Reward systems at heritage le telfair

Tourism industry is a heavy dependent of human interaction, including employees (Baum, 1993; Davidson, 2003). Go et al., (1996) argue that the of products’ or experiences’ quality relies on competent, committed, and satisfied hospitality staff. Subsequently, numerous studies have demonstrated a positive correlation between employee satisfaction and customer satisfaction (Schmitt and Allscheid, 1995; Schneider et al., 1998; Ulrich, et al., 1991; Wiley, 1991) cited in Jing and Avery (2008). Hence, to ensure job satisfaction the appropriate reward mechanism needs to be adopted (Danish and Usman, 2010; Bai et al., 2006).

Rewards play an important role in organizations today: they influence a variety of work-related behaviour (Eastaugh, 2002; Helmer et al., 1988) and as well as the motivation of employees (Nayeri et al, 2005). Reward can be defined as the benefit derived from performing a task, rendering a service or discharging a responsibility (Pitts, 1995; Silbert, 2005). Thus, this conceptual analysis aims at reviewing clear definitions of reward systems (Lawler, 1993; Herzberg, 1966) and its structure (Bartol and Srivastava, 2002). Light will also be shed on the development of reward systems by Zhou et al., (2009), its objectives by Lawler (1993), and the total reward system (Armstrong, 2006). Furthermore, the literature sets out the prominent reward practices of the hospitality industry argued by a myriad of authors, lists the tools to determine reward effectiveness (e-reward, 2009) and finally analyse the perceptions of managers and employees on rewards by Nelson, 2003; Perkins, 2007, among others.

2.1 REWARD SYSTEMS

Reward Systems are a critical part of any organisation’s design. The way in which they fit with its other systems will determine the latter’s effectiveness and the quality of life of its employees (Lawler 1993, p.2). Reward systems refer to the intrinsic and extrinsic benefits that workers receive from their jobs (Herzberg 1966; Katz and Van Mannan, 1977). Moreover, Byars and Rue (1997) define reward systems as being “all the returns employees receive as a result of the employment by their organization, monetary as well as non-monetary.” In contrast, Armstrong, (2006) incorporates the element of “effective reward management” in order to benefit both people and organisation in his definition.

2.1.1 STRUCTURE AND COMPONENTS OF REWARD SYSTEMS

According to Bartol and Srivastava, (2002) and Grawitch et al., (2007, p.3), rewards could range from:

Monetary and;

Non-monetary incentives

In addition further research by De Cenzo et al. (1996) has been agreed by Bartol and Srivastava, (2002) on the categorisation of rewards as being intrinsic and extrinsic (depicted in figure 2.1.1).

Figure 2.1.1: Reward Structure-Source: De Cenzo et al., 1996

2.2 DEVELOPMENT OF REWARD SYSTEMS

Attesting that reward development has experienced five phases, Zhou et al (2009) summed up the relevant records in table 2.2a.

Table 2.2a: The Five Phases of Reward-Source: Zhou et al, 2009

To provide a historical glimpse, another version on the development of reward systems-figure 2.2b-has been compiled from Shermon, 2004; World at work, 2007; AWLP, 2006.

Figure 2.2b: Brief Overview the Evolution of Reward Systems

Source: Adapted from Shermon, 2004, World at work, 2007, and AWLP, 2006

2.3 OBJECTIVES OF REWARD SYSTEMS

Every hospitality industry employer wants to recoup back investment on its employees (Glenn, 2006). Traditionally, the purpose of reward systems is to monetarily reward desirable behaviour (Bartol and Srivastava 2002; Rajagopalan and Finkelstein 1992). But, further research suggests that there are other objectives which potentially can impact organization effectiveness (Lawler, 1993).

