Types of Employee Rewards

 Employee rewards are an excellent tool to recognize good performance and make the employee feel
valued and appreciated. There are many ways to reward employees that involve both monetary and non-
monetary efforts. At times a simple "thank you" can go a long way. The important thing about employee
rewards is that they must be fair to all employees and given in appropriate situations. The company policy
on employee rewards should be specific and clearly defined.

Monetary Rewards
 Monetary rewards are given for a variety of reasons. Some examples are meeting sales goals,
achieving quality, outstanding performance in a given situation, or delivering a special project. Typical
rewards are money in a form of a bonus, trips paid for by the company, gifts from a rewards catalog, or
services such as cell phone or paid cable.

Non-Monetary Rewards
 Non-monetary rewards are given for going above and beyond as a team player, perfect attendance, or
learning a new skills. Examples of non-monetary rewards are movie tickets, restaurant coupons,
certificates, thanks from the bosses, flexible schedules, a day off, picnics, recognition of birthdays, and
free lunches.

Other Rewards
 Other types of rewards can also be given to employees. Some examples are a parking space,
outstanding employee plaque, corner office space, personalized items (brief cases, day planners), shirts,
jackets, and employee discounts. Regardless of the type of rewards given, be consistent and fair in
delivering the rewards program.

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Maslow's Hierarchy of Needs

If motivation is driven by the existence of unsatisfied needs, then it is worthwhile for a manager
to understand which needs are the more important for individual employees. In this regard,
Abraham Maslow developed a model in which basic, low-level needs such as physiological
requirements and safety must be satisfied before higher-level needs such as self-fulfillment are
pursued. In this hierarchical model, when a need is mostly satisfied it no longer motivates and
the next higher need takes its place. Maslow's hierarchy of needs is shown in the following
diagram:

Maslow's Hierarchy of Needs

Self-Actualization

Esteem Needs

Social Needs

Safety Needs

Physiological Needs

Physiological Needs

Physiological needs are those required to sustain life, such as:

 air
 water
 nourishment
 sleep
According to Maslow's theory, if such needs are not satisfied then one's motivation will arise
from the quest to satisfy them. Higher needs such as social needs and esteem are not felt until
one has met the needs basic to one's bodily functioning.

Safety

Once physiological needs are met, one's attention turns to safety and security in order to be free
from the threat of physical and emotional harm. Such needs might be fulfilled by:

 Living in a safe area

 Medical insurance
 Job security
 Financial reserves

According to Maslow's hierarchy, if a person feels that he or she is in harm's way, higher needs
will not receive much attention.

Social Needs

Once a person has met the lower level physiological and safety needs, higher level needs become
important, the first of which are social needs. Social needs are those related to interaction with
other people and may include:

 Need for friends

 Need for belonging
 Need to give and receive love

Esteem

Once a person feels a sense of "belonging", the need to feel important arises. Esteem needs may
be classified as internal or external. Internal esteem needs are those related to self-esteem such as
self respect and achievement. External esteem needs are those such as social status and
recognition. Some esteem needs are:

 Self-respect
 Achievement
 Attention
 Recognition
 Reputation

Maslow later refined his model to include a level between esteem needs and self-actualization:
the need for knowledge and aesthetics.
Self-Actualization

Self-actualization is the summit of Maslow's hierarchy of needs. It is the quest of reaching one's
full potential as a person. Unlike lower level needs, this need is never fully satisfied; as one
grows psychologically there are always new opportunities to continue to grow.

Self-actualized people tend to have needs such as:

 Truth
 Justice
 Wisdom
 Meaning

Self-actualized persons have frequent occurrences of peak experiences, which are energized
moments of profound happiness and harmony. According to Maslow, only a small percentage of
the population reaches the level of self-actualization.

Implications for Management

If Maslow's theory holds, there are some important implications for management. There are
opportunities to motivate employees through management style, job design, company events, and
compensation packages, some examples of which follow:

 Physiological needs: Provide lunch breaks, rest breaks, and wages that are sufficient to
purchase the essentials of life.
 Safety Needs: Provide a safe working environment, retirement benefits, and job security.
 Social Needs: Create a sense of community via team-based projects and social events.
 Esteem Needs: Recognize achievements to make employees feel appreciated and valued.
Offer job titles that convey the importance of the position.
 Self-Actualization: Provide employees a challenge and the opportunity to reach their full
career potential.

