Essay: Equality for employees

$pagename = “Free Essays”;
= “Equality for employees | Business”;

$description =”Business Essay – The working title of the project is Reward Management: An Investigation at Fulford Independent Financial & Mortgage Advisers”;

$subject = “Business”;

The working title of the project is ‘Reward Management: An Investigation at Fulford Independent Financial & Mortgage Advisers’.  The author proposes that the planned report evaluates how successful reward management systems in Fulford Independent Financial & Mortgage Advisers are at motivating employees. 

The general area of study for the proposed project is human resources management.  Reward management is the specific area of study.  Narrowing the topic down further demonstrates a focus on small, sales-focused organisations. 

The author’s own background provides competencies in this chosen area of study as previous employment has been in management of employees and included input on the design and management of a reward scheme.  This is also an area that greatly interests the author and so provides further motivation for the study of this subject.

The chosen area of study, reward management, holds great importance currently.  As more and more organisations recognise the importance of employee retention, this area continues to grow in significance.  Although there is some literature available on the subject of employee reward, it is still a relatively under studied topic considering its prevalence in the business world.

In particular there are gaps in the understanding of reward management’s application to sales focused organisations.  This area of study has had relatively limited focus and attention in scholarly articles and texts.

Much investigation has been conducted and it has been identified that this will be an original piece of research as the proposed area has not been studied before.  There has been no identifiable text that specifically considers this organisation when evaluating its reward system’s effectiveness at motivating employees. 

Key Research Question

The proposed topic can be completed within the time period allowed.  In order to ensure that the project is manageable the author will focus on one key question within the niche area.

That is:

1. Do the reward systems in place at Fulford Independent Financial & Mortgage Advisers successfully motivate employees?

The report will be considered to have been successful if it is able to answer this question adequately. 

Methodology

My chosen research methodology can be classified into two parts.  Initially a literature review will be undertaken to understand the current thinking on both reward management as a whole (paying particular attention to any reference to sales focused organisations) and motivation.  An understanding of what motivates employees and its applications to the real world will aid in design of the primary research.    How being a sales-focused organisation affects reward management systems will be concluded based on the literature review.

Secondly, primary research will be undertaken at Fulford Independent Financial & Mortgage Advisers.  Much thought has gone into what method of primary research would be suitable for the proposed report.  As resources and money are limited interviews with the two managing directors will be conducted.  In addition, a questionnaire will be issued to gather information.  Questionnaires are an inexpensive method of gathering data from a potentially large number of respondents.  They are the only feasible way to reach a number of respondents large enough to allow statistically analysis of the results.  In addition the questionnaires will be designed to be administered confidentially in order to elicit more truthful responses from candidates. 

As the company is relatively small the sample will involve all employees who are eligible to be a member of a reward system of any type.  This is the eighty nine sales staff, their job descriptions being financial advisors.  Also all seven district managers will be requested to complete a questionnaire.  Finally, the views of the two managing directors will be sought via one on one interviews. 

The twenty administrative staff will not be consulted as they do not participate in a form of reward scheme and are not able to evaluate its effectiveness on other employees.  They work in a centralised location and so this means that they are unable to evaluate the effectiveness of the reward systems on other employees either. 

Much thought has gone into the design of the questionnaire.  Questions will be designed to gather quantitative data.  By their very nature, quantitative questions are more exact then qualitative. For example, the word ‘easy’ and ‘difficult’ can mean quite different things to different people.  All questions will be carefully phrased to avoid ambiguity.  The author wishes to ensure that the data gathered is useful in answering the question asked.

It is noted that qualitative questions may also require more thought on the part of the participant and may cause them to become bored with the questionnaire sooner. Closed format questions will be used as they offer many advantages in time needed to analyse the answers.  By restricting the answer set, it will be easier to calculate percentages and other hard statistical data over the whole group or over any subgroup of participants. 

The questionnaire will be emailed to all identified participants.  This has been already agreed with one of the managing directors who is a family friend of the author.  The questionnaires will be designed and tested as part of the initial stages of the whole project so that they can be sent out to participants early on.  Reminders will be sent each week for four weeks by email to ensure maximum participation.  The more responses received and analysed the more the results can be relied upon as indicative of employees’ motivation as a result of the reward management system. 

Data will be analysed by way of creation of a spreadsheet and pie charts to easily show appropriate trends.  Reference to the literature review will be made and conclusions drawn as to whether or not the reward systems in place at Fulford Independent Financial & Mortgage Advisers successfully motivate employees.  The primary research will be deemed to be successful if enough respondents participate in the questionnaire and the data taken from the completed surveys combine to enable the author to answer the question asked.

In addition a gap analysis will be conducted based on the author’s understanding of the reward system at Fulford Independent Financial & Mortgage Advisers.  Details of what should be experienced at the organisation will be taken from the literature review that discusses the factors needed for employees to be motivated.  These will be compared to what is actually happening and the gap between the two will be established. 

Statement of Proposed Work

The author is aware of the need for planning as there is limited time to carry out all of the tasks needed for this report.  To aid with both identifying and planning the tasks that need to be completed a Gantt chart has been created.

Tasks    Month One    Month Two    Month Three    Month Four    Month Five    Month Six
Decide topic of project
Refine topic with help from  tutors
Choose organisation to study
Gain agreement for primary research to be conducted in organisation
Get permission for the study
Create a work schedule
Create a plan of study
Interviews with managing directors
Analysis reward systems
Review the literature  available
Draft management research  proposal
Submit and polish the proposal
Present the polished proposal to the committee
Make requested corrections to proposal
Revise and expand the literature review
Design Questionnaire
Pilot test questionnaire
Adjust and refine questionnaire
Send out questionnaires and reminders for completion
Score the data
Analyse the data
Interpret the results
Write up results
Do gap analysis
Write main part of essay
Write conclusions and implications
Write all other areas of report
Check report for errors and proof read
Submit report for publication

Relevant Literature

While allowing for my own methodological resourcefulness to emerge through the course of my inquiry I also intend to draw on the following resources:

Literature on Human Resources Management and Reward Management

1.    Human Resource Management Journal
2.    Personnel Review Journal
3.    Team Performance Management Journal
4.    Hume, D.A. (1995). Reward Management. Blackwell Publisher, Oxford.
5.    Sisson, K. (1994) Personnel Management: A Comprehensive Guide to Theory and Practice in Britain, Blackwell Publishers, London.

