that financial rewards initially had greater impact onspecific employees. However, as the programs continue over a long period of time, managers should combine financial and nonfinancial rewards since they equally affect the employees’ behavior which in turn reduces employee turnover.
To simplify the result, both equities are important when done in complimentary proportions. This study emphasized on the impacts of non-financial rewards in driving performance in an organization. This is in order to understand how to retain skilled employees and subsequently sustain a successful work-related culture and organization without the use of monetary incentives.
The Communications Authority in Kenya (CA) had recognized both rewards system; however, sustaininga motivated and skilled employee had been their utmost dilemma, attaining minimal improvement in employee production and rate. This study seeks to address the gap that will be filled in the firm, and other related entreprises, if non-financial rewards are to be implemented in driving the strategies of the organization.
Moreover, this study also gives room to address criticisms and oppositions that may arise if non-financial rewards are introduced in different departments within the Communication Authority of Kenya. Furthermore, this study seeks to determine the employees’ flexibility towards a different form of rewards rather than aiming for tangible rewards.
Armstrong, M., Brown, D., & Reilly, P. (2011). Increasing the effectiveness of reward management: an evidence‐based approach. Employee Relations, 33(2), 106-120. http://dx.doi.org/10.1108/01425451111096668
Armstrong, M. & Taylor, S. (2014). Armstrong’s handbook of human resource management practice, 13th edition (1st ed.). London: Kogan Page.
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