Reward Systems for Employee Retention within the Higher Education Sector

This report describes the study made on how reward systems affect staff retention in higher education systems. The aim of the study was to review ways in which higher education systems use reward systems to improve their employee retention. In order to gain a clear insight on the topic, varied literature sources were studied.  This paper clarifies the fact that workers require some source of motivation in order to develop strong relationships with their employers. It also notes that reward systems are some of the most effective means of achieving employee loyalty and good performance. In this paper, the types of reward systems used in higher education systems are thoroughly discussed based on the findings of previous studies. In the results and conclusion sections, a summary of observations that answer the research questions are discussed. The study concludes that total rewards systems are the most efficient in improving employee retention.

CHAPTER I

1.0 Introduction

Managing human capital is one of the challenging aspects facing present day organizations. This is due to the rapidly changing employee expectations. In the current age, employees are more likely to change jobs and careers in pursuit of employment opportunities that meet their growth and development needs. It is hence crucial for modern business organizations to have sound strategic management and policy measures for meeting employee expectations and rewarding their contribution to organizational growth.  This ensures reduced employee turnover and boosts retention.

One of the sectors that have been affected by the recent labour market changes is the higher education sector. There are high expectations across societies that higher education systems should contribute significantly to their overall growth and development (Aldrich, 2011). For that reason, higher education systems aim to attract and retain the most qualified skilled labour. However, this cannot be attained without putting in place sound methodologies for attracting and retaining employees. One of the approaches used in employee motivation and retention within the higher education sector is the use of reward systems. In that regard, this study analyses the use of rewards management as an incentive for the retention of staff within the higher education sector.

1.1 Rewards Management

Reward management is one of the methodologies that are useful for employee retention. The rewards management process entails the formulation of sound policies and the implementation of selected strategies for rewarding human capital in a fair and acceptable manner. Rewards management is done to ensure equity and consistency in the management of the human resource with regard to acknowledging to their value and contribution to an organization. In the higher education sector, reward management system entails analysing and controlling human inputs through the use of methods such as remuneration, compensation and awarding of other employee benefits availed by an organization (Agarwal, and Arun, 2012). Studies on human capital development indicate that reward management structures are constituted of organizational pay policies and practices, the nature of total reward, the measure of a minimum wage, and the systems for salary and payroll administration.   The goal of reward management systems is to ensure that effective and efficient structures for improving workplace conditions are put in place.

1.2 Types of Rewards

Various types of rewards are employed in the workplace to ensure employee motivation and improvement in the retention of workers. Since the goal of reward systems is to ensure better working conditions for employees and to boost their motivation levels, the combination of various rewards has been found to be more effective in meeting these goals. The mastery of the different types of rewards, their application, and impacts is, hence, crucial for individuals tasked with the management of human capital (Aldrich, 2011).

Rewards are broadly categorized into two classes; intrinsic and extrinsic motivational rewards. Extrinsic rewards are defined as the concrete items of motivation which are outward to the employees. That means that they exist outside the employee and the desire of employees to acquire them generates motivation. A common example of the extrinsic approaches to motivating employees in the higher education sector is the award of employees on the basis of their work performance.  Bonuses are usually given to workers with a view of motivating them to continue working towards the accomplishment of organizational objectives. They are also awarded as a way of appreciating those employees that attain the targets set by their employers.  In addition to bonuses, extrinsic rewards such as salary increments and gifts are also administered. Salary reviews are often made upon the acquisition of new skills or a result of demonstrated sound contribution to the organization. Salary increments are mainly long-term reward strategies and the idea behind them is to appreciate employee input and reduce turnovers in the workplace (Agarwal & Arun, 2012). On the contrary, gifts are mainly short-term tokens given to employees a way of appreciating performance. They have been found to boost self-esteem of employees through the recognition of the positive contribution of employees. Other forms of extrinsic inputs such as promotions, and holidays, and luxury items, etc., are also used in motivating the employees in the workplace.

Intrinsic rewards include motivational factors that satisfy intrinsic needs existing within an employee and which naturally give individuals personal satisfaction from performing specific tasks. There are several types of intrinsic factors of reward such as recognition to the employees, empowerment, and feedback to the employees in the workplace. The main goal of the intrinsic motivational rewards is to create an internal connection of the employee to the organization (Gberevbie, 2015). The outcome is the development of a strong attachment which leads to reduced turn over and retention of the workers in the firm.

