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What is a Reward Strategy? Report

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Updated: Jan 28th, 2020

A reward strategy is a method utilized within companies in order to increase motivation, job satisfaction as well as ensure the retention of good employees. The concept of a “reward” for services rendered within a company is intrinsically connected to the concept of job satisfaction wherein an employee derives satisfaction for the work he does for the company based on the level of compensation he/she receives (Giancola 2009).

Normally taking the form of monetary assets, a reward strategy can take on various forms such as giving bonuses for performance, an extra day off due to compliance to a company’s attendance policies as well as a variety of other iterations as deemed necessary by a company (Badawy 2007).

Other types of rewards that companies give their employees come in the form of free gym memberships and product promotions where employees get a discount when buying products from the company.

What is a Performance based Reward Strategy?

A performance based reward strategy can be defined as a method of compensating an employee for services rendered based on a measurable set of defined metrics that a company has set on employee performance that determines the level and amount of compensation that an employee will receive.

As noted by studies such as those by Muduli (2011), no two workers are the same in that they will perform at different levels of efficiency and effectiveness (Muduli 2011). As a result, many companies, often question having to pay workers the same amount of “reward” despite variances in performance.

A more effective method would be to pay workers based on their performance levels in order to ensure that the company gets the most out of the salaries that they pay out (Human Resources and Payroll Outsourcing Pays Rewards for Local Entrepreneur 2012).

By establishing a set amount of compensation for the type of performance rendered, companies are able to utilize the theory of expectancy as a means of encouraging higher levels of performance since workers will know exactly how much in terms of a “reward” they will receive based on the type of performance they rendered during that particular payment period (McAdams & Hawk 1993).

An examination of the current practices of Accenture in their business process outsourcing division within the U.K. reveals the use of performance based advancement opportunities as a means of attracting and retaining Gen Y employees (United we stand 2009). This process works by setting a series of metrics that each individual employee is measured by with an evaluation period coming once every month.

Should that particular employee meet the metrics set by the company they are paid based on their level of performance as measured by a pay scale (Kerr & Slocum Jr. 2005). This method of performance based advancement is in line with what was mentioned earlier regarding the need to correlate the concept of “reward” with performance.

However, it must be questioned whether performance based incentives through metrics is an applicable type of reward within present day companies (Yi Hua & Hai Ming 2011).

Located in London, Hamleys is the largest toy store in the U.K. and has dozens of employees working in several areas of shop (Williams 2004). For the floor walkers (i.e. shop assistants), they actually gain a percentage of the amount of a product that a customer buys whenever a cashier indicates that they have helped a customer come to a buying decision (Williams 2004).

This percentage is accumulated and added to their monthly pay during the next payment cycle. As such, this version of performance related pay encourages employee performance by correlating substantial rewards based on the number of deals they close to convince customers to buy a particular product.

Mc Donald’s and its Performance Based Incentives

Another factor that you should take into consideration is that performance based incentives encompass not only the amount of work done but can also involve an employee’s attendance level and the amount of time that they constantly report early for work (Lewis 2004).

For Mc Donald’s, this comes in the form of its performance incentive program where employees get a 5 to 10% increase in monthly pay (depending on the location) for constantly arriving early and working at the hours designated by the company (Lewis 2004). By correlating a pay increase with the concept of prompt attendance, this method of performance based incentive focuses on encouraging employees

Barriers/Challenges to Implementing Performance Based Strategies

  1. Present Business Culture – the present business culture within the company may be so static that implementing a performance based strategy would be viewed as detrimental to company operations.
  2. Cost – implementing a performance based policy may entail significant costs which the company may be unable to cover.
  3. Employee resistance to change – the last of the barriers/challenges to implementing a performance based strategy is the level of resistance employees have to changes within the company. This can come in the form of direct/indirect methods of employee protest to proposed metric based methods of evaluation which could negatively impact the performance of the company as a whole.


When examining the findings of this paper, it can be seen that the concept of the performance based reward strategy is an effective means of increasing an employee’s motivate to work. Through such a policy, the company is able to properly reward employees for their hard work resulting in better operational performance for the company as a whole.

Reference List

Badawy, MK 2007, ‘Managing human resources’, Research Technology Management, vol. 50, no. 4, pp. 56-74, Business Source Premier, EBSCOhost.

Giancola, FL 2009, ‘Is Total Rewards a Passing Fad?’, Compensation & Benefits Review, vol. 41, no. 4, pp. 29-35, Business Source Premier, EBSCOhost.

‘Human Resources and Payroll Outsourcing Pays Rewards for Local Entrepreneur’ 2012, San Diego Business Journal, vol. 33, no. 29, p. S34, MasterFILE Premier, EBSCOhost.

Kerr, J, & Slocum Jr., J 2005, ‘Managing corporate culture through reward systems’, Academy Of Management Executive, vol. 19, no. 4, pp. 130-138, Business Source Premier, EBSCOhost,

Lewis, E 2004, ‘Hamburger culture’, Brand Strategy, 186, p. 3, Vocational and Career Collection, EBSCOhost.

McAdams, J, & Hawk, E 1993, ‘Performance-based rewards…what works and why’, Journal Of Compensation & Benefits, vol. 8, no. 5, p. 52, Business Source Premier, EBSCOhost.

Muduli, A 2011, ‘Performance Based Reward and National Culture: An Empirical Evidence from Indian Culture’, Synergy (0973-8819), vol. 9, no. 1, pp. 1-13, Business Source Premier, EBSCOhost.

‘United we stand’ 2009, Director (00123242), vol. 62, no. 10, p. 22, Business Source Premier, EBSCOhost.

Williams, C 2004, ‘Inequality in the Toy Store’, Qualitative Sociology, 27, 4, pp. 461-486, Academic Search Premier, EBSCOhost.

Yi Hua, H, & Hai Ming, C 2011, ‘Strategic fit among business competitive strategy, human resource strategy, and reward system’, Academy Of Strategic Management Journal, vol. 10, no. 2, pp. 11-32, Business Source Premier, EBSCOhost.

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