CHAPTER II

REVIEW OF LITERAURE

REVIEW OF LITERAURE

The appropriate literature on the theme Reward system & Performance is somewhat lacks in .
Nevertheless, there are some literatures which aptly describe the theme in near sense.

Adams, J.S.. Inequity in social exchange. ,New York: Academics Press ,( 1965 )pg 264-300.

According to Adams social relationships involve an exchange process where a person may expect
equity in comparison with others .A persons feeling about the equity of the exchange is affected by
the treatment they receive when compared with what happens to other people. When there is an
unequal comparison of ratios, the person experiences a sense of inequity. that causes tension which in
turn causes the person to decrease the amount of quality work or working additional hours without
pay.

Ajila C and Abiola A Influence of Rewards on Workers Performance in an

Organization J. Soc. Sci., (2004) ,8(1): 7-12Extrinsic rewards are those that are external to the task
of the job, such as pay, work condition, fringe benefits, security, promotion, contract of service, the
work environment and conditions of work. Such tangible rewards are often determined at the top
organizational level, and may be largely outside the control of individual managers. Intrinsic reward
on the other hand are those rewards that can be termed psychological rewards and examples are
opportunity to use ones ability, a sense of challenge and achievement, receiving appreciation,
positive recognition, and be ingtreated in a caring and considerate manner .

Akerele, A.. Role of labour in productivity. Nigeria Journal of Industrial

Relation, (1991 )5: 50-58.Observed that poor remuneration is related to profits made by organization.
However ,wage differential between high and low income earners in the same organization was
related to the low morale, lack of commitment and low productivity.

Ali Reena & Ahmed M.Shakil , The Impact Of Reward And RecognitionPrograms On
Employees Motivation And Satisfaction , International Review of Business Research Papers ,
(2009)If more focus is placed on rewards and recognition, it could have a resultant positive impact on
motivation and thus result in higher levels of job performance.

Anderson E, Oliver R. L , Perspectives on behavior-based versus outcome based sales force

Control Systems , J. Mark. (1987) ,51: 76-88
Employees value both intrinsic and extrinsic rewards available in organizational settings. This
presupposes that managers of rewards systems must therefore blend the two to meet expectations of
employees.

Armstrong Michael , Employee Reward , (1996) , p. 569

Employee motivation is one of the most essential parts in a companys development and success. In
order to maximize the overall performance of the company it is vital for an employer to understand
what motivates the employees and how to increase their job satisfaction. A well designed and
functional reward system is an efficient way to increase employee work motivation.

Aslam Marwat Zubair , Qureshi Tahir Masood , Ramay Muhammad I Impactof human
resource management practices on employees performance (A case ofPakistani Telecom Sector)
Muhammad Ali Jinnah University, Islamabad (2006 )

Training and compensation are having positive effects on organization and employees performance.

Andrew, D. P. S., & Kent, A. , The impact of perceived leadership behaviors onsatisfaction,
commitment, and motivation: An expansion of the multidimensional model of leadership.
International Journal of Coaching Science, 1(1) (2007).

Commitment of all employees is based on rewards and recognition.

Baron, R. A , Behaviour in organizations New York: Allyn & Bacon, Inc. .

(1983).

When we recognize and acknowledge the employees in terms of their identification, their working
capacity and performance is very high. Recognition today is highest need according to most of the
experts whereas a reward which includes all the monetary and compensative benefits cannot be the
sole motivator for employees motivation program.

