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Reward Is a Predictor of Job Satisfaction: a Question of the Relationship.

Reward Is a Predictor of Job Satisfaction: a Question of the Relationship.

Table of Contents Topic2 Introduction2 Relationship between job rewards and job satisfaction3 Significance of the Relationship Between Job Satisfaction and Reward in Organizations7 Conclusion11 Appendix A12 Appendix B14 Reference16 Topic Reward is a Predictor of Job Satisfaction: A question of the relationship. Introduction The employees of the organization should be satisfied in order to have a healthy environment at the work place. Rewards are one of the most significant issues in corporations in the field of human resource management.

According to the online dictionary, reward is defined as the, “Incentive plans: scheme to support and reinforce desirable behavior, such as wage rage that increases with the productivity of the worker” (www. businessdictionary. com, 2010). According to Sandra O’Neal (1998) rewards “can help create a work experience that meets the needs of employees and encourages them to contribute extra effort, by developing a deal that addresses a broad range of issues and by spending reward dollars where they will be most effective in addressing workers’ shifting values. Theorists and practitioners often emphasis the importance on reward systems and how they add to motivate employees, however, one step forward is the relationship between reward and how it acts as a predictor of job satisfaction. Job satisfaction is another crucial issue in human resource management, because it is important to have satisfied and content employees working in an organization so that they can perform at their optimal capacity. Job satisfaction can be defined as “a pleasurable or positive emotional state resulting from the appraisal of one’s job or job experiences” (Edwin, 1976).

According to another journal, Edwin (1976) defined job satisfaction as “a function of the range of specific satisfaction and dissatisfactions that he/she experiences with respect to the various dimensions of work” (Riaz et al, 2010). It is known that its best to have satisfied employees in the organization, however, a satisfied worker is not necessarily a high performer and a high performer is not necessarily a satisfied worker. Satisfaction may lead to good performance however, a good performance may just as well be the cause of satisfaction, the relationship can be reciprocal (Micheal, 2008).

It is unrealistic to prove that there is only one factor affecting job satisfaction. Satisfaction level can vary from employee to employee, what some employees deem as satisfactory might not be satisfactory for another employee working in another organization or industry. There are many determinants of job satisfaction, such as work values, maladjustments, work rewards, work ethics, personal attributes, hours of work, emotions, performance, threat to work stability, work environment and other external factors. Therefore we can comprehend that there is a relationship between job satisfaction and work rewards.

This study will help analyze to what extent do reward systems motivate the employees such that they performance efficiently, thereby providing them optimal job satisfaction. Relationship between job rewards and job satisfaction In this age of global competition, most organizations try to ensure that their employees are motivated and satisfied in order to get the best performance from them. Rewards strategies are usually associated with human resource development in order to increase the performance level of employees by motivating and satisfying their needs.

The question is what drives job satisfaction? – The person or the situation? According to Jon and Randy (2006) there are three approaches to explaining job satisfaction; need based, cognitive process and non-cognitive process. Needs are said to drive behavior through the combination of need activation and need satisfaction. ProcessExample Layoff announced; Need for security is activated Layoff announced; Need for security is activated Need is activated Need is activated Tension expressed in fear and worry

Tension expressed in fear and worry Tension is created Tension is created Improve performance? Politics? Job search? Improve performance? Politics? Job search? Search for ways to reduce tension Search for ways to reduce tension Perform behaviors to reduce tension Perform behaviors to reduce tension Performance improvement leads management to remove employee’s name from layoff list Performance improvement leads management to remove employee’s name from layoff list Fear and worry significantly reduced Fear and worry significantly reduced

Tension eliminated or significantly reduced? Tension eliminated or significantly reduced? No No Yes Yes Need satisfied; need no longer drives behavior Need satisfied; need no longer drives behavior Need for security satisfied Need for security satisfied Figure 1:The Need Activation – Need Satisfaction Process(Jon and Randy, 2006) An evident need-based theory is Herzberg’s two factor theory. Frederick Herzberg argued that the factors that relate to the satisfaction of employees are different from the factors that affect the dissatisfaction level.

According to a research conducted by him, employees spoke about intrinsic factors such as responsibilities, achievements (“Motivators”) when asked about their satisfaction with the work, and when asked about the time they are dissatisfied with the work, they discussed about the extrinsic factors such as company policies, working conditions (“Hygiene’s”). Therefore he concluded that elimination of hygiene factors would not increase the motivating factors. Also the extrinsic rewards or hygiene factors are more related to the dissatisfaction level and the intrinsic rewards or the motivating factors relates to the satisfaction of the employees.

