Strategies to reduce "Perceptional gap"
on Reward Management System


Prof. Dileep Kumar M.
E- mail:


Reward system usually mean the financial reward on organization gives its employees in return for their labour.  While the term reward system, not only includes material rewards, but also non-material rewards. The components of a reward system consist of financial rewards (basic and performance pay) and employee benefits, which together comprise total remuneration. They also include non-financial rewards (recognition, promotion, praise, achievement responsibility and personal growth) and in many case a system of performance management. Pay arrangements are central to the cultural initiative as they are the most tangible expression of the working relationship between employer and employee. Many papers examine the role of organizational culture i.e., the demand for monitoring compensation.  Such investigations conclude that organizational culture places a significant role in determining the level of economic demands.   Recent researches on industrial unrest rest indicate that reward criteria of the organisations both financial and non-financial rewards have tremendous influence upon the employees and employers performance.

Why reward system is required?

These components will be designed, developed and maintained on the basis of reward strategies and policies which will be created within the context of the organizations between strategies, culture and environment: they will be expected to fulfill the following broad aims;

1. Improve Organizational Effectiveness:  Support the attainment of the organization's mission, strategies, and help to achieve sustainable, competitive advantage.

2. Support and change culture:  Under pin and as necessary help to change the 'organizational culture' as expressed through its values for performance innovation, risks taking, quality, flexibility and team working.

3. Achieve Integration:  Be an integrated part of the management process of the organization.  This involves playing a key role in a mutually reinforcing and coherent range of personal policies and process. 

4. Supportive Managers:  Support individual managers in the achievement of their goals.

5. Motivate Employees :  Motivate employees to achieve high levels of quality performance.

6. Compete in the Labour Market:  Attract and retain high quality people.

7. Increased Commitment:  Enhance the commitment of employees to the organization that will a) want to remain members of it, b) develop a strong belief in and acceptance of the values and goals of the organization and c) be ready and willing to exert considerable effort on its behalf.

8. Fairness and Equity:  Reward people fairly and consistently according to their contribution and values to the organization.

9. Improved Skills :  Upgrade competence and encourage personal development.

10. Improved Quality:  Help to achieve continuous improvement in levels of quality and customer service.

11. Develop team working : Improve co-operation and effective team working at all level.

12. Value for money:  Pride value for the money for the organization.

13. Manageable: Be easily manageable so that undue administrative burdens are not imposed on managers and members of the personal department.

14. Controllable:  Be easily controllable so that the policies can be implemented consistently and costs can be contained within the budget.

Intrinsic rewards:

Intrinsic rewards are less tangible, originate from persons or job itself and reflect Herzberg motivators.  Example of such factors includes;

* Variety in Job Content.
* Sense of being a part of value adding process.
* Believe that they are valuable members of a team.
* Increased responsibility and autonomy.
* Sense of accomplishment.
* Participation in setting targets and opportunities to achieve them.
* Feed back information.
* Recognition.
* Opportunities to learn and grow.

Extrinsic rewards:

Results from the actions of others, such as supervisions are more easily controlled by managers. Examples include pay, fringe benefits, praise and promotion.

Meaning of reward to people

Pay is frequently used as a motivator and reinforce on it can easily be differentiated and computed, linked, clearly and visibly to direct performance and is generally valued reward.  While outlined the major components in the meaning of reward to people;

* Short-term material enjoyment.
* Long term security,
* Social status.
* Recognition of personal achievement.

Studies related to Reward Management system

Singh et. al. (1977) in a study of organizational culture and its impact on  managerial remuneration concluded that the demands for money was significantly influenced by the quality of organizational culture and that it can substantially be reduced by improving the quality of organizational culture.  Findings such as those suggest that satisfaction, task involvement, demand for money and commitment are largely determined by organizational culture.

"Judy L. Agnew and William K. Redmon, (1992), indicates that the organization may have the latest technology, well -thought out strategic plans, detailed job descriptions and comprehensive training programmes, but unless the people are rewarded for their performance-related behaviours, the "up-front" variable (technology, plans and so on) or the rules that govern their behaviour have little impact". Pay and allowances as the most important factor causing satisfaction or dissatisfaction to workers.

Steve Williams and Fred Luthans (1992) stated that, "the choice of reward interacting with feed back had a positive impact on task performance".

According to Dean R. Spitzer, (1996), mentioned in their article that "recent practitioner oriented literature stresses the value of empowering employees and the use of power rewards (let employees make choices, set their own goals and increase their responsibilities) to motivate employees".

According to E. Brian Peach and Daniel A. Wren  (1992), "the performance and satisfaction will be more strongly related when rewards are made contingent upon performance than when they are not".

According to Theodore R. Buyniski (1995),  "Despite the tendency in recent years to down grade the importance of money as an organizational reward, there is ample evidence that money can be positively reinforcing for most people.

Ganguli O,N, (1967), in his study found "pay and allowances as the most important factor causing satisfaction or dissatisfaction to workers"

According to Fred Luthans (1981), "inequality occurs when an individual perceives that the ratio of his outcomes to input and the ratio of relevant others outcome to input are unequal" 

These findings indicate that the reward management system in an organisation highly influence member's behaviour at work. We can see glaring example that some members are highly involved in the work environment and some members doesn't. The possible explanation given by many authors on these differences are intrinsic and extrinsic factors at work. A perceptional difference between what they have and what others have, develop a feeling of inequality among members. High dissatisfaction, high stress and frustration etc are the resultant manifestation of this perceptional gap. The perceptional gap affects the productivity and the performance of the members at work. Hence it is necessary to develop an effective reward management system that reduce the perceptional gap.