Literature on Motivation

1.    Maslow, A (1954) Motivation and Personality, Harper & Row, New York.
2.    Steers, R. and Porter, L. (1991) Motivation and Work Behaviour. McGraw-Hill, USA.
3.    Vroom, V (1964) Work and Motivation, Wiley, New York.

Conclusion

The author envisages that the research will contribute to debates and discussions in the area of reward management in sales focused organisations in particular. The author considers by filling in gaps in existing work on reward systems in sales focused organisations the report will contribute something new to the topic of reward management.

Reward Management:
An Investigation at Fulford Independent Financial and Mortgage Advisers

Table of Contents

• Abstract
• Executive Summary
• Introduction
• Literature Review   
• Employee Reward Management
• Theories of Motivation
• Content Theories of Motivation
• Process Theories of Motivation
• Reinforcement Theories of Motivation
• Application of Motivational Theories
• Current Reward System
• Methodology
• Findings
• Findings of Primary Research
• Gap Analysis of Reward System
• Analysis
• Application of Findings for Other Organisations
• Conclusion
• Critical Review
• Appendix A – Questionnaire Design
• Appendix B – Questionnaire Results in Tabular Form
• Appendix C – Questionnaire Results in Pie Chart Form 
   

Abstract

This report answers the question as to whether or not the reward systems in place at Fulford Independent Financial & Mortgage Advisers successfully motivate their employees. 

The relevant literature on reward management with particular attention paid to sales focused organisations is reviewed and discussed.  As the report aims to evaluate how effective the reward system at Fulford Independent Financial & Mortgage Advisers is at motivating, literature on theories of motivation are appraised and evaluated.  The appropriateness of such theories in designing and maintaining a reward system at Fulford Independent Financial & Mortgage Advisers is discussed. 

This report reviews reward management practice in Fulford Independent Financial & Mortgage Advisers, based on interviews with the two managing directors and an emailed survey of all employees who participate in the reward system.  Research of the results provides evidence that the reward scheme is generally successful in motivating employees. 

The report outlines the research methodology, the nature of the reward schemes Fulford Independent Financial & Mortgage Advisers and the themes that emerged from the data analysis. The themes were: complexity of reward system, equity and consistency and the reward scheme in relation to objectives other than sales figures.  The implications of these outcomes for the effective management of reward schemes are considered in the final section.

Executive Summary

This report examines the effectiveness of the reward management system at Fulford Independent Financial & Mortgage Advisers in motivating its employees.  A literature review is conducted that reveals the main issues that need to be addressed by a reward system in order to motivate employees.  There are numerous theories of motivation and several are identified, discussed and their implications in designing reward systems considered.

Primary research is conducted by way of interviews with the two managing directors and by way of a questionnaire for all employees who are eligible for some form of reward over and above basic pay.   

The findings of the report suggest that Fulford Independent Financial & Mortgage Advisers is broadly successful in motivating its customers.  Several recommendations are made as to how to improve the current reward systems so as to further motivate employees. 

 
Introduction

First and foremost employee reward management and motivation will be defined.  A literature review will examine and classify the text on the subject so far.  Any particular reference to sales focused organizations will be highlighted. 

The literature review will also examine both past and present motivational theories and their practical implications on reward management systems.  There are numerous theories that have contributed to the current understanding of motivation.  These will be examined and their worth evaluated in understanding how reward systems should be designed to motivate employees. 

The report will use Fulford Independent Financial & Mortgage Advisers as an example.  They are an independent financial advice (IFA) company which has its headquarters in York.    Analysis of the reward system at Fulford Independent Financial & Mortgage Advisers will be conducted.  The various reward systems will be identified and explained. 

There are several reasons for choosing Fulford Independent Financial & Mortgage Advisers as the basis for the analysis for this report.  These include the ability to access employees in order to find out their opinions on the reward system.  In addition using Fulford Independent Financial & Mortgage Advisers as an example provides the author with both a small company and a sales based environment and.  Being a small company means that Fulford Independent Financial & Mortgage Advisers has particular challenges in creating and managing an appropriate reward system.  Sales staff make a strong and immediate impact on business results.  This has led to an emphasis on financial incentives in reward systems for sales staff.  As such Fulford Independent Financial & Mortgage Advisers is an appropriate study for this report.

The main part of the report will be an analysis of the current reward arrangements at Fulford Independent Financial & Mortgage Advisers.  An evaluation of the reward systems’ effectiveness will be performed.  There are numerous methods of determining whether or not a reward system is effective.  The report will solely examine its success in terms of motivating employees.  This means that the report will be able to fully focus on this topic and formulate an in-depth answer to the question posed.  The author will then evaluate the reward systems using established criteria taken from literature on the subject of employee reward systems. 

Primary research will be conducted.  It will take the form of a questionnaire that will be given to the majority of employees.  These are eighty-nine financial advisors and seven district managers.  In addition the two managing directors’ views will be sought.  The twenty administrative staff will not be consulted as they do not participate in any form of reward scheme. 

The questionnaire, or employee opinion survey will be designed to find out whether or not the respondents found the reward system successful in motivating them. 

The second focus of the report will offer recommendations about how reward systems should be managed within Fulford Independent Financial & Mortgage Advisers.  These recommendations can not only be directly applied to Fulford Independent Financial & Mortgage Advisers but can also be adapted for other similar sales focused organisations. 