The cognitive process theories recognize a person’s thoughts and beliefs (cognitions). The expectancy theory represents an individual’s judgment about whether applying effort to a task will result in its successful accomplishment. It is based on the outcomes and the employee’s perception of how desirable or undesirable are these outcomes (rewards). Instrumentality Will I receive various outcomes if I reach my performance goal? Instrumentality Will I receive various outcomes if I reach my performance goal? Expectancy How likely is it that I will reach my performance goal? Expectancy How likely is it that I will reach my performance goal?

Should I exert effort? Should I exert effort? Valence How desirable or undesirable are these outcomes? Valence How desirable or undesirable are these outcomes? Figure 2: Representation of Expectancy Theory (Jon and Randy, 2006) “According to this (Goal-Setting) theory, an employee who establishes career goals is more likely to advance his or her career, especially if the goals are specific, challenging, and accompanied by regular feedback on progress toward the goals”(Jon and Randy, 2006). The equity theory is related to the ideology that the employee’s performance or satisfaction is influenced by the desire to be treated equally.

The Equity theory states that employees who are treated equally will be more satisfied and continue to perform efficiently as compared to victims of inequity. Outcomes/rewards received by self Outcomes/rewards received by self Outcomes/rewards received by relevant others Outcomes/rewards received by relevant others Motivation to correct or reduce inequity Motivation to correct or reduce inequity Perceived inequity Perceived inequity Perceived equity Perceived equity Socials comparison of outcomes to inputs Socials comparison of outcomes to inputs Inputs of self Inputs of self Inputs of relevant others Inputs of relevant others

Motivation to maintain present equity relationships Motivation to maintain present equity relationships Figure 3: Representation of Equity Theory (Jon and Randy, 2006) To support the Non-Cognitive approach, the Reinforcement Theory is used. The theory explains he behavior without referring to unobservable internal forces such as needs or thoughts. “The theory is based on the law of effect, which states that behavior that is followed by a pleasurable consequence will occur more frequently (a process called reinforcement), and behavior that is followed by an aversive consequence will occur less frequently” (Jon and Randy, 2006).

Therefore, we can relate that if an employee is pleased with his/her intrinsic or extrinsic reward, it is likely that job satisfaction is will higher. Significance of the Relationship Between Job Satisfaction and Reward in Organizations According to Steve Jobs, “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.

The journey is the reward,” (Vadim, 2010) There are two types of rewards the extrinsic rewards and intrinsic rewards. “Extrinsic rewards provide by employers in the form of pay will help to attract and retain employees and, for limited periods, may increase effort and minimize dissatisfaction. Intrinsic non-financial rewards related to responsibility, achievement and the work itself may have a longer-term and deeper impact on motivation. Reward systems should therefore include a mix of extrinsic and intrinsic rewards” (Micheal, 2008).

Previous researchers such as Gerald and Dorothee (2004) and Clifford (1985) have proved how job rewards are a strong determinant and are significantly related to job satisfaction. There is generally a relationship between work values and work reward. But there is a difference on how they relate to job satisfaction. Work values means the general attitudes regarding the meaning that an individual attaches to the work role. Work values are related to job rewards but it is not directly related to job satisfaction. Work values are usually related to the intrinsic benefits one obtains at work and job rewards are the extrinsic benefits one receives.

Many multinational corporations use rewards to increase performance of employees with the intention that will help increase job satisfaction. Intel Corporation uses rewards schemes to improve the performance of employees. “At Intel, rewards are clearly linked to performance. About half of pay is tied to company and/or divisional performance, and more than 70% of employees have rights to purchase stock options. The way Intel management sums this up is, “The reward system reinforces the company’s high expectations of its employees to grow, learn, and lead” (Vadim, 2010).

According to Intel, linking rewards to performance helps the employees become more involved thereby increasing job satisfaction. So we can comprehend that reward has a strong relationship with job satisfaction. Figure 4: Porter-Lawler (1948) Motivation Model (Micheal, 1980) Rewards, motivation, performance and job satisfaction appear in the same cycle. Every individual’s job satisfaction level will depend on his/her perceived value of the obtaining worthwhile reward. The factors that give rise to job satisfaction and motivation are different from that of the factors that lead to dissatisfaction.

Reducing dissatisfaction might not necessarily lead to increasing satisfaction; on the contrary it might not affect the level of satisfaction level of an employee at all. However, it can neutralize the level. Job satisfaction received from the job rewards are short-lived as compared to the job values created and obtained by employees. However, employees are more motivated even for a short period more by job rewards than job values. But job satisfaction varies differently from age differences, gender differences and also sometimes job levels and positions. Daniel and Caryl (1981), study was designed to explore the ability of the investment model to predict job satisfaction and job commitment. The result showed that job satisfaction was best predicted by the reward and cost value of the job. And job commitment on the other hand was best predicted by a combination of rewards, cost values and investment size” (Chris and Awonusi, 2004) “Job satisfaction and occupational success are major factors in personal satisfaction, self-respect, self-esteem, and self-development,” (www. Enotes. com, 2010).

