Hence, reward system in organization can be defined as “The degree to which reward allocations (i.e., salary increase, promotions) are based on employee performance criteria in contrast to seniority, favoritism and so on.” However, reward systems are more than bonus and stock options. As Steve Jobs says “The journey is reward”; often rewards include both of these incentives, they can also include other recognition such as reassignment, non-monetary like vacations.
Abraham Maslow’s theory of needs hierarchy explains the needs of human beings into five hierarchical categories namely physiological, safety, social, esteem, and need for self-actualisation. On the contrary, Victor Vroom’s expectancy theory explains why employees act the way they do, in light of their aspirations and their expectation of reaching those goals. These two theories are renowned frameworks that are used to create effective reward systems in organisations.
Intrinsic rewards are intangible, i.e., feeling of accomplishment and a sense of achievement. These rewards are those that produce non-quantifiable, personal satisfaction and a feeling that the work of employee is appreciated. On the other hand, extrinsic rewards are tangible outcome such as monetary, promotion, bonuses and sales prizes. Such employees are thought to be motivated to work hard to produce quality results when extrinsic rewards are offered.
In research paper of “Management implication of the interaction between intrinsic motivation and extrinsic rewards” by David Beswick of University of Melbourne, when employee is intrinsically motivated, they are more aware of wide range of phenomena while giving more attention to complexities, inconsistencies and unexpected possibilities. Such employees need time and independence to make choices, to collect and process information, and to get applauded for well