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Reward Management in Human Resource Management


Reward management creates policies and procedures that ensure that every person in the organization is treated fairly and consistently. Employees who are rewarded for exceptional performance feel valued, which can be a powerful motivator for increased productivity. Rewards can take many forms, but those that support your company’s overall strategy, purpose, culture, and performance, as well as its personnel needs, are the most effective. An important aspect of reward management is determining who should be recognized and how to go about selecting people who have contributed to a successful project or shared goal. Reward management is a strategy for motivating employees to improve their productivity, engagement, and morale. Employees are compensated for the value they add to the company and for contributing to their own well-being. Things that send the proper message about critical business behaviors and outcomes are prepared or can pay for and are rewarded according to a corporation’s principles (Morris, 2021). It also aids in the development of a strong, positive company culture, enhancing employee value proposition, motivating and confirming employees’ dedication and engagement within it, retaining top talent, improving efficiency, and establishing a solid reputation, which can be a critical way to engage employees, contribute to a positive reputation, and have a significant influence on clients (Rai, 2018). As a result, the focus of this research will be on HRM reward management, with a focus on intrinsic and extrinsic motivation concepts.

Intrinsic and Extrinsic motivation theories of reward management

Employee motivation has always been a matter of interest to business executives and managers (Amabile, 1993). Reason has been described in a variety of ways over the years, and many different interpretations have emerged (George & Jones, 2012). Finally, motivation refers to when someone is inspired to do something (Ryan & Deci, 2000). A person is motivated if they feel exhilarated and activated towards something, according to Ryan and Deci (2000), whereas an unmotivated person lacks inspiration and impetus.

Work motivation, according to George and Jones (2012), is the psychological force that directs a person’s behavior in an organization, their amount of effort, and their tenacity in the face of obstacles. Unmotivated people, according to Amabile (1993), are more likely to put forth minimum effort at work, create lower-quality work, avoid the workplace, and even quit if given the option. Motivated employees, on the other hand, are more likely to take on duties willingly, produce high-quality work, and be inventive, tenacious, and productive. While motivation is sometimes reduced and described to as a single case with just tiny differences in amounts or levels, it is obvious that employees are driven in a number of ways (Riasat et al., 2016). (Riasat et al., 2016). Since it describes why people function or act in a specific way, motivation is among the most crucial components of understanding and controlling organization performance.

Intrinsic motivation is described as doing something for the sake of doing it rather than for a subsequent advantage. When someone is intrinsically driven, they are motivated to perform because they love or are challenged by the activity at hand, rather than by external products, pressures, or incentives (Ryan and Deci, 2000). (Ryan and Deci, 2000). Extrinsic motivation, however, refers to when someone conducts a given activity in order to reach a specific goal. Extrinsic motivation is distinct from intrinsic motivation, which explains to doing something for the sake of doing it rather than for the benefit of doing it. The primary distinction among intrinsic and extrinsic motivation is now that intrinsic motivation comes from inside, but extrinsic motivation is impacted by external circumstances (Nickerson, 2021). (Nickerson, 2021).

Intrinsic and extrinsic motivations can be blended in many situations, such as when a promotion comes with a wage boost and additional duties. As a result, managers must be aware of both internal and extrinsic motivators in order to motivate employees (Root, 2022). Another example is people working on completing a task to meet a coworker’s deadline while having fun and producing excellent results (Sennett, 2021). As a result, the simplest method to classify rewards is to divide them into two categories: intrinsic and extrinsic. Awards, acclaim, and public acknowledgment that convey a sense of success but aren’t monetary are examples of intrinsic awards. Extrinsic benefits, on the other hand, are tangible and can include monetary value, such as a bonus or paid vacation (Morris, 2021).

Conflicting views on extrinsic and intrinsic theories of motivation

Although the two ideas can coexist, several studies have shown that if extrinsic rewards are offered for actions that an individual already finds inspiring, intrinsic motivation would drop over time (Lumen learning, n.d). As a result, there is disagreement about how and for how long motivators influence behavior. Some evidence suggests that providing extrinsic motivation reduces internal motivation, a phenomenon known as the overjustification effect. If extrinsic incentives are utilized to encourage activities that an individual already finds desirable, intrinsic motivation for that activity may fade with time, even if external reinforcement is not used.Extrinsic motivators can backfire in some cases, undermining a previously held intrinsic motive instead of serving as an incentive for the desired activity. This can deplete intrinsic drive and lead to a reliance on extrinsic rewards for long-term success (Deci & Ryan, 2000).

According to other study, intrinsic motivation may not be as susceptible to extrinsic reinforcements as previously thought, and that external reinforcements such as verbal praise may potentially improve intrinsic motivation (Arnold, 2002). Physical rewards, such as money, have been demonstrated to reduce intrinsic motivation, but verbal rewards, such as praise, increase it. Furthermore, an individual’s expectation of the extrinsic motivator is critical: if an extrinsic reward is expected, intrinsic motivation for the job is diminished. If there is no such expectation and extrinsic motivation comes as a surprise, intrinsic motivation for the job is more likely to last (Deci & Ryan, 2008).

