Benefits of an effective rewarding approach based on performance

The report provides an analysis about the strategic human resource management (HRM) aligning to employee’s performance and reward. The analysis in this study has been done based on the given case study that highlights on the Samsung rewarding mobile division despite their poor performance in the year 2015. An effective rewarding approach based on performance can bring about several benefits to the employees as well as organization. Employees reward system is an efficient tool used by the organization to encourage the employees for focusing more on their work. Most of the organization pays bonuses to the employees as part of the reward and recognition program. Performance and reward are interlinked as the employees working in a particular organization likes to perform at high level if their work is being rewarded. Reward management is also considered as one of the vital components of HRM (Brauns, 2013). This management mainly encompasses strategy as well as practice of the remuneration system. In addition, efficient reward management system has beneficial impact on the financial performance of the organization. Implementation of rewarding policies by the company also increases their staff performance and enhances total output. The reward management program of Samsung has been highlighted in this study. In the last section, strategic HRM aligning to the performance and reward is also discussed in this report.

Samsung Company has been considered as one of the leading electronics brands in the globe. This company has gained huge popularity with the launch of the varied android smart phones. The management of the company applies traditional performance appraisal method that involves target vs achievement method. The workers performance of this organization is generally evaluated on the basis of their achievement during the particular period. However, this company rewards their employees based on whether they have the ability to meet the goal. The given case study reflects that this organization does not have higher payment system, thereby supplements their workers base salary with yearly bonuses (Jung, 2014). These bonuses are mainly capped at 50% of the salary of the workers and are generally rewarded for exceeding the profit target specified to each division. In the year 2015, the mobile section of this company had low performance in respect of sales. Despite performing poorly, the management of Samsung company paid maximum bonus to their employees for their sincere contribution in keeping this mobile section running inspite of numerous challenges (Kehoe & Wright, 2013). The employees of this mobile section were awarded with 50% bonus while the employees of other sections were given less bonus as compared to this section. The employees of the other division were of the view that the company did not treat them well because the workers in the mobile division were paid higher bonus despite performing badly. The main problem that reflects from the above case study is that there was less cooperation between the managers and the employees while designing the reward system (Chomal & Baruah 2014). As a result, it did not satisfy the employees of other sections including consumers electronics , technology centre, digital media research lab, semiconductor division etc. Historically, this reward system did not function on the employees side of the organization. It has been suggested by Cho  & Perry (2012) that, both participation as well as cooperation in the payment system design leads to proper understanding of the company’s operation and hence requires for introduction. Furthermore, the basic factors that are needed to be considered while designing the reward system includes-

• Equity and Comparability- The workers of the company desire to be financially rewarded in respect of their performance and to be treated fairly. In addition, they also wants to receive rewards for their effort, skills and inputs. But in case if they don’t receive suitable rewards or treatments from the organization, they might take actions such as attempt to decrease their effort, ask for higher promotion or leave the job. Buller & McEvoy (2012) has made this divergence in respect of equity and thus classified into two kinds of criteria- internal and external. Internal criteria involve the pay assessment within the company that is based on the relation between employees and employer. On the other hand, external criteria refer to the pay assessment in comparison with the individual’s income who are outside the organization. However, few evidences highlights that this divergence generates conflicts during the reward system, which in turn adversely affects the productivity of the company.

Review of Samsung’s reward and performance management program

The two basic factors of the management system of  Samsung company includes competitiveness and reward. This company has adopted outcome based system of reward that has divergence in the promotion and other advantages for their workers. The managers of the company believes that this divergence help in stimulating the performance of job that includes- motivation of challenging, improvement in total productivity and achievement of target (Shields et al., 2015) Moreover, the management of this company specifies the goals of their workers in order to make appropriate reward system. They also offer them huge opportunities for achieving the target so that they can satisfy each of the individual. However, these characteristics along with reasonable reward system increase the organizational competitiveness in the global market. The framework of Samsung reward system is given below:

• The basic yearly salary of the Samsung employees accounts for near about 50 % to 60% of the total yearly salary
• A huge amount of incentives as well as other rewards represents vital part of the person’s total wage.

The characteristics of reward includes-

• Annual Salary- This is mainly decided by the current year assessment outcome regardless of last year’s salary.
• Profit sharing-the company redistributes their excess profits as this is provided when the employees of the respective departments exceed their target, up to 50% of the total salary.
• Productive incentive-This is mainly given when the individuals or the respective departments attains their targets, near about 300 of the monthly salary.
• Non- financial incentive-This includes promotion as well as other beneficial programs.

In the year 2013, this company has launched flexible benefits scheme by utilizing the online portal for providing their employees higher opportunity to design their benefits package (Lepper & Greene, 2015). The flexible reward system also includes attaining the feedback of their employees, constant reviews a well as update of these benefits.