1. Attraction and Retention

Enz (2009) affirms that attraction and retention are among the main HR areas of concern in the hospitality industry. A firm’s reward system can influence employees’ desire to stay in the company-as demonstrated by Bamberger and Meshoulam, 2000 and MacDuffie, 1995. Similarly, Gerhart and Milkovich, (1992) are convinced that organisations which give the most rewards tend to attract and retain most people. However, owing to its poor image in terms of remuneration and working conditions (Baum, 2007; Kusluvan and Kusluvan, 2000), the hospitality sector has lost its ability to attract and retain skilled staff compared to other sectors (Christensen Hughes, 2002; Lucas and Jeffries, 1991; Barron, 2008). On a serious note Terry and Lam (2000) cited in Chellen and Nunkoo (2010) warns that if hotels want to survive in today’s highly competitive arena, they earnestly need to attract and retain quality employees. Though not being a panacea, “to facilitate organisational commitment to employees” has been the idea proposed by Dawson and Abbott (2009) with the aim of a positive relationship with attraction and retention of these employees

2. Motivation of Performance

Wagner (1990) claims that a primary concern in the design of reward systems is how well the plan will work in motivating employees. Responding to this, the works of Gerhart and Milkovich, 1992; Lawler, 1971, 1990; Bamberger and Meshoulam, 2000, MacDuffie, 1995 have proved that reward systems have been demonstrated to motivate performance under certain specifiable conditions. Simons and Enz (1995) research translated that hotel employees viewed bonuses associated to guest-satisfaction scores as an opportunity for motivation. Affirmatively, Torrington et al, (2009, p. 162) and Rabey (2000) allege that expectancy theory’s advocates and behavioural sciences believe that employees will work harder if rewards are attached. Nonetheless, (Luthans and stajkovik, 1999) contest that there are a few who challenges the above perspectives. Such a scholar is Kohn, (1993), who concur that any incentive system makes people less enthusiastic, hence, less committed to excellence to their work. Notwithstanding with the above views, Chopin et al., (1995) have found that compensation depends on firm size and performance

3. Skills and Knowledge

“Just as reward systems can motivate performance they can motivate skill development” by tying rewards to it (Lawler, 1996b). Jamison and O’Mara, 1991 and Pfeffer, 1998 explain that healthy work programmes are those which provide employees with the opportunity to increase and apply their knowledge and skills to different situations. Indeed, Kilik and Okumus (2005) ascertained that education and training were associated with productivity in hotels. Also, there has proved to be a positive relationship between training and employee retention, as reported by Dearden et al. (1996); Umiker (1994); and Blundell et al., (1996). However, being reputed for its high labour turnover culture (Denvir and McMahon, 1992; Deery, 1999; Tracey and Hinkin, 2006; Pizam and Thornburg, 2000; Rowley and Purcell, 2001; Lo and Lamm, 2005), the hospitality industry faces a lot of educational investment loss when training was provided to those leaving employees (Kang and Gould, 2002, Iverson and Deery, 1997; Rowley and Purcell, 2001; Jenkins, 2001).

4. Culture

Kerr and Slocum (2005) are among the advocates of the approach that the reward system can be a powerful means for influencing an organisation’s corporate culture. This is because of their important influence on communication, motivation, satisfaction, and membership (Lawler, 1998). Going a step further and in accordance with Brewster (1995); Bellenger et al, (1984); Milikić (2007); and Nacinovic et al., (2010), Lawler (1998) suggests that pay systems can help to change culture. As a deduction, Bauer and Erdogan (2009) admit that which behaviours are rewarded and punished determine the progression of a company’s culture. Tracey and Hinkin (2000); and Davies et al., (2001) propose that increased wages and improved management practices such as increase staff motivation, commitment, flexibility and the quality of employees within an organisation could be efficient tools to remedy for the labour turnover culture in the hotel industry. However, Buultjens et al., (2007) emphasise on the fact that hospitality businesses should “adopt a more strategic approach to reward” and “monitor its effectiveness”.

2.4 THE TOTAL REWARD SYSTEM

The time when reward was only about cash and when people worked only for money, has nearly reached, if not yet, its extinction (Thompson, 2002; Phonsanam, 2010; Silverman, 2003; Schuster and Zingheim, 2000). Gao (2009) states that hoteliers have shifted from traditional to total reward systems. Simply defined, Total Rewards are “the monetary and non-monetary return provided to employees in exchange for their time, efforts and results” (Worldatwork, 2007). Alternatively, Zingheim and Schuster (2000) suggest that the new concept of total rewards comprise four total reward components as depicted in figure 2.4a.

