Effectiveness of Reward Policies in the Growth of Organizations: A Case Study of Tesco

This paper analyzes the effectiveness of reward policies in the growth and development of organizations, using Tesco as a case study. It explores the impact of reward policies on organizational culture, employee motivation, and business outcomes. The findings highlight the importance of effective reward strategies in driving higher profit margins and potential growth.

Running head: REWARD MANGEMENT
REWARD MANGEMENT
Name of Student:
Name of University:
Author Note:

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Executive Summary
The paper deals in the understanding of effectiveness of reward policies and practices in the
development and growth of organization. The effectiveness of the reward policies can be seen
from the outcomes of Tesco. Tesco has got effective policies that helps to maintain organization
culture and keep employees motivated to do their best. This leads to higher profit margins and
potential growths.

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Table of Contents
1. Introduction..................................................................................................................................3
2. Discussion....................................................................................................................................4
2.1 The context of reward environment and the key points that addresses rewarding decisions....5
2.1.1 Tools to identify the internal and external factors affecting business development...........5
2.1.2 Implications on business drivers of economic growth and strategic outcomes..................7
2.1.3 Methods of gathering and presenting reward intelligence..................................................8
2.2 Understanding of the rewarding principles with respect to core management practices.........10
2.2.1 Importance of total reward principle and its effectiveness in the reward strategy...........10
2.2.2 Significance of equity, fairness, consistency and transparency as they affect the reward
policies and practices.................................................................................................................11
2.2.3 Explanation of methods of implementing policy initiatives and practices.......................13
2.3 Ways in which line mangers contribute to reward decision making.......................................14
2.3.1. Various ways by which line managers contribute to the reward decision making..........14
2.3.2. Contribution of extrinsic and intrinsic rewards to improve the contribution of an
employee towards sustained organizational performance.........................................................15
3. Conclusion.................................................................................................................................16
Reference List................................................................................................................................18

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1. Introduction
The business environment is under a continuous change which is based on various
factors. The performance of the firms is heavily dependent on the quality of the firms which is
backed by effective performance of the employees. Employees must be motivated to boost their
productivity and outcomes. This is done by rewarding the employees from various backgrounds
which can adequately improve the performance of the firms. The impact can be seen from the
change in output and profit level. The reward environment is an active policy opted by various
businesses for organizational improvement (White 2016). It becomes important to understand the
effectiveness of rewarding policies in the growth and development of businesses with respect to
an organization. Tesco is a good company which is well known for its growth due to effective
rewarding strategies that leads to essential growth. The aim of the paper is to undergo an analysis
of Tesco with respect to rewarding policies in the growth of business outcomes.
2. Discussion
This section addresses about the reward environment with respect to varies factors that
can effectively change the business outcomes. The paper then addresses about the rewarding
practices in Tesco and how efficiently does it work in fostering growth. This is done by
identifying the internal and external factors that drives rewarding policies. An important analysis
is done by qualitatively analyzing the factors that serves as drivers of business growth with
respect to reward intelligence (Mueller and Somasundaram 2018). The evidence is drawn from
various examples of rewarding policies of Tesco.
Tesco is a multinational company of British origination that has effective business
practices in groceries and other sectors related to general merchandiser. The firm is
headquartered in England, United Kingdom. It is renowned as the third largest retailer in the

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world by value of gross revenues. It has business operations in more than ten countries. It has
over 450,000 employees around the globe (Rose 2018). The company has net income of about
1,320 million euros with a revenue value of 63,911 million. Tesco has diversified its venture in
various other products apart from groceries such as books, electronics, clothing, petrol, furniture,
software, internet services and various other financial services.
It is not easy to maintain such a large number of employees by effectively managing its
business practices. Tesco has qualitative management practices that boosts the efficiency of the
employees and coordinates the management practices effectively. This can change the perception
the people as per the change in overall cost effective outcomes (Wood, Wrigley and Coe 2016).
Tesco provides an extensive work culture for its worker as they believe that a great work culture
with effective rewarding polices enables business growth and profit. Tesco has made great
changes in the rewarding strategies that will positively affect the rewarding sector.
2.1 The context of reward environment and the key points that addresses rewarding
decisions
2.1.1 Tools to identify the internal and external factors affecting business development
The subject of rewarding policy is solely related to various attributes that can hamper the
internal and external factors. The internal environment defines the internal environment of the
organization with respect to business, technology, people, coordination and conflicts (Nastasoiu
and Vandenbosch 2019). The external factors are those that hamper the business of an
organization externally such as globalization, demographics, competitive pressure and
organization culture. According to surveys, most of the people change job due to the suitability