1.2.1 Incentives as Management Rewards

An incentive is defined as any monetary or non-monetary factor which is offered with the goal of motivating employees in the workplace. Incentives are crucial in reward management since they play an important role in keeping employees attached to the firm. There are two broad categories of incentives in the management of the employees. They include financial stimulators, which boost the efficiency of employees, and non-financial incentives, which include the non-monetary stimulators that motivate employees to attain more in the organization.

Financial incentives include items such as payments and allowances, profit sharing, bonuses, stock options provision, fringe benefits, and commissions among others. On the other hand, non-financial incentives encompass status ranks in the workplace, organizational climate, career growth and development, as well as job security and promotions. The main impact of incentives is creating a psychological connection between the employer and the employee, which reduces the chances of separation of the employee from the organization.  

1.3 Employee Retention

Employee retention is defined as the approach in which an organization reduces the level of turnover and attrition rates through the use of motivational methodologies (Bies & Cummings, 2008). In the higher education sector, low retention is costly since the turnover of trained and qualified employees impacts on the growth of an organization. It also leads to other associated costs such as recruitment process and hiring costs. The importance of the employee retention in the higher education cannot be overlooked since it determines the productivity of the education sector.

1.3.1 Rewards Systems and Employee Turnover

Both the internal and external factors of reward systems are significant in determining its ability to influence employee retention and turnover of workers in higher education systems. As stated earlier, reward systems are important for the motivation and retention of employees. However, it is important to note that poor reward systems can have negative impacts on employee retention. This occurs where reward systems cause negative motivation and fail to meet employee needs and expectations, as explained by Shahzadi et al. (2014). For example, fairness is a crucial requirement for the success of employee reward systems and a lack of it may create perceptions of bias, a factor that could result in employer turnover. Where the award of bonuses is subjective and not based on the level of employee performance, negative outcomes like demotivation and poor retention could override the intended benefits.

Externally, competition is one of the factors that may limit the effectiveness of a reward system in addressing employee turnover. In the current age of globalization, employees have better access to information and are more willing to expand their reach when it comes to finding better employment opportunities. This is a significant factor in the higher education sector where a limited pool of highly skilled professionals exists, a factor that increases the competition for skilled employees among institutions. Therefore, the competitiveness of an organization’s rewards structure and management is important in determining its ability to retain employees.

1.4 Research Problem

The high education sector has been faced with various challenges related to the management and motivation of the labour force. The impact has been felt in terms of high employee turnover and, subsequently, a reduced productivity of the industry due to the high costs associated with recurrent recruitment and hiring processes. The use of reward management as an incentive factor to improve the retention of employees in the industry has been used for a long time. However, there is a need to have a close view of the current applications of reward systems as incentives for staff retention in the higher education sector and the factors that limit the effectiveness of these methods.

1.5 Research Aim

This study makes a detailed analysis of the use of rewards management as an incentive for the retention of staff within the higher education sector. The aim of the study is to identify current reward management approaches, challenges, gaps, and opportunities for curbing the challenge of employee turnover in the higher education industry.

1.6 Research Objectives

  1. To establish the current approaches to rewards management within the higher education sector
  2. To evaluate the impact of rewards management as an incentive for staff retention within the higher education sector
  3. To establish the factors affecting the effectiveness of reward systems as an incentive for staff retention within the higher education sector

1.7 Research Significance

Studying reward management as an incentive for the retention of staff in the higher education sector is crucial for the education industry. This is in consideration of the significant challenge that employee turnover poses to the industry in terms of high costs of hiring and training new employees. The study contributes to current research on this issue by analysing the reward management approaches used in the higher education industry and the factors that limit their efficiency. 

1.8 Study Outline

This report consists of five chapters. Chapter I introduces the topic of study, the problem relating to the use of reward systems as an incentive for the retention of staff in higher education systems, the research objectives, and the significance of ding the study. Chapter II discusses the current ideas on the study topic, the theories related to the topic, and the existing research gaps. Chapter III, on the other hand gives a detailed outline of the methodology used in completing the study. The results of the study are discussed in Chapter IV, where the current use of rewards systems in higher education systems and its limitations are outlined. Finally, the conclusions and recommendations of the study are made in Chapter V.

CHAPTER II

2.0 Literature Review

Saunders (2009) noted that a critical literature review aids in developing a deep understanding of previous research on a given topic. This particular literature review analyses rewards systems and the impact they have on higher education staff by evaluating relevant theories and previous research findings. Appropriate literature on reward systems and staff retention is scrutinized in order to understand the relationship between the two variables.

