Literature Review: Impact of Rewards on Employee Performance, HRM591

This literature review examines the significant impact of reward systems on employee motivation and its subsequent effect on organizational productivity. It delves into the crucial aspects of employee motivation, differentiating between intrinsic and extrinsic factors, and explores various reward categories and their forms. The review analyzes the link between reward strategies and organizational productivity, emphasizing the importance of employee motivation in ensuring optimal performance. It also addresses research gaps and formulates a research question to investigate the degree to which rewards influence employee performance. The methodology includes a survey of 50 organizational employees to gather quantitative data on the influence of rewards on motivation and performance. The review covers topics such as employee motivation theories, the reward system in organizations (including intrinsic and extrinsic rewards), and the direct correlation between employee motivation and productivity, highlighting the importance of understanding motivating factors to establish efficient organizational functions.

Running head: LITERATURE REVIEW
LITERATURE REVIEW
Name of the Student
Name of the University
Author Note

1LITERATURE REVIEW
Abstract
The efficiency of employee performance majorly depends on the employee satisfaction and
motivation of employees in the organizations. The prime responsibilities of managers and
team leaders have been considered to be ensuring productivity by stimulating motivation
amongst the workforce. The purpose of the literature review was to present an extensive
discussion regarding the influence of reward system on the involvement and contribution of
employees. The review discussed the essential aspect of employee motivation, the categories
and forms of the reward system and the link between the strategies of reward and
organizational productivity. The paper also demonstrated the significance of employee
motivation on ensuring the performance of the employees. The paper represented the gap in
the researched content and deduced the question aimed at the understanding of the extent of
influence reward has on employee performance. The research will be conducted amongst 50
organizational employees through survey method.

2LITERATURE REVIEW
Human resources are considered to be the most significant resources that can be
channelled for stimulating value proposition, competitive advantages and design implement
unique quality standards. Organizational values and image are depicted by the efforts of
people working in it, demonstrates the importance of motivation system for effective staff
performance towards the organizational goals. For the purpose of motivating the most
important resource of an organization, the understanding regarding needs and motivating
factors are very crucial for a successful future. Staff motivation is crucial as it can determine
the performance of a unit and the organization. Staff motivation practices should be included
in the regular schedule.
In the age of globalization and increasing competition both nationally and globally,
the managers of organizations recognize the demand for effective performance. Motivation
system for encouraging staff performance may lead to the growth of employees with the
development of organizational functions. Motivated staff depicts the capability of increasing
customer satisfaction, efficient performance, stimulating profitability and results in low
employee turnover rate.
The purpose of the literature review is to present an exhaustive discussion regarding
the role of rewards in motivating the performance of staff in organizations. The areas that will
be covered in the literature review include employee motivation, rewards system and link
between employee motivation and productivity.
The literature review will aim at stimulating the factors of motivation and forms of
reward that can directly affect the productivity of organizations. The paper will extract an
extensive study regarding understanding the importance of various reward and recognition
forms for improving the value proposition in organizations. It is crucial for organizations to
acquire knowledge about the motivating factors for establishing efficient organizational
functions.

3LITERATURE REVIEW
Review of Literature
Employee motivation:
The factors in the organizational scenario, which encourage employees to pursue
allotted goals are known as employee motivation. The motivation of employees depicts the
process of stimulating capabilities and involvement in the path towards accomplishing
organizational goals. Employee motivation consists of two primary theories, intrinsic and
extrinsic motivation.
The aspect of rewards, praise, monetary benefits and performance review constitutes
the extrinsic motivation factors in an organization. In accordance with the discussion of
Benedetti et al. (2015), extrinsic factors in an organization can also be categorized into
rewards and punishments. Motivation encourages employees for behaving or contributing in
a certain order for the purpose of avoiding punishment. On the other hand, rewards are
known for motivating employees by stimulating the urge of receiving the rewards. Positive
experiences deduced from the organizational environment and practices reflect a crucial role
in determining the aspect of employee motivation. Extrinsic motivating factors can include
various forms, bonus, pay structure, stock options and profit-sharing rate.
On the other hand, intrinsic motivation relates to the psychological aspect of working
for a task in an organization. Intrinsic motivation drives satisfaction, involvement and
effective participation of employees in the functions of an organization. According to Bradler
et al. (2016), it has been deduced that unlike extrinsic employee motivation, intrinsic
motivation directs the focus on self-confidence, self-esteem and non-monetary recognition
for stimulating efficiency in the organization. The intrinsic employee motivation factors
include professional growth and development, work contentment, leadership implication or
performance, roles and responsibility distribution and job autonomy.
Reward system in organizations:

