Impact of Reward Systems on Organizational Performance

The report provides an insight into business communication in context of the impact of rewards on organizational performance. Rewarding of employees has been associated with motivating the workforce for a better performance. The report commences with a discussion of the importance of the reward system in relation to employee productivity and performance.

Running head: BUSINESS COMMUNICATION
Business and Communication
Name of the Student:
Name of the University:
Author Note:

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Executive Summary:
The aim of the report is to provide an insight into business communication in relation to the
impact of the reward systems on the organizational performance. The report commences with a
discussion of the importance of the reward system in relation to employee productivity and
performance. There are also discussions about the two types of reward system, the intrinsic and
the extrinsic and how they influence to the employee performance within the organization.

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Table of Contents
Introduction:....................................................................................................................................3
Discussion:.......................................................................................................................................3
Conclusion:......................................................................................................................................6
References:......................................................................................................................................7
Appendices:.....................................................................................................................................7

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Introduction:
The report provides an insight into business communication in context of the impact of
rewards on organizational performance. Rewarding of employees has been associated with
motivating the workforce for a better performance. Therefore, determination of the exact type
and the mix of the rewarding tools remains a challenge for organizations. Studies have put
forward that rewards have a positive impact on the workplace safety and health of the employee.
In fact, rewards refer to one of the vital elements in the work performance for increasing
employee engagement.
Discussion:
According to Shields et al. (2015), it has been a concern for all the organizations across
the world to decide on the effectual human capital strategies for enhancing productivity.
Employee’s productivity in an expanding organization represents one of the crucial factors of the
organizational performance. Technically termed as the human resources in the modern
organizations, employees are one of the most important assets for an industry. In the developed
countries of United States, Japan, United Nations and Germany organizations recognizes
employees as one of the vital assets that require consideration. The rationale behind use of the
employee rewards remains in the fact that the motivated employees are satisfied in terms of the
fulfillment of the want that is both non-financial and financial. Failure in doing so will tempt the
employees in leaving the organization. It is to be noted that some employees prefer in receiving
the intrinsic rewards determined in terms of workplace accomplishments and terms of praise
while others who happy with the extrinsic rewards determined in terms of the bonus, salaries and
incentive offered to the employees.

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Reward however represents the compensation that the employee receive from the
organization in exchange of the work done. In fact, it is referred to the brain structures that help
in controlling and regulating the behavior through the inducement of pleasure. Various
techniques are adopted for ensuring employee reward and their optimal utilization. Zameer et al.,
(2014) said that every organization should have a proper reward system related to the
organizational productivity that ultimately contributes to the organizational performance.
Therefore, organizations must undertake procedure and policies for formulating a reward system
that will help in enhancing employee satisfaction. De Gieter & Hofmans (2015) stated that pay is
a reward that has direct relation with the productivity and depends on the size of the
organization.
According to Wu & Lu (2013), the reward system is classified as either intrinsic or
extrinsic. The intrinsic reward is primarily concerned with the psychological developments of the
employees. They represent the tangible benefits and are composed of characteristics like
feedback, autonomy and participation in decision-making. This type of reward system is created
for appreciating the employees in a manner that builds up the self-esteem along with the feeling
of achievement and growth within the organization. This system of reward helps in making the
employees in feeling satisfied. The employees are able to create the thought that they have
accomplished something worthy that calls for oral representation of the organization. The
extrinsic rewards on the other hand, cover the basic needs of the income for survival. It brings in
a feeling of consistency, recognition and stability. According to Dugguh & Dennis (2014),
extrinsic reward presents the outcome provided by the organization in terms of status, job
security, salary and the fringe benefits.