There are several reasons for choosing Fulford Independent Financial & Mortgage Advisers as the basis for the analysis in this report.  These include the ability to access employees in order to find out their opinions on the reward systems currently in place.  In addition using Fulford Independent Financial & Mortgage Advisers as an example provides the author with both a small company and a sales based environment.  Being a small company means that Fulford Independent Financial & Mortgage Advisers has particular challenges in creating and managing an appropriate reward system.  In addition, sales staff makes a strong and immediate impact on any business’s results.  This has led to an emphasis on financial incentives in reward systems for sales staff.  This emphasis means that sales focused companies have a unique environment in which they need to create and manage an employee reward system.   Finally, the financial advice industry is one where there are too few qualified advisors for the number of vacancies that exist.  As such the industry is unique and an appealing one to study.  Fulford Independent Financial & Mortgage Advisers is therefore considered to be an appropriate and interesting study for this report.

Literature Review

Employee Reward Management

Reward management relates pay and other benefits to objectives of the company and the individual.  Put simply, it aims to reward employees for their contribution to the organisation.  Reward Management is of fundamental importance in relation to good management.  Without a solid approach towards reward management, an organisation is likely to have an unsatisfied or unmotivated workforce.  It covers both strategy and practice.  Reward management has to support the achievement of the business strategy.  The overall aim of reward management is that employees should be rewarded fairly, equitably and consistently in accordance with their value to the organisation in order to further the achievement of strategic goals (Smith, 1992). 

There is limited literature available on reward management for sales focused staff.  Sales are very important for the vast majority of organisations.  The motivation level of a sales force must be kept high in order that the sales force efficiently realises the sales goals set for them.  As such motivation, and therefore reward management is vital in sales focused organisation.  Sales focused employees are found to be more motivated by money than other types of employees (Grundy, 2002). 

The aims of reward management are numerous.  They can be categorised as follows; motivating people and obtaining their engagement and commitment, rewarding employees according to the value that they create and helping attract and retain the type of people the organisation needs.  This report will concentrate on the goal of motivating employees.

It is important to understand the link between motivation and reward management.  Reward and recognition systems need to identify and tap into what motivates employees in order to be effective. 

Theories of Motivation

The word motivation comes from the Latin word ‘movere’ which means ‘to move’. In recent times, however, the word has taken on a whole new meaning.  Nowadays the word refers to ‘the forces either within or external to a person that arouse enthusiasm and persistence to pursue a certain course of action’ (Daft, 1997). As the levels of motivation of a workforce can influence productivity it is clear that it is the best interests of organisations to have motivated employees.

Motivation refers to the drive and effort to satisfy a goal or want.  It should not be confused with satisfaction which refers to the contentment experienced when a want is satisfied. In other words, motivation implies a drive toward an outcome, and satisfaction is the feeling after the outcome is experienced.

From the management point of view, then, a person might have high job satisfaction but a low level of motivation for the job, or the reverse might be true. Understandably, the probability exists that highly motivated people with low job satisfaction will look for other positions with another organisation.  Similarly, people who find their positions rewarding but are being rewarded considerably less than they desire or think they deserve will probably search for other jobs.

It was not until the negative side effects of Taylorism (absenteeism, sabotage, and unionisation) were becoming too blatant to just ignore in the 1950’s to 1970’s, that management started to pay attention to the topic of motivation.  This resulted in a change in the methods used to motivate employees.  Changes were made in going from the stick (fear of losing the job if work was not deemed sufficient) to the carrot (some form of reward) happened approximately the same time that social scientists began producing theories on work motivation in the 1970’s. 

In this literature review we will first study the theoretical input of social scientists in the field of work motivation, and then view their practical application through a study on work design and empowerment.

There are numerous theories that have contributed to the current understanding of motivation and therefore how reward systems can be designed to motivate employees.  These theories on work motivation can be divided into three different groups; content, process, and reinforcement theories.

Content Theories of Motivation

The first type of theory to be studied is content theories, which look at the role played by the individual’s need strength, and how these affect motivation at work. One of the key theories of the content motivational theories is Maslow’s theory based on the hierarchy of needs.

Needs theory, promoted by Maslow, maintains that unsatisfied needs create conflict and disequilibrium.  To restore balance a goal is identified that will satisfy this need, and a behaviour path is selected that will lead to the achievement of the identified goal.  Essentially, only unsatisfied needs provide motivation.  The practical implication of this theory is that a number of key needs need to be identified in order to develop a total reward policy (Maslow, 1954).

Maslow believed that humans were motivated by many needs of hierarchical order. (Buchanan, 1997).  The first type of need identified is that of physiological needs.  These include the need for a secure environment, which incorporates issues such as job security and benefits.  The second category was the need for belongingness, need of acceptance from others, and a sense of belonging.  This means having good co-workers and the ability to participate in a work group.  The importance of this need and the positive impact a sense of belonging to a group had on productivity was underlined by Mayo in the Relay Assembly Test.  The third need is the esteem need, or the need to receive attention and appreciation.  In practice this meant an increase in responsibility and recognition of contribution to the organisation.  The last need was the need for self-actualisation.   This is the need for self fulfilment or the need to become a better person by having the opportunity to grow, be creative, and acquire training for challenging assignments.  Maslow believed that the low order needs had to be satisfied before the individual would attempt to fulfil the higher ones. Once a need was satisfied, the individual would move on to the fulfilment of the next one.

It is also necessary here to briefly mention the role of non financial rewards.  According to Maslow’s hierarchy of needs, what may be important to someone on low wages may not be as important to someone who earns more (Marchinton, 2002). It is argued that employees value feedback and recognition for their work as well as involvement, autonomy and responsibility.  From the evidence and as already mentioned, it seems that if feedback through appraisal schemes is used in conjunction with financial incentives then the success rate will be far greater.

Alderfer had a similar theory on motivation, ERG theory, yet he summed the needs in to three different categories.  The first one was the need for physical well being, the existence need.  The second was the need for satisfactory relationships with others, the relatedness needs.  Finally the last was the need for development of human potential, or the growth need.  What characterises both theories is the general way in which both authors look at human motivation as related to a chain of certain types of needs . (Daft, 1997).