2.2 Staff Turnover in Higher Education Systems

Van (2011) defines a turnover as the decision made by an employee to vacate an organization. Employee turnover, especially in higher education systems, is major concern for many institutions (Hong et al, 2012).  The loss of skilled human resource is alarming since it leaves institutions with skill vacuums that affect students’ performance. Masoga (2013) states that it is much easier to comprehend why staff leave their jobs than it is to develop effective measures for reducing turnover rates. However, it is necessary for firms to measure turnover rates since the results attained from such evaluation helps organizations to understand their effectiveness in addressing the challenge (Armstrong, 2006).

According to Griffeth and Hom (2001), there are two types of turnover, namely; voluntary and involuntary turnover. Voluntary turnover occurs where an employee decides to resign and leave the organization, leading to a termination of the employee-employer relationship. This decision is therefore made by the employee, solely (Masoga, 2013 pg 23). Voluntary turnover can also be categorized to functional and dysfunctional turnover. Functional turnover occurs when poor performers decide to leave work whereas dysfunctional turnover occurs when effective performers decide to leave an institution. Buck & Watson (2002) noted that dysfunctional turnover is mainly a result of decline of morale and productivity amongst staff. The dysfunctional turnover negatively affects an organization and may end up being costly. It also disrupts normal activities within the institution since it alters the consistency of results. When an employee resigns due to reasons beyond their control, this is termed as ‘involuntary turnover’ (Brown, 2009). Common causes of involuntary turnover include: death, retrenchment, dismissal by a higher body, retirement, or ill health. In such cases, human resource managers may opt to re-hire well performing employees if they show interest in future (Glen, 2006). In order for higher education to retain their members of staff there is a need for management and the HR department to evaluate the determinants related to voluntary turnover.

2.2.1 Employee Retention

Retaining employees is a great challenge for most firms since more appealing job opportunities keep arising everyday (Ali & Ahmed (2014).  Higher education systems are facing a similar challenge with their staff. To overcome this challenge, employers need to develop a deep understanding of employee needs in order for them to set up an environment that keeps them engaged (Rowley, 2000). Skilled human capital, due its capabilities and scarcity, is important to institutions since it is the backbone of their productive assets. Retention of worthwhile staff has vast impacts on an institution since the entity is able to manage its productivity levels and also achieve its objectives. Hong et al. (2012) states that higher education staff have a major role in the growth and development of the institution. There are various elements that are nurtured through the help of the staff, including: the learning system, infrastructure, working culture and attainment of management objectives. In that case, the staff plays a crucial role in ensuring the stability and growth of a higher education system.

2.2.2 Compensation and Turnover

According to Venter & Renard (2013), a significant impact is derived from the reward systems created by an institution. The most important factor is that it helps institutions to attract and motivate workers within the institution. According to Armstrong (2006), the best way of ensuring employee retention is by having close interactions with staff.  This is because members of staff are the only individuals who best understand the issues they face and, hence, they can advise management on ways in which to improve their reward systems in order to retain staff.

 Snelgar and Venter (2013) carried out a study on 250 employees drawn from higher education institutions in order to identify the rewards that were effective in improving retention and performance. The study revealed that base pay was the prerequisite reward for ensuring employee retention and job motivation. According to Goosen and Goldman (2012), employees are likely to leave a firm if they are offered a better salary in another organization. Butt & Jinnah (2008) also agreed that a great compensation positively reduces employee turnover. In summary, a high salary promotes employee commitment and good performance within an institution hence reducing turnover rates. On the other hand an inadequate compensation increases the rate at which voluntary turnover occurs.

2.3 Rewards Management

Rowley (2000) states that efficient rewards management has a distinct correlation with employee retention. Reward management is complex and requires managers to focus on the factors that affect staff retention. In essence, thorough research and planning should be done in order to avoid incorporating irrelevant rewards in an organization’s rewards system. Effective knowledge management by human resource teams is crucial in evaluating staff within a higher education system. Human resource managers should keep sufficient records of employees’ professional qualifications, skills, performance, and complaints use this to develop the most appropriate reward systems for boosting employee morale. Through a reward system, a firm ensures that its employees recognize that they are cherished and that the management acknowledges their role within the entity’s progress. By such actions, the workforce morale is boosted adequately. When the morale of workers is high, productivity improves either at the individual or organizational level. The effectiveness of reward systems is determined in the long-term through the evaluation of the performance of a company after a reward system has been implemented (Danish & Usman, 2010).

