KHADIM ALI SHAH BUKHARI INSTITUTE OF

TECHNOLOGY

COURSE:

A REWARD SYSTEM & ITS IMPACT ON

EMPLOYEE MOTIVATION & PERFORMANCE

Group members:

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TABLE OF CONTENTS

ACKNOWLEDGEMENT 03
ABSTRACT. 04
INTRODUCTION TO THE TOPIC 05
1.1 Background of the study...05
1.2 Problem Statement.05
1.3 The Research objective..06
1.4 Purpose of the Research ...06
1.5 Hypothesis07
2. LITERATURE REVIEW08
2.1 Reward System....08
2.2 Employee Performance ...08
2.3 Employee Motivation...09
2.4 Motivation Theories ...09
2.5 Purposes of Rewards Systems ..........10
2.6 Extrinsic and Intrinsic Rewards.11
2.7 Theoretical framework...12
3. METHODOLOGY..13
3.1 Introduction to research..13
3.2 Introduction to variables.13
3.3Target population.13
3.4 Procedure. 13
3.5 Research Approach..13
Research type 14
3.6Statistical tool.......................14
4. RESULTS & INTERPRETATION 15
6. CONCLUSION & RECOMMENDATION 17
7. REFERENCES 19
8. APPENDIX 20

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 ACKNOWLEDGEMENT

We want to recognize the ceaseless support of our course facilitator Mr. Awall Raza for making
this research paper fascinating and learned. His supervision and research information has made
us ready to finish this research paper study in an expert way. Last however not the minimum, we
might want to recognize the enthusiastic and generally support of our group members who were
there while our this group research.

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 ABSTRACT

The objective of this research was to investigate two essential issues in human resource
department to accomplish organizational goals, one was to find out whether rewards distinguish
what sorts of benefits employee consider generally useful & get motivated & perform better,
second was the issues organizations face while creating a better reward system to accomplish
organizational objectives.

In this research, the impact of compensation as a motivation factor and employers confront in
motivating their employees were investigated through Interviews with individuals from Human
resources department of different organizations, the research of the proposes that while the
utilization of benefits is crucial in motivating representatives, there is need of extrinsic &
intrinsic reward system in organization comprehension of the human instinct and what really
persuades employees.

The research suggests that reward system program comes from intrinsic & extrinsic rewards as
opposed to concentrating on any one specific one. At last, upgraded compensation plan can be
accomplished at the point when supervisors do their best to outline the work setting so they get
to be inspirations in themselves while in the meantime eliminate ate demotivating variables at the
workplace

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 INTRODUCTION

1.1 Background of the study

In organizations, Reward systems are mostly aimed at attracting individuals to join the
organization. Basically Reward systems are the compensations employee get during his job.
Hence, it is used as a motivating tool to attract potential employees. As a result, it allows them to
come to work while encouraging them to perform their jobs at maximum levels (Murphy, May
2015)
For existing employees, reward structures are designed in a way that would better motivate them
to perform their current work. In organizations, management takes into consideration all
components of organization while designing reward systems, such as activities related to
processes, people and decision making which are included in the allocation of benefits and
compensation to employees as an outcome of employees contribution to the company.
Employees can be rewarded both extrinsically and intrinsically. Pertaining to extrinsic rewards,
they are tangible rewards structures which are external to the task or job role assigned to an
employee. For instance, extrinsic rewards can include pay, salary, job security, incentives,
bonuses etc. In contrast, intrinsic rewards are also known as psychological rewards which
internally motivate employees to do their jobs. For instance, it can include appreciation from
manager, caring attitude, positive work environment, supportive organization culture, meeting
new challenges, or job rotation when employee achieve some specific goals.
1. 2 Problem Statement
During our research it has been identified that employees are not rewarded according to their
work, management is less likely reward them both extrinsically & intrinsically. We found a
number of researches on compensating employees both financially & non-financially. Thus, in
this paper we will work on a reward system & its impact on employee motivation& how would
he be able to perform for organization, throughout this study we get to know that organization
see employees as an additional cost & liability, after the study well be able to find out the
benefits of a well-designed reward system and how an organization will grow if the employees
will be compensated well.