Figure 2.4a: Total Rewards-Source: Zingheim and Schuster, 2000

For the purpose of this study, the below model has been derived from the extensive list of total rewards provided by Worldatwork (2007) (Find in Appendix) which will be used to categorise Heritage Le Telfair Golf and Spa Resorts reward model.

Figure 2.4b: TOTAL REWARD MODEL

Source: Adapted from: “Total Rewards: Different things to different employers” Worldatwork (2007)

A summary of the components found in the TR system with specific reference to the hospitality industry brought the classification of some points (Refer to Appendix B)

The justification to adopt a total reward approach might be because it improves job satisfaction, work efficiencies, job performances, psychological contract and organizational citizenship behaviours (Zhou et al., 2009). Pessimistically, Kantor and Kao (2004) attributes to HR professionals of “feeling confused or sensing chaos regarding TR” thus contributing to the poor, complex and risky development and execution of TR (Thompson, 2002) leading to counter productivity and resource wastage (Albertson, 2000). Ergo, an advice would be that all pay components should be aligned complementarily and that the TR strategy should be derived from business strategy and, most importantly, be communicated to all employees, (Lyons and Ben-Ora, 2002; Gilbert and Cornish, 2005).

2.5 REWARD PRACTICES IN THE HOSPITALITY SECTOR

2.5.1. MYTH OR REALITY?

Stereotype thinking has been revealed to be that the tourism and hospitality sector “offers low pay, very little training and career prospects, limited scope for promotion, and unsociable working hours” (WTTC, 2002a; HTF, 2000; Walmsley, 2004). Nickson (2007) also narrates the same facts but he associates this situation to the endemicity of unskilled or semi-skilled employees in the hospitality sector.

2.5.1.1 Low Pay

Recurring evidence shows that that the compensation of regular employees of the hospitality is averagely lower comparatively to other sectors (Deery and Shaw, 1999; Hoel and Einarsen 2003; ABS, 2006a; Baum, 2007; Lucas and Jeffries, 1991; Tracey and Hinkin, 2000;; Worcester, 1999). However, hotels and restaurant recruiters are reporting that subject to the growth of the industry employers are increasingly offering attractive recruitment packages to attract the right staff (Wilson, 1999; HCIMA, 2010). Furthermore, wages in hospitality is on a rising trend owing to an increase in minimum wage (Clarke and Chen, 2007; McManus et al., 2011). Yet, Baram (2008) reports that minimum wage raise is not enough to survive in a high cost of living economy.

2.5.1.2 Unsociable Working Hours

The hospitality sector requires employees to work relatively long hours (Pratten, 2003; Baum et al., 1997; Kelley-Patterson and George, 2001; O’Leary and Deegan, 2005; Wallace, 2003; Lo and Lamm, 2005; Baum, 2006; Karatepe and Uludog, 2007 and Wong and Ko, 2009; Birdir, 2002) which deter a good work life balance. Further contributing to the black list, this sector is also associated to “high-burn out” service jobs (Maxwell; Faulkner and Patiar, 1997). Astonishingly, we have not come across any studies which sing the praises of working hours in the hospitality sector. It can thus be deduced that the hospitality workplace will fit only those who love the job environment and working night shifts that Barron’s et al., 2007 study concluded.

2.5.1.3 Limited Training

The EFILWC (2004) and STB (2002) stress that training is viewed as interesting by both employers and employees but is not the priority due to time and money constraint. Jameson, 2000; Dawson, 2006; Roberts 1995; Pratten, 2003; Lucas, 2002; Maxwell et al., 2004; Choe and Dickson, 2010 and Cairncross and Buultjens, 2007 also ratify the lack of investment in training. Indeed, Sigala et al., (2001) and Lashley and Best (2002) affiliate this with the high labour turnover in the industry. Howbeit, employers who admit that employee training has become preponderant for hotels, gain from “improved service quality, decreased labour costs, increased productivity and profitability, high retention” (Kim, 2006). Such companies are Ritz Carlton which provides its employees with 200 hours of training each year (Snell and Bohlander, 2010), Choice Hotels International, Coastal Hotel Group, Four Seasons & Regent Hotels and Resorts, and Disney’s Polynesian Resort (Enz and Siguaw, 2000).