Carnegie, D. , Managing through people , New York: Dale Carnegie

&Associates, IN (1987)

The work of Dale Carnegie focuses on principles of good human relations to effective management.
He highlighted that human capital play very important role in an organizational effectiveness as
compared to financial capital. People are now seen as the Primary source of a companys competitive
advantage. The most important motivational aspect of work for people would be money, personal
time and attention from the supervisor as most rewarding and motivational for them at work.
Deeprose, Donna , How to recognize and reward employees , New York: AMACOM
Greenfield, (1994) ( p. 26)

Posits the view that effective reward management can help an organization to achieve its business
objectives by attracting and retaining competent people. She quoted that

Its not the money , but unique , value-based rewards that differentiate employers of choice.
The reward management system can therefore be seen as a set of relationships between the various
reward management processes and the corporate strategy. Rewards have to be a combination of
monetary as well as non-monetary rewards. The monetary rewards are crucial to any employee reward
system, because money is a strong motivator. People render their services to a corporate organization
in return for monetary payment. Therefore, the importance of financial rewards cannot be
undermined.

Drucker, P.F. , The coming of the new organization Harvard Business

Review, 66 (1), 45-53. (1988)

The development of systems of rewards, recognition and career opportunities is one of several critical
tasks of management in the information-based companies.

Flamholtz M , The two authority structures of bureaucratic organization ,Admin. Sci.

,(1996) ,13: 211-228

The design and management of rewards is very critical to the survival of the any organization, as if
properly designed, reward systems can lead to desirable behaviour for an organization & if incorrectly
designed or administered, reward systems can lead to gradual deterioration of an organization if not
its abrupt demise.

Freedman, M. S. , Some Determinants of Compensation Decisions The Academy of

Management (1978).

When effective rewards and recognition are implemented within an organization, favorable working
environment is produced which motivates employees to excel in their performance. Employees take
recognition as their feelings of value and appreciation and as a result it boosts up morale of employee
which ultimately increases productivity of organizations .

106

Flynn, G , Is your recognition program understood? Workforce, 77(7), .(1998).

Rewards and recognition programs keep high spirits among employees, boosts up their morale and
create a linkage between performance and motivation of the employees. The basic purpose of
recognition and reward program is to define a system to pay and communicate it to the employees so
that they can link their reward to their performance which ultimately leads to employees job
satisfaction .

Gomez-Mejia, L.R. and Balkin, D.B. Compensation, Organizational Strategy,and Firm

Performance , Southwestern Publishing Company, College Division, Cincinnati, OH, (1992)

Contend that the old model of compensation (with pay structures based on job analyses, descriptions,
specifications, and classifications) is no longer effective in today's business environment. They
conclude that modern organizations must align their reward system practices with their organizational
strategy in order to achieve higher levels of performance at both the individual and organizational
level.

Griffeth M Sur H, Mumcu G, Soylemez D, Atli Y, Idrim C Factors affecting Dental Job
satisfaction, Evaluation and the Health , The Haworth Press , (2000), 27: 152-164.

Noted that pay and pay-related variables have a modest effect on the exit of employees. Their analysis
also included studies that examined the relationship between pay, a persons performance and exit.
They concluded that when high performers are insufficiently rewarded, they quit.

Hansen F, Smith M, Hansen RB , Rewards and recognition in employee motivation: effective

compensation programs must distinguish between rewards and recognition. Compensation &
Benefits Review (2002)

Monetary/tangible rewards will have little impact on behaviour without the intangible positive rein
forcers (eg. managerial praise, public/peer recognition, thank-you notes,

Houran James , Kefgen Keith Money & Employee Motivation Mineola NY ,(2000)

Companies must balance financial considerations with other non-financial reinforcements to

maximize job quantity and quality.

Ivana Nacinovic, Lovorka Galetic, and Nevenka Cavlek Corporate Culture andInnovation:
Implications for Reward Systems , World Academy of Science ,Engineering and Technology ,
( 2009)

Reward system is an important ingredient in managing innovation in a company .Different features of

the reward system can stimulate different aspects of innovation within a firm. Only smaller
investments into reward system could result in higher level of innovation and improved company
performance.

Jishi Hala Abdulhadi Al , Motivation & its effects on performance , OpenUniversity

Malaysia , ( 2009 )

Motivated employees help organizations survive as motivated employees are more productive. To be
effective, managements need to understand what motivates employees within the work they perform,
and to recognize motivation and performance; to find out motivation effects on employee
performance.