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of the work culture. Maintaining a good work culture is essential for business productivity.
Employees and managers make up the team and the team performance is effective in raising the
overall output level. Skilled labor looks for a work with good work culture and stay loyal to the
organization for a long time. Employees perform effectively in the presence of a good work
culture. This can be analyzed by doing a Pestle analysis of Tesco that comprise of five factors,
political, economic, social, technological, legal and environmental.
Political Factors: Tesco operates in twelve countries. The political stability and structure of
each country is different. Countries have their own political structure and likely tax is or import
duties are imposed which restrict the level of output sold to the economy. For example, the
referendum of EU is making investment in Europe highly risky as Brexit uncertainly is lowering
the business opportunities.
Social Factors: Consumer demand plays an important role as profit of firms is dependent on the
demand and proportion of income spent on that item. As Tesco offers a range of services, it is
easy to extract huge profits from the sale of the good. Consumers prefer organic food products
and Tesco has tried to meet with consumer expectations and provide quality food products.
Economic Factors: Tax rate, import duties, unemployment rate, minimum wage rate, inflation
rate and the rate of growth of GDP can affect price, cost and profits of Tesco. The company is
hugely dependent on UK market and a change in economic indicators will affect the productivity
of the firm and lead to a fall in brand reputation.
Technological Factors: Usage of innovative technologies make production easier and deliver
more outputs at low cost. Tesco uses innovative techniques for production and well as selling

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goods. Tesco has its own mobile payment system, scanning system and has implemented RFID
technology that automatically counts stock and remove it after sales.
Environmental Factors: Companies need to focus on environmental issues and deliver goods
with the usage of efficient and sustainable techniques as government is taxing firms that
increases carbon footprint. Tesco uses renewable sources that consume less electricity and
minimizes the level of carbon footprint to about 50 percent. It uses fuel saving routes and gather
wasted plastic bags from consumers and recycle them.
Legal Factors: Legal factors are laws that affect businesses because legal factors are different in
each country. Tesco has been accounted as fraud as it has mislead investors and had to pay 12
million GBP for settling legal action. Tesco was claimed to pay low rates for workers during
weekend, night and bank holiday shifts and about 17 workers took action against the employee.
Rewarding practices and policies are implemented by the mangers to increase the
efficiency level in the organizations. A strategy that is related to the implantation and designing
of reward policies that supports organizational development (Santosh 2017). Motivation is an
important tool in sustained growth which helps to save the personal interest of the employees and
safeguarding the external factors such as reward and praise. Many theories are used by managers
to motivate employees, where pay serves as a primary motivator. Other factors are related to
appreciation of hard work, responsibility, empowerment, a sense of appreciation and challenge,
enjoyment and an opportunity for advancement (SALEM 2015).
Motivated workers works efficiently and produce greater output in lesser time which
decrease the labor costs. Motivated employees have a high level of concentration and makes
lesser mistakes (Gaina Lucas and Pérez-Liébana 2019). They are less likely to get involved in

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conflicts and be loyal to the organization. Motivation denotes lower absentees and provide a
good quality of work. Tesco operates its business in two groups such as employees and
customers. Employees in Tesco are supported with flexible working hours, discount gym
membership, company share options, competitive salaries, reduced or free health membership
cards (Leonidou et al. 2017). Tesco reward the customers by giving gifts after they have made
purchase that exceeds a certain limit.
According to the Mayo effect, internal or external factors motivates an individual to
change their actions. Internal factors are judged as the desire of an employee to learn new skill
and challenges and rewarding employees based on their availability enhances the productivity
level. Mayo said that work efficiency is generated by factors like greater communication,
ensuring well-being of others, showing interest in worker, helping others, team work and spirit
and ensuring non-repetive work (Grayson and Hodges 2017). Tesco gives the reward for helping
others and give appraisals in formal structures. External factors are judged on the performance
and completion of daily targets by the employees and giving incentives as reward amount.
2.1.2 Implications on business drivers of economic growth and strategic outcomes
Tesco’s has been a successful business because it has effectively acknowledged about the
core competencies of its workers. Businesses can run effectively when each and every employee
delivers an outstanding performance. Tesco need motivated and well trained staff members to
support its growth (Schlechter, Thompson and Bussin 2015). Tesco supports its employees in
different roles at various levels. Tesco has seen that employee management serve as the biggest
drivers of growth in the organization. Motivation of employees is essential for a continuous
company growth (Cameron and Green 2019). The company tries to maintain the efficiency level
of workers by raising the knowledge and skills through continuous training and development.