2.5.1.4 Limited scope for promotion and career prospects

In accordance with Getz, 1994; Hjalager and Andersen, 2001 and Page et al., 2001, Walmsley’s (2004) exact words for tourism jobs are “lacking in a clear career structure.” Furthermore, various studies have shown that the hospitality sector is not a career option but rather a “refuge sector”. (Szivas and Riley, 1999; Riley et al., 2002; Wildes, 2007). Wright and Pollert (2006) also talk about an inhibitation of promotion of employees in hotels. Though, Hai-yan’s and Baum’s (2006) survey findings revealed that a majority of 68.1% envisage their future within the hotel sector, the other facet of the research is that nearly half of the staff feel uncertain about their hotel career and whine about promotion opportunities. Regardless of the above, Visit Scotland/George Street Research, (2002) and Wilson (1999) found that careers in the industry were in fact considered challenging and interesting.

2.5.2 FINANCIAL REWARDS

Financial reward are rewards that enhance directly the financial well-being of the employee Chelladurai, (2006) and consists of base and variable pay, employee benefits and allowances (Armstrong, 2002). In an effort to develop a comprehensive understanding of the remuneration in the hotel sector, Mars and Mitchell (1974, p.27) and Wood (1994, 1997) suggested that payment to hotel employees from the perspective of a total payment system is comprised of basic pay ,subsidized food and lodging, tips, ‘fiddles and knock offs’.

Base pay

Base pay is a crucial component of any individual’s total pay, and is used as a tool by many employers to attract talent (Sturman, 2006; Walker and Miller, 2008; Saks et al., 1996). Basic pay is the rate of pay which notionally reflects the market value for a job in an organisation (Heery and Noon, 2001). By far, many studies discerned that wages were preponderant and powerful motivational factors among hospitality employees (Simons and Enz 1995; Griffin and Moorhead, 2009; Blinder, 1990; Lawler, 1991e). Nevertheless, as Milkovich and Newman, 1990 expressed, pay is only one attribute among many others in attracting candidates.

Pay for Performance Plans

Most hospitality businesses are currently using some form of pay-for-performance compensation (Berman, 2010). Pay for performance has often been viewed as a “norm of distributive justice” by Campbell et al., (1998). UNISON (2001) highlights that the most common types of performance pay are “piecework, payment by result, organisation wide incentives, merit pay, performance- related pay, competence based pay, profit related pay”. When pay advancement is based upon an assessment of individual performance, against pre-established objectives, it can be referred to as performance related pay (Egan, 2010; Tanke, 2000). Nonetheless, when employees receive permanent pay increases based upon individual performance assessments, this can be referred to as merit pay (Heneman and Werner, 2005; Park and Sturman, 2009).

Indeed, research evidence clearly supports that pay-for-performance plans have been found to help achieve desired results, at both the individual level (Bonner and Sprinkle, 2002; Gerhart and Milkovich, 1990; Heneman and Werner, 2005; Lawler, 1971, 1981; 1992; Schwab and Olson, 1990) and organizational level (Gerhart and Milkovich, 1990; Gomez-Mejia and Welbourne, 1988; Lawler, 1981). In contrast Hayes and Ninemeier (2009) avow that hospitality managers disagree that pay should be linked to individual performance as this has proved unbeneficial to teamwork. Many other counteracting studies divulged that PFP plans do not always affect performance (Heneman and Werner, 2005; Kahn and Sherer, 1990; Kuvaas, 2006; Pearce et al., 1985; Rynes et al., 2004 and Benson and Brown 2000) and does not really lead to motivation (Marsden and Richardson, 1994; Harris, 2001). Furthermore, PFP has been categorised as being subject to favouritism, personal bias, and deliberate distortion (Pfeffer, 1998; Milkovich and Boudreau, 1991; Campbell et al., 1998) and as an anxiety generator among employees (Bassett, 1994). Thus, the minimum requirement for the proper functioning of PFP should be, as Kessler (1994) says “agreeable to employees.”