When an employee is positively satisfied with the job it is more likely that the employee will be more flexible, loyal and innovative in his/her work. In the case of Apple Corporation the employees were rewarded despite the fact that the company was unable to meet the set target (Refer to Appendix A). When employees feel that their efforts are acknowledged and recognized in the organization they tend to perform better and thus increases their self-esteem. Apple not only paid the top executives but also kept in mind the lower workers who contributed in their own way.

We can see the use of the Equity Theory being applied here, where the employees feel they are appreciated and this boots them to perform even more for the organization. According to the research conducted by Chris and Awonusi (2004), “poor remuneration in relation to profits made by organization, wage differentials between high and low income earners among other things contributed to low morale, lack of commitment and low productivity. ” Apple seems to be using different reward strategies to keep their employees at every level content (Refer to Appendix A and B).

From the top executives to the lower sales reps and retail outlet staff, they try and keep them satisfied so that they remain committed and loyal to the company. It is also a means of gratitude for their work ethics. “Monotonous jobs can erode a worker’s initiative and enthusiasm and can lead to absenteeism and unnecessary turnover. Job satisfaction and occupational success are major factors in personal satisfaction, self-respect, self-esteem, and self-development,” (www. Enotes. com, 2010). Though this we can understand that there should be job enrichment and that it can affect the workers efficiency. Employers are continually challenged to develop pay policies and procedures that will enable them to attract, motivate, retain and satisfy their employees” (Chris and Awonusi, 2004). For this reason, companies like Apple and Intel go out of their way to keep their employees content. However, sometimes this might outweigh the future economic benefits of the organization. It is important that organizations are able to strike a right balance between compensating employees in order to acknowledge their work and over doing it simply to retain employees.

The reward system has the potential to integrate individual efforts and direct them towards the strategic objectives of the organization, as long as this is well-defined and perceived as fair. The iPod Shuffle and the bonus offered to the employees (by Apple) are set act as motivators for the employees to perform better in order to work towards laid out objectives. Thereby making the employees feel that their work is acknowledged and appreciated, and helping them work towards the attainment of the goals.

This study will prove to be beneficial to policy makers and HR managers. By understanding the relationship between rewards and job satisfaction, managers can come up with employee motivational programs. Also enhancing the work contents and making it interesting that the employees don’t feel that their job is boring, pointless and dull. “Rewards enhance the level of productivity and performance at job whether it’s a first time performance or repeated activity at the job in a progressive way” (Rizwan and Ali, 2010).

Lastly, reward systems do trigger job satisfaction either intrinsic rewards or extrinsic and it does play a vital role in the significant performance in job and it is positively associated with the process of motivation. Conclusion Rewards play a significant role in the day-to-day performance of employees especially when it comes to appreciating them for their effort in working towards the organizations goals. When employees are acknowledged for their performance it stimulates them to perform more efficiently and increases their motivation.

When employees are not compensated with a good remuneration package for their job done or not appreciated for their effort put in then they tend to express their discomfort through their poor performance at work. It is therefore imperative for the organization to consider the needs and feelings of its work force and not just over look them in order to safe guard organizational harmony. Apart from that, for employees to not feel that job is monotonous and dull, employers can make them participate in the decision making process in the organization. Therefore it is important that rganizations should come up with not impressive but at least some kind of career satisfaction and motivational programs for employees that would be mutually beneficial to both the organization and the employees. Appendix A Apple misses target but rewards staff NEWS: In a filing with the Securities and Exchange Commission on Monday, Apple said last year it awarded employees in its incentive bonus programme a “special recognition bonus” amounting to between 3 percent and 5 percent of their base salary, despite the fact that the company failed to reach its stated objectives.

The bonus plan applied to 230 executives at the director level or higher, but excluded the company’s senior executive officers such as chief executive officer Steve Jobs and his top deputies “The company did not meet the metrics specified in the Incentive Bonus Plan,” Apple said in the filing. “However, the (compensation) committee believed that the employees participating in the plan had significantly contributed to the company’s overall performance and that external economic and business conditions may have produced results that were unrelated to employee performance.

As a result, the committee approved a special recognition bonus for all plan participants. ”  Lower-ranking Apple workers who take part in a separate bonus programme were eligible for bonuses, although the total pool was reduced because Apple missed its companywide targets, the company said. As for Apple’s top executives, Jobs again earned a salary of $1 in 2002. His income reflects $2. 2m (? 1. 3m) in bonuses related to the jet that Apple purchased for him several years ago. In all, Apple spent more than $90m to buy the jet for Jobs and pay his taxes for the plane.