Herzberg claimed that the factors giving rise to job satisfaction are distinct from the factors that lead to job dissatisfaction.  This hypothesis is known as two factor theory.  It states that any feeling of satisfaction as a result of pay increases is likely to be short lived compared with the longer lasting satisfaction taken from the job itself.  The theory makes a distinction between intrinsic motivation arising from the work itself and extrinsic motivation provided by the employer such as pay.  This theory reminds those designing and implementing reward systems that pay increases have limited effect when motivating employees and should be incorporated only as part of a total reward package (Pfeffer, 1998).

Herberg interviewed engineers and accountants and found that two factors influence their levels of motivation at work. The first factor is what Herzberg called the hygiene factors, which corresponded to the lower level needs of Maslow’s hierarchy.  This first factor includes the extrinsic rewards; such as pay and working conditions. If there was an absence of hygiene factors there was job dissatisfaction, but their presence alone was not enough to arouse sufficient motivation to motivate people to do their best.

The second factors, the motivators corresponded to the high-level needs of Maslow’s hierarchy; recognition and responsibility. Their absence would make employees act neutral to work, but their presence would make them feel very motivated.  This motivation would have a positive effect on their productivity.  Content theories on motivation, thus, study the individual’s needs and how these affect his/her behaviour in the organisational context.

Process Theories of Motivation

Process theories, on the other hand look at how employees select their behavioural actions to meet their needs and determine whether their choices were right.  The first theory is Adam’s equity theory which focuses on individual perception of how fairly people feel that they are being treated compared to others (Murrell, 1976).

Adams put forward equity theory which simply states that people will be better motivated if they are treated equitably and de-motivated if they are not treated in an equitable manner.  Equity is not the same as equality.  Equity is where people feel that they are being treated fairly.  Equality is where people are being treated the same and can in fact be seen as inequitable if they deserve to be treated differently.  Equity theory informs us that reward systems need to be transparent and generally accepted as fair by employees in order to succeed in motivating people (Lawler, 2003).  People evaluate with a ratio of inputs and outcomes to see if their compensation is equal to what others receive.  Inputs are what a person puts into a job; experience, education and effort. The outputs are what a person gets from a job; that is pay, benefits and recognition.  Inequity happens when input and output ratio is perceived to be out of balance.

Expectancy theory argues that motivation is only likely when there is a clearly perceived and useable relationship between performance and outcome and the outcome is seen as a means of satisfying needs.  The main proponent of this theory was Vroom and the theory provides the foundation for good practise in the design and management of contingent pay.  It emphasises the need for a clear link between the reward and what is being done to achieve it (Vroom, 1964).  Expectancy theory attempts not to define specific needs, but to show that they exist and can be different for different individuals.

Instrumentality theory states that people will be motivated to work if rewards and penalties are related directly to their performance.  Instrumentality theory came out of Taylor’s work and led naturally to the development of performance related pay schemes.   

Goal theory asserts that motivation and therefore performance are higher when individuals are set specific goals.  Not only this, but the goals need to be difficult but accepted and employees need to receive feedback on their performance.  The practical consequences of this theory are obvious, highlighting the importance of goal setting and feedback as part of a reward system.  

Reinforcement Theories of Motivation

Reinforcement theories look at the relationship between behaviour and its consequences.  It focuses on changing employees’ behaviour through the appropriate use of immediate rewards and punishment.  Managers have four different reinforcement tools to motivate their employees.  The first tool is positive reinforcement.  This is the administration of a pleasant or rewarding consequence following a desired behaviour.  This will increase the likelihood of a good work behaviour being repeated.  The second reinforcement tool available is the process of avoidance learning.   Avoidance learning is the removal of an unpleasant consequence that follows a desired behaviour.  Thus, employees learn to avoid unpleasant situations by doing requested behaviours.  The third tool is the imposition of a punishment for an undesirable behaviour.  Negative outcome will take the form of a punishment and reduces the likelihood of this behaviour being repeated. The last tool is the method of extinction, which is the removal of a positive reward.  The employee will sooner or later realise that their behaviour is the catalyst in no longer receiving pay or praise or some other desirable reward.   Reinforcement theories take the employee to be a rational human being who will be able to correlate their performance with the consequences (Steers, 1991).

Application of Motivational Theories

Three approaches to motivation have been examined and it appears that all three have positive and negative aspects.  It must be remembered that motivation comes partly from within the individual and partly from the particular situation.  The internal motivation of an employee tends to be relatively constant and is something that needs to be evaluated in individuals entering the organisation.  External motivation is the only type that can be manipulated.  The working environment of employees can have an important influence on their motivation. A negative atmosphere will cause workers to perform poorly when they would have performed better with a positive atmosphere. For instance, if a new employee is assigned to a team with high hostility levels, it is likely that there will be mediocre results. Conversely, if a new employee is assigned to a team with high performance levels, it is likely that they will stay very productive. ‘All behaviour is ultimately initiated by the external environment’ (Kohn, 1998).

The strengths of these theories help explain motivational processes behind behaviour. Individuals appear to be motivated partly by innate needs, partly by cognitive processes and partly by external influences. Although theories of motivation are simple, in practice they may not be. In depth analysis of these theories is therefore necessary to fully grasp the techniques that can be used to turn motivation into an essential tool that will help managers increase worker’s productivity. ‘Motivation is the key to effective performance’ (Smith, 1993).  Motivation refers to the ‘motor’ of behaviour, what force keeps it running and provides with directions to goals. Consequently, it is widely assumed that the key task of managers is to motivate their employees because their most important job is to get them to work (Hudy, 1992). There is no doubt that formal theories of motivation are practical and valuable for managers.  They can be used as a basis for a gap analysis that will be performed on the reward systems at Fulford Independent Financial & Mortgage Advisers.

Now that the various theories of motivation have shown which factors are believed to affect motivation in employees, the second part of this report will evaluate whether or not the reward system at Fulford Independent Financial & Mortgage Advisers delivers these features for their employees through the employee reward systems.  These motivational factors will be used in the design of the questionnaire to be used in the primary research. 