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Tesco organizes reward and recognition programs timely to provide increased job satisfaction for
the employees. Employees are trained to cater the customer needs and assist them in stores.
A good work culture is essential for maintaining the organization’s values. Good culture
creates an operational value for the people and guides them to stay motivated in their work.
Company culture is important as it is related to several other things such as employee
engagement, happiness, retention rate, productivity, and efforts for a positive recruitment
(Harring 2016). It is important to identify the strategies that will work in the development of
organizational culture because it can either bolster the organization or erode it. Firms effectively
try to improve the working culture by praising and rewarding the employees. Employees try to
deliver a strategy that is crucial for organizational development and rewarding gives the
employees of the people. Rewarding enables the employees to understand their contribution to
the organization that is dealt in the effectiveness of core business outcomes. In profession term,
rewards is the value of total return that is given by an employer to the employees for the
provision of services that leads to organizational development.
This system not only creates a team spirit but also boosts the confidence of the
employees. Tesco has a set of attributes by which it effectively identifies the performance of
individuals (Salmon et al. 2018). The principles that are related to rewarding the employees of
Tesco are as follows:
 Recognize- Identify the contribution of an individual in the team and in the
organization in overall
 Remain- Tesco tries to gain over the employees by fostering them a sense of
loyalty and pride such that employees feel encouraged to stay in the organization

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 Align- Tesco tries to incorporate the shareholder value into the organization by
focusing on the efficiency of the employees and doing what makes them better
 Motivate- Employees stay motivate once they see their work has been
encouraged, it boosts up their thought process and they are ready to work more
efficiently and take more risks (Noe et al. 2017)
 Attract- These attributes allows Tesco to recruit the right people
2.1.3 Methods of gathering and presenting reward intelligence
Tesco has a set of rules that guides the company to address about the rewarding
principles because the people they reward will have a long lasting effect on the firm. It is
important to identify the efficient people. The rewarding system has to be authentic and needs to
be operated by the inclusion of several parameters. These policies are crucial for the economic
development of the firm and create a great culture that is moved by quality production from the
people (Wilmer and Chein 2016). The redrawing policies are dependent on several parameters
such as competitive, fair, sustainable and simple. Tesco introduces a rewarding system that is
clear, simple and easy to apprehend.
The company tries to avoid any policies that are complex to understand, which might
lead to complexities inside the organization. The policies implemented has to be fair and
transparent such that it is consistent and equitable to all the employees working in the
organization irrespective of any biasness (Schlechter, Thompson and Bussin 2015). Reward
decisions has to be properly governed by the employers before undergoing a specific work
culture that is effective for the business development and detrimental to core efficiencies and
objectives. Reward system delivered is accurate, compliant and legal to employee performance.

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The principle that acknowledges the rewarding system is dependent on the total rewarding
structure that fosters business development with respect to various market outcomes.
The principle is to gather all the information regarding performance outcome is solely
related to financial and non-financial growth. Reward is useful in denoting the role of an
individual in the workplace such that the contribution has been an effective parameter for the
success of the company. The package offered in the reward strategy is different as per the
performance of an individual. There are three different rewarding strategies that is provided in
monetary terms. According to Mao et al. (2017), annual bonuses are given throughout the Group
that can be linked to the local business performance. The success of the group is structured in a
way that is consistent with the annual bonus of the Executive Directors by focusing on profit,
sales and performance of an individual.
Employees are rewarded with share incentive structure where employees get the added
advantage of buying or given shares in the company. It enables the efficient workers to buy
shares from their pre-tax earnings. People in senior posts are given this offer so that management
team can receive bonus from Tesco shares. These shares are deferred for a period of two- three.
2.2 Understanding of the rewarding principles with respect to core management practices
Rewarding principles are those that is followed by mangers or other experts for designing
reward policies. Businesses design reward policies based on the effective management practices.
2.2.1 Importance of total reward principle and its effectiveness in the reward strategy
The concept of total rewards is related to all the tools that is used by an employer to
motivate, attract and retain employees. The value of total reward is based on the tools that helps
to enhance employee relationship in the organization (Sung, Choi and Kang 2017). For new

