Comparing Reward Approach between Asia and Western Economy - Essay Example

Comparing reward approach between Asia and Western economy Module Reward approach has been used to attract, motivate and retain employees. The retention of workers in an organization is paramount in this era of economic uncertainty. There are many reward approaches utilized that are based on a number of theories. Most of the reward approaches are biased to monetary incentives. Globally human resource management has been a challenge to many institutions. The use of total reward management approach has shown to be an appropriate strategy even though there is no isolate strategy that is best to be in all settings. The strategy incorporates four components that include total pay, compelling future, individual growth and positive workplace. The western economy has shown progress mainly because of the motivated workforce. They have adopted the total reward management strategy. This compares to Asia that also has seen economic rise though not successful as the western economy. The Asian countries have also shifted from the traditional reward system to the total reward system. Western countries adopt the change quickly because they have less cultural cohesion unlike the Asian with the cultural cohesion. The success of the western economy can be linked in the utilization of total reward system to make decisions, improve staff performance and help solve potential reward problems. Keywords: Rewards, reward theories, total reward management, Human resource management culture, comparison, Asia, the Western economy. Introduction With the uncertainty of the world economy, having the right talent at the right cost in companies across the world has been a great challenge in human resource. Total reward programs aim at attracting and retaining a talented workforce in any company. As technological advances are, and the swaying global economy poses a significant threat to companies`, it has been shown that total reward strategy is used to achieve excellence. This paper compares the reward approach between Asia and the western world (Chiang and Birtch 2007, p.61). Through use of literatures, rewards systems in the international context have been explored. The main objectives of the paper include: 1. To identify total reward concept in a theoretical perspective for multinational companies and international business. 2. To compare the reward system between Asia and western economy. 3. To assess the significance of total reward system under the culturally, globalization influence and through theoretical views of total reward management know the use, models and design in the global economy. Literature review According to Milkovich and Newman, (2006, p.8) reward is all the tangible and non-tangible benefits and provisions presented to an employee as part of improving employment relationship. Work rewards refer to benefits employees receive from their workplace that are considered as the determinants of job satisfaction and commitment (Malhotra et al. 2007, p.12). Rewards can be seen as cash and non-cash payment and psychological payments given by an organization in return for employee`s contribution to the organization. Material incentives and financial incentives do not necessary satisfy the basic psychological needs of some employees, and they discern the individual variance (Stone et al. 2010, p.110) Goss and Friedman (2010 pg.10) showed that rewards are beyond the concept of getting paychecks after a week rather they comprise the whole scheme value that includes compensation, benefits, and careers. The definition of reward from the American employers in 2010 had the following findings: 46% respondents described it as pay and benefits, 21% consider reward as pay, career, and benefits. In the following year, of the same group, 35% defined reward as benefit and pay while 35% define it as pay, career, and benefits. Employees of the big organization receive huge wages, benefits and promotion as compared to smaller organizations. Globally, organizations have monetary incentive part of the reward. Similarly most countries in Asia, an example of China and the Western countries hold the same opinion. Pay is considered motivator and reinforcement that retains employees. Distribution of financial rewards may make employees feel they are treated unequally and hence destabilize an organization leading to negative consequences for the company. Reward in theoretical perspective and its application The utility entrenched in reward is shown in a variety of theoretical perspectives (Chiang and Birtch 2007, p.64). There are two types of rewards namely intrinsic and extrinsic. The intrinsic reward involves things such as recognition, achievement and advancement and they motivate an employee more than intrinsic rewards such as job security, salary, and working environment. Zhou et al. (2009, p. 78) argues that the extrinsic reward philosophy originated from utilitarianism, and it points out that people`s behaviors and actions are modifiable. The use of extrinsic reward help elevate innovation is creativity in an organization. According to expectancy theory, there is no difference between extrinsic and intrinsic rewards as both plays the same psychological function that aims at motivating the employees. This theory has been applied in most parts of the managerial system, and it has shown to bore some fruits. The attitudes, perceptions and beliefs of a person on his behavior, dictate the punishment or reward that accompanies his actions. The cognitive theory is based on the actions and the expectations after that action, this means if a person works for particular expectations, he or she will be compelled to work hard to seize that reward. Certain behaviors are prophesized if expectations and the consequences occur that are related to the event. Maslow’s theory states that the unsatisfied needs create motivation and because they are not satisfied; they create disequilibrium that needs to be returned to equilibrium. This disequilibrium creates motivation for individuals