Tipping

Tipping is a common practice in the hotel industry and is a considerable source of revenue for service employees (Lynn, 2003; Azar, 2004). Lynn (2001) defines tipping as “an economic payment that occurs in the context of a commercial exchange” thereby encouraging many hotel managers to view it as a useful management tool. Ogbonna and Harris (2002) perceive tipping as an effective way to control employee behaviour and wage cost, and a potential path towards organizational profitability, whilst Lynn (2001) distinguishes tipping as a tool to measure customer satisfaction and server’s performance. Also, tips represent an opportunity for workers to supplement low pay level (Wood, 1992). It is commonly believed that there is a relationship between service quality and tip size (Lynn and Graves, 1996; Conlin et al., 2003). However, empirical research examining this relationship found it to be insignificant (Lynn and Graves, 1996; Lynn and McCall, 2000; Lynn 2001; Azar, 2003a). As such, tipping is an investment for future good service and deters reduced attention (Pearson, 2010; Bodvarsson and Gibson, 1999; Lynn and Withiam, 2008; Lynn and Thomas-Haysbert, 2003). Azar (2007b) strictly disputes this and notes that future service is not dependent on tipping. Consequently, Casey (2008) warns service managers not to count on tipping to motivate staff to provide good service as researchers have found tipping negatively effects employee commitment. Withal, Wood (1992); Lucas, (1996); and Shamir, (1983) criticise this practice as research has demonstrated that tipping can bring perturbation, increase competition and individualism, and overdependence on customers among workers at the workplace. Williams et al. (2004) identified that the collection and distribution of tips method was also customary by managers.

2.6 NON-FINANCIAL REWARDS FOR EMPLOYEES

Direct financial rewards albeit play a central role in the attraction of talented employees, it has been proved that they trail only a short-term impact on employees’ motivational levels (Ellis and Pennington, 2004; Samodien, 2004). This is where non-financial reward programs come in handy. They are in fact tied to the quantity and quality of individual performance to generate greatest impact on improving overall business value (Stolovitch et al., 2002). Non financial rewards, according to De cenzo and Robbins, (1994, p.413), emphasise on making life easier on the job more attractive. According to Armstrong (2002) it includes of recognition, achievement and responsibility.

Non-Financial Recognition (NFR)

“I can live for two months on a good compliment.”

Mark Twain

According to Moody (2008, p. 277), non-financial compensation is defined as “satisfaction that a person receives from the job itself or from the psychological and/or physical environment in which the person works.” Recognition forms an indispensible part of the total reward system of a company (Dessler, 2009; Human Capital Institute, 2009). Recognition typically relates to formally recognising employees’ accomplishment to strengthen employee loyalty, intrinsic motivation and productivity (Aamodt 2007; Dessler 2009; Marchington and Wilkinson 2008; Blum and Tremarco, 2008). Liu (2010) expresses that NFR can convey the message on the type of performance that the organisation expects from them to other employees Silverman (2004) and Human Capital Institute (2009) clarify that the NFR schemes may vary from informal to formal structures (See figure 2.6.3 a)

Figure 2.6a: A dissection of Non-financial Recognition

Schuster and Zingheim (2000) categorise recognition as being verbal, written, work related, social, symbolic, tangible, and financial. According to an employee recognition survey carried out in 2002, 84 percent of the responding 391 companies had the following forms of recognition:

Note: Total adds more to 100% because respondents were asked to indicate all that apply.

Gift Certificates 63%

Other 31%

Cash 58%

Watches 28%

Office accessories 41%

Electronics 24%

Jewellery 40%

Travel 14%

Household items 35%

Debit cards 6%

Table 2.6b: Employee Recognition survey Findings-Source: Compensation and Benefits Report, 2003

Some authors highlight the essential nature of employee recognition as a vector of motivation (Dutton 1998; Appelbaum and Kamal 2000; Saunderson 2004; Grawitch et al., 2006), identity (Dejours, 1993), component of meaningful work (Mow, 1987; Morin, 2001) and company success (Ford and Fina, 2006; Armstrong and Brown 2006; Cilmi 2005; Schuster and Zingheim, 2000). In fact, a lack of recognition embodies the second-largest risk factor for psychical anxiety at work (Brun and Biron et al., 2003) and to high turnover in hospitality industry (Raleigh, 1998). Surprisingly, Nelson (1998) reports that employee recognition might not be beneficial when it becomes annoying to others who have to hear the continuous praises of their colleagues. Moreover, it has been found that traditional forms of recognition such as Achievement Awards, Cash Substitutes, Nominal Gifts or Food, and Public Perks have diminished in importance for most of today’s employees (Nelson, 2004). Results from various studies have indicated that indicate that wage increases and cash incentives are important motivational rewards for lower-level employees (Hong et al,. 1995; Arnolds and Venter, 2007). Thus, managers should bear in mind that recognition might not always be appropriate for everybody.

