Organizational Culture/Rewards System There Are Numerous Links

Organizational Culture/Rewards System

There are numerous links made in research regarding organizational culture and a rewards system. A majority of the studies available suggest that in general an organizational culture that fosters communication and a collaborative or team oriented environment is more likely to successful implement a rewards system, and more likely to have a rewards system in place than one that does not (Burke, 1995).

Malekzadeh and Nahavandi (1993) show that cooperative behavior and productivity can be encouraged when the organizational culture is one that is built on employee participation and commitment, and that organizational reward systems typically encourage a culture that is cooperative and collaborative in nature (p.22). Further they argue that when an organizational culture supports a reward system employees learn to behave in a collaborate manner but still value competition and consider it a key success factor related to high performance (Malekzadeh & Nahavandi, 1993).

Boughton, Gilley & Maycunich (1999) suggest that the formulation of a compensation and reward philosophy that "anchors development of long-term compensation and reward strategies" is critical to an organization success and that compensation and rewards should be culturally linked to employee growth and development in a manner that enhances organizational performance capacity (p. 140).

As organizations are every changing it is also critical that a reward philosophy is flexible and takes into account the values, guiding principles as well as strategic goals and objectives of the organization or the system will ultimately fail (Boughton et. al, 1999:140).

An organizational culture that supports teamwork and a team based approach to problem solving is more likely to support a rewards-based system that acknowledges the accomplishments of individuals and groups alike (Ezzamel & Willmott, 1998:358).

The stability and success of a rewards system often depends on the extent to which a rewards-based program is adopted and incorporated into an organizations culture (Cesaria, Morley & Shockley-Zalabak, 1997; Shockley-Zalabak & Morley, 1994). Research suggests that relationships between organizational cultural themes and employee values as well as communication activities within the organization and perceptions of outcomes influence the success and impact of a rewards-based system as well (Cesaria et. al, 1997: 253).

Johnson (2000) finds that supervisors perceptions of culture are generally much more positive than employees perceptions of culture, and that for a rewards program to be successfully implemented it is critical that the organizational climate be assessed more from an employees perspective than that of a manager (Johnson, 2000). Johnson further descries the notion that a rewards-based system is more feasibly adopted in a democratic vs. A hierarchical work climate where management and labor relations in general are perceived more favorably.

Hallowell, Schlesigner, & Zornitsky, (1996) find that the organizational culture can impact a rewards system in a positive manner if the internal environment fosters a communication oriented atmosphere where customers and employees are encouraged to interact and engage each other in a positive and collaborative manner (p. 20).

Factors Influencing Pay Structures

There are a number of factors that influence the internal pay structures of organization. In fact no one factor typically is responsible for influencing the entire internal pay structure evident within a given organization. The primary factors that have been identified as influencing pay structures in a majority of organizations include organizational culture, the presence of or lack of performance measurement systems, the organizational design (i.e. whether an organization is hierarchical or more democratically or team based) and the size of a company. The organizations role in the marketplace and productivity are also factors that may influence the overall pay system and structure adopted.

One of the factors that influence internal pay structures is the existence of lack of a performance measurement system (Grifel, 1994:19). Performance measurement data can be utilized by organizational management to make budgetary decisions with regard to employee reimbursement and pay. Generally performance appraisal systems are used for budgetary decision making and allocation of resources, though it is difficult to design systems that "appropriately link the measurable goals and objectives of programs with results and link results to budgeting and pay" (Grifel, 1994:19).

Boughton et. al, (1999) suggests that establishment of an internal pay and compensation structure should be based on rewarding people for "the right performance" and rewarding people for tasks that are fully accomplished and secure the desired outcomes of the organization as a whole (p. 140). Thus many internal pay systems are structured via a performance-based pay model which rewards employees for positive performance achievements. A majority of these types of performance systems are grounded in goal setting and other similar factors.

Bannister & Newman (1998) suggest that a relationship exists between CEO remuneration and the remuneration of other employees, finding that in general a great pay divide exists or earning gap exists between executives and middle managers or lay employees within corporations, thus when considering the internal pay structure of an organization one might necessarily look at executive compensation separately from other employees (p. 223).

Other factors influencing the internal pay structure within an organization include firm size. Generally it has been found that the larger the organization the greater the compensation and complexity of the compensation system (Agarwal, 1981). In addition top management is generally higher in larger corporations, presumably because the job entails greater oversight and complexity (Griner, 1995). Large organizations generally reap more revenues which also impact the organizations ability to pay employees at a standard or above standard rate.

There is also evidence to suggest that employee compensation and internal pay structure vary according to the profitability of the firm and the firm's involvement in research and development activity (Clinch, 1991:70). Generally the more the firm is involved in research and development the more profitable it is considered and the more technically skilled the employees working for the firm are, thus the pay structure if often more accommodating to a wider range of talents, skills and abilities and more flexible. In general employees engaged in research and development is compensated at a higher rate than those involved in more maintenance activities (Clinch, 1991).

References:

Agarwal, N.C. 1981. "Determinants of executive compensation." Industrial Relations 20