and employees of various institutions. According to the scientific theory of management, only continuous and enormous amount of pay that can make people work harder and motivation is realized if penalties and incentives are directly linked to performance. This is because people work for money. Latham and Locke, (2007, pg. 73) states that the performance can be uplifted if the goals and objective se are challenging. In the goal setting theory, feedback is linked to the elevated performance for attaining the higher goals and objectives. The equity theory states that the reward system or the pay system is fair if the employees of such an institution view it fair. According to the principal agency, theory states that most people are opportunist and are motivated by money. Socioeconomic theorist argue that employees are not inclined only to monetary incentives neither is their reward homogeneous, the employees are rather motivated by a cocktail of monetary reward and non-monetary rewards in order to improve their performance in their institutions. Therefore, managers blend the two in order to have better performance. According to Vandenberghe et al. (2008, p.446), there are five personal cardinal attributes that can enhance performance of the employee. These are agreeableness, extroversion, stability, openness, and conscientiousness. The employee with agreeableness and extroversion are considered more cooperative. The extroverts are more concerned with social interaction. The agreeable and conscientious workers are inclined more unto the future. Issues such as pension, insurance and job security among others preoccupy them. Types of rewards According to Buch, (2006, p.361), he identified the concept of six sigma that points out unto the four categories of reward. The four include intrinsic, extrinsic, organizational and social remunerations. The intrinsic rewards encompass the internal feelings of growth, involvement, satisfaction, self-competence and autonomy. On the other hand, extrinsic rewards involve organization participation and performance. This is further grouped unto direct and indirect forms (Westover and Taylor 2008, p.818). The direct rewards are the minor tokens of appreciation while the indirect reward refers to financial security and an array of better future prospects. The social rewards include affiliation, relatedness. This encourages the employees to interact and work together in order to have shared goals and objectives and have shared goals. Through this approach, a better outcome and overall elevated performance are achieved. Performance appraisal based reward approach This system dictates that the best performer is awarded accordingly. The successful performance-based rewards have perfect beginning, are well implemented and are aligned with total reward approach. When an organization has the award system entirely according to employees` intent, then they work for attain their own goals as well as the goals of the institution they are working for (Wei & Atuahene-Gima 2009, p.91). Employee’s motivation and enthusiasm for work has been shown to be elevated if performance appraisal is done directed to the objectives of the employee in line with those of the organization (Fay and Thompson, 2011, p.216). In the Chinese culture, seniority, internal equity, traditional pay and performance based incentives are highly ranked as a reward system for the employees. Evaluation and establishment of efficacy of compensation practices and human resource pay have a paramount role for the company in service and knowledge based economy. Reward system in the western economy Total reward is no widely and highly in use in USA and UK. The system is one of the top agenda in human resource management in most of the western countries and it has proved to boost the economy because the employee are motivated leading to elevated performance (Armstrong & Brown 2005, p.47) the companies do no stress for the pay but focus on emotional, spiritual social and intellectual incentives of an individual. This is a holistic approach to the reward system. (Brown & West 2005, p.22). However, the implementation of total reward strategy seemed to be dire leading to slower evolution in UK, unlike USA. This is due to primitive human resource information systems and conservatism in some of the companies. Offering competitive benefits and salaries to the employees in UK that are affordable pose serious challenges to employers (Philpott 2008, p.39). Chinese attitude towards reward China places itself at a better economic level in Asia and the world as well. Because of the substantial influx of oversea investors in china, tackling of employee’s welfare schemes through the government waned off. The western practices swept Chinese management of the employees. The performance based pay, monetary incentives, welfare benefits and growth opportunities have infiltrated the human resource management sector in China. The labour market in china is reckoned as a challenge in the world and human resource management face the challenge of high labour cost and high employee turnover (Leininger 2007, p.29). Long-term trend in the reward structure in china and other Asian countries has to be established in order to augment the positive results in the market and performance of new products and services. China however has shown an enormous shift from their traditional reward system, and they have embraced the total reward approach as means intended to boost the employees’ motivation and elevate performance. Cultural orientation in reward perspective Culture reflects on one`s customs, beliefs, and values. It provides means that rectify the preferences of the employee regarding rewards (Chiang & Birtch, 2007, p.1298). Culture can be viewed as a mechanism through which people distinguish themselves from others. Organizational culture encompasses all t work pace experience whether it entails the ethics, commitments, flexibility, autonomy, competence employee`s enthusiasms. The organizational culture makes an employee to join or leave an