“Fiddles” and “Knock-offs”

Although recruitment, retention, and understaffing issues in hospitality are well documented (Baum, 2002; Brien, 2004; Choi et al., 2000; Gustafson, 2002; Jameson, 2000), there is poor literature dedicated to the issue of fiddles and knock-offs (Jones and Groenenboom, 2002). In addition to tips, some hotel and catering workers might also benefit from “Fiddles” and “Knock-offs” (Wood, 1992). “Fiddles” refers to pilferage that goes on in hotels. Whilst “knock-offs” is a particular form of fiddle involving the purloining of (usually) small items such as soap and towels, but mostly consisting of stealing food (Mars, 1973; Mars and Nicod 1981). In accordance with Mars and Mitchell (1976) and Nickson (2007) who establish that “fiddles” and “knock-offs” are in fact institutionalised in hotels whereby management collude on allowing to a certain extent this practice, Gill et al. (2002) have also stated that small-scale theft of hotel property are tolerated as a form of “shrinkage”. The reasoning behind might be explained by Hollinger and Clark (1983) who found that employer retraction against theft was inversely related to theft. Despite that, agreement is widespread that theft in the workplace is a serious problem (Greenberg, 2002, Weber et al., 2003) and has proved costly for businesses (McClurg, 2006). Hence, the challenge lies in “management’s concern in setting parameters beyond which pilferage will not be tolerated” (Mars and Mitchell, 1976).

Fringe Benefits

Heneman and Schwab (1985) defined benefits as “indirect pay or payment for “time not

worked” such as health care, retirement account, and insurance”. Benefits account for a big portion of the reward package, and employees recognise them as an integral part of their reward package (Gross and Friedman, 2004; Williams et al., 2007). In its simplest forms benefits may include: breakfasts, lunches, dinners and snacks, that the employees and their families can have (Rubis, 2004), free cab rides home after certain times (Oldfield and O’Donovan, 2001). Namasivayam and Zhao. (2007) apprised that benefits should be offered to all employees as they found out that benefits had greater positive effects on motivation, retention and job satisfaction on non-managerial employees. Considering the lack of academic research in the field of employee benefits in the hospitality industry, information on employee benefits at three international hotels has been gathered from their respective websites in the table 2.6c.

Conversely, Hansen (2005) recur that “the cost of employee benefits in the united states is killing profitability for whole sectors.” Because of such costs, organisations are increasingly implementing cost containment strategies to lower labour expenses (Lucero and Allen, 1994). The same authors continue to argue that negative repercussions can range from mild dissatisfaction to severe outcomes like outrage, resentment, and anger.

Table 2.6c: Examples of Employee Benefits in international hotels

THE RITZ CARLTON

FOUR SEASONS HOTELS AND RESORTS

SHERATON HOTELS AND RESORTS

Well-tailored Uniforms

Medical, Dental, Vision Coverage

Life and Accidental Death & Dismemberment Insurance

Short and Long Term Disability

Health Care and Family Care Spending Accounts

Domestic Partner Benefits

Vacation, Sick/Personal and Holiday Pay

Retirement 401(k) Plan

Employee Stock Purchase Plan

Employee Assistance Program

Educational Assistance Program

Employee Discounts on hotel rooms, restaurant outlet meals and retail items

Complimentary Employee Meals

Complimentary stays at Four Seasons properties with discounted meals

Paid holidays / vacation

Educational assistance

Dental and medical  / disability / life insurance

Retirement benefits / pension

Employee service awards

Annual employee party / social and sporting events

Complimentary meals in dedicated employee restaurants

Comprehensive, low cost health insurance for employee and family

Dental and vision insurance coverage

Company-sponsored retirement plans (U.S. 401(k) program)

