Friday, June 02, 2006

How do you reward your employees ?

Rewarding and motivating workforce is a perennial challenge for HR. The traditional reward system of monetary incentive, bonus has given way to ESOPS, Holiday Trips, and Gifts.

How do employee perceive these changes in the reward system and are they happy with this?
A study by Wharton management professor Sarah Kaplan gives some interesting insights on the employee incentive system.

Kaplan and Henderson's paper deals with incentive structures across the board, in startups as well as more established firms. But they note that established firms face particular challenges because they have long histories of operating -- and rewarding employees -- in specific, well-known ways. "Not only do you have to figure out a new method [of providing incentives to employees], but you also have to break the set of promises you made based on the old incentive system."

The incentive system is likely to be "embodied in a series of relational contracts" -- meaning ones that cannot be fully written out but are enforced by the fear of repercussions if they are not followed.

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