2.3.1 Extrinsic Rewards

According to Tsai (2005), extrinsic rewards are motivational factors like monetary rewards or cash incentives that are offered at the end of a desired performance and that are used to meet the expectations of employees so as to keep them motivated. Extrinsic rewards also include the financial rewards, public recognition, and an increase in benefits, commissions or promotions that are realized through the performance of particular tasks. Tsai also discussed the concept of pay for performance, describing it as one of the best incentives for improving employee motivation and productivity. However, the results gained from this type of pay is short term.

2.3.2 Intrinsic Rewards

Torrington et al. (2009) defined intrinsic rewards as non-cash rewards or non-material rewards that increase employee satisfaction. Intrinsic nature rewards are non-financial and may include the following elements; sharing success stories with new employees, recognition of employee achievements, and creating better opportunities for employees. Yousaf et al. (2012) conducted a study on intrinsic rewards which revealed that, at an individual level, workers mostly participate in exchanges that are social or in processes related to a social nature. Every employee within an organization also tends to compare the reward they attain against their work performance. The result is later placed within their context of individual and social needs and the conclusion from this helps them in judging the rewards system.

2.3.3 Rewards Implementation

Torrington et al. (2009) noted that there is a need to balance between the extrinsic and intrinsic rewards availed to employees so as to make sure that a reward system meets both extrinsic and extrinsic employee needs. Similarly, Ali & Ahmed (2014) noted that the optimisation of employee commitment in higher education systems can be met through the combined use of intrinsic and extrinsic rewards. Organizational citizenship is promoted through the creation of effective rewards and motivational systems by management. Pratheepkanth (2011) revealed a remarkable association between reward systems and employee motivation. Job satisfaction improves employees’ perception about the company’s achievements. An increase in job satisfaction also motivates employees to give better results and to be more committed to their work. 

2.4 Theoretical Foundations

2.4.1 Maslow’s Hierarchy of Needs Theory

Maslow’s theory is one of the earliest works on job satisfaction and employee motivation. The theory provides notions and concepts about job satisfaction and the means of controlling organizational behavior. According to the theory, there are basic needs that should be met by a firm in order for an employee to feel satisfied with their work (Tan & Waheed, 2011).  Maslow’s theory is significant in this study since it teaches that mere rewards are not a guarantee to motivation. Motivation occurs when an employee feels that there is need to work hard in order to improve their status at work.

Maslow hierarchy of needs states that physiological needs should be fulfilled before looking into any other needs.  Satisfying individual needs like safety, love, and self-esteem, as outlined in the Maslow hierarchy, is vital in ensuring that an individual is highly motivated   Managers can ensure that an employee gains self-esteem by respecting them and acknowledging their achievements. Motivation can also be achieved by ensuring that cordial employee relationships are maintained at all times.

Figure 1: Maslow’ Hierarchy of Needs Model

2.4.2 Herzberg’s Two factor Theory

This is a prominent theory that explains employee performance and motivation at work and is based on Maslow’s work (Lambrou et al., 2010). According to Herzberg, there are distinct factors that motivate staff to excel and retain their jobs. The theory argues that it is impossible to satisfy employees fully especially if an employer focuses on their low level needs. As a matter of fact, salary benefits and other common rewards do not offer complete satisfaction amongst workers. Management should satisfy higher employee needs like recognition and appreciation in order to improve job satisfaction and motivation levels (Lambrou et al., 2010). Herzberg theory also states that a manager should plan professional development sessions for their employees in order to improve their motivation and performance. 

Herzberg's two factor theory

Figure 2: Theoretical Model of Herzberg’s Two Factor Theory. Adapted from Lambrou et al. (2010)

The theory states that the core factors that managers should focus to improve are hygiene and motivation. Motivation factors as earlier mentioned motivate employees whereas the hygiene factors make sure that staff consistently remain happy. Examples of hygiene needs include; company car, security, salary, work conditions, a great relationship with supervisors as well as subordinates. Motivation factors on the other hand that lead to total satisfaction include; personal growth, responsibility, achievement, recognition, and gradual advancement (Kuo & Chu, 2015).   Herzberg noticed that employees are more likely to remain loyal to their work and employers if managers address the two factors adequately (Tan & Waheed, 2011). Therefore, it can be inferred that hygiene and motivation factors contribute to employee retention and performance at work. In this regard, a reward system should include both hygiene and motivational factors in order to achieve a holistic approach to motivation and retention of staff. 

