(Solution) 5HR03 AC1.1) Explain the principles of reward and its importance to organisational culture and performance management.
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Description
Solution
The term “total reward” describes the benefits an employee receives from their job, which go beyond their base pay or compensation. Eco-Insulate UK will need to adhere to intrinsically suitable, fair, equitable, and transparent incentive policies in order to promote a positive organisational culture, drive transformation, and strengthen performance management. It is also important to note that when done effectively, total reward strategies do have the capacity to alter the organisational culture and thereby enhance corporate outcomes (CIPD, 2022).
Fairness
Consequently, Cotton (2023) argues that fairness is part of Eco-Insulate’s organisational culture as it promotes constructive employee relations and employee productivity. When compensation is perceived as unfair, then the confidence in the management is eroded, thus leading to low morale and a bitter employee who is disengaged. The compensation reviews must be done frequently to prove to the workers that their efforts are valued.
Adequate wages, which respond to the abilities, the responsibilities of the employee, and his performance, prevent a qualified worker from feeling underestimated at his workplace. Paying employees based on their success at work encourages better output. Inequitable organisational systems do not stimulate workers to become more productive or produce higher-quality work.
Transparency
Transparency in incentive practices is a key component of Eco-Insulate’s second main organisational culture. This will foster a culture of understanding and trust between the management and the employees. A culture of conjecture and uncertainty is facilitated by a lack of transparency regarding compensation decisions and benefit plans, and this gradually erodes employee collaboration and loyalty.
Transparency promotes pay-for-performance in performance management and this leads to increased output. When employees know what is expected of them and what is expected of anyone who excels in the position, then they can assume responsibility for their growth. Transparency helps make the rationale for awards clear and motivates personnel to set higher goals, and make it easier for Eco-Insulate to achieve its goals.
Equity
The notion of equity promotes individual justice in creating professional relationships and the organisational culture of Eco-Insulate. An equitable system offers a diplomatic approach to the way compensation is done depending on the job or contribution of the personnel, thus offering different employees their fair worth (ACAS, 2024). When people feel valued for what they can provide employers with, their loyalty towards such organisations and the morale of the organisation increases.
Equity business performance does not consider tenure and other aspects; it just focuses on rewarding work output. When variable pay is based on team and individual performance levels, fairness in pay increases the focus on performance and sustains a culture that promotes high-performance levels.
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