“Effective reward management is critical to organizational performance.”
Effective reward management, as a system, is the most powerful tool available to reinforce organizational values and translate them into employee actions (read behavior). Here, the ‘organization’ does not only refer to a business structure, but any institution (or activity) that involves people working together, and requires their voluntary contributions in order to operate successfully. Whether it is a school, a hospital, an NGO, a government agency, a political party, or a religious foundation, all require a matrix through which the performance of its individual members can be measured, and rewarded. Although, each organization may have its own manner, and means, of achieving this objective; their practices may differ but the general principles largely remain the same.
The need for the formulation of an adequate, and appropriate, system of rewards (as well as punishments) can be determined from the dictates of ancient wisdom when civilizations were first faced with the task of governing a society:
”People do not do as they are told; they do as they are paid i.e. as they are rewarded or punished.”
Wherein it is important to reward individual actions that are desirable and deemed as right by an organization, it is also imperative to rectify what is wrong, and provide deterrents to possible reoccurrence of such behavior. A responsible management has to brace the challenge of balancing both the good and the evil in human nature.
In an ideal world, people should do what is right because it is right. In the real world, people mostly do what is right (or wrong) only when they are paid for it in some form, or manner, that they can relate with, which promotes their personal growth and well-being. Similarly, people usually avert wrong doings whenever they can sight a strong penalty to be suffered as a consequence.
Being rewarded and recognized for their work or contribution is what keeps an employee motivated to work towards achieving organizational as well as personal goals. It necessitates the need for managers to pay more attention in understanding their employees and come up with suitable types of reward systems for the organization so that the employees are intrinsically and extrinsically motivated all the time. The hypotheses that I put forward here is to support this statement that effective reward management is critical to organizational performance as it helps in enhancing operational efficacy and in turn production output.
Allen, Takeda, White, & Helms (2004) state that reward practices play an important role in motivating employees and some reward practices are more effective than others in influencing performance. Reward practices logically serve as motivators in shaping the behavior of employees, motivating them to perform at higher levels, and the use of proper rewards can culminate in better performance at the organizational level.