Reward Management: Factors Affecting Reward System, Motivation Theories, Intrinsic and Extrinsic Rewards

Reward Management

Table of Contents
Question 1: The reward system in an organisation is affected by both internal and external
factors. Identify two internal and two external factors that need to be considered when
introducing performance related pay in this retail organisation and evaluate their potential
impact.....................................................................................................................................3
Question 2: It is likely that introducing performance related pay will have the potential to
increase the cost of reward in the retail organisation. The senior management have asked,
therefore, for some way of evaluating whether the approach is successful. Applying theory,
explain an approach that could be used to critically. Evaluate the strengths and weaknesses of
your chosen approach.............................................................................................................5
Question 3: Pay does not necessarily motivate individuals, but other aspects of reward might
motivate. Critically analyse how particular intrinsic and extrinsic reward strategies can
motivate employees................................................................................................................8
Question 4: Design a reward strategy for the retail organisation that utilises both extrinsic and
intrinsic reward. What effect might this strategy have on the motivation of employees
working as sales staff in the retail organisation? Provide specific examples in your response.
..............................................................................................................................................10
Question 5: Critically evaluate what you need to consider to ensure that the performance
related pay scheme is both ethical and demonstrates a professional approach to reward. What
impact will this strategy have on expatriates working in Paris and New York?..................13
Question 6: Critically evaluate the key issues in reward management in relation to the retail
organisation. To what extent can these issues be mitigated?...............................................14
REFERNCES:................................................................................................................................17
Books and Journals:..............................................................................................................17

Question 1: The reward system in an organisation is affected by both internal and external
factors. Identify two internal and two external factors that need to be considered when
introducing performance related pay in this retail organisation and evaluate their potential
impact.
The main part of the performance management consists managing workers and managers,
as their performance will deliver a huge impact on the entire performance of the company.
Reward system is a broader term which includes monetary, psychological and non-monetary
payments that a company serves for its workers, labours and employees in exchange for the work
they do for the company (Bi and et.al., 2019). It may include both intrinsic and extrinsic rewards.
Intrinsic rewards link with the job satisfaction that is generate from performing the job such as
individual fulfilment and a sense of contribution to the community. While, extrinsic rewards are
working conditions and financial payments that the workers receives as part of their
employment.
It is found in a research that both internal and external environmental factors affects the
reward system. PESTLE includes various external factors such as political, economic, social,
technological, legal and environmental factors. This is used to make strategic decision for the
company. For the retail organization, it is quite important to know the factors that has an impact
on the reward system. The following are two external factors that has an impact on the reward
system:
 Economic factors: These factors include economic growth or decline, inflation rates,
interest rates, exchange rates, working hours, minimum wage, unemployment, working
hours, cost of living and credit availability. The variables are crucial to performance of
an economy that directly affects the organization and also have rolling the effects in
long run. Employees performance in the retail organization also gets affected by the
economic factors (Chen and Xu, 2017). If the organization is not offering minimum
working workers and employees work beyond the limit then it might affect their
performance due to sickness. It is important for the company to understand that if the
employee is working hard and put their efforts for the company then he must be
compensated with reasonable rewards. Also, salary and wages must be decided
according to the cost of living of the country.

 Environmental factors: These factors are mainly concerned with the effect of
environment and the influences of ecological concerns. These include environmental
protection laws, disposal laws , energy consumption regulation and so on. Hence, these
factors are not limited to the global changes in the climate, geographical location,
weather or climate. There are many companies in the market which are highly focused
on the environment safety and protection. Also, there are many laws which have been
introduced by the government to protect the greens and environment. If the retail
organisation does not abide the laws and regulations related to the environment then it
might lost his reputation in the market (Cornelis, Baker and Ahsan, 2021). Due to that
reason customer purchase also might fall which affect the revenue of the business.
Hence, if there is a fall in the profitability of the business then the reward system also
gets affected.
Internal factors can also affect the business in both terms positively and negatively. The
internal factors of the company can be controlled. It includes mainly staffing, finance, corporate
culture, current technology and so on. The following two internal factors are discusses in depth:
 Budget: Any organisation needs sufficient budget or funds in place with a purpose to
grow and survive successfully in the market. Managing budget in the company is quite
challenging especially when determining new methods to recognize and reward the
workers and employees. In order to set a employee reward program, budgeting is the
most prominent to handle. The budget is primarily of three types such as fixed budget,
allocated budget and variable budget. These budget is pre-decided by the financial team
of the company (Dharmadasa, 2019). Employees reward system also get affected by the
company budget in such way.
 CEO approval: The approval by the CEO in retail organisation also affects the reward
system. In order to plan the employee reward system, it is very fundamental to take the
approval of the top management. Taking approval from the CEO needs time and involves
lengthy procedure which sometimes affect the performance of employees and they got
demoralized towards work. If the employees are demotivated at the work then it also
influences the organisational productivity as a whole.
Overall, it has been observed that both internal and external factors affects the reward
system in the retail organisation. Rewards plays the most important role in the performance of