As part of a plan announced last week, nearly 27. 5 million of Jobs’ stock options have been cancelled in exchange for the promise of 5 million shares of restricted stock in three years’ time. Apple also initiated a programme that will allow other employees to exchange their below-market value options for new ones. Timothy D. Cook, who has taken on responsibility for Apple’s sales and operations, saw a jump in pay. He earned a salary of $563,829 in 2002, up from $452,219 in 2001. AvadisTevanian, senior vice president of software engineering, saw his salary increase to $492,212 in 2002 from $460,873 a year earlier.

Several other senior executives saw their salaries decline slightly in 2002. Chief financial officer Fred Anderson’s salary dipped to $656,631 from $657,039 a year earlier. Jonathan Rubinstein, the company’s senior vice president of hardware, earned $452,588 in 2002, down from $469,737. -By Ian Fried, CNet, 25th March 2003 Appendix B Apple to reward employees with free iPod shuffles (updated) Apple Computer in the coming weeks will begin offering complimentary iPod shuffles to many of its employees, AppleInsider has learned. Apple is handing out free iPod shuffles to many of its retail employees.

Sources says that the freebies may be an incentive to increase the work ethic amongst Apple sales reps, or maybe even a ‘thank you’ for recent prosperity. In the past, Apple has offered promotional items to retail staff of stores that meet weekly or monthly sales targets. Apple’s retail employees, however, do not work on commission. Several Apple employees at the company’s retail stores have been told to expect a free 1GB iPod shuffle sometime in the next three weeks. So far, AppleInsider has confirmed that certain stores in New York, California, and Missouri are awaiting arrival of the complimentary players.

Sources tell AppleInsider that such a gesture will likely extend to all retail stores and may even include some groups within Apple’s corporate structure–although this has not yet been confirmed. Workers at Apple’s flagship SoHo store in New York City will be given a free iPod shuffle, according to one source. Additionally, the store is expected to begin selling versions of the new flash-based player this evening. But over in Cupertino, some employees AppleInsider spoke with had only heard about the freebies through word of mouth and were not necessarily expecting on themselves. Time will tell.

According to sources, Apple retail stores that meet weekly quotes often hold weekly raffles, where lucky employees can walk away with cool gadgets such as the iPod photo. Apple announced the iPod shuffle just over a week ago. To date the player has been met with favorable reviews from both the main stream media and Wall Street analysts, and is already in tight supply with Apple’s online store quoting backlog of up to 4 weeks. Update: According to multiple sources, all Apple employees will be receiving a 1GB iPod shuffle by the end of the month, not just those affiliated with Apple Retail.

Sources say Apple chief executive Steve Jobs announced the gesture during a company meeting last Thursday, the day following Apple’s blockbuster earnings report. “Seeing as last year we all received additional vacation time, an iPod shuffle is a small investment for a company to reward its employees for the best quarter in our history,” one employee told AppleInsider. – By Kasper Jade, Apple Insider, 19th January 2005 Reference Books: Clifford, J. M. , 1985, The Relative Importance of Intrinsic and Extrinsic Rewards as Determinants of Work Satisfaction, Sociological Quarterly – Volume 26 – Issue 3. Gerald, M. Dorothee, L. , 2004, Relationship of professionalism, rewards, market orientation and job satisfaction among medical professionals; The case of Certified Nurse – Midwives. Werner, J. M. , DeSimone, R. L. , 2006, Human Resource Development, 4th Edition, Thomson – South Western, U. S. Thorpe, R. , Homan, G. , 2000, Strategic Reward Systems, Financial Times – Prentice Hall. Armstrong, M. , 2008, Employee Reward Management and Practice, 2nd Edition, India. Journals: Ajila, C. , Abiola, A. , 2004, Influence of Rewards on Workers Performancein an Organization, Department of Psychology –ObafemiAwolowo University, Nigeria.

Qaiser, R. , Usman, A. , 2010, Impact of Reward and Recognition on Job Satisfaction and Motivation: An Empirical Study from Pakistan, International Journal of Business and Management – University of the Punjab, Pakistan. Rehman, M. , et. al. , 2010, Effect of job rewards on job satisfaction, moderating role of age differences: An empirical evidence from Pakistan,International Islamic University – Islamabad, Pakistan. Gibbs, M. E. , 1980, The Effects of Extrinsic Rewards on Work Performance, Job Satisfaction and Intrinsic Motivation, Texas Tech University, Texas – U.

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