(Solution) 5HR03 (AC2.2) Explain how contingent rewards can impact individual, team and organisational performance
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Description
Solution
Contingent Rewards
Financial or non-financial awards given upon meeting predetermined performance or outcome standards are known as contingent rewards. They motivate and facilitate the behaviour that needs to be achieved or exhibited (CIPD, 2022). When it concerns Eco-Insulate, this can involve activity-based remuneration, for instance, when installers are given incentives to undertake a given number of installations. Another example of this would be recognition awards, whereby groups are rewarded publicly, especially when they have complied with certain quality standards.
Individual performance
At Eco-Insulate, a skill-based compensation structure also improves each installer’s performance (Cotton, 2023). For example, Eco-Insulate might have to pay more for installations that need to be certified Energy Star. As a result, the installers would be more inclined to choose the better paying installation than undergoing training for such a certification. Increased pay for more experienced installers can encourage them to take Energy Star training provided by the employer voluntarily. With these higher prices for such convoluted systems, the installers would be motivated to advance their technical know-how. Therefore, the contingent reward of a higher pay for skill could improve the technical quality and efficiency of individual installers.
Team performance
It may be useful to point out that contingent team rewards can have a positive effect on the team performance of Eco-Insulate. Ladley, Wilkinson and Young (2015) also support the view, stating that if the productivity objective is attained, non-monetary incentives such as a month-long casual clothing code will foster cooperation. This is due to the possibility that employees will help one another finish installations on schedule so they can share in the incentives. Since each person’s actions now directly impact the team’s success, the incentive may also increase motivation. If team members are dependent on one another to perform to expectations in order to be rewarded, then improved motivation and teamwork may result in increased attendance, fewer errors, and reduced expenses associated with rework.
Organisational performance
By giving installers and teams profit-sharing awards that are based on business revenue twice a year, it may be possible to match team and individual aspirations with organisational objectives. This could encourage on-time and economical deliveries. If installers accept more responsibility for the quality requirements, warranty costs may be reduced. Employee investment in the success of the company will lead to an improvement in organisational performance over time in critical measures, including productivity, customer satisfaction, and profits.
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