John Bratton and Jeffrey Gold, Human Resource Management, 3rd ed.,Hampshire: Palgrave
Macmillen, 2003, p.276.

Reward refers to all of the monetary, nonmonetary and psychological payments that an organization
provides for its employees in exchange for the work they perform .

Kreitner J (1988) Relation of leader consideration and initiation structure to R& D

subordinates satisfaction. Admin. Sci. Q. 16: 19-30

Argues in support of Maslows position that managers must take time to understand the needs of
employees on individual basis especially during challenging times. He points out that managers have
the responsibility to create a proper climate in which employees can develop to their fullest potential.

Kunz and Pfaff ( 2002) Agency theory, performance evaluation and thehypothetical construct of
intrinsic motivation, Account. Organ. And Soc. 27: 275-

It is widely held view that in general, employees value both intrinsic and extrinsic rewards available
in organizational settings 1987). This presupposes that managers of rewards systems must therefore
blend the two to meet expectations of employees.

Kurt Verweire, Integrated Performance Management: A Guide to StrategyImplementation,

London: GBR: Sage Publications, 2004, p.216.

Reward refers to all forms of returns direct and indirect, short-term and long-term ,financial as well
as non-financial that employees receive as part of their employment relationship .

La Belle, J.E. , The paradox of safety hopes and rewards: are you rewarding the right
behaviour? , Professional Safety, (2005 ) ,pp. 37-39
Advocated that different individuals have different perceptions of rewards . For instance, some
individuals may consider being recognized by their leader as more rewarding than financial
incentives.

Lawler, E.E.. The effects of performance of job satisfaction. Industrial Relations, (1985 )7: 20-
28

Emphases satisfaction of the employee depends on the amount received and the amount the individual
feels he or she should receive. Also what others collect influences employees satisfaction and that the
employees satisfaction with both intrinsic and extrinsic rewards received affects overall job
performance. He also observed that, people differ widely in the rewards they desire and in the value
they attach to each. And concluded that, many extrinsic rewards satisfy only because they lead to
other rewards. All these observations suggest the need for a diverse reward system.

Liew Chai Hong and Kaur Sharan , A Relationship between Organizational Climate,
Employee Personality and Intention to Leave , International Review of Business Research
Papers , (2008)

Management should form an organization that promote positive organizational climate which includes
well-defined job responsibilities and policies with flexible structure, fair and equitable rewards system
as well as a supportive and friendly work atmosphere.

La Motta, T , Recognition: The quality way New York: Quality Resources. .(1995).

The level of motivation of employees increases when employees get an unexpected increase in
recognition, praise and pay .

Micheal Armstrong, Employee Reward, 3rd ed., London :CIPD, 2003, p.8.

Total reward is all of the available tools of employers, that may be used to attract, retain, motivate
and satisfy employees. It is an approach to providing a package of reward to employees in ways that
optimize employee satisfaction with reward from their work, and which does this in such a fashion
that the employees contribution to the employer is optimized at an acceptable cost .

Pratheepkanth Puwanenthiren , Reward System And Its Impact On Employee Motivation In

Commercial Bank , Global Journal of Management and Business Research , Global Journals
Inc. (USA) ,( 2011)

When the employees needs are fulfilled satisfactory through reward system, the employees
Consistency achieved increases.
Pushpakumari M. D The Impact of Job Satisfaction on Job Performance :AnEmpirical
Analysis ,( 2008

Satisfied employees have positive attitudes regarding their jobs. Satisfied workers are tend to attend to
work on time, more concern about the given targets, work speedily, work free of errors and omissions,
loyalty and commitment to the job, less dependability, suggest new ideas, tend to improve knowledge,
willing to accept more responsibility, obedience of rules and regulations, less absenteeism and effort
to retain in the present job. The positive attitudes will increase the quality and quantity of employees
performance.