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We have found a gap between employees & management this is just because an employee is
not rewarded as per job. (Murphy, May 2015) Hence, in order for a reward system to be
effective in encouraging and motivating employees, it should include both components of
motivation provided that all rewards structures are designed to better retain, motivate or attract
employees. When compared with traditional reward systems, those systems have been
commanded by base payments controlled by particular occupations, the need to keep up value
among representatives, and the need to pay rates and wages that are focused in the commercial
center. Under this framework, singular representatives were paid by aptitudes they conveyed to
the occupation and not energized or remunerated for adaptability, judgment or working with
others (Nicole, Spring 2015).
1.3 The Research objective
The key objective of the research is to assess the relationship between rewards and employee
perceived level of motivation& how employee will perform in result?
To achieve this objective, here are some questions
To analyze the impact of a well-designed compensation plan on employee
performance
To identify the attention of employer that how timely an employee is compensated
To identify the reward package & how it is effecting employee performance
What makes employees more committed towards his work?
How a reward system can be improved, what should be taken in mind while
designing?
To determine the effect of rewards on performance of employees.
To determine what rewards, extrinsic or intrinsic, more likely to motivate employees.
To assess the relationship between rewards systems and employee motivation in
organizations.
1.4 Purpose of the study
In attempting to propel representatives, the circumstance is not diverse. HR heads tend to
concentrate more on extrinsic rewards. This research will endeavor to examine the
accompanying:
a. Discover how to design an effective reward system

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 b. Whether rewards motivate representatives & impact on employee performance
c. Recognize what sorts of benefits workers consider generally useful.

1.5 Hypothesis
Based on the study which we are conducting on Reward system & its impact on employee
motivation & Performance we developed below hypothesis
Ho= Our Null Hypothesis is There is an impact of Reward system on employee motivation &
employee Performance
H1= our alternate hypothesis is There is no impact of Reward system on employee motivation
& employee Performance

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 LITERATURE REVIEW

2.1 Reward Systems:

In organizations, Reward systems are mostly aimed at attracting individuals to join the
organization. Basically Reward systems are the compensations employee get during his job.
Hence, it is used as a motivating tool to attract potential employees. As a result, it allows them
to come to work while encouraging them to perform their jobs at maximum levels (Murphy,
May 2015).
Rewards can be partitioned into four classes: Transactional, social, individual and common.
Some rewards can be considered as value-based and individual in the same time. Others can be
considered as social and mutual. Value-based rewards are substantial. They incorporate the
monetary rewards. These rewards can be effectively duplicated by contenders. In addition,
individual rewards are the ones that are given to representatives separately. A case of a value-
based individual reward is the unforeseen pay.
Rewards can in like manner be vague and these are called social rewards. These rewards are
critical to redesign the worth based prizes (cash related prizes). Social prizes "are less easy to
mimic by contenders In addition, common rewards generally join remunerates that need to do
with the work environment or gathering. This makes it identified with social rewards and some
way or another makes it a piece of it. Examples of social common rewards are: employee
voice and recognition. (W. L. Njanja, 2013)
2.2 Employee Performance:
Employee Performance can be defined as willingness to do a task or activity in result of
motivation. Besides, the idea of "performance" implies that compensate frameworks are for the
most part intended to fit for a worker's execution. To be general, businesses look to utilize
rewards to rule a representative's conduct and to build efficiency. In this sense, managers have
negligible desires for every worker. In this manner, when workers achieve a normal level of
employment execution, an association will pay consideration on them and give them legitimate
reward. In addition, if a reward framework is set up decently and fairly, most people in the
association will endeavor more noteworthy efforts for organizations. (Nicole, Spring 2015)

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2.3 Employee Motivation:
The performance of employee is every now and again portrayed as a joint capacity and
motivation, and one of the essential assignments confronting a chief is rousing representatives to
perform to the best of their capacity Truth be told, motivation has been depicted as "a standout
amongst the most significant worries of present day hierarchical examination Despite that,
what precisely is work motivation? Work motivation is a center reach idea that arrangements just
with occasions and marvels identified with individuals in a work connection. The definition
perceives the impact of both ecological powers (e.g., reward systems in organization, the nature
of the work being performed) and powers inborn in the individual (eg: worker needs and
motivations) on business related conduct. (zbouj & Antoniades, 2015)
2.4 Motivation Theories:
Motivational theories are part into two groups as procedure and content hypotheses..
A well-known content hypothesis would be Maslow's Hierarchy of Needs, and an admired
procedure theory would be the equity theory. (Mikander, 2010)
Theories of motivation give a hypothetical premise to remunerate administration however
a portion of the best known ones have risen up out of the brain research discipline. Maslow's
Hierarchy of Needs depicts a pyramid involving a progression of layers from at the base the most
major physiological needs, for example, sustenance, water, safe house and sex, ascending to the
peak where self-actualization needs included ethical quality and imagination. Maslow saw these
levels of necessities being satisfied each one in turn in grouping from base to best. Business and
the assets it brings are classed under safety needs' (level 2) while the working environment may
likewise add to a feeling of "belonging" (level 3) and acknowledgment at work can fulfill the
requirement for 'self-esteem (level 4)
Frederick Herzberg's motivation-hygiene theory, initially published in 1959, contends
that a representative's occupation fulfillment or disappointment is affected by two unmistakable
arrangements of variables furthermore that fulfillment and disappointment were not at inverse
finishes of the same continuum but rather should have been measured independently. The two
arrangements of components are motivation elements and cleanliness elements. As per Herzberg,
genuine motivation originates from the work itself, from finishing errands, while the part of
rewards is to forestall disappointment arising