2.4.3 Pink’s Theory of Motivation

According to Gillard & Pratt (2015), Pink’s theory is an influential concept that proposes the best methods of motivating employees at work. Its focal point is the significance of intrinsic elements that should be maintained at work such as; purpose, mastery and autonomy. According to the theory, any work task that goes above one’s cognitive state should be rewarded with something greater than finances (Gillard & Pratt, 2015). However, simple tasks can be rewarded through financial means. The limitation of this theory is that, its application may lead to employees having excess freedom and, hence, less productive. The key elements of Pink’s theory include;

  • Autonomy: Employees should be allowed to work based on their self-direction; this motivates them to work harder.
  • Mastery: Employees should be offered opportunities to self-improve themselves; the theory noted that human beings love being challenged and trying new things. By this, they feel as if they are attaining personal achievement, a realization that can improve staff retention (Maitland, & Thomson, 2014). On the contrary a lack of this opportunity may demotivate employees, hence leading to negative outcomes like retirement or resignation from their respective tasks. Pink advices managers to offer their employees tasks that are neutral i.e. neither those which are too hard nor those that are too easy. 
  • Purpose: Tan and Waheed (2011) states that purpose is a desire to carry out activities in order to provide service to a particular cause. The theory notes that people want to carry out activities that matter not only to the firm but also to society, at large. In order to fulfil this purpose, employers should communicate the organization’s vision to the employees so that they may appreciate the value of their work.

2.5 Summary

The literature review reveals that employees require motivation in order to continue their relationships with employers. Staff in higher education systems face motivational issues that are similar to those affecting employees in any other regular organization and are likely to react to those issues like corporate employees (Ali & Ahmed, 2014). The issue of turnover has been a great challenge for many institutions as it contributes to staff inadequacy and poor performance in most institutions. It is therefore important to develop reward systems that best address work-related issues in order to enhance employee retention and performance.

2.6 Research Questions

  1. What are the current approaches to rewards management within the higher education sector?
  2. What is the impact of rewards management as an incentive for staff retention within the higher education sector?
  3. What are the factors affecting the effectiveness of reward systems as an incentive for staff retention within the higher education sector?

CHAPTER III

3.0 Research Methodology

3.1 Introduction

In order to attain the objectives stated in Chapter 1, the research study utilized a research methodology that was based on the onion model proposed by Sanders et al. (2009), as shown in fig. 3 below. The study involved an analysis of data collected from secondary sources. In the research, an in-depths study was carried out on existing literature that proved relevant to the topic of study. This chapter describes the data collection process in terms of literature selection, research philosophy, research approach, research design, data collection methods, and analysis. The ethical issues faced during the process are also highlighted in this section.

The onion research model

Figure 3: The Onion Model of Research Methodology. Adapted from Saunders et al. (2009)

3.2 Research Philosophy

 Adopting an appropriate philosophy was an important preliminary step in the research process and mainly related to the comprehension of existing knowledge and adopting an appropriate stance in answering the research questions (Saunders et al, 2009). This research study is grounded on human behaviour, and specifically, the behaviour of employees working in higher education institutions. A positivist philosophy was adopted in this study whereby the researcher tested the relationship between rewards and the retention of members of staff in higher education institutions. The researcher utilized this philosophy in order to obtain objective conclusions derived from facts.

3.3 Research Approach

According to Saunders et al. (2009), there are two major types of approaches that can be utilized in a research study, namely; inductive and deductive reasoning. Deductive reasoning is the logical process of getting in to a conclusion from a premise that one is aware of. An inductive reasoning, on the other hand, is the systematic process whereby a general proposition is gained after observing particular facts. The approaches mentioned above are commonly utilized in management research especially when looking at a cause-effect relationships. The deductive approach was chosen in this case and was actualized through the study of numerous literature.  The latter offered the researcher a broad opinion in regard to the impact of varied reward systems on the retention of staff within higher education systems. The deductive approach was utilized to test for the existence of a positive relationship between the two.

3.4 Research Design

In this study, the researcher incorporated elements from the research onion model design as outlined below.