However, not all people are driven by the same needs - at any time different people may be
motivated by entirely different factors. It is important to understand the needs being pursued by
each employee. To motivate an employee, the manager must be able to recognize the needs level
at which the employee is operating, and use those needs as levers of motivation.

Limitations of Maslow's Hierarchy

While Maslow's hierarchy makes sense from an intuitive standpoint, there is little evidence to
support its hierarchical aspect. In fact, there is evidence that contradicts the order of needs
specified by the model. For example, some cultures appear to place social needs before any
others. Maslow's hierarchy also has difficulty explaining cases such as the "starving artist" in
which a person neglects lower needs in pursuit of higher ones. Finally, there is little evidence to
suggest that people are motivated to satisfy only one need level at a time, except in situations
where there is a conflict between needs.

Even though Maslow's hierarchy lacks scientific support, it is quite well-known and is the first
theory of motivation to which many people they are exposed. To address some of the issues of
Maslow's theory, Clayton Alderfer developed the ERG theory, a needs-based model that is more
consistent with empirical findings.

Vroom's expectancy theory

...assumes that behavior results from conscious choices among alternatives whose purpose it is to
maximize pleasure and minimize pain. Together with Edward Lawler and Lyman Porter, Victor
Vroom suggested that the relationship between people's behavior at work and their goals was not as
simple as was first imagined by other scientists. Vroom realized that an employee's performance is
based on individuals factors such as personality, skills, knowledge, experience and abilities.
The theory suggests that although individuals may have different sets of goals, they can be
motivated if they believe that:
 There is a positive correlation between efforts and performance,
 Favorable performance will result in a desirable reward,
 The rewardwill satisfy an important need,
 The desire to satisfy the need is strong enough to make the effort worthwhile.
The theory is based upon the following beliefs:

Valence
Valence refers to the emotional orientations people hold with respect to outcomes [rewards]. The
depth of the want of an employee for extrinsic [money, promotion, time-off, benefits] or intrinsic
[satisfaction] rewards). Management must discover what employees value.

Expectancy
Employees have different expectations and levels of confidence about what they are capable of
doing. Management must discover what resources, training, or supervision employees need.

Instrumentality
The perception of employees as to whether they will actually get what they desire even if it has been
promised by a manager. Management must ensure that promises of rewards are fulfilled and that
employees are aware of that.
Vroom suggests that an employee's beliefs about Expectancy, Instrumentality, and Valence interact
psychologically to create a motivational force such that the employee acts in ways that bring
pleasure and avoid pain.
ERG Theory

To address some of the limitations of Maslow's hierarchy as a theory of motivation, Clayton

Alderfer proposed the ERG theory, which like Maslow's theory, describes needs as a hierarchy.
The letters ERG stand for three levels of needs: Existence, Relatedness, and Growth. The ERG
theory is based on the work of Maslow, so it has much in common with it but also differs in
some important aspects.

Similarities to Maslow's Hierarchy

Studies had shown that the middle levels of Maslow's hierarchy have some overlap; Alderfer
addressed this issue by reducing the number of levels to three. The ERG needs can be mapped to
those of Maslow's theory as follows:

 Existence: Physiological and safety needs

 Relatedness: Social and external esteem needs
 Growth: Self-actualization and internal esteem needs

Like Maslow's model, the ERG theory is hierarchical - existence needs have priority over
relatedness needs, which have priority over growth.

Differences from Maslow's Hierarchy

In addition to the reduction in the number of levels, the ERG theory differs from Maslow's in the
following three ways:

 Unlike Maslow's hierarchy, the ERG theory allows for different levels of needs to be
pursued simultaneously.
 The ERG theory allows the order of the needs be different for different people.
 The ERG theory acknowledges that if a higher level need remains unfulfilled, the person
may regress to lower level needs that appear easier to satisfy. This is known as the
frustration-regression principle.

Thus, while the ERG theory presents a model of progressive needs, the hierarchical aspect is not
rigid. This flexibility allows the ERG theory to account for a wider range of observed behaviors.
For example, it can explain the "starving artist" who may place growth needs above existence
ones.

Implications for Management

If the ERG theory holds, then unlike with Maslow's theory, managers must recognize that an
employee has multiple needs to satisfy simultaneously. Furthermore, if growth opportunities are
not provided to employees, they may regress to relatedness needs. If the manager is able to
recognize this situation, then steps can be taken to concentrate on relatedness needs until the
subordinate is able to pursue growth again.
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