organization after reviewing it. China has shown to score higher in cultural cohesion at the workplace compared to western cultures such as UK. The western countries demonstrate masculinity whereby they have a high propensity to material incentives and prefer individual performance rewards as compared to Asian countries (Chiang 2005, p.1551). However, economic and social changes have seen china shift from collectiveness, and they prefer equity rather than equality based rewards. Globalization has diluted the cultural cohesion that was witnessed by China`s employees. Still cultural orientation is perceived as a powerful tool that shapes the reward system of any organization. Every organization has its culture that the employees work with. Total reward management and its application Total reward encompasses all work aspects valued by the employee whether it is related to better opportunities for learning and career advancement, healthy working conditions or benefits packages that are linked to payment. This implies; total reward covers the tangible rewards and the relational rewards in an organization. It is the sum total of the reward package that a worker receives from the company (Rumpel & Medcof 2006, p31). This means that the employee is working more than money, and it is aimed at retaining and motivating the employees in the organization (Giancola 2009, p.30). This concept helps to broaden the earlier one of total compensation that addressed the benefits of high priced programs. Total reward can be categorized into four groups: convincing the future, individual growth, encouraging work environment and total pay. The table below illustrates the four components. Total pay can be viewed as a combination of performance-based salary, feedbacks, and benefits. On the other hand, total reward strategy is a plan of action that clarifies the human and non-human resources organized in order to achieve the desired outcome within a prescribed timeframe. Giancola (2009, p.30) contend that total rewash strategy is a way of thinking that one can implement to any problem that regards reward in order to achieve valuable outcomes. Reward strategy differs from one organization to another. Similarly, in the same organization, employees have distinct traits in term of culture, race and ethnicity that are determinants of reward Total reward strategy helps a company to manage its cost and the whole award package, and it helps be attractive to enhance attraction of investors. It also influences the decisions that a company makes and averts compensation predicaments. The reward policies help in negotiations between the employers and employees to meet solution in the labour market. Quality information and analysis to make better decisions and evaluation of the impact of such decisions helps to maintain effective total reward management. Table 1. A Four-component Module (Philpott, 2008). TOTAL REWARD COMPONENTS Individual growth Compelling future Total pay Positive workplace Many leading organization of Human resource constituent their total reward model to create improved and attractive employer brand. A real power comes when companies combine transactional and relational rewards. The workplace model has seven components that included benefits, compensation, work-life balance, career opportunity and development, recognition performance, environment, and culture. Azasu, (2009, P.22) present four quadrants to organized total reward elements that include: pay, learning, development and benefits. Comparison of Total reward system between Asia and western countries Organizations are making use of total reward approach to underpin the company objectives. Research shows that organization mainly looks for centralization in order to fabricate consistency and half of the companies practice this while 51% of them wanted to implement this within two years (Zingheim & Schuster 2007, p.54). Centralization differs from one company to another; weak centralized companies offer total reward as the guidance whereas the highly centralized organizations may present the phenomena of total reward approach. However, irrespective of the degree of centralization, research shows that 60% of companies advocate for total reward approach. The western countries the example of USA and UK have many forms of reward in their organization. This ranges from the use of Aldelfer`s model, Maslow’s model, input and output model, expectancy model among other and they have still faced the challenges of human resource management. The companies experience employees’ turnover and dissatisfaction. This is even more scaled up in the Asian countries an example of china. The adoption of the total reward management in the western economy has seen the countries develop and their gross domestic product increase. This is because the employees were motivated to produce such good results. The total reward system helps to vie the employees holistically unlike the other models that were biased to monetary incentives. The success in the western economy compared to Asia can be linked to the implementation of total reward management that has helped to improve the employees perforce. The employees feel motivated, and they prefer performance-based motivation. The approach has also helped organizations to make decisions that are basis to the success of their companies. This system also helps to solve potential human resource conflict within the organization because it has both the monetary and the non-monetary incentives that work well in motivating the employees. Both Asian and Western economies regard the issues of attraction and retention of its workers. Therefore, the best model has to be used in order to ensure that the workers are satisfied, and they work harmoniously toward the objectives of the company. In the western countries, through successful implementation of total reward management, most of the employees are met. This results points out that the total reward system that has been adopted by the human resource management has helped to improve productivity (Kaplan 