Reward Systems

REWARD AND PUNISHMENT SYSTEMS

Oct. 4, 1996

A useful equation to bear in mind is:

PERFORMANCE = MOTIVATION X ABILITY

Schneider and Bowen (Winning the Service Game. HBS Press, 1995) say that there are four ways organizations fail to use reward effectively.

They fail to use the full range of available rewards.
Incidentally, pay fails the test of an effective reward.
They fail to use the intrinsic reward of goal accomplishment.
If a customer leaves with a big smile, it can be highly rewarding to the employee.
They fail to use reward systems to facilitate service quality.
The reward system may inhibit rather than facilitate. Remember "the folly of rewarding A while hoping for B." People do the things that are more likely to lead to rewards or less likely to lead to punishment. Behavior that yields rewards will persist. Behavior that fails to yield results will be extinguished.
They fail to manage reward systems effectively.
Sometimes rewards or uneven or inequitable.

Definition of Motivation

To be motivated means to be:

Energized
Directed
Persistent

People are energized by needs: security, esteem, justice.

People are directed by pursuing goals that yield reward that gratify needs.

People persist in behaviors that regularly yield rewards that gratify needs.

TYPES OF REWARDS

Money can gratify security needs. It can gratify esteem needs (if you earn more than someone else in your peer grup). It can gratify justice needs (if those who work hardest and do the best work earn the most). These are big ifs and often the conditions are not met. Further, money may not be an available tool for the manager at the time it is needed.

Seven tests of an effective reward are as follows:

Availability
One needs to be able to give the reward when earned in a large enough amount to be meaningful.
Flexibility
One needs to be able to give it when the manager wants to, to whom, and how.
Reversibility
One should be able to undo the reward if it becomes clear that a mistake has been made.
Performance Contingency
The reward should be connected to the thing you hope to get more of (i.e., performance).
Visibility
The reward should be visible and understandable.
Timeliness
It should be given immediately after the behavior whose frequency one wants to encourage.
Durability
There should be evidence of the reward for a long time after it has been given.

REWARDS OTHER THAN PAY

Jobs as a Source of Reward

Jobs need to possess five characteristics to be effective sources of rewards for employees.

SKILL VARIETY
Different activities and different talents needed in carrying out tasks.
TASK IDENTITY
Completion of a whole identifiable piece of work with a visible outcome.
TASK SIGNIFICANCE
Task should have a substantial impact on the lives of others in the organization or in society.
AUTONOMY
Considerable freedom and discretion in scheduling work and in determining how it will be carried out.
JOB FEEDBACK
Performing the job itself should be a source of direct and clear information about how well the work has been done.