Current Reward System

Fulford Independent Financial & Mortgage Advisers has four distinct reward systems.  The first is the financial method of rewarding sales staff by means of basic pay plus bonus.  The bonus is based on achieving and exceeding sales targets in addition to meeting quality objectives. 

Every advisor earns credit for each sale they make.  Each product has a different formula for calculating the credit received.  The most common is an investment for which the advisor receives between three and five percent of the total amount invested, depending on the product chosen.  An investment of £100,000 in a product that gives four percent commission would earn its advisor £4,000 worth of sales credit.  

Each advisor is allocated a quality score based on an evaluation of a random sample of their work.  The more of a risk that they are considered to be the more of their work that is assessed.  Any advisor with an advice quality score that is too low (i.e. poor advice is deemed to have been given) are ‘locked out’ of bonus, no matter how high their sales figures are. 

This particular reward system aims to provide financial motivation for high levels of sales whilst maintaining a focus on quality of advice.  League tables are published each and every month to enable advisors to know how much bonus they are entitled to.

Bonus Band
    Commission Credit Target
    Lump Sum
    Bonus Rate

1    £71,000    £1,000    10%
2    £89,000    £4,000    15%
3    £112,000    £5,000    20%
4    £156,000    0    30%

So, an advisor who gets £75,000 worth of sales credit would get a lump sum payment of £1,000 plus 10% of anything over £71,000 but below £89,000.   So their total bonus would be £1,400. 

Taking another example, an advisor who gets sales credit of £100,000 would receive lump sum payments of £1,000 and £4,000 and 10% of sales credit between £71,000 and £89,000 (£1,800) plus 15% of sales credit between £89,000 and £112,000 (£1,650).  That means a total bonus payment of £8,450. 

The idea behind this particular bonus system is that each time an advisor reaches a new band they get paid a greater percentage of the sales in this new, higher band.  This acts as an incentive for each advisor to get to each new, higher level of sales credit.  In this way higher achievers are paid proportionally more bonus than lower achievers. 

A second reward system in place at Fulford Independent Financial & Mortgage Advisers is Platinum Club.  The top ten advisors based on sales credit each year become members of the Platinum Club.  Again, a low quality score means that advisors are locked out of the Platinum Club.  Each year the top ten advisors get to go on a week long holiday to somewhere like Kenya or China.  This trips and outings are all expenses paid and allow advisors to bring their spouses or friends.  The destinations of these trips are published well in advance.

Fulford Independent Financial & Mortgage Advisers contributes to each employee’s pension. They match the employee’s contribution up to 5%. 

The final type of reward system is team based incentives such as bottle of champagne for the most consistent advisor.  These are relatively small and given soon after the behaviour performed to deserve it. 

Methodology

As the company is relatively small the sample involved all employees who are eligible to be a member of a reward system of any type.  This is the eighty nine sales staff, their job descriptions being financial advisors.  Also all seven district managers were requested to complete a questionnaire.  Finally, the views of the two managing directors were sought by way of an informal talk. 

The twenty administrative staff were not be consulted as they do not participate in a form of reward scheme and are not able to evaluate its effectiveness on other employees.  They work in a centralised location and so this means that they are unable to evaluate the effectiveness of the reward systems on other employees either. 

Much thought has gone into the design of the questionnaire.  Questions were designed to gather quantitative data only.  All questions were carefully crafted and phrased to avoid ambiguity. 

By restricting the answer set, it will be easier to calculate percentages and other hard statistical data over the whole group or over any subgroup of participants. 

The questionnaire was emailed to all identified participants.  This was agreed with one of the managing directors, who is a family friend of the author.  The questionnaires were designed and tested as part of the initial stages of the whole project. 

Of eighty nine financial advisors surveyed, twenty six replied.  This is a response rate of 29%.  Of four line managers surveyed, one replied.  This is a response rate of 25%. 

Findings

Findings of Primary Research

At the beginning of this report the author set out to answer the question as to whether or not the reward systems in place at Fulford Independent Financial & Mortgage Advisers successfully motivate employees.  The primary research undertaken is the main source of information used in addressing this concern.

Only 4% of respondents fully understand the reward systems in place.  Although the most popular answer to the statement ‘I fully understand how our reward system works’ was ‘partly agree’.   This shows that most employees, although they understand to some degree how the reward system works, lack full understanding of it.

The statement ‘our reward system makes me feel more engaged in my job’ revealed that no respondents fully disagreed with the sentiment, but most either partially agreed or partially disagreed.  This shows that there is no strong commitment to this statement.

Over two thirds of respondents disagreed with the statement ‘levels of reward are comparable to or better than others in the industry’.  This shows that either there is an issue and in fact the respondents are correct and levels of reward are not comparable to or better than others in the industry or that the perception is that they are not comparable.  Fulford Independent Financial & Mortgage Advisers need to ensure that they regularly review the level of rewards to ensure that they are in fact comparable or better.  This will enable Fulford Independent Financial & Mortgage Advisers to find out this is an issue or simply a perception.

Just over a quarter of respondents either partly agreed or fully agreed that ‘there is a clearly defined relationship between my performance and my reward’.  This is a disappointing result for Fulford Independent Financial & Mortgage Advisers as a clearly defined relationship between performance and my reward is thought to be very important in motivating employees by many motivation theories.

The questionnaire results showed that 62% of respondents fully disagreed with the statement ‘I am satisfied with the methods used for evaluating performance used to determine my reward’.  This shows that some employees have a clear issue with the methods used for evaluating performance.  This shows quite a severe issue that needs to be dealt with. 

The findings show that employees are happy with the rewards they get from doing well in their jobs.   62% of respondents agreed fully with the statement ‘the rewards I get from doing well in my job are important to me’.  As the rewards on offer are mostly of a financial nature, these results seem to show that the employees of Fulford Independent Financial & Mortgage Advisers are happy with these types of rewards.  This is consistent with the findings in the literature review that sales focused staff are more likely to be motivated by monetary rewards than non sales focused employees. 