Chiang & Birtch (2012) opines that bonuses impact on the work performance of the employees. The employers along with proper performance management system usually connect compensation to the ratings of performance appraisal in order to determine bonus for workers. Furthermore, most of the companies includes bonus as the part of the workers rewards as well as recognition program. The management of the company usually pay bonuses to the workers who attains satisfactory ratings during their performance appraisals. Moreover, incentive-based bonus generally links the total amount of payment to their performance level. The bonus payments involve both advantages as well as disadvantages, which are given below:

Advantages

Motivation-The bonus payment provided to the workers motivates them to focus more on their work and meet their target. This in turn enhances overall productivity and improves the company’s financial performance.

Appreciation-The bonus scheme can also be used as an appreciation means for the workers hard work during a certain period of time. However, the workers receiving bonuses from the company reflects that they are being appreciated for their hard work (Den Hartog et al., 2013). Apart from this, it also encourages them to continue with this effort for attaining further rewards.

Disadvantages

Increases company’s cost- Bonuses might be costly for the small scale organization. However, several small companies’ uses gift cards as means of bonuses rather than paying cash.

Characteristics, advantages, and disadvantages of bonuses in workplace

Taxes- When the workers gets bonus, it gets included in their total income at the year end. This reflects that the workers have to pay taxes on the attained bonus and in some cases can lead to higher taxes in the year end.

Fairness issues- As the management of the entity determines the bonuses to be paid to each employee, it sometimes leads to fairness issues. However, in some situation the employees donot receive the amount according to their expectation and thus leads to conflicts. This in turn negatively impacts on the workplace environment and company’s performance.  Therefore, from the above case study, it can be predicted that there can be fairness issue within the Samsung Company regarding the bonus payment of the workers.

One of the vital strategies that have been used by the human resource (HR) managers is the reward management. The basic motive behind the implementation of this strategy is to enhance the performance of their employees through motivation by complying with the employment regulation as well as legislation. However, the HR managers of the company design the reward framework that helps the company’s strategic goals as well as individual workers goals (Daley, 2012). The system of reward is very important for the firms as it helps to retain employees and also attract skilled individuals. The main purpose of this system of reward is to provide proper method of delivering positive result. Nevertheless, when the workers surpass their goal, they should be rewarded in order to encourage them. Being a consultant, it is suggested that adoption of this strategy by the HRM will help the employees to link the reward with higher performance that they have achieved. Ferner & Almond (2013) suggested that effective reward management system should mainly concentrate on positive reinforcement. This in turn will motivate the behavior of the employees in the company.

One practical example in this context is the reward system offered by the management of the Kenya Power and Lighting Company (KPLC). This entity transmits and distributes electricity within the nation and also offers vital services, which supports varied sectors of this nation. The HRM  of this organization has established reward system including cash bonus payment in order to pursuit of enhancing workers performance for ensuring quality service. Implementation of this strategy by the KPLC’s management motivated their employees to be highly productive in their respective work and also has noteworthy influence on the employee’s turnover rate during the particular year (Njanja et al., 2013). Some of the researchers have proved that when the individuals are appreciated or praised, they apt to enhance their performance. Praise can be in the form of managers meeting with the employees and identifying them who have high performance and this plays huge role in improving the performance of workers. This can be adopted as another method of motivating the employees of the organization. In addition, it has been suggested by Jung (2014) that small scale companies can utilize their reward system through personalizing reward for increasing output. This is because when the rewards apt to be general, it provides less value to the employees. However,  being the consultant of Samsung, it is recommended that their HRM  should sometimes apply this strategy in order to attain the best outcome. In addition, they can also provide reward by incorporating promotion or appraisal for the workers who have attained good performance (Daoanis, 2012). Another practical example of strategic HRM in connection to reward and performance is highlighted by the Continental Airlines. The HRM of this company introduced bonus incentive packages for around $65 bonus each month as turnaround strategy in order to ensure proper operations in on time flight. As a consultant of the organization, it is recommended that the HR managers should understand the employees attitude before designing the reward system based on their work performance.

Importance of reward management in HRM

Conclusion

The above report highlights that HR policies as well as procedures in reward management system indeed impact on the company and employees performance. Effective adoption of strategy regarding rewarding the employees helps the company to attain the employees trust and morale.   Moreover, while designing it the management should have proper cooperation with other staffs and employees in order to avoid conflict within the business. Additionally, variable pay also plays vital role to boost the employees especially star performers rather than fixed salary package. Therefore, it is necessary for every organization to recruit skilled HR managers in order to improve the employees and company’s performance in the longer run.

References

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