Note on Reward Management and Performance Appraisal Practices

  • Note
  • Things to remember

Reward management

Reward is a driving force for pushing employees towards the job to achieve organizational goal. Reward management is a matter of virtual concern for human resource management. Employees expect something of value as compensation for doing a job. Organizations need to design and manage reward structure to attract, retain and motivate the employees. The totality of valuable, real and perceived benefits the employees get is a reward. Its management is a function of an organization. Reward consists of pay, benefits, services, and job-related rewards.

  • Pay: Wages and salaries received for performing work are pay.
  • Benefits: Payments made in addition to paying for vacation, holidays, leave, pension, insurance, gratuity, payments etc. are benefits.
  • Services: They increases employee well-being at no cost or significantly reduce the cost to the employees. They can be housing, food, transportation, loans, discount on a purchase, children, educational expenses etc.
  • Job-related rewards: They are obtained as a result of the job itself. They can be promotion, participation in decision making, interesting job assignment and opportunity for growth etc.

Reward management is an emerging concept of human resource management. It focuses on improving productivity through motivation and motivation is a result of reward. So, reward management is creating, implementing and controlling reward system that improves organizational structure. Organization uses rewards to motivate people. The most obvious reward employee get from work is pay. It also includes promotion, assignment of desirable works and host of other fewer obsession pay-offs.

No organization is perfect in reward issue.Jobs of each organization differs. So, the organization should structure their reward system in such a way that it should provide the maximum in motivational potential.

According to Michael Armstrong," Reward management is essentially about designing and implementing pay system which helps to improve organizational performance."

According to Decenzo and Robbins," The most obvious reward employees receive from work is pay. However, reward also includes promotion, desirable work assignment and a host of other less obvious payoff. A smile, peer acceptance, work freedom, or a kind of word of recognition."

Types of reward management

Reward is a pay that motivates employees up to some extent. It can be provided in terms of pay, benefits, services and job-related rewards.  Reward can be classified as follows:

Intrinsic and extrinsic

  • Intrinsic reward: An internal feeling that arises due to the good job design and employees perceive positively about the job and job-related factors are called an intrinsic reward. Interesting work, greater responsibilities, job freedom, participation, diversity of activities etc. provides satisfaction. It is assumed as a reward. Interesting and challenging work satisfy employees. Feelings of more responsibilities provide satisfaction. They feel pride in their job. They are obtained as a result of the job itself. Greater job freedom to employees in doing the job provides satisfaction. Participation in decision making makes the employee's more responsible. It also provides satisfaction to employees. Intrinsic reward is intangible. An example of it like feeling of the achievement, self-pride of the work done etc.
  • Extrinsic reward: They include pay benefits, services and promotion. They are external to the job and are provided by management. An increase in salary, allowance, promotion increment in figure benefits is an example of extrinsic reward. It can be controlled by management and they are received from management sides. An extrinsic reward can be financial or non-financial. Financial reward is performance based and membership based. Non-financing reward based on status and privileges. It is tangible. This reward can be seen, touched or felt.

Financial and non-financial reward

  • Financial reward: Monetary rewards that provided to employees for the enhancement of their financial well-being directly or indirectly is known as financial reward. They can be wages and salaries received by employees. The reward that is related to money is this type of reward. It is an Incentive bonus, commission received by employees. Benefits like holiday's payment, vacation leave, gratuity, pension, insurance, payment etc. Profit sharing schemes and food, housing, transport, loans, educational expenses, discount on purchases etc. They can be on performance based and membership based. An example of performance-based rewards is peace work, commission, incentives plans, bonuses, married pay plan. Membership based reward can be pay benefits and services. It is program basis.
  • Non-financial reward: Non-financial reward does not consider financial well-being of employees. This type of reward is unrelated to the money. They make the employee's life better on the job. They are a desire of employees. They can be status based and privilege. They enhance the status of employees but does not bring improvement in the financial condition of the employees. For example: own secretary, office furnishing, desirable works, impressive job titled, lavish car etc. The non-financial reward is psychologically based in which reward cannot be program basis.