77% of respondents agreed either totally or in part with the statement ‘people are fairly rewarded according to their contribution’.  Only 7% fully agree with this statement though, and this seems to show that there is room for improvement in the reward system to make it, or make it appear, more equitable. 

‘Our reward system is too complex’ is a statement that received either full agreement or part agreement from 96% of respondents.  This clearly suggests that the employees surveyed have a particular issue with the reward system currently in place.  This will need to be addressed.

63% of respondents fully agree that they receive relevant and timely feedback on their performance.  This is positive news as our literature review showed that relevant and timely feedback is an important element in a well motivated work force.

The most important statement in the questionnaire, ‘our reward system makes me feel more motivated at work’ found that 30% of respondents fully agreed and 59% partially agreed with the statement.  This shows that the reward system currently in place is largely successful. 

Overall, it can be seen from the primary research completed that the reward systems in place at Fulford Independent Financial & Mortgage Advisers are broadly successful at motivating employees.  The organisation’s strong points are that relevant and timely feedback is offered to them on their performance and the financial rewards offered are largely valued by employees.  However, the questionnaire found that employees have a clear issue with the methods used for evaluating performance and the reward systems in place were found to be too complex.  These identified issues will be used to conduct a gap analysis of the reward system at Fulford Independent Financial & Mortgage Advisers.
Gap Analysis of Reward System

Gap analysis is a business resource assessment tool that enables an organisation to compare its actual performance with its potential performance.  This tool will be used by the author based on all of the evidence gathered about the reward system at Fulford Independent Financial & Mortgage Advisers. 

The literature review undertaken has suggested various factors needed in a reward system in order for employees to be motivated.  These factors will be compared to what the author considers is actually happening based on interviews with the two managing directors of Fulford Independent Financial & Mortgage Advisers, the authors’ own experience and opinions formed by spending time at the organisation and the results of the employee survey.  From these three sources the gap between what should be happening and what is happening will be established.

What Should Be Happening    What Is Happening    What Needs To Be Done

 

A total reward approach is adopted that emphasises the significance of both financial and non financial rewards.    Emphasis firmly on financial rewards. Non financial rewards are very limited.  However, this is quite common in a sales-focused industry.      Increase in non financial rewards.  Non financial rewards are currently team centred, these should be extended.  This is a cost effective way to improve the reward systems in order to increase employee motivation.
Reward policies and practises and developed within the framework of a well defined strategy that is designed to support the achievement of business objectives and meet the needs of stakeholders.    The reward systems are set up with the focus being on increasing sales.  The quality of people’s work is also considered when evaluating employees, but level of sales is by far the most prevalent objective.  This is not in line with the stated objectives of the organisation.  Although, obviously sales are the major focus, great emphasis is also placed on ensuring that customers are offered regular reviews and people are offered a full financial review rather than just one need being addressed.  This is in response to greater regulation from the Financial Services Authority (FSA).      Introduce new criteria into existing performance criteria.  In the same way that a poor quality score ‘locks out’ an employee from any bonus, similar measures should be created for performing regular reviews and a sufficient  number of full financial review performed.  After discussion with the two managing directors it was decided that employees should be locked out of bonus if they have not performed at least 75% of scheduled reviews.  In addition, they should be locked out of bonus if they have not achieved at least 25% of new customers receiving a full financial review.  There is a danger that this will over complicate the reward system, but it is thought that aligning the reward system with both the organisation’s and the regulator’s objectives. 
Equal pay issues are given serious attention.  Equal pay reviews are conducted and their results acted upon.    Equal pay reviews are conducted every two years.  Results are acted upon within six months of each review.    No action needed at present.
Market rates are tracked carefully so that competitive pay structures exist that contribute to the attraction and retention of high quality employees.    Market rate pay reviews are conducted every two years.  Results are acted upon within six months of each review.    No action needed at present.

The reward system rewards contribution fairly and consistently.    High achievers are rewarded a higher proportion than those that achieve less.  In this way the reward system can be seen to be unfair and to not reward contribution fairly and consistently.  In addition, any contribution that is not related to sales is not rewarded and in fact discouraged as it takes away time that could otherwise be used for selling and therefore earning bonus.  On the job training of new employees and public relations are two quite common activities that are encouraged but not rewarded by the current reward system.    This is a very difficult issue to address.  Those employees that partake in desirable activities other than selling which are to be encouraged could receive a reduced target in line with the amount of time that they take on these activities.  However, this system would be open to abuse and further accusations that it does not reward contribution fairly and consistently.  Taking this into consideration, it is recommended that non financial rewards be utilised for employees that contribute in ways like training and public relations.
The goals set by the reward system are difficult but accepted by employees.    The goals set by the reward systems are generally considered to be difficult by employees but are accepted as necessary in a sales focused environment.  There is no upper level for the reward system, so employees can earn unlimited bonus.      No action needed at present.

The reward system offers recognition for employees. League tables are regularly published and these serve to give top performers recognition amongst all other employees.    No action needed at present.
The reward systems support the motivation of employees. It seems that the reward system seems to generally support the motivation of employees.     No specific action needed at present.
The reward system delivers the right message about the organisation.    The reward system’s emphasis on sales figures delivers a slightly distorted view about the organisation. The managing directors state that while sales volume is very important to the organisation, other issues such as good customer service and regulatory precision are also important.  This is an issue that can be addressed with communication to all employees as to the organisation’s aims and goals.  Once again non financial rewards for those that excel in the areas of customer service and regulatory precision.  At the moment employees are punished for poor quality of work by way of being ‘locked out’ of bonus, but a non financial reward for excellence in quality of work would work to motivate employees to concentrate on this area of their work even more and so motivate the correct behaviours required by the organisation. 
The reward system offers an easily understood link between effort and reward.    The majority of employees disagreed with this statement.      The reward system needs to be simplified.  The tiers currently in place should be removed.  This will have the effect of reducing complexity and so increasing the ease with which employees can see the link between their effort and their reward.  It will mean that the highest earners will not receive that additional benefit of an increasing proportion of reward.  However, the author thinks that this downside is more than offset by the benefits of a simplified system that all employees understand.
The reward system is cost effective to manage.    The two managing directors felt that the reward system was cost effective to manage.    No action needed at present.
The reward system’s aims are transparent and communicated well to staff.    The aims of the reward system are simply to increase sales without negatively affecting quality of work.  This is widely understood by most employees.    No action needed at present.
Steps are taken to evaluate the effectiveness of the reward system to ensure that they reflect changing needs. 