Life Insurance and Disability Insurance

Flexible Spending Accounts

Employee Stock Purchase Plan

Employee Assistance Program

Adoption Assistance

Domestic Partner eligibility

SOURCE: Adapted from: http://corporate.ritzcarlton.com/en/careers/benefits.htm, http://jobs.fourseasons.com/workingatfourseasons/benefits/Pages/fsbenefits.aspx, http://www.starwoodhotels.com/sheraton/careers/offer/benefits.html

2.7 MEASURING THE EFFECTIVENESS OF REWARD SYSTEMS

“You cannot improve what you cannot measure”

Lord Kelvin

Pfeffer (1998) remarked that there was little devotion in measuring the efficacy of rewards although the design of the reward system loomed much management attention. However, Armstrong et al. (2009) rate the importance of such practice even above the design and execution of rewards. The primordial reasons for measuring reward effectiveness are to apperceive the benefits and impediments of a reward strategy Hodgson (2010) and to discern potential areas for improvement (Armstrong et al. (2009). Yet, Heneman (2002) comments that the evaluation of a reward system’s effectiveness remains often overlooked. For instance, reward survey conducted by the CIPD in 2009 showed that only 32 percent of respondents had carried out any form of evaluation. In addition, a survey of reward by e-reward in 2009 established that only a low proportion of 12 percent of respondents had evaluated their performance-related pay schemes.

Tools used to carry out the evaluation, according to e-reward (2009a) are:

External market survey

Staff attitude survey

Benchmarking

Internal data analysis

Equal pay reviews

Apparently, simpler methods for such practice do exist. For example, a survey carried out by Edenred concluded that reliance on manager observation, feedback and employee surveys were common for measuring reward effectiveness Hodgson (2010). Other criteria that could be used to measure reward effectiveness include improved performance, compliance with laws and regulations, cost reduction, contribution to strategic plans (Bergmann and Scarpello, 2002); Gomez-Mejia, 1992) and employee attitudes (Ram and Prabhakar, 2010). Hence, hospitality businesses could engage in carrying out such assessments in order to investigate the problem of high labour turnover in the industry.

The tendency for overlooking the evaluation of rewards as highlighted by Heneman (2002) can be justified by the following reasons provided by Pfeffer and Sutton (2006):

Lack of time and resources to evaluate

Bewildering sources of information

Lack of training and skills in statistics

Laziness

Constant change in organisations

2.8 THE GAP BETWEEN HOW MANAGERS REWARD EMPLOYEES AND HOW EMPLOYEES WANT TO BE REWARDED

Figure 2.8: What Do Employees Want From Their Jobs?-Sources: Foreman Facts, Labor Relations Institute of NY (1946); Lawrence Lindahl, Personnel Magazine (1949)

Repeated with similar results: Ken Kovach (1980); Valerie Wilson, Achievers International (1988)

Bob Nelson, Blanchard Training & Development (1991)

Sheryl & Don Grimme, GHR Training Solutions (1997-2001)

Most managers feel that all employees want is more money (Nelson, 2003). Research shows there is a wide gap between managers and employees on this issue, as shown in the figure 2.8.1. However, other survey findings revealed new elements which have not been found by the original study in 1996. Thus, the below list has been compiled from various authors’ survey findings on the subject in hand.

Fair (competitive) Compensation (Perkins, 2007)

Flexible working hours and time-off from work (Nelson, 2003)

Personal praise: verbal, public and written (Corelli, 2008)

Increased autonomy and authority in their job (Corelli, 2008; Sandberg, 2004)

Time with their manager ( Hodgetts and Heggar, 2007)

Respect and dignity (Hodgetts and Heggar, 2007, Perkins, 2007)

Organisational culture and open communication (Croteau, 2010; Corelli, 2008)

2.9 Summary

The literature has permit us to have a critical assessment of various authors’ viewpoint on Reward Systems, its development, the different types, its measurement and the different perceptions of rewards between managers and employees. Though, research evidence are somewhat lacking on areas like measurement of rewards, a base idea has been established.