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 On the other hand, Expectancy Theory is the theory which sets that we choose our
conduct in view of the attractive quality of expected results of the activity. It was most
noticeably utilized as a part of a work connection by Victor Vroom who tried to set up the
relationship between execution, motivation and capacity and communicated it as a multiplicative
one where execution levels with motivation X capacity There are a ton of attractions for this
sort of methodology, especially for bosses who can focus on their motivation exertion and
suspect a determinable scientific return for them. As this is a subjective procedure hypothesis it
depends in transit workers see remunerates. These three speculations in addition to variations of
them have been utilized as a part of countless examination studies and keep on informing the act
of reward administration up to the present day. (Eshun & Duah, 2011)
2.5 Purposes of Rewards Systems
(Taylor, 2014) Contended that the rewards utilized do not should be fiscal. It is essential that the
reward is something craved by the representatives. Expertise advancement and better vocation
decisions are profoundly reward rewards in some profession fields. To be legitimately viable, the
rewards must be founded on execution. As a representative achieves particular objectives, some
kind of reward given will motivate others to achieve the objective as well.
While both money and non-money rewards perceive a representative's commitment to an
organization, the likenesses end there. Non-money remunerates, for example, trainings, driving
and flying days, among other optimistic blessings and encounters have importance and the
potential for the advancement of the business worker security that fiscal rewards do not have. An
organization's legitimizations for the inclination of one to the next can change contingent upon
the motivational intentions they credit to a specific type of reward. Human Resource
administration inquiries about routinely underscores the spot of a motivational system in any
advanced administration procedure. Reward frameworks are turning out to be progressively
compelling in the working environment and are connected to execution objectives, as well as an
ascent in work environment resolve and general worker fulfillment. (Muda, 2014)
2.6 Extrinsic and Intrinsic Rewards
In organizations, people get rewards which can be distinguished in two major categories,
extrinsic and intrinsic. With regard to intrinsic rewards, they are mainly internal to individuals
and that they give themselves. Such rewards may comprise of sense of accomplishment, self-
esteem, and feeling of growth, development of special talent or skills. Much of the intrinsic

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rewards are desired from the work itself. Hence, these rewards are mainly related to the
perception of job by the worker. Hence, intrinsic rewards are also affected by job design. These
rewards are also referred as non-financial rewards.
The second major category of rewards is referring as extrinsic rewards. These are known
as external to the individuals working in organizations and include indirect compensation or
direct compensation. Direct compensation normally involves money such as salaries and wages,
incentives, commission, stock options, profit or gain sharing. With regard to indirect incentives,
they are related to benefits and prerequisites of employees such as paid off time, protection
programs, child care benefits, health insurance plans etc. Hence, extrinsic rewards are known as
financial or monetary rewards.
Chiefs by and large, and anybody formally or casually in charge of oversight of other
people who are occupied with work or learning errands, will know that some individuals are
taking an interest more out of enthusiasm for the undertaking than others are. Others pick up
their fulfillment essentially out the path in which their execution on the errand prompts rewards
like pay or status or decent evaluations in a course. Be that as it may, normally there is a blend of
intentions in which a scope of various motivating forces is significant. A great many people will
discover at any rate some fulfillment in just taking the necessary steps. They may say, for
instance, that they thought that it was "interesting". For the vast majority there is likewise some
fulfillment in rewards which are dependent upon execution in the errand. The equalization of
these characteristic and outward wellsprings of fulfillment fluctuates starting with one individual
then onto the next and between various circumstances. Some individuals undoubtedly are
profoundly energetic by both inborn interest and extrinsic rewards.
By intrinsic motivation, it means a procedure of excitement and fulfillment in which the
rewards originate from doing an action rather from an aftereffect of the movement. We talk
about the rewards being natural for an assignment instead of the undertaking being an
unfortunate chore that is remunerated or fulfilling. By differentiation, one may buckle down at an
errand with a specific end goal to eat or increase social endorsement work, attempted as a
necessary chore, is regularly deficiency inspired conduct, in which there is a reward as an
outcome of push to achieve an objective where the shortage is lessened. Intrinsic motivation
tends more to be appetitive, new data stimulating a slight enthusiasm prompting avidness for
further.