No reviews have ever taken place of the effectiveness of the reward system. Reviews to be undertaken every two years to valuate the effectiveness of the reward system and to ensure that they reflect the changing needs of employees. 

Analysis

The findings can be applied to other similar sized companies that have a sales focus but are also heavily regulated like Fulford Independent Financial & Mortgage Advisers.  The recommendations stated below can be applied to any other organisation.  In particular the recommendation to simplify the bonus reward scheme is the one that could be heeded by many other organsiations.

Recommendations

The following actions are recommended by the author to be implemented at Fulford Independent Financial & Mortgage Advisers in order to improve their reward system. 

1.    Simplify the bonus reward system.

The tiers currently in place should be removed.  This will have the effect of reducing complexity and so increasing the ease with which employees can see the link between their effort and their reward.  It will mean that the highest earners will not receive that additional benefit of an increasing proportion of reward.  However, the author thinks that this downside is more than offset by the benefits of a simplified system that all employees understand.

The bonus reward system to be changed from this:

Bonus Band
    Commission Credit Target
    Lump Sum
    Bonus Rate

1    £71,000    £1,000    10%
2    £89,000    £4,000    15%
3    £112,000    £5,000    20%
4    £156,000    0    30%

To this:

Bonus Band
    Commission Credit Target
    Bonus Rate

Once over    £71,000    20%

2.    Increase non financial rewards for desirable activities not related to sales performance.     

This is a cost effective way to improve the reward systems in order to increase employee motivation.  Non financial rewards should be implemented for employees that exceed in the following areas:

• Training of new employees
• Public relations on behalf of the organisation
• Excellent customer service
• Excellence in quality of work

At the moment employees are punished for poor quality of work by way of being ‘locked out’ of bonus, but a non financial reward for excellence in quality of work would work to motivate employees to concentrate on this area of their work even more and so motivate the correct behaviours required by the organisation. 

These non financial rewards should be those that are valued by employees.  Suggestions include:

• Family photography session
• Day at the Races
• Trip on the Eurostar

3.    Realign the reward system to regulatory requirements.

Increase number of criteria that mean an employee is ‘locked out’ of bonus. 
    These criteria are to include:

• Not performing at least 75% of scheduled reviews. 
• Not achieving at least 25% of new customers receiving a full financial review.

There is a danger that this will over complicate the reward system, but it is thought that aligning the reward system with both the organisation’s and the regulator’s objectives. 

4.    Communicate to all employees the organisation’s aims and goals. 

There is an understanding amongst employees that the organisation is solely concerned with sales performance but both managing directors stated that this was not the case.  This needs to be communicated to all employees so that they can identify with what is expected of them and so feel more motivated to achieve these.

5.    Reviews to be undertaken every two years to evaluate the effectiveness of the reward system.

In addition these reviews can be used to ensure that reward systems reflect the changing needs of employees.

Conclusions

This report concludes that the reward system at Fulford Independent Financial & Mortgage Advisers is broadly successful.  However, issues do need to be addressed. The particular areas that need attention are a need to simplify the bonus reward system, increase non financial rewards for desirable activities not related to sales performance, realign the reward system to regulatory requirements and reviews to be undertaken every two years to evaluate the effectiveness of the reward system. 

Critical Review

In the given area of an evaluation of the reward systems at Fulford Independent Financial & Mortgage Adviser, the question proposed has been adequately resolved.   That is not to say that there is no need for further work.  Serious criticism can be levied at the report as only one relatively small organisation has been chosen for study.  It is suggested that the study be widened to include several small financial advice organisations in order to offer a more complete picture of that type of organisation. 

The report failed to address other established approaches to evaluating success or otherwise of reward systems.  In particular the aim of reward systems to help attract and retain high quality people was not explored.

Marginal criticism can be made of the study in the way that the discussions with the managing directors and the author’s general observations at the organisation were not more formally directed and documented. 

Of eighty nine financial advisors surveyed, twenty six replied.  This is a response rate of 29%.  Of four line managers surveyed, one replied.  This is a response rate of 25%.  These response rates are relatively good for the medium used; that is questionnaire.  The reason for this is the commitment gained from senior management.

The questionnaire itself was the correct method for finding out employees’ opinions on their reward schemes, given the restrictions in time and budget.  However, with hindsight, the questionnaire could include more qualitative questions.  In particular, it would have been interesting to ask respondents which types of rewards other than monetary ones would motivate them.

Bibliography

1.    Armstrong, M (2002) Employee Reward (People and Organisation), Chartered Institute of Personnel & Development, London.

2.    Armstrong, M and Brown, D (2001) New Dimensions in Pay Management, CIPD, London.

3.    Armstrong, M & Brown, D (1999) Paying for Contribution: Real Performance-related Strategies, Kogan Page, USA.

4.    Boxall, P. and Purcell, J. Strategic HRM: Where have we come from and where should we be going? International Journal of Management Reviews, Vol2 (2), 2000, pp. 183-203.

5.    Bratton, J and Gold, J (2003) Human Resource Management Theory and Practice, Palgrave Macmillan, London.
6.    Buchanan, D and Huczynski, A. (1997) Organisational Behaviour. Prentice Hall, London.

7.    Daft, R. (1997) Management. The Dryden Press, New York.

8.    Grundy, P (2002) Sales compensation programmes: built to last, Compensation and Benefits Review, September/October pp21-28.

9.    Guilford, J and Gray, D (1970). Motivation and Modern Management. Addison-Wesley, London.

10.    Heyes, J. and Stuart, M. (1996) Does training matter? Employee experiences and attitudes Human Resource Management Journal, 6 (3) pp 7-21.

