Rewards: Functions, Types, Examples, Intrinsic, Extrinsic

Once people are in their jobs, they need to be rewarded for good performance. Compensation is the most obvious and tangible mean of rewards. It includes salary, bonus, benefit packages, perquisites, insurance, etc. The reward system must balance the organisations long-and short-term goals of the organisation.


Intrinsic and Extrinsic Rewards

Rewards can be intrinsic or extrinsic.

  • Intrinsic Rewards: Intrinsic rewards are those which are non-cash rewards or not having any physical existence. For example, employee recognition, acknowledgement, professional growth, authority to immediate tasks, respect and appreciation are intrinsic reward.
  • Extrinsic Rewards: Extrinsic rewards are those which have physical existence and cash based rewards are lie under the category of extrinsic reward. Examples office pay, salary, bonuses and such indirect forms of payment as flexibility in time.

Rewards as factor of motivation

Rewards acts as motivator for employees. The three important factors are:

  • Compensation: Compensation is the most important and tangible mean of reward. It includes salary, bonus, benefit packages, perquisites, insurance, pension plan, stock-options and grants, deferred income, and so forth.
  • Power: Another important factor is Power. Power can be granted through promotion, organisational placement, recognition, title, or even simple visibility within the organisation. For some individuals this is an extremely powerful motivator.
  • Personal Development and Career Planning: The last important factor at the disposal of management is personal development and career planning. Education and personal growth and development are reward that can be used to motivate a desired performance. These alternative factors may become more important in the less hierarchical, “atomised” organisations in future.

Functions of Rewards

The two functions of rewards are:

  • Motivational – increase the chances of engaging in certain activities.
  • Informative – tells what goals are appropriate, and provides feedback on success.

Examples of Rewards

The following is a partial list of potential reward:

  • Pay in its various forms: Salary, bonuses, stock options, benefits, and perquisites,
  • Promotion: Both upward mobility and lateral transfers into desirable positions,
  • Management praise, letter of appreciation, personal praise
  • Career opportunities: a long-term chance for growth and development,
  • Appreciation from customers and or/clients of the organisation
  • Personal sense of well-being: feeling good about one-self for accomplishing objectives
  • Opportunity to learn: a chance to expand one’s skills and knowledge base through organisation training programmes
  • Security: a sense of job and financial security
  • Responsibility: Minding individuals with a sense of organisational responsibility
  • Respect from co-workers
  • Friendship with co-workers
  • Increase in percentage of commissions
  • Sponsoring employees for higher training, seminars and workshops
  • Incentive travel, etc.

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