Qualities of effective rewards

Reward is a pay that helps to motivate employees towards the job to achieve organizational goal. The reward management is controlling reward system by making appropriate criteria. It helps in attracting, retaining and motivating employees. Effective reward is essential to increase employee's satisfaction. So, reward should have good qualities as explained below:

Importance to employees: Reward is not equally important to all employees. Reward should be important for employees. The given reward must be considered by employees as important. So, individual's needs should be understood before rewarding.

Equitable distribution: Reward should be perceived by employees as equitable. It should be fair relative to what other employees get for doing a job. It can be measured in three levels. Internal equity is one level of it. In it, equity in reward system is observed within the same organization in a similar job. External equity is another level where fairness in reward is observed in different organizations of similar job and individual equity is the last level where fairness in reward is observed within the same organization in the same job among the employees. Equitable distribution can be evaluated through job evaluation, wages, survey, seniority and married based, legal compliance, collective bargaining.

Visibility: Reward should be visible to be effective. Everyone should and see what employee get as a reward. Visibility can be increased through well-published bonuses. Lump sum salary increases transparency and it should be openly communicated. If the reward system is visible then it becomes very easy to motivate the employee to work.

Flexibility: Flexible reward system can be effective. It should vary with changes in performance. Performance is the basis for varying reward from person to person. It should be responsive to the changing environment.

Competitive: External reward trend should match to retain and attract good qualities employees. If the reward is lower relative to the going on market rate, good employees may leave the organization. The inflationary pressures in the economy should guide the rate adjustment for reward.

Cost effective: Organizational effectiveness depends upon cost and benefits of reward. Reward system should be less expensive or cost effective. Paying capacity of the organization is to be considered to make reward system effective. So, the decision on rewards should be taken after analyzing cost effectiveness.

Performance appraisal practices in Nepalese Organizations

Reward management comprises of examining and controlling worker compensation, pay and the greater part of alternate advantages for the employees. .Reward structure, for the most part, comprises of pay approach and practices, compensation, and finance organization, absolute prize, the lowest pay permitted by law, official pay and group reward. Here, some of the practices are listed below:

Lack of transparency: It lacks transparency. The final evaluation results are mostly confidential and are not told to the concerned employees. Interpersonal relations, leniency errors are very common in Nepal. In fact, performance evaluation is not linked with other human resource management practices.

Low priority: Performance appraisal has not received adequate priority in Nepalese organization. It is largely confined to appraising current performance on the job. A large number of Nepal organizations are making formal as well as informal performance appraisal of their employees.

Informal and subjective: Formal performance appraisal is practiced at organized sectors only. Most of the small and medium-sized private organizations practice informal and subjective criteria for performance appraisal. Personal judgment and subjective assessment of owner-manager serve as the key criteria for performance appraisal.

Promotion oriented purpose: In Nepalese organization, the main purpose of performance appraisal is the promotion of employees. It does not provide maximum feedback to employees. The result of performance appraisal is not used to inform career development, reward management and employee training.

Performance appraisal in the public enterprise: Performance appraisal of employees in the public enterprises is done based on" General Principles" prescribed by public service commission. It is more or less similar to the government employees.

Performance appraisal in civil service: Civil service acts and rules have been developed in order to evaluate the performance of civil servants. A performance evaluation from has been prescribed. A total of 40 marks is allotted for performance evaluation.


Lepak, D., & Gowan, M. (2010). Human resource management: Training and Development. Upper Saddle River, NJ: Pearson Prentice Hall

Kharal, S.k. (2006). Foundation of Human Resource Management. Asian.

Shrestha, P. (2014). Foundation of Human Resource Management. Samjhana.

Acharya, B. s. (2014). Foundation of Human Resource Management. Kathmandu: Asmita.

Adhikari, D. (2010). Human resource Management. kathmandu: Buddha.




  • A reward is a driving force for pushing employees towards the job to achieve organizational goal.
  • Reward consists of pay, benefits, services, and job-related rewards.
  • The extrinsic reward can be financial or non-financial. Financial reward is performance based and membership based. Non-financing reward is based on status and privileges.
  • Monetary rewards provide employees for the enhancement of their financial well-being.
  • The non-financial reward does not consider financial well-being of employees.
  • It helps in attracting, retaining and motivating employees.

Very Short Questions



No discussion on this note yet. Be first to comment on this note