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Choudhary, Akhtar & Zaheer (2013) stated that organizational performance represents
the dependent variable of interest for the researchers that are concerned with an area of the
management. The broader construct is necessary in enabling the managers and the researchers in
evaluating the firms over time and comparing them to the rivals. In other words, organizational
performance puts forward the vital criteria in the evaluation of the organizations, their
environments and actions. The report further analyses the impact of the various reward systems
on the organization.
The intrinsic rewards influence both the individual and the organizational performance
(Stumpf et al., 2013). For instance, employees within organization might have achieved the
phase of self-actualization through the impact of the intrinsic rewards. These rewards enhance
and encourage both the employees and the employer to the extent of challenging them and
accomplishing newer tasks and cooperate with the others in working towards a harmonious
environment. Besides, intrinsic rewards also enable employees in having greater concentration
thereby ensuring self-management and energized. Through the higher levels of the intrinsic
rewards, employees became the marketers and the informal recruiters of the organization where
they can also recommend friends for working in the concerned organization.
On the other hand, the extrinsic rewards not only cover the basic need of the income for
the survival but also bring about a feeling of recognition, consistency and stability. According to
Murayama & Kitagami (2014), extrinsic rewards include job security, status and fringe benefits.
It has been found that rewards related to social recognition and financial rewards influences the
performance of the employees. Various managers have used the system of extrinsic reward in
stimulating creativity of the employees. Therefore, the extrinsic reward not only enhances the
creative performance of the individual and finally contributes to the organizational performance.

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Extrinsic Reward
Performance based
Basic Salary
Promotion
Bonus
Intrinsic Reward
Appreciation
Recognition
-
Organization Performance
Productivity
Profit
Sales Volume
Job Performance
Accuracy & speed
Number of tasks completed
Research has shown that the reward dimensions have a significant impact on the performance of
the employees. The pay, recognition, praise and performance bonus act as tools for management
to motivate the employees in ensuring effective performance. Thus, the reward package of the
workers should not only be a concern for the employees but the employers.
Figure: Conceptual Framework
Source: By Author
Conclusion:
On a concluding note, one can say that the necessity of the reward system in the day-to-
day performance of the workers cannot undergo overemphasis when the situation involves in
getting a rewarded for a job done. It has been found that human performance can be improved
through enhanced motivation. It can be said from the results of the study shows that workers
impose a greater value on the different rewards systems imposed by the organization in
Independent Variables Dependent Variables

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appreciating their value. Thus, the reward system is directly proportional to the organizational
performance.

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References:
Choudhary, A. I., Akhtar, S. A., & Zaheer, A. (2013). Impact of transformational and servant
leadership on organizational performance: A comparative analysis. Journal of business
ethics, 116(2), 433-440.
De Gieter, S., & Hofmans, J. (2015). How reward satisfaction affects employees’ turnover
intentions and performance: an individual differences approach. Human Resource
Management Journal, 25(2), 200-216.
Dugguh, S. I., & Dennis, A. (2014). Job satisfaction theories: Traceability to employee
performance in organizations. IOSR journal of business and management, 16(5), 11-18.
Murayama, K., & Kitagami, S. (2014). Consolidation power of extrinsic rewards: Reward cues
enhance long-term memory for irrelevant past events. Journal of Experimental
Psychology: General, 143(1), 15.
Shields, J., Brown, M., Kaine, S., Dolle-Samuel, C., North-Samardzic, A., McLean, P., ... &
Plimmer, G. (2015). Managing employee performance & reward: Concepts, practices,
strategies. Cambridge University Press.
Stumpf, S. A., Tymon Jr, W. G., Favorito, N., & Smith, R. R. (2013). Employees and change
initiatives: intrinsic rewards and feeling valued. Journal of Business Strategy, 34(2), 21-
29.

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Wu, J., & Lu, X. (2013). Effects of extrinsic and intrinsic motivators on using utilitarian,
hedonic, and dual-purposed information systems: A meta-analysis. Journal of the
Association for Information Systems, 14(3), 153.
Zameer, H., Ali, S., Nisar, W., & Amir, M. (2014). The impact of the motivation on the
employee’s performance in beverage industry of Pakistan. International Journal of
Academic Research in Accounting, Finance and Management Sciences, 4(1), 293-298.

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Appendices:
Appendix 1: Conceptual Framework