11.    Hume, D.A. (1995). Reward Management. Blackwell Publisher, Oxford.

12.    Kohn, A. (1998). Challenging behaviourist dogma: Myths about money and motivation. Compensation and benefits review [Online], Available  at: http://proquest.umi.com/pqdweb?index=0&did=000000028425962&SrchMode=1&sid=3&Fmt=3&VInst=PROD&VType=PQD&RQT=309&VName=PQD&TS=1068115996&clientId=29546 [Accessed 04/06/07]

13.    Lawler, EE (1990) Strategic Pay, Jossey-Bass, San Francisco.

14.    Lewis, P. (1998): Managing performance-related-pay based on evidence from the financial services sector, Human Resource Management Journal, vol 8,2 pp.66-77.

15.    Locke E. (1975). Personnel Attitudes and Motivation, Annual Review of Psychology, 16(2). Pp.457-480.

16.    Locke E., Latham G. (1984). Goal setting: A motivation technique that works. Prentice Hall, New Jersey.

17.    Maccoby, M (1995). Why work? Motivation the new workforce. Miles River Press, Virginia. 

18.    Marchington, M. and Wilkinson, A. (2002). People, Management and Development, Chartered Institute of Personnel & Development. 

19.    Maslow, A (1954) Motivation and Personality, Harper & Row, New York.

20.    Maund, L (2001) An Introduction to Human Resource Management- Theory and Practice, Palgrave, USA.

21.    Mole, G. (1996) The management training industry in the UK: an HRD director’s critique, Human Resource Management Journal, vol 6 (1).

22.    Murrell, W. (1976) Motivation at Work. Methuen, New York.

23.    Newell, S. and Shackleton, V. ‘Selection and assessment at an interactive decision-action process’, in Redman, T. and Wilkinson, A Contemporary HRM. (2001)  Prentice Hall, London. 

24.    Newell, S. and Shackleton, V. ‘Recruitment and selection’ in Bach, S. and Sisson, K. Personnel Management: A Comprehensive Guide to Theory and Practice. (2002) Blackwell, London.

25.    Perkins, S. Hendry, C. Woodward, S. and Bradley, P (2000) Performance and rewards: cleaning out the stables, Human Resource Management Journal, vol 10,3, pp 46-60.

26.    Pfeffer, J (1998) Six dangerous myths about pay, Harvard Business Review, May/June, pp42-51.

27.    Quick, T.L. (1988) Expectancy theory in five simple steps. Training and development journal [Online], Available at: http://proquest.umi.com/pqdweb?index=28&did=000000000817459&SrchMode=1&sid=5&Fmt=6&VInst=PROD&VType=PQD&RQT=309&VName=PQD&TS=1068053119&clientId=29546 [Accessed 03/06/07].

28.    Smith, R. (1993) Motivation is the key to effective performance. Management Accounting [Online], Available at: http://proquest.umi.com/pqdweb?index=0&did=000000000101025&SrchMode=1&sid=7&Fmt=3&VInst=PROD&VType=PQD&RQT=309&VName=PQD&TS=1068054353&clientId=29546 [Accessed 04/06/07]

29.    Sisson, K. (1994) Personnel Management: A Comprehensive Guide to Theory and Practice in Britain, Blackwell Publishers, London.

30.    Steers, R. and Porter, L. (1991) Motivation and Work Behaviour. McGraw-Hill, USA.

31.    Thorpe, R. and Homan, G (2000) Strategic Reward Systems, FT Prentice Hall, London.

32.    Vroom, V (1964) Work and Motivation, Wiley, New York.

 

Appendix A – Questionnaire Design

‘Reward system’ refers to your pay, pension, bonus system, Platinum Club and any in team prizes or rewards you can participate in.

   
Statement    Fully Agree    Partly Agree    Partly Disagree    Fully Disagree

1. I fully understand how our reward system works.
2. Our reward system makes me feel more engaged in my job.
3. Levels of reward are comparable to or better than others in the industry. 
4. There is a clearly defined relationship between my performance and my reward.
5. I am satisfied with the methods used for evaluating performance used to determine my reward.
6. The rewards I get from doing well in my job are important to me.
7. People are fairly rewarded according to their contribution.
8. Our reward system is too complex.
9. I receive relevant and timely feedback on my performance.
10. Our reward system makes me feel more motivated at work. 

     

Appendix B – Questionnaire Results in Tabular Form

Statement    Fully Agree    Partly Agree    Either Fully Agree or Partly Agree    Partly Disagree    Fully Disagree    Either Fully Disagree or Partly Disagree
   

1. I fully understand how our reward system works.    1    16    17    8    2    10
2. Our reward system makes me feel more engaged in my job.    4    11    15    12    0    12
3. Levels of reward are comparable to or better than others in the industry.     2    7    9    9    9    18
4. There is a clearly defined relationship between my performance and my reward.    2    6    8    14    5    19
5. I am satisfied with the methods used for evaluating performance used to determine my reward.    0    5    5    5    17    22
6. The rewards I get from doing well in my job are important to me.    17    5    22    4    1    5
7. People are fairly rewarded according to their contribution.    2    19    21    4    2    6
8. Our reward system is too complex.    15    11    26    1    0    1
9. I receive relevant and timely feedback on my performance.    17    4    21    3    3    6
10. Our reward system makes me feel more motivated at work.    8    16    24    1    2    3
     

Appendix C – Questionnaire Results in Pie Chart Form

1. I fully understand how our reward system works.
2. Our reward system makes me feel more engaged in my job. 
3. Levels of reward are comparable to or better than others in the industry.
4. There is a clearly defined relationship between my performance and my reward.
5. I am satisfied with the methods used for evaluating performance used to determine my reward.
6. The rewards I get from doing well in my job are important to me.
7. People are fairly rewarded according to their contribution.
8. Our reward system is too complex.
9. I receive relevant and timely feedback on my performance.
10. Our reward system makes me feel more motivated at work.