Running head: REWARD AND PERFORMANCE PRACTICES

Reward and Performance Practices MGMT 645 - Organizational Development & Culture March 10, 2014

REWARD AND PERFORMANCE PRACTICES Abstract

This paper describes a detailed report of the reward structure at XYZ Company. Along with extensive research, XYZ Company' reward programs will be examined, and information will be provided on the effectiveness of the programs as they relate to employee motivation and performance.

REWARD AND PERFORMANCE PRACTICES Reward Programs at XYZ Company

Many believe that a company's most important asset is its people. Keeping the company's employees happy will make the company a stronger force within its industry. Companies wanting to create the best environment to retain their employees need to create incentives that go beyond the typical benefits programs. According to Richard Bead, vice-president of human resources at Telus Corporation, Pay raises are gener ally effective for three months, and without further incentives, the motivation fizzles" (Rewarding, 2013). Even though rewarding employees monetarily is usually effective, once the money is spent it can be forgotten. And money is not a motivator for everyone, so it is important to use non financial rewards in place of money. XYZ Company is very active in several reward programs to help motivate its employees to increase sales, be productive, reduce wastes and be safe. Some of the company's incentive and reward programs are isolated to certain areas of the organization and others are offered to all employees. Even though all the incentive programs reward the employees in one way or another, not all the programs are effective in the company's efforts to create motivation. The reward programs reviewed in this paper are currently active at XYZ Company. The company's fiscal year is from January to December, and runs its reward programs on the same schedule. Attendance Bonus The easiest way for employees at XYZ Company to earn one type of incentive bonus is to do what they get paid for; going to work every day. The attendance bonus program was established only for hourly employees. First, it must be stated that an employee obtains vacation pay after one full year of employment, and receives two personal days per year after their ninetyday probation period. If the employee has perfect attendance for a month, then that person receives two positive points for that month, or a maximum of twenty-four points per year. An employee looses one point for being late, or missing a half day of work, and two points for

REWARD AND PERFORMANCE PRACTICES missing a full day of work. The "company" buys back the employees' positive points at the end of the year at the rate of $25 per point. So, an employee with perfect attendance for the entire year receives $600 in attendance bonus. This is a very effective program at XYZ Company, as thirty-six employees received the entire $600 bonus for having perfect attendance. Gainshare Bonus XYZ Company pays out gainshare bonuses per yearly thirds to all employees of the organization. This bonus program is paid on how well the company is overall performing financially throughout that period, taking into account overall sales, waste and overtime. The

bonuses are set up in three periods; January through April, May through August, and September through December. The periods were established to allow new employees, who did not work the entire year, to have a chance to benefit from the bonus program. If an employee worked the entire period, that person would be eligible for the bonus paid out for that period. The bonuses are paid at a percentage of an employee's base salary, and for the year ending 2013, the bonus program paid out 1% in each of the three periods, and paid employees who worked the entire year up to a 20% year-end bonus. According to the U.S. Office of Personnel Management, "Gainsharing is a reward program that allows employees to share in an award based upon productivity gains or savings in excess of a predetermined baseline of performance" (Gainsharing, 2014). If XYZ Company' goals include improving productivity, reducing waste, reducing costs, and creating a savings in production costs, its gainsharing program focuses employees on those goals. This has been a very effective and motivational program for the organization, as the goals have to constantly be increased every year.

Monthly Gas Card Bonus

REWARD AND PERFORMANCE PRACTICES

The monthly gas card program was created by the company's president to award all XYZ Company' employees for hitting pre-established monthly sales goals. The monthly goals are set at the beginning of the year by reviewing the previous years' sales averages and investigating current and projected industry trends. In 2013, the monthly goals were as follows:
$3.3 million = $50 gas card $3.8 million = $100 gas card $4.3 million = $200 gas card

In 2013, employees received $1350 in monthly gas card bonuses, an increase of $550 over the prior year. The monthly sales dollars are charted and reported to the employees on a weekly basis, so the employees know the actual sales dollars in comparison to the monthly goal. This is a very effective program for motivating employees to produce the maximum amount of products possible. The only negative aspect of the program is the trade-off of quality for quantity. There have been times when people have circumvented the established processes to meet the monthly sales goals. This reward program has the potential to cause quality issues. According to business consultant Barry Lynch, quality issues seem to be caused by people trying to speed up the process as opposed to following their own documented processes. Employees will make a few more products, but those gains were offset by expensive rejects that occurred (Lynch, 2012). This temptation to produce poor quality could be minimized by subtracting customer returns, return freight costs, and internal scrap from the monthly sales totals. Individual Performance Review Each year, XYZ Company' management holds performance reviews with each of its employees. Each review goes over the employee's performance towards the goals established in the previous year's review. The employee would receive a standard 3% raise, plus additional percentages for performance to established individual goals and the employee's attendance. This performance review process is very effective at motivating the employees to do the right things

REWARD AND PERFORMANCE PRACTICES to make the organization successful. XYZ Company has not always had performance reviews

with its employees, but upon reading all the entries in the company's suggestion box a few years back, the number one suggestion was to have annual employee reviews. When surveying employees now, it is one of employees' most positive points towards management. Rewarding Safety Safety is so important at XYZ Company that at the end of 2012 the President/CEO rolled out to the employees a safety reward program for the upcoming year. The program consisted of the company placing $25,000 into a "safety fund." Then, for every lost-time injury, $5000 would be subtracted from the fund. Whatever amount of money that remained in the safety fund at the end of the year is divided up amongst all hourly-paid employees. In 2013, the organization had one lost-time injury, resulting in $5,000 being taken from the safety fund. This meant that $20,000 was divided amongst 126 employees, at approximately $158 to each hourly employee. The problem with this type of safety reward program is that it will cause employees not to report accidents and injuries. For the previous four years, the average yearly lost-time injuries at XYZ Company equaled eight incidents per year, and nothing major was put in place to minimize this number. According to David Michaels, OSHA administrator, these types of programs discourage employees from reporting illness and injuries. As a result, problems are concealed, investigations cannot take place and workers remain exposed to harm (Morrison, 2011). This safety award program implemented by XYZ Company' senior management does not seem to be effective.

References

REWARD AND PERFORMANCE PRACTICES Gainshairing and goalsharing. (2014). Performance management: keys to effective group

incentive programs. United States Office of Personnel Management. Retrieved March 14, 2014, from https://www.opm.gov/policy-data-oversight/performancemanagement/performance-management-cycle/rewarding/keys-to-effective-groupincentive-programs/ Lynch, B. (2012, Dec. 20). Quality vs quantity: why faster is not always better. GE Intelligent Platforms. Retrieved March 15, 2014, from http://www.ge-ip.com/blog/quantity-vsquality-why-faster-is-not-always-better/ Morrison, K. (2011, April 11). What's your reward? The debate over incentive programs. National Safety Council, Safety+Health. Retrieved March 12, 2014, from http://www.safetyandhealthmagazine.com/articles/5501-whats-your-reward Rewarding your employees: 15 examples of successful incentives in the corporate world. (2013, June 20). Robinson Resource Group. Retrieved March 14, 2014, from http://www.robinsonresourcegroup.com/rewarding-your-employees-15-examples-ofsuccessful-incentives-in-the-corporate-world/