Reward System, Process of Designing Reward System, Human Resource Development, MS-22

What is reward system? Describe the process of designing reward system in your organization or an organization you are familiar with. Discuss how reward system has been used to help the organization. Briefly describe the organisation you are referring to.

The only way employees will fulfill your dream is to share in the dream. Reward systems are the mechanisms that make this happen. "However, reward systems are much more than just bonus plans and stock options. While they often include both of these incentives, they can also include awards and other recognition, promotions, reassignment, non-monetary bonuses (e.g., vacations), or a simple thank you.

A reward system, in isolation, can serve operational needs badly. Rewards influence behaviour, attitudes, job satisfactions and performance. Reward system can be classified as:

  •  Monetary Rewards (directly, indirectly or un-related to actual performance outcomes)
  •  Monetary equivalent Rewards
  •  Non-monetary rewards

Guidelines for Designing An Effective Reward System

  •  Performance payoff must be a major, not minor, piece of total compensation package.
  •  Incentive plan should extend to all managers & employees.
  •  System must be administered with scrupulous care & fairness.
  •  Incentives must be linked tightly to achieving only performance targets in strategic plan.
  •  Performance targets each person is expected to achieve must involve outcomes person can personally affect.

I am familiar with TriWest Healthcare Alliance. It has partnership with the Department of Defense (DoD) to provide access to cost-effective, high quality health care for nation's active and retired uniformed services members and their families.

Process of Designing the Reward System At TriWest

TriWest wanted to implement a reward system that went beyond the cookie-cutter "employee of the month" programs, but management wasn’t sure what it should look like. To be certain that what they came up with would appeal to employees, we put together a team of people from across the company to create the new program under the guidance of reward and recognition expert Pat Zingheim.

We created a Five Star Program, a multi-tiered reward system with a theme built around the company’s star logo. Each star represents a separate program. The first two, which were already in place, are the bonus program and employee service awards. The team added three programs that reward employees for exceptional customer service and teamwork, internally and externally.
The first, called the Shining Star, is a peer-to-peer certificate program. When employees experience or witness great service or teamwork, they give Shining Star certificates to show their appreciation. Employees can give the certificates to anyone in the company, regardless of their title or location. One copy is delivered to the employee and another goes into a fishbowl for bimonthly drawings for gift certificates, prizes such as T-shirts and coffee mugs, and other small items.

About 10 percent of certificate recipients win fishbowl gifts. The team considered giving every Shining Star recipient a small gift, but they were concerned that the program could be abused. With a drawing, there is no way to know who’ll win.

Employees like the Shining Stars because it’s not a top-down system. "They have a tool to thank each other." Employees frequently post their Shining Stars in their offices or the common rooms, and we list all the winners each month at the company’s intranet site.

The second program, called the Super Star award, is given by directors to employees in recognition of great performance. As part of the program, each year directors are given a pot of "Starbucks" coupons equaling roughly $40 per employee in their unit, which recipients can use to buy logo-ed merchandise or exchange for gift certificates.

When directors see employees doing excellent work, such as going out of their way to help customers handle claims problems, they can give them up to 50 Starbucks on the spot. "The point is for directors to be able to reward great behavior the moment it happens". Directors are also encouraged to use the money at least once a year to throw a party in honor of team successes.

The final program, called the All Stars Award, is in recognition of performance above and beyond the scope of the job description. It’s based on a cash incentive that allows directors to give up to Rs. 2000 to an employee who makes major contributions to the corporation as a whole. To win this award, employees have to do something truly exceptional. For example, if an HR person does great work during open enrollment, she might receive 50 Starbucks, whereas if a technical employee works late and comes in on the weekends to be sure the new phone system is up and running on schedule, that would be worth an All Star. The awards have been given to teams that have improved company productivity, and to units that have been recognized by the government for doing exceptional work in the field of health-care management.

It was the development team’s idea to make the All Star program cash-based while keeping the other programs gift-based. Actually we didn’t want people to expect payment for doing their jobs. And the development team didn’t think cash was necessary for the other programs to be successful. Employees like to be told they are doing a good job. It doesn’t have to be a large sum of money; they just want the recognition.

How Reward System Helps The Organization ?

  1. Reward can act as the 'catalyst' for improved performance and better productivity. 
  2. Rewards are generally reckoned to improve productivity by somewhere of the order of 20 to 30 per cent. This is nearly twice as much as that attained by goal setting or job-redesign.
  3. It helps to link to strategic direction and business goals.
  4. They can actively engage and renew the overall sense of community and mission of an organization.
  5. It increases the frequency of an employee action.
  6. Rewards increase the chances that a performance will be repeated.
  7. Rewards help to create a more pleasant work environment, one where rewards are used more frequently than discipline to manage employee behavior.
  8. Through reward system individuals feel acknowledged for their accomplishments, contributions, and performance. The staff will be motivated and inspired to continuously strive for excellence.
  9. An effectively designed and managed reward program can drive an organization's change process by positively reinforcing desired behaviors.
  10. Rewards act as reinforcers for a variety of individual behaviour.