3.4 Research strategy

This research study utilized an archival research strategy that would aid in gaining both qualitative as well as quantitative data. The importance of the archival research strategy is that it is an efficient means of gathering vast information from proportional populations Saunders et al (2009). In addition to that, information gathered from this research strategy can be analyzed easily and its utility can help in determining variable relationships.

3.4.1 Systematic Sampling

Through the systematic sampling strategy, the researcher managed to create research controls that would aid in obtaining data related to the study topic. The researcher considered certain variables in order to obtain relevant information which include; the year when the source was written, the language of publication, topic, and nature of the publication, etc. There is need for caution when it comes to using information from past literature, in order to avoid situations of biased data that may tamper with the researchers’ objectives. To counter this, Saunder et al (200, p. 141) states that one’s choice of strategy should be interrelated with research objectives, existing knowledge, psychological underpinnings and the available resources. In that regard, data controls were established as outlined in section 3.6 below.

3.4.2 Link to Research

The core aim in this part was to relate the data collected from secondary research to the study’s objective. The research questions were also linked to the aim of the research and were derived from a critical analysis of previous studies. 

3.4.3 Data Quality

In order to meet data quality, the researcher had to maintain validity, reliability and consistency during the research process. The data collected had to be related to the research objectives. Three aspects of reliability were considered while choosing secondary sources, that is, reliability of the sources, internal consistency and the independence of the sources.

3.5 Data Collection, Sampling and Analysis

A thorough literature analysis was carried out before and during the actual study. The researcher ensured that there were vast sources from which data could be collected for analysis.

In order to choose relevant data from secondary sources the following inclusion criteria was utilized;

  • Publication language: English
  • Subject: Reward systems and employee retention
  • Topic: The use ofreward systems for employee retention in higher education institutions
  • Date of Publication: Published within the last10 years
  • Nature: Research reports and journals

The secondary data collected in the study was evaluated qualitatively and quantitatively and the findings presented in statistical and descriptive forms.

3.6 Ethical Issues

Hart (2005) states that ethics in research is comparative and that procedures for ensuring the same must be established during studies. Less ethical issues were faced during the process of getting relevant answers for the research questions. Maintaining confidentiality was not mandatory in this case since the study utilized published secondary. However, the researcher took note of ensuring objectivity and citing data sources.

3.7 Research Limitations

The study’s limitations were contributed by the limited time allocated for the study. The study was also heavily reliant on secondary sources, hence there were high chances of errors and biases getting duplicated in this study. Finally, a great challenge was faced due to limitations in accessing some valuable secondary sources.

CHAPTER IV

4.0 Results and Discussion

This section links the findings derived from the secondary research to the study’s objectives and the theories highlighted in the literature review chapter. The concepts of total rewards system, team based rewards as well as performance related pay are discussed in this context, including their impact on employee retention. The findings of this study indicate that an efficient reward system is a prerequisite for instilling motivation and ensuring the long-term retention of employees.

4.1 Results

The first objective of the study was to establish the current approaches to rewards management within the higher education sector: The study established that most higher education systems use conventional extrinsic rewards as incentives for employee retention, including salary increments, promotions, bonuses and training. In some few cases, monetary rewards were used. As shown in figure 4 below, most of the previous studies showed that salary increments and training are the most popular reward incentives in higher education systems, where promotions are the least common incentive.

employee rewards

Figure 4:  Frequency of incentives use in higher education institutions

The second objective was to evaluate the impact of rewards management as an incentive for staff retention within the higher education sector. Previous studies considered rewards management to be a relevant factor in staff motivation and retention especially in higher education systems. Most members of staff interviewed in vast past research studies were positive about rewards management that were considerate of their needs; both intrinsic and extrinsic. In a study by Chu and Kuo (2015), 38 % of the participants stated that they felt valued when rewarded, 26% claimed that they felt motivated whereas 16 % stated that they did not feel anything on being rewarded. The total rewards system was found to be the most effective in employee motivation and retention and its effective application can yield retention rates of up to 80%.

employee reward systems

Figure 5: The use of reward systems in higher education systems

Figure 5 above is an illustration of the reward systems that are commonly used to improve employee retention in higher education institutions. The figure shows that the most preferred rewards system is the total rewards system while the least preferred is the team based rewards system.

The last objective was to establish the factors affecting the effectiveness of reward systems as an incentive for staff retention within the higher education sector. There are vast factors that were identified by the study that are capable of affecting the effectiveness of a rewards system. They include factors like the competitive advantage of staff, financial capability of the institution and the relationship between the managers and the members of staff.

