People are complex, and the elements that motivate the human will involve more than the material or financial.
Figure 1 is an author’s conception of the gamut spanned by the human resource reward system in an organization. Rewards may be intrinsic or extrinsic; intrinsic rewards are those values that an employee perceives he attains when he performs a certain job well. The value pursued by the employee is intangible, and the flawless execution of the job is itself its own reward, from which the employee derives immeasurable personal satisfaction. Factors that may enhance intrinsic rewards to the employee include the ability to participate in decision-making, relative freedom and discretion on the job, the assignment of work the employee finds more interesting, and the opportunity for personal growth, among others.
There are likewise rewards that are of an extrinsic nature, that is, the source of the personal satisfaction derived by the employee is not part and parcel of the job itself, but is a result of the workings of the company’s incentive policies and system.
Extrinsic rewards may be classified as either financial or non-financial. Financial rewards may be performance based (e.g. piecework, incentive pay plans, performance bonuses and merit pay plans), implied membership based (e.g.. profit sharing, cost of living increases, time-in-rank increase), and explicit membership based (e.g. protection programs, pay for time not worked, and services and perquisites). Those non-financial rewards include preferred office furnishing, assigned parking spaces, and ability to determine one’s preferred work assignments. Reference to different types of rewards or combinations thereof shall be made in the discussion.
Merit issues span a broad and differentiated set of considerations, but which principally involve the determination of those aspects of