4LITERATURE REVIEW
The preparation and establishment of plans and policies in an organization, which
aims at rewarding employees equitably, consistently and fairly based on the values of
organizations. The rewards system depicts the types of reward, which is constructed for
motivating employee performance. Reward management controls and manages the aspects of
employee benefits, compensation and remuneration decisions for employees. Reward
management ensures the efficiency of operating a planned reward system. The reward system
of an organization usually comprises of salary structure, pay policy, total reward, minimum
wage, payroll administration, team award and executive pay. Reward system in organizations
is known for influencing the efforts and performance of employees. In accordance with the
expectancy theory, the contribution and efforts of employees increase with the link of
rewards and effective performance. Reward system also influences the retention process and
attendance rate of employees. Properly planned reward system generates a sense of
commitment from the workforce. Employees tend to form a strong relationship with the
organization with the experience of being valued and treated well in their respected role of
work. Job satisfaction is another aspect, which is influenced by the implication of the reward
system.
Reward system can be divided into two categories, intrinsic and extrinsic rewards.
Intrinsic rewards are the rewards, which connects directly with job performance. Intrinsic
rewards are also known as self-administered rewards. Intrinsic rewards are based on the
psychological or emotional aspect of the employees that build a different perception about the
rewarding strategies. According to Bao and Lyubomirsky (2013), there are different forms of
reward system or strategies including, appreciation from the seniors or supervisor, non-
monetary recognition, freedom of expanding the role competencies and pride for the job role
or position. Management or team leaders administer extrinsic rewards externally in the
organization. Extrinsic rewards comprise of different forms of rewards, attractive pay
structure, incentive or bonus, gifts and fringe benefits.

5LITERATURE REVIEW
The link between employee motivation and productivity:
Productivity is defined as the degree of performance capacity of employees and
overall organizational functions in the process of deducing value proposition or outputs from
inputs and contribution. Productivity directs the focus on the performance of the resources
operating in an organization. Work satisfaction is a major source for ensuring efficiency in
staff participation in an organization. Satisfaction can be depicted through the gap of actual
and perceived values of rewards received amongst the workforce. Work satisfaction also
depends on the value of rewards received by a co-worker. Satisfaction can also be stimulated
by the connection of various forms of rewards; a reward may be linked with other forms of
rewards (Anastasia & Welly, 2013).
The link between employee performance and reward can ensure commitment and
employee retention in an organization by encouraging the contribution of employees in the
organization. The encouragement of improving the performance and contribution of
employees for accomplishing the goals are derived from the proper management of the
reward system. The dependence of the reward system on the performance and contribution
towards an allotted goal influences the drive for performing efficiently. Pay hike or incentives
majorly influence the contribution of employee (Dobre , 2013).
However, as per Dweck, C. S. (2013) more than being paid more, employees prefer to
be recognized amongst their social circle or amongst their colleagues. Both approaches
paying for the performance level and recognizing the contribution should be incorporated for
ensuring retention, involvement, motivation and satisfaction. Thus, from the above discussion
regarding employee motivation, reward system and the link between rewards and employee
productivity, it has been observed that staff performance is highly influenced by the
implication of different forms of reward system, but the direct relationship between the two
aspects are not quantified. The extent to which employee performance can be motivated with

6LITERATURE REVIEW
the incorporation of rewards has not been researched. Hence, the research question deduced
from the research paper is:
RQ: What is the degree of influence rewards have in motivating the staff performance in
organizations.
Method:
For deducing answer to the research questions, a quantitative research method will be
used. In this method, the data from a sample of 50 organizations and at least 20 employees
from each organization will be approached. The method will be accomplished by the survey
method, which will include a questionnaire asking about the factors of motivation and
influence of reward system on their performance commitment. The organizations will be
selected through random sampling approach. The responses from the questionnaires will be
grouped into various categories depending on the intrinsic and extrinsic rewards so that the
understanding of the extent of influence of all the forms of rewards on employee performance
can be clearly understood.

7LITERATURE REVIEW
References
Anastasia, A., & Welly, J. (2013). Managing High Performance in an Organization by Means
of Employee Value Proposition (Case Study in PT ISS Indonesia). Indonesian
Journal of Business Administration, 2(2).
Bao, K. J., & Lyubomirsky, S. (2013). The rewards of happiness. The Oxford handbook of
happiness, 119-133.
Benedetti, A. A., Diefendorff, J. M., Gabriel, A. S., & Chandler, M. M. (2015). The effects of
intrinsic and extrinsic sources of motivation on well-being depend on time of day:
The moderating effects of workday accumulation. Journal of Vocational Behavior,
88, 38-46.
Bradler, C., Dur, R., Neckermann, S., & Non, A. (2016). Employee recognition and
performance: A field experiment. Management Science, 62(11), 3085-3099.
Dobre, O. I. (2013). Employee motivation and organizational performance. Review of applied
socio-economic research, 5(1).
Dweck, C. S. (2013). Self-theories: Their role in motivation, personality, and development.
Psychology press.