2007, p.16). Culture has an evident impact on the reward system of employees. The western countries have little grip on workplace culture as compared to the Asian countries. However due to the effect of globalization, the Asian culture has been diluted, workplace culture in Asian countries has seen the human resource work collectively to achieve the shared objectives and outcomes of the institution. Culture also has been seen as one of the components that affect total reward system. The western world has less of culturally cohesion at workplace; employees are more focused to achieve individual reward, and performance-based reward (Rowley 2009, p.21). Both of the Asian and Western countries have adopted the total reward management strategy even though at different paces. The implementation of total reward approach experiences slow adoption in UK just like most of the Asian countries example of China (Hiles 2009, p.47). The major challenge is having the system affordable to the institution to avoid overspending on the human resource. The system requires striking a balance that ensures the employees are satisfied, and the outcomes are significantly impressive. However, this approach has shown globally to yield good results, and the human resource can be viewed holistically to avoid bias. Companies use different total reward management styles in order to make their companies have the best brand hence a more marketable and competitive company globally (Egan 2011, p.45). Which reward option is appropriate? It should be understood however that the effectiveness of reward approach in use would depend upon the circumstances that they are applied and making them effective has no possible way. Monetary or non-monetary, intrinsic or extrinsic are paramount when developing effective and successful; reward program. Reward mix is the primary source of designing desired performance oriented behavior, motivation and productivity to the extent a company enjoys success. Most human resource situation at hand needs is adopting of total reward management system since it is flexible and accommodates the differences in countries (White 2005, p.33). It should also be understood that the Asian and Asian economic, social, political and cultural alignments are different from one another. Practically it is impossible to use the approach to managing the reward of the employees. However, through total reward approach, have several components that favor it to be adopted in such settings. Conclusion Following the information that has been presented through critical analysis of literature, the following conclusion has been arrived at. One of the greatest concerns for any organization globally is to attract and retain its workplace during this period of globalization. One way to achieve this is through offering reward to the employees. Various theories have been laid down to show how the reward should be done and what is considered the motivating factors to enhance employees` performance. Some of the theories that are applied to explain what employees can view as motivating rewards include the expectancy theory, the Aldeifers theory, the Maslow’s theory, Vrooms theory, input and output theory and other socioeconomic theories. All of these theories are biased to the monetary incentives. However, the total reward approaches view the employee holistically, and it has four main components that include total pay, positive workplace, compelling future and individual growth. Globally, the approach of total reward management as proved to be the appropriate in human resource management. The western economy lead by USA and UK among other countries has successfully utilized the strategies, and it has shown employees` satisfaction and informed decisions being made about their organization. The same has spread and found the root in the Asian economy example of China. The adoption of the strategy is also slow due to conservatism and the challenge that the strategy has. The Asian countries have cultural cohesion. This factor affects reward for the employees. It means that the employees feel more satisfied to work as teams to achieve shared organization goals and outcomes. However, this cohesion is being diluted due to the effect of globalization and information technology. The western countries have less culturally cohesion therefore, they desire individual reward and performance based rewards. Despite the differences in the adoption rate and culture differences, globally the human resource has seen a transformation over years, and total reward management seems the best way to make the employees feel motivated at their workplace. Recommendations Recommendation includes the blending of both monetary, non-monetary rewards both in Asian, and in Western, countries will motivate the employees who in turn will improve performance. Through improved performance, the economy of these countries will also develop. Both the monetary and non-monetary rewards have been shown tremendous motivate, engage and retain employees in organizations. It is also important to call for the organization to put more weight on non-monetary incentives because it has proved to motivate employees. This will help reduce the bias that is given to monetary incentives when reward is discussed. Primary reason some countries drag behind economically is the unawareness about new culture. The study recommends that employers need to study the human resource culture and be familiarized with values, norms, practice and beliefs of employees. Culture affects the reward process. This means that knowing what hold in the other country will help improve the human resource management, and this will influence positively on the company`s success. References Armstrong M, Brown D (2005). Reward Strategies and Trends in the United Kingdom: The Land of Diverse and Pragmatic Dreams Compens. Ben. Rev., 37(4): 41-53. Azasu S (2009). Rewards and Performance of Swedish Real Estate Firms.Compens. Ben. Rev., 41(4): 19-28. Brown D, West M (2005). Rewarding Service? 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