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 The expression "intrinsic" infrequently additionally happens with an alternate implication
in reference to impetuses which are reliable with individual qualities, expectations and qualities.
Fulfillment picked up from such motivating forces might be seen as characteristic for the
individual instead of to the errand. The facts can confirm that conduct, for example, undertaking
an exploratory examination venture can help with the fulfillment of self-improvement objectives
while it is additionally intrinsically remunerating in itself. The smaller scale feeling of inborn
enthusiasm for the assignment is the essential importance; however, fulfillment characteristic for
the individual in the full scale sense conveys a portion of the same significance, particularly with
respect to the procedures of incorporation which will be viewed as further underneath.
Notwithstanding, while the two can cooperate, characteristic motivation in the essential sense is
powerless against being hindered by the utilization of outward remunerates in ways which do not
give the optional sort of natural fulfillment yet are experienced as outsider to the individual. The
work of a few specialists as of late indicates the significance of the auxiliary or large scale kind
of natural fulfillment from outward remunerates as the piece of information to dealing with the
impacts of extraneous rewards in ways which do not restrain the operation of intrinsic motivation
for engagement in the job. (Pratheepkanth, 2011)

2.7 Theoretical Framework

From the above review of literature, it is found that both intrinsic and extrinsic rewards
play vital role in motivating employees. The view of different theories of motivation revealed
that different types of rewards tend to motivate employees, depending on the nature of job or
work tasks. Hence, employee motivation & performance are taken as dependent variable while
rewards (both intrinsic and extrinsic) are taken as independent variables to form the theoretical
framework.

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 The following theoretical framework is developed for this study.

EXTRINSIC
REWARDS
EMPLOYEE
MOTIVATION &
INTRINSIC
REWARDS
PERFORMANCE

Dependent Variable
Independent Variables

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 METHODOLOGY

3.1 Introduction to Research

We have chosen to conduct study on Reward System & its impact on Employee Motivation &
performance.

3.2 Introduction to Variables

Here we have 3 variables
1. Reward System (Extrinsic & intrinsic)
2. Motivation
3. Performance

3.3 Target Population

We have chosen Pakistani FMCG HR personnel for our study.

3.4 Procedure:
We have interviewed those participants through audio recording & emailing, we have used open
ended questions for our research.

3.5 Research Approach

To conduct this study, interview method is used; interviews were conducted from potential
respondents that would have helped to gather more in-depth information about the research topic.

3.6 Research type

Our research study is Testing Hypothesis- we are checking the relationship of reward system
with employee motivation & performance.

3.7 Scope of the Study

We are conducting this study within Pakistani Industry- FMCG in Karachi, Pakistan

3.8 Statistical tool:

We are checking Relationship of reward system with employee motivation & performance so we
are using Correlation here in our study.

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 RESULTS & INTERPRETATION

According to research our dependent and independent variables are given below:
1. Reward System (Extrinsic & intrinsic)
2. Motivation
3. Performance

We run Correlation in SPSS and results are as follow:

Motivation Performance
Reward Pearson correlation .682= 68.2% .423= 32%

Sig 0.03 0.03

If significance value is less than 0.05 so relationship is present, significantly correlated

Here we are checking the relationship between 3 variables.

