REWARD SYSTEM, REWARD POLICY, AND REWARD STRATEGY

Phuoc D. Nguyen

Anku, Amewugah, and Glover (2018) define “Reward systems are based on the reward strategy; which runs from the business strategy, for instance, to gain competitive advantage, and the human resource (HR) strategy, which is impacted by the business strategy yet in addition impacts it.” (pp. 623-624). The reward system, reward policy, and reward strategy belong to the HR management system, HR policies, and HR strategy respectively. When a corporate strategy is deployed it directs all activities within an organization to measure strategic goals including business objectives that leaders who establish a performance management system to measure the performance of the strategic management system. Therefore, the reward system is to implement the employees’ behavior control and strategic implementation control. The company sets up a reward system to give employees the incentive to make the organizational structure work effectively and align employees’ interests with the strategic goals and purpose of the organization.

Burton, Obel, and Håkonsson (2015) state “A traditional view of incentive design has taken a control perspective, i.e. designing incentives so that they control either the behavior of employees or the results of what managers or employees do.” (p. 218). The organization tries to control the behavior of its employees by linking the reward system to its control systems. Based on corporate strategy strategic managers must decide what behaviors are going to be. Kerr (1983) suggests that “Strategy affects reward system design by generating demands for particular forms of control. The steady-state strategy results in a need for a tighter, behavioral form of control.” (p. 199). Leaders create control systems to measure these behaviors and link them to their reward system. The relationship between reward and strategic performance is a fundamental strategic decision because it determines the incentive structure that impacts the behavior of executives and employees at all levels within the organization. Milne (2007) proposes “It is generally accepted that incentives such as rewards and recognition programs are used in the belief that they will reinforce an organization’s values, promote outstanding performance and foster continuous learning by openly acknowledging role model behavior and ongoing achievement.” (p.30). Designing reward systems is an important element in the control process because it motivates employees who implement desired behavior. Because of the reward system which affects how managers and employees act, the reward system also impacts the type of standards, values, and corporate culture developed within the organization.