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employees, the total reward is perceived as an instrument of employment relationship. The total
reward system comprise of all the instrument that generate employee motivation towards their
work. It includes various instruments like gifts, benefits, schemes, offers, compensations,
vouchers, recognition and package. The reward system not only comprise of offering the biggest
salary because it is not the only factor that keeps am employee motivated and loyal towards an
organization (Castilla 2015). This is why organizations like Tesco has reframed the traditional
compensation schemes and has moved towards better communicative tools that boldly
recognizes the perks of employees.
The system enables the employees of Tesco to distinguish themselves as employers of
choice. The company has now extended its rewards towards multiple health insurance benefits,
free vision, overtime bonuses, paid time offs and dental checkups and life insurances. Total
rewards system also sponsors training, employee wellness programs and the flexibility of
choosing workplace location. Wood, Wrigle and Coe (2016) describes how companies include
theft protection plans and employee discount programs in the total reward system that is not
generally taken consideration. It also offers various personal growth opportunities inside the
organization that is related to development and non- monetary rewards. Child care vouchers and
educational scholarships are rewarded to employees with respect to their financial condition.
The effectiveness of the total reward system can be seen from the past years data of
national statistics. The unemployment rate has gone down and firms have strived to a long-term
growth outcomes. This has led to increased competition among the people in a friendly working
culture which boosts the performance of each firm as a whole (Nastasoiu and Vandenbosch
2019). Tesco is renowned as one of the largest public company employers. Tesco hires people
from different backgrounds as per the skills and requirements needed to run business in different

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regions. Total reward statement has been sent to every staff such that employees work have
complete information about the rewarding structure and perform accordingly. This has helped in
lowering the rates of employee turnover by promoting future entitlements and benefits to the
people (Yoder, Visich and Rustambekov 2016). Employees motivated and try to stay with the
organization for the longest time period.
2.2.2 Significance of equity, fairness, consistency and transparency as they affect the
reward policies and practices
Reward is given with reference to internal relativity and the external market practice.
Internal relativity refers to fair practices in the organization such that there remains equity in the
comparison of positions and assure a fair pay. This helps keep up the moral value of the
company and enhances employee motivation. In order of this fair pay scale, when employees are
rewarded, they become happy and motivated to perform better (Coburn, Hill and Spillane 2016).
Employees who did not receive any award, start working harder to enhance their productivity
and receive the rewards.
Tesco has more than 326,000 people working in the company and is not easy to reward
all of them together. External market practice refers to the global trade practices which is
engaged in the expansion of business over various countries (May, Stahl and Taisch 2016).
Therefore, rewarding is done by evaluating the performance of workers with respect to the
performance of a unit in a specific place. Tesco carry out their rewarding practices in a proper
way that is aligned to their business strategy. The rewarding framework is organized in a
sustainable manner, which is flexible to meet with the changeable needs of the business
environment. Tesco has identified the importance of trust, respect and organization culture (Noe

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et al. 2017). They happily takes feedback from customers and employees about the
organizational structure and treat everyone fairly.
According to Taylor’s motivational theory, people mainly worked for money which
based is on the production amount such that employees doing the same type of type needs are
treated equally. Tesco does the same and motivates employees in both personal and work life.
Promotions are fairly offered based on their tenure of service and production level (Cappelli and
Tavis 2016). The theory also says how the introduction of non-financial services can work
effectively for organizational growth. Tesco has a program named staff satisfaction survey which
estimates things that motivate an individual depending on their perspective and design benefits
accordingly. Employees are given 4-12 wee offs under the lifestyle break system to enhance
productivity and drive out monotonousness (Vu 2016).
2.2.3 Explanation of methods of implementing policy initiatives and practices
Tesco has several rewarding policies that complies with the needs of employees and
words in favor of organizational development. Performance in workplace is dependent on
employee satisfaction that typically comes from extrinsic rewards. This reward system boost
organizational revenues in the short run as it quickly improves the productivity of individuals.
Intrinsically motivated employees willingly competes a task, much before the deadline which is
error free in most of the times (Msaga 2018). Tesco arranges with a range of competitive benefits
that suits the employee outputs. These are competitive salaries, bonus scheme, flexible shifts,
holidays, pensions, holidays and life assurance, colleague cub card, long service awards and
discounted home and motor insurances.
Extrinsic rewards of higher value are given to employees senior level employees and
these benefits are planned after five year achievement in the organization. Tesco’s rewards has a