The need for flexibility was a point of concern for most of the reward systems used in higher education systems. Apparently, most higher education systems had been using the same reward system since they were founded. Due to this, the employees were not that thrilled with the rewards, a factor that limited their performance. Previous studies also showed that there are high levels of employee autonomy in terms of the roles of employees in higher education institutions. The failure by some systems, more so the team-based reward systems, to reward individual performance increased the probability of high performers to resign. 

In summary, the reward systems used in higher education institutions, despite being comprehensive, do not meet the expectations of employees on an ideal reward system as they are not well structured to address the needs of the members of staff. The major concern is that individual efforts by members of staff are not adequately appreciated and this contributes to most of the resignations within the higher education system as employees search for better reward opportunities.

4.2 Discussion of Results

4.2.1 Team Based Rewards

Team based rewards are the most commonly used reward systems in higher education systems. The study, however, observed that team based rewards are limited by the fact that they are not effective in rewarding higher performers, which raises concerns over the fairness of such systems in rewarding individual contribution within an organization. Johnson (2009) argues that there is a need to introduce individual rewards in a team setting. Managers should consider rewarding the team mates individually depending performance as well as one’s input. This way, team members are likely to work harder than when they are rewarded generally. Similarly, Bamberger & Levi (2009) noted that, in order to address the limitation of team based rewards, organizations should adopt an equity reward system whereby high performers are offered rewards for their categorical behavior especially for helping other team mates. Team based rewards aid in encouraging the sharing of knowledge as well as enhancing communication amongst employees. This ultimately leads to an elevated institutional performance (Rock et al., 2001). The implementation of the rewards system should also be well organized in order to ensure efficiency (Taylor, 2015). Most authors agreed that an equitable team based reward system was only effective if well organised.

4.2.2 Performance Related Pay

Performance Related Pay is one of the reward systems that are commonly adopted by organizations. There are controversies regarding the ability of the system to make employees perform better. The study noted that different authors gave mixed views regarding the efficiency of the system, with some stating that it was effective in enhancing employee retention whereas others claimed that it was not. Rayner & Adam (2005) noted that there is some difficulty in illustrating whether a Performance Related Pay System is effective in ensuring employee retention or not. The authors observed that when all variables within the system are removed, it becomes hard to relate a performance related pay with performance. Bhakta & Nagy (2005) stated that the performance related pay model should have clearer goals and should be aligned with the operational objectives of employees in order to increase its ability for retaining employees.

Danish & Usman (2010) observes that managers should be wary of this pay system since it tends to demotivate some employees hence drawing them away. This is because performance related pay systems tend to push employees to achieve goals that are more management-oriented at the expense of the personal needs of employees. This study found out that employees believe that the PRP model has short term benefits since, on getting used to the reward system, employees do not make efforts to further improve their performance. In the long run, employees seek better places where they can get individual rewards that keep them focused on achieving higher goals. These dysfunctional elements illustrate that a performance related pay system is not an ideal employee retention strategy for a higher education facility. In addition, a Performance-related Pay system should not be used when long term performance and employee retention are needed.

4.2.3 Total Rewards Systems

Hall (2014) observes that there is a direct link between performance, employee retention, and a total rewards’ system. A total rewards system creates an environment where employees build trust between themselves and also with their managers. In this type of reward, there is a distinction between rewards that cater for either intrinsic or extrinsic needs (Armstrong, 2006). The Pink theory of motivation illustrates that intrinsic needs cannot be satisfied by financial rewards. According to Bhakta and Nagy (2005) a point reaches where higher pay becomes irrelevant in promoting job satisfaction; in that case chances of employee turnover increase. A total rewards system that combines both financial and non-financial incentives is the best approach to enhancing employee retention. 

Different firms have diverse cultures where some employees may be money oriented whereas others may be focused on gaining non-monetary rewards such as appreciation. A total rewards package should have strong elements of financial rewards, appreciation and recognition (Mujtaba & Shuaib, 2010). Once basic professional needs are catered for, the next important factor in improving employee retention is obtaining recognition from management. With proper recognition, employee performance and retention improves: appreciation by management in front of peers boosts the morale of individual employees. Generally, a total rewards system is comprehensive in attracting new talents and also retaining them.