Variable 1= Reward System
Variable 2= Motivation
Variable 3= performance

Reward system is 68.2% is significantly correlated with motivation

Reward system is 42.3% is significantly correlated with performance

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 CONCLUSION & RECOMMENDATION

In organizations, human resource is one of the significant resources that enable them to compete
in such as competitive marketplace. Acquiring and retaining the right workforce is the key
challenge faced by organizations today. To retain productive employees, motivation plays key
role that allows them to be productive while contributing to the effectiveness and efficiency of
the organization. Hence, the reason why we conducted this research we wanted to check the
relationship of reward with employee motivation & performance, where extrinsic and intrinsic
rewards were chosen to determine the employee opinion working in organization. The results of
this study showed that both intrinsic and extrinsic rewards are important for motivating
employees, however intrinsic motivation is more important for employees working in different
organizations. This might be because of the fact that majority of the study participants were
satisfied with their current salaries. This implies that these employees were already motivated
extrinsically hence for them intrinsic motivation was more important. Also, pay is a huge
element which influences employee motivation yet the outcomes decently bolsters the theory
because of distinction between the compensation bundles of three unique associations. Incidental
advantages are vital in rousing representatives as indicated by this concentrate, so associations
must need to give all the crucial incidental advantages to their workers, it likewise build their job
proficiency.
Both extrinsic and intrinsic motivation can be considered as a continuum. Toward one
side, it is found that a few workers persuaded by substantial, outward advantages, for example,
pay and the trappings of position.

Others might be inspired by variables at the inverse end of the range. These workers have a
tendency to forego the unmistakable prizes of money related advantages, for self-satisfaction.
In any case, to pick up the most from the nuts and bolts of intrinsic extrinsic motivation,
it is maybe best to recall that individuals can without much of a stretch move along any
continuum. As opposed to considering these motivational variables as alternate extremes,
associations must attempt to recollect that the vast majority are propelled by a blend of the two.
Furthermore, that such inspiration is likewise affected by various other minds boggling, social
and monetary variables, for example, age, family status, etc.

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 Both intrinsic and extrinsic motivation assumes a part in building a society of
engagement. Clearly, extrinsic motivation (as cash) is critical all things considered,
individuals should be paid with a specific end goal to put nourishment on the table. In any case,
natural inspiration has significantly more prominent impact in the realm of employee
engagement.
The truth of the matter is, inherently roused representatives will probably be occupied
with what they're doing than their partners who depend just on extraneous inspiration to put a
spring in their progression. In addition, inherently roused representatives will probably go well
beyond to invest that discretionary exertion. Likewise, over-dependence on extrinsic
remunerates regularly prompts undesirable practices and a disintegration of any inherent
practices.
Our Null Hypothesis is accepted there is a strong relationship exist between Reward, Employee
Motivation & Employee performance

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 REFERENCES

Murphy, B. (May 2015). The impact of reward systems on employee performance. Dublin Business
School in association with Liverpool John Moores, 97.

Nicole, N. &. (Spring 2015). A study about reward system & employee motivation in call Center.
Management/Industrial & Financial Management, 47.

Eshun, C., & Duah, F. k. (2011, January 24). reward as a motivational tool for employee performance.
School of Management, 78.

Mikander, C. (2010). The impact of a reward sytem on employee Motivation. International Business, 51.

Muda, R. R. (2014). Factors effecting Employee Performance- A study on the Islamic Banks in Indonesia.
International Journal of Business & Social Sciences, 51.

Pratheepkanth, P. (2011). Reward System And Its Impact On Employee Motivation In Commercial Bank
of Sri Lanka. Global Journal of Management and Business Research, 9.

Taylor, A. &. (2014). Importance of Reward in Organization. International Business Journak, 42.

W. L. Njanja, R. N. (2013). Effect of Reward on Employee Performance: A Case of Kenya Power.

International Journal of Business and Management, 9.

zbouj, N., & Antoniades, N. (2015). A study about the use of Reward System System & Employee
Motivation in a Call center. Journal of Business, 78.

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 APPENDIX

Interview Questions:

Name_______________ Qualification_____________

Age________ Organization______________

Do you think there is relationship of reward on employee motivation? Your

Views______________________________________________________________

Which reward (extrinsic & Intrinsic) motivates employee? Your

Views________________________________________________________________________

Do you think motivated employee can perform better on workplace? Your

Views________________________________________________________________________

How reward system creates impact on employee performance? Your

Views________________________________________________________________________

Do you think that reward system is based on employee performance? Your

Views________________________________________________________________________

Do you think that reward system can be created as per company growth? Your Views?
________________________________________________________________________

In your point of view which is/are the main factors that can increase employee performance?

_____________________________________________________________________________

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How you reward your employee? Please elaborate?

_____________________________________________________________________

Your understanding regarding relationship of reward motivation & performance?

_________________________________________________________________________

Does an organizational growth & success is dependent on employee performance?

_________________________________________________________________________

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