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good reputation in the market and employees stay in the organization for time period to access
the reward facilities offered by the organization (Quadri 2019). Salaries are increased based on
the term of service and productivity level. Bonus schemes are rewarded on an annual basis. The
scheme of flexible benefits works effectively for organizational development where employees
have the flexibility to choose their benefit program depending on things that is most valuable to
them.
Pension scheme is enabled for all employees ranging between 16 and 70 years of age
who meets with the qualifying criteria. Insurance benefits of about four times the salary is given
to every staff member. Tesco gives a colleague club board where employees get ten percent
discount for buying service and products of Tesco (WAWERU-GATHII 2018). This further
increases the brand value and increases sale of goods in bulk amounts which satisfies employees.
Insurances relating to health, motors and homes are rewarded to employees which enables
employees to stay loyal to the organization for long time periods. Long service awards are
regarded as special holiday offers that is served after 3 years of service.
2.3 Ways in which line mangers contribute to reward decision making
2.3.1. Various ways by which line managers contribute to the reward decision making
Mangers are responsible for designing, planning, administering and implementing an
efficient total reward strategy that enhances the organizational development. Mangers carefully
observes the performance of employees in the organization and try to identify tools that will
improve their performance. Managers face various challenges on how to reward the employees
in order to make it fair and transparent. They are given the task of designing strategies on how
employees are to be rewarded (Chowdhury 2016). Employees and managers share a quality
relation about each othr. This is because the mangers guide the employees and know about the

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work of an individual. The strategy is to look carefully into the matters of the people who has
originally been affected by the overall organization.
According to several surveys, employees leave mangers or work environment and not the
job type. Managers undergo high quality line management techniques that is focused on
coaching, supporting and motivating the employees. Total reward works successfully when the
line mangers promote the scheme and select employees by carefully measuring the contribution
of an individual. Mangers handle the office work and logistic staff (Cappelli and Tavis 2016).
Tesco operates as a conglomerate that provides alternative goods and services in online
shopping, banking and financial services. Being the biggest retailer, Tesco operates with a
worldwide workforce of about 468,000 employees.
Line managers organize daily team meetings to give an update about the things
happening inside the organization and give out the value awards. About 3,000 mangers were
hired by Tesco to facilitate smooth organizational growth by designing rewarding policies. Line
managers working in Tesco has implemented a system known as the 360 degree feedback which
enables them to understand the strength and weakness of the workers. Tesco has several personal
development plan that helps employers to reach out to the employees by encouraging self-
assessment programs with various rewards.
2.3.2. Contribution of extrinsic and intrinsic rewards to improve the contribution of an
employee towards sustained organizational performance
Intrinsic rewards are denoted as a tangible reward for the services offered by the
employees in correspondence to recognition, satisfaction and a sense of achievement. Extrinsic
rewards are tangible rewards which is physically provided for the accomplishment of targets or
doing something very extraordinary. Employees who has done something creative in the

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organization and constantly guided others are remembered by team leaders (Coburn, Hill and
Spillane 2016). They are encouraged with a few round of applause. Extrinsic rewards comprise
of certificates, bonus, spot awards, trophies, medals, cash awards, gif vouchers and other
incentives that motivates employees from time to time. Both intrinsic and extrinsic rewards
generates a higher level of job satisfaction for the employees (Schlechter, Thompson and Bussin
2015). Vroom’s expectancy theory assumes that the behavior of individuals are related to the
conscious choices by minimizing pain and maximizing pleasure.
The effectiveness of intrinsic rewards can be felt in the long run because continuous
recognition and sense of achievement enables workers to perform better. The intrinsic rewards
act as a positive tool for development of team performance. Intrinsic reward enables employee to
a challenging target and get recognition in the team. They are entitled to work effectively and
reaches an esteem stage of development where employees come to office with a positive
mindset. Employees slowly and steady become informal recruiters and recommend friends and
other people to work in the organization (Sung, Choi and Kang 2017). They recommend the
product and services to the potential customers which enhances the value of company reputation
in the organization.
As a result, people are entitled to work effectively and get extrinsic rewards. When
employees are satisfied, they become confident and encouraged to take up new opportunities at
work place. On the customer side, extrinsic rewards like gift coupons and free delivery reward
services generates customer satisfaction. Rewarded employees feel that their choices and
opinions are valued in the businesses (Nastasoiu and Vandenbosch 2019). Mangers has taken
various surveys to denote the relationship between intrinsic and extrinsic rewards and staff
performance. The survey concludes that there remains a strong positive relationship between

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employee performance and rewarding systems. These rewarding systems has effectively
improved the performance of employees and led to extensive growth. The annual revenue has
effectively improved over the years and employee turnover rates has severely fallen.
3. Conclusion
Thus, it can be concluded that rewarding system is an essential driver of growth in an
organization. The profit of Tesco has adequately increased in the past few years and led them to
be the biggest retailer in United Kingdom. The implementation of intrinsic and extrinsic rewards
has effectively improved performance of employees. They are motivated and encouraged to
work willingly without making much mistakes. New challenges are taken which is positive for
the organizational development. Tesco has several mangers who designs reward policies that
works well for the organization and leads to huge profits. Therefore, Tesco has effectively
applied rewarding policies that has worked positively for the organization.

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