A particular city bank.
This story is about the importance that a particular city bank, Commerzbank, put on bonuses as an aid to retention. It mentions two issues that need to be managed in this environment if it is not going to have a negative effect on staff turnover:- the huge disparity between individual bonuses, and the effect of rumours on the expectations of size of the payout. Bonus allocation is decided by section heads, who need to justify very large bonuses. It also mentions the issue of sex-discrimination in the allocation of bonuses.
Finally, it identifies reward management as a key tool in competition for the best talent. Bonuses are used, particularly in City Institutions, as the core way of motivating and recruiting staff. Indeed, in the newspaper article of 26/7/07 Ian Davidson, head of compensation and benefits at Commerzbank states that they are “the only way to retain talented staff”. In this essay we will explore the theories of motivation. We will then look at reward policy, linking this particularly to retention. Concepts used in the essay come up in different sections.
This is because motivation and retention are interlinked- if motivation can be improved, so will retention. And because a reward system is designed to affect both, an effective reward system will rely heavily on the theory of motivation. Retaining and motivating employees are two of the most difficult tasks for any company Boyens, John. 2007 (p59). Motivating staff is the principal key to success of teams, departments and companies. The employee should feel deeply committed to management and the company in order to put their best efforts to achieve peak performance.
To motivate the employees, leaders must first understand the reasons behind employee behaviour. By recognizing the nature and behaviour of employees, a range of methods of communication, training, reward and motivation can be chosen. (Bossi?? -Smith, 2005 (p22) Motivation, to link to Maslow’s Hierarchy of Needs and elaborated by Hertzberg (Taylor, 2006), does require a hygiene factor of how far the job meets their requirements in terms of income to satisfy the basic physiological needs.
However, Money is a not the top motivator as it actually doesn’t encourage the employees to put forth their best efforts. In order to ascend the “pyramid” towards “self actualisation” more is needed to facilitate the fulfillment of the “ego” and “love” needs. The primary need for employees is to feel that their individual contributions are both important and recognized. This feeling can be met by various means – both in the way people are managed on a day-to-day basis, and in the way the reward system is designed. The way people are managed is crucial to engendering a well-motivated workforce.
While people do work for economic reason and because it gives a structure to life, it is the work’s contribution to self esteem and development, status, interest and achievement that motivates people. Firstly, a positive work environment needs to be created and maintained. Whilst good facilities, proper equipment, and large workspace are useful, it is the communication environment that is crucial. The deeper the employees can get involved with decision making, the more they will perceive their views and opinions count. In line with this is giving them opportunities to take charge and finding ways to give them special attention.
(Boyens, 2007) Because each person has individual needs, and displays different needs at different times, it is better to know the interests, qualities and behaviours of an employee in order to recognize and reward their individuality (Qubein, 2001). There is no substitute for communicating with the employees regularly to find out the problems they are facing and what challenges they need. Finally feedback is crucial. The concept of “management by exception” can be a poor motivator because interactions tend to be governed by feedback when results have deviated from the required path. Read about Evolution of Job Design
It is essential to build an “emotional bank-balance” with positive feedback, appreciation, and recognition, so that when negative feedback needs to be given it is received in the context of a good relationship with open dialogue. Reward system design can be a powerful reinforcer to the above. Reward management is mostly concerned with the benefits given to the employees in return for working for an organisation. Along with the evolution of personnel management into Human Resource Management, it has changed from a focus on just pay to something more encompassing, designed to both recognise contributions and reward achievement.
Reward systems can be classified into two; intrinsic and extrinsic rewards. Intrinsic rewards concern work design, aiming for a job that is both fulfilling and contributing to an individual’s self esteem. This has had major attention from theorists, particularly Herzberg, with a belief that through job design, work can be “enriched”, evolving into the concept of a “high performance work system”. Herzberg claims that pay, working conditions and supervisory style are but “hygiene factors” (potential demotivators if lacking).
To actually motivate, the job content needs to contribute to the individual’s feelings of achievement, advancement and growth though recognition and responsibility. This can be achieved only if the job content itself supports achievement of the above (Huczynski and Buchanan, 2007, pp. 258). Extrinsic rewards are what is classically thought of as the reward policy of a company. These can be classified into monetary and non-monetary. Whilst financial rewards are a hygiene factor, increasingly there is recognition that non-financial rewards may play an important part in attracting, and more particularly retaining employees.
(Armstrong 2002). Non financial rewards can lead to the opportunity for personal growth higher than financial rewards (Redman, Wilkinson, in Bach, 2006). Generally it is non-financial rewards that are used to motivate the employees and develop positive attitudes amongst them. Increasingly the trend in monetary rewards is “linking reward to performance, skills or profit; these include merit pay, team performance incentives or profit related pay (Thorpe, Horman, 2000). Performance-related pay recognises employees individual contributions and rewards them as such.
However, it must be stressed that this system is not a substitute for effective management and intrinsic job satisfaction. Instead, according to HRM principles, in the well designed payment system employees are not driven to “compensate for their dissatisfaction with intrinsic rewards by demanding improvements in extrinsic rewards, particularly pay”(Beer et al. ,1984). It should complement a new “corporate culture” through the management pay systems, with pay systems “prais[ing] those who serve the new values”. (Bell, 2000).