Rahim Gul & Alamzeb, A Survey on impact of compensation of employees performance

Compensation management has a direct relationship with employee motivation and performance.
Extrinsic benefit plans plays a delight role in perception of an employee towards its organization and
its work. And these factors play the role of satisfiers. Extrinsic compensation has a profound impact
upon an employees loyalty and an organizations turn over. Extrinsic compensation plays the role of
motivators for the employees and associates them with their job and organization.

Ramakrishna , Get the basics right. . (2002)

Recognizing contributions of employees will result in a world class working environment that
motivates and propels people to work better and stay on.

Richard S. Allen , Ralph H. Kilmann The role of the reward system for a total quality
management based strategy , Journal of Organizational Change Management , MCB UP Ltd ,
(2001)

The use of extrinsic reward practices including profit sharing, gain sharing ,employment security, and
comp time exhibited a significantly positive moderating effect on the relationship between TQM and
perceived firm performance .

Risher H., The end of jobs: planning and managing rewards in the new work paradigm.
Compensation & Benefits Review ( 1997 )

Most workers want their contributions recognized and when management recognizes their value they
respond by increasing their commitment .

Roberts R.L. Relationship between rewards, recognition and motivation at insurance

company in the Western Cape , University Of The Western Cape ,(2005)

Organizations are under constant pressure to enhance and improve their performance and are realizing
that relationship exists between organizational Performance and employee performance Reward
management as: the process of developing and implementing strategies, policies and systems which
help the organization to achieve its objectives by obtaining and keeping the people it needs, and by
increasing their motivation and commitment.

Rose Tim and Manley Karen , An Integrated Framework to Assess Financial Reward Systems
in Construction Projects , Estes Park, Colorado , (2011 )

Highlight the importance of situating financial reward systems within a complementary suite of
interrelated project procurement initiatives that promote the recognition of high performance. As
without a supportive environment based on trust and fairness, contract agents may perceive the
intention of a reward system as potentially calculative, and thus, will be less likely to be motivated to
pursue its goals.

Sharma Ram Phool and Mehlawat Seema Impact of human resource management strategies
and business strategies in Indian banking sector Institute of Management Studies and
Research , (2011)

Those banks which have promoted the Human Resource Management strategies and Business
Strategies in the field of Promotion, Training, Reward System , Productivity, Job Security and
Placement are performing better in the present time.

Steers A and Porter J (1983) An empirical test of the consequences of

behaviorandoutcomebased sales control system, J. Mark. 58: 53- 67.

Failures to provide a healthy climate to employees would theoretically increase employee frustration
and could result in poorer performance, lower job satisfaction, and increased withdrawal from the
organization .

Taljaard Jacob Johannes, Improving job performance by using non-monetary reward systems
to motivate low-skilled workers in the automotive component industry , S Perks , (2003)

Non-monetary rewards play as important a role in reward schemes as monetary rewards.

Remuneration packages should integrate monetary rewards to satisfy the basic needs of employees.

Thomas B. Wilson , Innovative Reward Systems for the changing Workplace

, ( 2002)Gaining an employees satisfaction with the rewards given is not a simple matter. Rather, it
is a function of several factors that organizations must learn to manage .Feelings of satisfaction or
dissatisfaction arise when individuals compare their input -job skills, education, effort, and
performance - to output - the mix of extrinsic and intrinsic rewards they receive. Also overall
satisfaction results from a mix of rewards rather than from any single reward.
Tripathy, Kumuda., A study on the wor klife of BPO employees and the various

human resource practices in a BPO - A case study (2006)Strategies like building a high degree of
recognition value into every reward offered, reducing entitlements and linking as many rewards as
possible to performance, troubleshooting the reward system to make sure that what it is rewarding is
what you really want to happen, rewarding promptly, giving employees a choice of rewards
,increasing the longevity of rewards will motivate the employees.