Reward Management in Tesco

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Reward Management in Tesco

Reward Management is one of the crucial strategies of human resource management. „Reward‟ in Reward Management means all kinds of tangible and intangible benefits provided to employee as part of employment relationship. Employees see reward as a return in exchange of their performance being appreciated by employer. Thus, being rewarded for a job well done is what keeps employees motivated to reach their full potential. In this manner, reward is a tool used to raise commitment and performance of employees.

Why companies care for their employee‟s performance so much? Nowadays, only goal the companies have is to be profitable and cost-effective as much as possible to survive in „workforce performance‟ competitive market. In order to do cost-effective cost-effect ive business, „workforce performance‟ is one of the key factors that has to be handled carefully. According to motivation theory developed in th

the middle of 20 century, motivated worker is a productive worker and motivated employees tend to perform higher levels of job-related performance behaviours than unmotivated ones. Therefore, factors that motivate workers has to be defined and applied in order to increase workforce performance. In case of Tesco, it has been realized that 22-grade pay structure exists due to massive and rapid worldwide expansion. There was no sufficent link between pay and performance which also diminished the career development that Tesco needs to manage in period of expansion. According to Brown and Purcell (2007), Tesco‟s response was introducing a new broad banded structure allows managers to manage the pay of their teams, so new line managers have freedom to reward employees and produce their own potential top class staff to contribute Tesco‟s success. In addition, Philip Clarke, new appointed CEO of Tesco, is the clear example of Tesco‟s commitment on developing their


staff and tuning their jobs into careers. As stated in 2011 Financial Statements, it is believed that if Tesco look after their staff, they will look out after their customers. Not only for Tesco but also for the most companies that delivers any kind of service to their customers, customer satisfaction recognized as the ultimate goal. Therefore, in practice creating a fair rewarding environment at work is more likely to result in a high-performance workforce with high business returns rather than „bankruptcy‟ as in theory.

In literature, Reward Management is generally defined as application of strategies that reward employees to motivate them to work together towards the success of the company. As Armstrong and Stephens (2005) argued, there are several aims of the Reward Management. A reward scheme is responsible for rewarding employees for the value they create by ensuring fair, equitable and transparent approach. In addition, a performance culture has to be developed to make sure that there is sufficient link between reward and performance which would also attract high quality employees. Nowadays, financial reward might not be the convenient way to motivate employees. As stated by Armstrong and Stephens (2005), Kohn (1993) claims that employees that only rewarded financially tends to lose their interest in job and focus on the reward itself instead. Thus, causing employees to lose their interest in job is not what reward scheme aims to. Reward scheme aims to motivate workers and lead them to give higher workforce performance. Recently emerged „Total R eward‟ approach, which is based on all types of rewards, has more convenient reward scheme to achieve its purpose.


Basic pay Tangible Rewards

Contingent pay Employee benefits Total Rewards Learning and development

Intangible Rewards

The work experience Achievement,responsibility,growth Figure 1. The types of Total Reward

As it can be seen from the Figure 1, Total Reward approach embraces all types of rewards that an employee possibly value and aims to maximize it. For example, for a well-performing employee more responsibility can be given which could make j ob more interesting and turn his/her job into career or even become a manager in future. Rewarding people only with money would not be the proper way of improving employment relationship. On the contrary, it would lead people think that their workforce has been exploited by money and they are servants of power. Instead, rewarding with intangible rewards would improve the degree of trust between employee and employer and create more fulfil ling and mutually beneficial work environment. Therefore, money is not and should not be the only motivator for the employees for reward scheme to achieve its goal.

Although Reward Management is seen as particularly empirical and pr actical affair by reward practitioners, academic researches could be more beneficial for them if collaboration with academics and practitioners are established as stated Reward Management Symposium organized by CIPD in 2005. Based on this information, practitioners, academics and consultants come together in symposium to discuss these matters on 13 July 2005. Practitioners at the symposium made it clear that there is a major difference between evidence


and practice. Practitioners do not act on the research evidence since they believe that evaluation of reward processes is not easy procedure to handle. On the other hand, academics claim that this has been made possible by an increase in the employee surveys to identify employee characteristics. However, surveys might not reflect to truth since people might not want to be honest about their jobs due to possibility of losing it . Furthermore, front line managers are the one who applies the reward scheme that has been suggested by HR managers. Therefore, they are the ones who make difference based on t heir perception. It can be said that, although reward schemes can be researched and developed through the process, distribution of rewards are mostly based on how well employees are interpreted by their front line managers. As a result, practitioners do not find the academic researches as useful but they care the outcomes of an academic research thinking might be beneficial for their organization.

Keeping employees motivated is the main factor of rise in Reward Management methods. In the past when unemployment level was high, it was not that necessary to motivate employees with rewards. Employees were working hard to keep their jobs. However, nowadays regardless of unemployment rates, employees‟ motivation level is much more important in order to provide cost-effective business to be able to compete in the market. Therefore, reward methods which are mostly performance based were born encourage the employees to work harder. There are some struggles have to be overcame in order to establish a functional reward scheme which is main concern of Reward Management. First of all, in order to reward workers based on their performance, their performance has to be monitored in perfect sense which might not be easy in some cases. In addition, various theories has been claimed to define the best possible reward that motivates an employee so far. As Pfeffer (1998) suggested, “Although people work for money, they also work to find meaning and a sense of identity” which means keeping reward as an only economic entity might not be


enough to motivate workers. Thus, reward has to be an entity which perceived valuable by an employee individually as Vroom (1964) stated. Total Reward scheme which emerged recently covers all types of rewards that a worker possibly value. However, still it would not be easy to discover perception of each worker and reward in that way. On the other hand, reward has to be given to employees fairly. Unfair reward distribution would completely diminish the meaning of reward system and cause demotivation instead if people think that they are treated unfairly. For instance, if an employee performs much higher than his/her co-workers, rewarding all of them in same manner would cause the employee to stop working harder. Therefore, fair reward distribution system has to be established for a functional reward system. As a result, these are the struggles that Reward Management strategies have to deal with. A reward scheme might be useless or even detrimental in motivating the workers if the scheme fails the overcome these struggles. Word Count: 1289 References

Armstrong, M. & Stephens T. (2005) A handbook of employee reward management and practice, Kogan Page, London Brown, D. & Purcell J. (2007) Reward Management: On the Line . 39(28), Sage, London CIPD. (2005) Reward Management Symposium Report Pfeffer, Jeffrey. (1998) The human equation: Building profits by putting people first Roehampton University. (2011) Motivation and Employee Reward and Engagement Week 8 Lecture Slides


Tesco 2011 Financial Statements Vroom, V. H. (1964). Work and motivation. New York: Wiley

Reward Management in Tesco

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