Extrinsic motivators’ effectiveness varies depending on various factors like self-esteem, perceived control (the degree which someone thinks they have control over the events that impact them), self-efficacy (how somebody evaluates their ability to solve complex problems and achieve goals), and neuroticism, according to other studies (a trait marked by moodiness, anxiety, worry, jealousy, and envy). People with strong self-esteem may have less of an impact on behavior since they don’t have the same drive for approval that makes external praise appealing. Someone who lacks confidence, on the other hand, may strive for attention incessantly.

Application of Extrinsic and Intrinsic theories of motivation in reward management

A reward is a form of recognition granted by an employer to an employee in exchange for their contribution to the company. Employees are motivated by a well-designed reward system, which aids in the development of a positive emotional response to their work. It also leads to better and higher employee productivity that directly affects the company’s performance (Bajrachayra, 2018). Organizations have various options for rewarding and recognizing their employees’ contributions, each with benefits and risks. The most effective incentive packages are aligned with business needs, employee desires and reflect the organization’s mission and performance. As a result, extrinsic motivation encompasses all financial provisions made to employees, including cash pay and a broader benefits package that includes paid leave and pensions. It can also have more comprehensive benefits for employees. The term ‘total reward’ refers to non-monetary benefits such as praise, classified as intrinsic motivation.

The primary goal of delivering compensation and benefits is to influence employee behavior so that they want to join and stay with a company and strive to achieve their best. The salary was traditionally used to recruit individuals to an organization, while benefits helped them survive, and bonus and incentive plans encouraged them to work harder. However, there has been a shift in understanding regarding which aspects of reward are best suited for recruitment, retention, and motivation. Varieties of financial and non-financial benefits attract, keep, and engage people, which might change over time based on personal circumstances. Individuals may not perceive the financial aspects to be very relevant in some instances. For example, people who are just starting their careers may be more interested in getting access to training and development.

Individuals may also be willing to labor for less salary or even volunteer if they are passionate about its objective. Employers should learn what motivates, retains, and inspires their employees and then figure out how to best address those needs while still meeting the business’s needs in a legal and regulatory context. It’s also critical for companies to integrate the various aspects of an incentive package to complement rather than contradict one another.

Intrinsic rewards

Creating a positive work environment, great acknowledgment, and praise, offering people autonomy and trust, and mastery of new skills and information are all examples of intrinsic rewards.

Positive work environment

A significant emotion associated with inclusive and supportive workplace cultures is a sense of belonging. Employees are more intrinsically motivated to achieve at their employment and reciprocate when they feel valued and celebrated by their peers. According to one study, organizations with good cultures can increase income by attracting top personnel and observing enhanced job performance (DCR strategies, n.d). Employees’ attitudes toward corporate culture are influenced by how their beliefs fit with the company’s. Workers who feel meaning or purpose in their jobs put in more significant effort to help customers and coworkers succeed. However, because culture begins at the top, managers must first exemplify their company’s principles to provide a supportive environment for their staff.

Acknowledgment and praise

Employees who receive words of praise from their managers or coworkers are more engaged than those who do not. Most employees believe that receiving recognition would motivate them to work more at their jobs (DCR strategies, n.d). Despite this, most businesses lack an employee recognition or feedback program. Feedback can be given in formal and casual situations, such as team meetings or coworkers passing each other in the hall. Employers, for example, can use 360-degree feedback.

Trust and autonomy

Employees need to know that their boss believes in their ability to handle their job obligations and that they have the potential to advance in the role. Because we perform better and feel accomplished when we have control over our tasks, autonomy is one of the four universal intrinsic sources of motivation (DCR strategies, n.d). Delegating and enabling your employees to take ownership of their job allows them to make decisions and be recognized, boosting morale.

Mastery of new skills and information

Employees who produce high-quality work and make progress add tremendous value to their teams and are proud of their jobs. Providing training and development to encourage mastery is a good strategy because it helps them gain more knowledge and skills (DCR strategies, n.d). Since most workers want more career growth opportunities and offering training can increase profits, providing training and development to encourage mastery is a good strategy because it helps them gain more knowledge and skills.

Extrinsic rewards

Extrinsic rewards include job perks, giveaways, bonus payments, pay rises or promotions, and profit-sharing programs.

Job perks

Perks are typically thought of as tiny “extras” that might make working life more enjoyable. From donut and coffee hump days to dress-down Fridays, there’s something for everyone. Previously considered “fringe” benefits, these are increasingly gaining popularity in companies and becoming more important to employees. Many employees desire to improve their lives, and companies who are aware of this are beginning to understand it (Morris, 2021). Time allowances for learning new languages, taking fitness classes, or engaging in cycle-to-work programs are now commonplace in forward-thinking firms. It’s unlikely that you’ve forgotten how beneficial these benefits are to both you and your employees. Employees who are happier and healthier are more likely to contribute to the culture of an organization by living better lives both at work and at home.

