Three nonfinancial segments of total reward: Application across cultures, implementation and challenges

Author: Iloka Benneth  Chiemelie

Published: 20-October-2014

Introduction

Retaining employees is very important in the business world because it defines the extent of competitive advantage that a company can have in its market. This is because when companies retain employees with huge potentials, sustainability in both production and profitability are assured, which is a major plus for the company. Even in the mist of differences in their approach, motivational thinkers of the early age such as Maslow (1954), Herzber (1966) and Deci (1975) do agree on two distinct motivational subsystems as: intrinsic and extrinsic motivation. Intrinsic are of the internal in terms of the factors or feelings that defines people’s will and desire to achieve, perform or become very much involved in activities. They are motivated by the employees’ underlying need for competence and self-esteem, which can be done without the influence or help of external forces. On the other hand, extrinsic are those kind of motivation that stems from the working environment external to the task, and they are normally stimulated by external rewards. This is where financial and non-financial rewards come to play as they are both extrinsic rewards.

Three nonfinancial segments of total reward

There are numerous kinds of recognitions. In accordance with research conducted by IDS (1999), there is no standard approach when it comes to adopting financial recognition. This is because variance exist in terms of the size and sector of the employer, and the objective of the approach (take for instance when the company intends to recognize a particular behavior, e.g. timeliness to work). In any case, the IDS still proceeded to argue that the most influential factors determining the nature of any adopted approach is organizational culture. The organizational culture determines the form of recognition that will be most appropriate for them. In assessing their evidence, the following methods stand out as the most widely used form of non-financial recognition scheme and they are:

1.      Appraisal

2.      Vouchers / gifts

3.      Promotion / nomination

Implementation across cultures

In this section, the three identified segments of reward will be discussed in terms of what they actually mean and how they are applied across culture.

Appraisal – this is the most fundamental level of non-financial recognition and it comes in the form of simple personal acknowledgement from the management to the employees, recognizing the fact that they have performed well. Obviously, this form of appraisal is very easy because it doesn’t cos much to just say “thank you.” In any case, good management practice suggests that this should be done irrespective of the reward approach adopted. For instance, my Boss (Mrs. Vivian) is very particular with appraisal as she takes time to acknowledge the performance of employees and encourage them to do more. On a personal ground, this is very motivating as I feel energized being appraised by the boss in front of my colleagues. In any case, it should be noted that this can lead to organizational conflicts and politics especially in cases where a particular employee is constantly being appraised even if the employee is performing well constantly. It can limit knowledge sharing due to increased internal competitiveness.

Vouchers / gifts – besides appraising employees, companies can be more direct by offering employees free vouchers to attend shows, go shopping or holidays, or other gifts as an appreciation of their efforts. This is also an effective approach in Nigeria. For instance, the Nigerian government recognized the performance of “super eaglets” s they won the under 17 world cup in Dubai by offering them national recognitions, cash and houses as gifts as well as holiday packages. This is now a major motivation for both the super eaglets to perform better in future competitions, as well as the super eagles to perform well in the 2014 world cup coming June (Brazil). Thus, it can be seen that the recognition of employees’ performance is not within the private sector only, but can extend to the private sector. The issue here as noted by People Management (2004) is that the HRM managers is normally the one deciding on what the employees will get, which means that what employees get are not necessary what they want to get but instead what the HRM managers want to get.

Promotion / nomination - for their continued performance, employees are be nominated or promoted to higher positions in the organization. While this does come with some financial benefits, employees can still be promoted in some cases without financial benefits (retaining their original salary (Michael, 2004). This is probably the most difficult to implement as some culture (such as japan) demand that employees be promoted based on their length of stay in the company and not just on their performance. In my own company (Nigeria), promotions are based on performance and not length of stay. For instance, I was promoted within just 4 months from marketing executive to brand manager. Also, I want to point out that this can also be a case of circumstances and chance as my promotion was because of the brand manager quitting the company, which left the position vacant and I the most prominent to fill it. I was put on 1 month trial of which I delivered and it landed me the job. Just like the appraisal, this can lead to organizational conflict and politics. In my own cases, I have had direct charges from colleagues that where they before me or feel that they cannot take orders from me because they are older than I am.

Potential challenges in implementation

From the above discussions, it can be seen that are number of challenges are potentially possible in the course of implementing these reward segments and they are:

Defining value of the scheme – as noted by IDS (2002), reward schemes are very effective when they are inclusive of all staffs, but the inclusion of all staffs is difficult because the manager cannot maintain close watch on all these staffs (especially in multinational companies), which means that some well performing staffs can be ignored in the process.

Credible assessment guideline – another issue comes in the form of instilling fairness in the procedural aspect of the scheme. It is very important that process is robust, credible and transparent irrespective of what form of reward is used. However, human nature means that preferentialism is inevitable, which can become very challenging for managers to assure fairness in the reward system.

Cultural fit – as noted in the case of Japan, the way non-financial rewards are viewed can be conflicting, which means that understanding cultural fit of reward systems is a potential challenge and multinationals need to know what is obtainable in their different markets.

Conclusion

From the above analysis, appraisal, voucher and nominations remain the most adopted form of non-financial reward. However, the fact that cash is not involved doesn’t make it easy to adopt as numerous challenges occur in the course of implementing non-financial rewards. Cultural fit is the most significant, which means that multinationals and even local companies employees diverse cultural workforce needs to understand the perception of cultural values of their workforce and align it with that of their corporate culture in order to create the right environment for successful implementation.

References

Income Data Services (2002), ‘Employee recognition scheme’, IDS studies plus, Autumn issue.

Maslow A (1954), Motivation and personality, Harper and Row: New York.

Michael S. (2004), ‘Non-financial reward: the most effective recognition?’. Available at: http://www.employment-studies.co.uk/pdflibrary/mp4.pdf [Accessed on: 3/29/2014]

People Management (2004), ‘Reducing features’, People Management Magazine, 15 july.