The economic health of an institution largely determines the nature of the rewards offered to its employees (Hong et al, 2012). Being in a position to offer great packages may, at times, be costly. The suitability of rewards also depends heavily on the preferences of employees. A total rewards system provides an opportunity to overcome these challenges since a wide array of rewards are offered that cater for both the extrinsic and intrinsic employee needs.

4.3 Summary

Team based reward systems are not fully appreciated by most members of staff in higher education systems since they do not reward individual needs and individual performance. Similarly, performance-related pay models have a short term impact and a limited ability for long-term employee motivation and are, hence, ineffective in ensuring employee retention in the long-term. A total rewards system on the other hand is effective since it is all rounded and caters for both intrinsic and extrinsic needs, hence it leads to better staff retention.

Most of the current studies recommend the use of a combination of reward systems that cater for both intrinsic and extrinsic employee needs. The managers of higher education systems should be keen on choosing reward systems that are best aligned to the needs of their staff and avoid dwelling heavily on monetary rewards since the motivational value of such incentives is lost with time.

CHAPTER V

5.0 Conclusion and Recommendations

5.1 Conclusion

The research study was aimed at determining the reward systems that higher education systems use as an incentive for retaining their members of staff. As discussed in the research introduction, the needs of employees have evolved over time and, considering that most institutions have failed to revise their reward systems in line with these changes, higher education systems have ended up losing significant numbers of employees.

Human capital due its capabilities and skills is important to institutions since employees the most significant productive assets in an organization. Switching of staff within a Higher Education Institution contributes to a decline when it comes to employees’ morale and productivity. Retention of worthwhile staff has vast impacts on an institution since the entity is able to manage its productivity levels and also achieve objectives.  Retaining employees is a great challenge for most firms since, every day, there are new opportunities arising that are more attractive to employees (Ali & Ahmed (2014).  Higher education systems are also facing a similar challenge.

Managing a reward structure within a firm can be a challenging task and may go wrong if not executed in a wise manner. There are adverse effects to be realized if the structure is poorly managed which may affect organizational productivity. Managing such systems becomes more complicated if the institution has members from diverse cultures. The challenge of retaining staff needs enough knowledge on employee needs in order to comprehend and develop the best environment for employee retention (Rowley, 2000). The best way to counter this is and to improve employee retention is by ensuring the close interaction between managers and staff in order to understand employee needs and, ultimately, revise reward systems accordingly.

The study also notes that there is a close interrelation between reward systems motivation, performance and retention of staff. Motivation is the primary factor that determines whether a member of staff will resign or stick to their job. Effective rewards management is relevant for enhancing employee performance and retention. Members of staff strive for vast reasons based on their personal circumstance, their skillset and the desire for career progression. It is eminent that employees love feeling a sense of belonging at work, a factor that increases their likelihood to stick to their places of work. The value of rewards is very important since, where employees value the rewards offered to them, they end up performing better than expected. Higher Education systems must strive to retain their members of staff by offering them effective and rewarding incentives since, in failing to do so, the systems are likely to post declining performance results.

5.2 Recommendations

The first recommendation made by this report is that Higher Education systems should create well constituted rewards management systems mandated to research on the current reward systems relative to the current needs of their employees. This will aid in identifying gaps within the rewards systems and the most appropriate ways of aligning them to current demands. Irrelevant rewards should also be scrapped and replaced with more appropriate and desirable rewards in order to halt further employee turnover.

Secondly, higher education systems must accept the fact that members of staff are the only individuals who best understand the issues they face. Therefore, the rewards management teams should consult them on the best reward factors to be included in the new reward systems. This will effectively motivate employees to remain within the higher education systems since it will elicit the feeling that their contribution to these systems is valued.

Finally, rewards management teams should consider using a combination of rewards systems in order to have a holistic rewards model that caters for both the intrinsic and extrinsic needs of their employees. This study appreciates the fact that there is no rewards system that can provide a conclusive solution for employee retention on its own. This is because each system presents unique advantages and disadvantages to both the employers and the employees. Therefore, rewards management teams should use a combination of systems that balance between extrinsic and intrinsic employee motivation and both organizational and employee gains. In doing so, these teams should focus on maximizing on the benefits of a combination of rewards models while ensuring their affordability and cost effectiveness. Moreover, these rewards systems should foster employee cohesion, employee and organization growth, and satisfaction by encouraging both teamwork and individual excellence and by ensuring fairness in rewarding performance.

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