Giveaways/corporate gifts

A gift is a short-term award provided to the entire workforce as a token of employee performance or appreciation. You’ve previously gotten branded pens or notebooks, packaged foods, or gift vouchers as a business presentation. Digital rewards, such as virtual gift cards for online purchasing, can also be issued. Gifts are best used to commemorate minor milestones or seasonal festivities.


A bonus is a small, short-term monetary reward usually given once a year. The assessment process varies by company, with some offering predetermined bonuses after employees have worked for the company for a particular time. Others may decide on a reward based on job performance, a more subjective metric.

Pay rise and promotions

Although pay hikes and promotions are frequently offered together, not all wage increases are accompanied by a promotion. Wage raises, like bonuses, are given out after a specified amount of time for a significant shift in performance or a set of new talents. Workers must obtain their bosses’ favor and trust to be promoted to greater responsibility and seniority. To feel positive and put forth extra work, employees must know that promotion prospects are within grasp.

Profit-sharing programs

Employee profit-sharing schemes are effective incentives because they directly link employees to the company’s profitability. Each employee receives a portion of the company’s quarterly or annual earnings based on 2.5 percent to 7.5 percent (DCR strategies, n.d). Profit-sharing encourages employees to adopt a collectivist mindset and strive toward the company’s overall success rather than focusing just on their own immediate goals.

Importance of reward management to Human Resource Managers

Human resources managers are in charge of planning, coordinating, and directing the administrative operations of a company. They are responsible for recruiting, interviewing, and hiring new employees, as well as consulting with top executives on strategic planning and serving as a liaison between management and staff. As a result, employee productivity has a direct bearing on them (Bureau of Labor Statistics, n.d). Keeping this in mind, we can demonstrate how paying employees benefits people managers.

Assuming that managers care about their company’s success, they will act in accordance with how they believe this aim can be achieved. Many surveys (Robinson et al., 2004; Scott & McMullen, 2010; Towers Perrin, 2008) were conducted to indicate that managers had a major impact on employee engagement. Managers usually provide formal rewards, such as pay raises and performance assessments, but they also provide internal motivation, such as varied and demanding work assignments.

Typically, when it comes to legislation relating poor performance or failure to fulfill targets by employees, corporations are constantly on. A reward management program can help to balance this and prevent a gloomy mood from forming, which can result in lower productivity and higher worker turnover.

To begin with, reward management can assist HR managers in attracting top talent to the company. People are drawn to organizations that treat their employees properly and appreciate them while they are looking for work. Second, incentive management aids human resource managers in retaining the company’s best employees. Increased staff retention is one of the goals of implementing incentive management. It’s difficult to overstate the significance of employee retention. Keeping the best employees on board is crucial for business success, and if they do not feel valued, they may leave to work for a competitor (Grewar, 2021).

Furthermore, HR managers may find that replacing them is time and money demanding. There are a variety of ways to keep them, and efficient reward management is critical. Lower employee turnover and lower costs associated with hiring new personnel have been linked to reward management. If an incentive system is introduced, employees will be more loyal to the organization. Employees will feel valued and their thoughts will be heard if there is an incentive structure in place. Employees who are happy with their pay structure are more likely to love their jobs and stay loyal to the company.

Implementing an incentive system in the workplace will reduce absenteeism. Employees appreciate being recognized for their hard work, and if a system is in place, they are less likely to call in sick or fail to show up for work (UKessays, 2021). If a reward system is in place, employees will be more aware of the organization’s aims and goals since they will be reimbursed when particular milestones are fulfilled. As a result, utilizing a reward system as an incentive will cause HR managers to be less worried about job productivity.


Reward management establishes policies and procedures to ensure that every employee in the organization is treated fairly and consistently. Reward management can be studied using both intrinsic and extrinsic motivational theories. Intrinsic motivation is defined as doing something for the purpose of doing it rather than for a subsequent reward. Extrinsic motivation, on the other hand, is a concept that applies whenever someone engages in an activity in order to achieve a certain goal. There is disagreement over how and for how long motivators alter behavior. Extrinsic rewards for an activity that an individual already finds inspiring may cause intrinsic drive to wane over time, according to several studies. Others have found that verbal rewards like praise can boost intrinsic motivation. An appealing work environment, gratitude and reward, trust and autonomy, and mastery of new skills and information are all examples of innate motivations. Job perks, freebies, bonuses, pay hikes and promotions, and profit-sharing programs are examples of extrinsic benefits.

Managers have a significant impact on staff engagement and productivity. Like pay hikes and performance reviews, managers commonly use formal rewards. Managers also offer intriguing assignments and demanding and varied work assignments to motivate personnel. A reward management program can aid in balancing this and avert a poor atmosphere from developing. Incentive management has been connected to decreased worker turnover and cheaper expenses associated with engaging new workers. An incentive system guarantees that employees feel valued by the firm. If an incentive system exists, employees will also be more aware of the organization’s ambitions and goals.


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