A study conducted by P. Sing, T. Mathew and G.S. Das (1990) concluded, "Organizational culture affects the determining level of economic demands.  Lower quality of organizational milieu leads to higher level of expectations for monetary compensation. This is so because such organizations do not gratify social and psychological needs of individuals.  They lead to subordination, dependence and submissiveness.  Concern for money arises because of the basic incongruity between the individual need system and the organizational demands.  Coercive authority system—autocratic and custodial—affects the motivational pattern.  It de-emphasizes self actualization, growth process, creativity and innovativeness and emphasizes the role of monitory rewards for the motivation.  In the absence of autonomy of work system and socio task grouping, higher order human needs—love and belongingness, ego, achievement and self-actualization are threatened.  It hampers the growth of full personality and leads to frustration and anxiety".

Significant Reasons to develop better reward management system

* To reduce the dissatisfaction of the employees on promotion criterion
* To reduce the dissatisfaction of the employees on appraisal system.
* To reduce the dissatisfaction of the employees on salary, bonus and other fringe benefits.
* To improve the work performance
* To improve the productivity
* To reduce the level of occupational stress that arises from feeling of inequality on reward
* To reduce the perceptional gap on reward management system and develop a culture of high performance.

Strategy to reduce "Perceptional gap" on Reward Management

1. See quantifiable goal for better evaluation of performance.
2. Reward behaviour towards accomplishment of tasks.
3. Reward based on personnel choices of employees.
4. Never reward indiscriminately.
5. Compliment the action of individual.
6. Develop objective criteria for reward eligibility.
7. Communicate well the eligibility criteria for reward to each member.
8. Make employee know the performance value.
9. Develop reward system that match with the culture and values widely held by the organizations,
10. Ensure the accountability of the reward system across functional level.
11. Ensure top-level support in reward policy development and implementation.
12. Develop a reward system that in tune with the organizational goal.
13. Introduce individual and group reward system
14. Set performance evaluation measure simple and understandable.
15. Develop standardized performance evaluation indicators.
16. Introduce performance related pay system.
17. Make use of (ITMS) Integrated talent management software system to make it easy for managers to calibrate goals
18. Provident training to members to aware of performance based reward system and management.
19. Celebrate the employee's success in completion of projects.
20. Communicate the value of benefit offered.
21. Invite suggestions of the members in the reward modification and restructuring process.
22. Ensure healthy competition to improve the effectiveness of competency based reward performance.
23. Reward system should ensure opportunity to growth and development of members.
24. Ensure compensation package in tune with the personal life balance.
25. Superior performers to be motivated to exceed their expectation and mediocre performance will be encouraged to improve performance.
26. Personally thank employee for a specific job well done.
27. Share valuable and remarkable employee performance with top-level officials.
28. Avoid favoritism and nepotism.
29. Never make use of denial of reward as punishment behaviour.
30. Motivate the subordinates through recognition and support.

Organisational culture and reward management system

Higher the job satisfaction members have at work higher the member's better adjustment with the work and work organisation. Here the culture of the organisation is an important factor, which conveys the policies, and practices widely held by the organisation. An organisational culture, which give importance to employees satisfaction at various level viz., psycho-social and economic needs, can develop better productivity and performance at work.  It reduces the perceptional gap on the reward management and performance management system and ensures better involvement and commitment at work. A strong organisation culture, in which the employers take effort to reduce the perceptional gap in the reward management system and induce trust and confidence among the employees at work. 

References and Bibliography

1. Ganguli, O.N. (1967), A Study of Attitude and Impact on Personal Relation and Recruitment in an Engineering Industry, Bombay: Central Labour Institute.

2. Judy, L. Agnew. & William, K. Redmon (1992), 'Contingency Specifying Stimuli: The Role of Rules in Organisational Behaviour Management'. Journal of Organisational Behaviour Management, Vol.12. No. 2. P: 67-76.

3. Luthans Fred. (1981), 'Organisational Behaviour' 54h (Edn.) Mc Graw Hill, JNC, NY.

4. Robbins, S.P. (1993),  'Organizational Behaviour: Concepts Controversies and Applications', Prentice Hall of India, New Delhi.

5. Spreitzer, G. (1996), "Social Structural Characteristics of Psychological Empowerment", Academy of Management Journal, Vol. 39, No. 2, P: 483-504.

6. Steve Williams & Fred Luthans (1992), ' The Impact of Choice of Rewards and Feed Back on Task Performance, Journal Of organisational Behaviour. Vol. 13, P: 653-666.

7. Singh P, & Das G S (1977) 'Organisational culture and its impact on remuneration', Decision. From, Sing, P. and Das, P.A Organisational Culture and its impact on commitment to work', Academy of Management Journal. Vol.  No. P511-524.

8. Theodore R Buyniski (1995), ' Feed Back Pay: Using Compensation as a Business Management Tool', Compensation and Business Review, May, June, P: 62-70.

Prof. Dileep Kumar M.
E- mail:

Source: E-mail February 14, 2006


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