Total rewards in practice- slp 4

 

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Address the following questions in a question-and-answer format; that is, state the question and then answer it in detail.

The Background readings for this module explore the premise of how contingent workers, who have become a key foundation of the U.S. workforce, are compensated. In this assignment, compare and contrast the various aspects of how contingent workers are compensated compared with conventional workers. As you undertake this comparative analysis, address the following:

  • How does the employment of contingent employees affect an organization’s business, its HRM responsibilities, its overall costs, and its organizational culture?
  • In your educated opinion, should the compensation of contingent workers be the same (on a pro-rated basis) as conventional, full-time employees doing the same work? Discuss, bringing in both the strengths and challenges this approach presents.
  • How would you, as the CEO of the company, create a sense of engagement with the infusion of contingent workers in a workplace that historically consisted of conventional, full-time employees?

Use at least 2 library sources and/or background readings to help strengthen and support your 3-page response.

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Purpose

The purpose of this paper is to examine the influence of total rewards components (monetary, material and non-monetary) on happiness of employees working in Indian technology-based new ventures. Further, with the theoretical lens of social exchange theory, the mediating role of work engagement between total rewards perceptions and work happiness relationship has also been evaluated.

Design/methodology/approach

A survey of 201 employees working in Indian technology-based new ventures was conducted. Structural equation modeling was utilized to measure the proposed theoretical model. Regression analysis was conducted to test the direct effects of the hypothesized relationships. Sobel test and bootstrapping analysis were utilized to test the indirect effects of the proposed hypothesized relationship.

Findings

The findings supported the hypotheses that employees’ perceptions of total rewards have a significant impact on employee work engagement and happiness at work. However, individual component of total rewards, i.e. monetary rewards, demonstrated an insignificant impact on the employee work happiness. Work engagement was positively related to work happiness and fully mediated the relationship between total rewards perceptions and work happiness.

Practical implications

Special attention should be given to enhance the material and non-monetary rewards, specifically strengthening the feeling of appreciation, learning and growth opportunities and improving feedback functions. Given the challenges of new ventures (productivity and efficiency of talent), management of total rewards mix should be considered as the main concern of human resource (HR) managers and management (founders). The paper also provides important implications for designing a reward system that enhances employee productivity and efficiency in the unstructured and ambiguous work environment of new ventures.

Originality/value

The present study has significant contributions to the HR, entrepreneurship and positive psychology literature. It is an attempt to understand the association between total rewards components and work happiness via mediating mechanism, i.e. work engagement in new ventures. It also extends research in the entrepreneurial context. The emergence and growth of new ventures in India has meant a growing importance for understanding employees’ needs and expectations and guaranteeing their happiness. The findings of the study contribute to social exchange theory, Vroom’s expectancy and self-determination theory. This research is also a rare investigation of employees’ perspectives in an entrepreneurial context.

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1. Introduction

India has emerged as the third largest start-up ecosystem globally and is expected to grow by 2.2 times till 2020 (NASSCOM, 2016). Although, new ventures (also called start-ups or young firms) are enablers of innovation and economic progress, their success during their first years is uncertain as they face competition from established firms and the liability of newness challenge (Boso et al., 2013). As new ventures struggle to grow and achieve success, motivating and engaging talent is also a challenge and therefore developing innovative strategies to attract, engage and improve the productivity of employees that can contribute to their survival (Leung et al., 2006). A critical area in human resource management (HRM) that has been seen to affect an individual’s motivation to join, learn and stay with the firm is compensation and rewards (Medcof and Rumpel, 2007). Since new ventures adopt an informal HRM function, they have fewer choices available in terms of compensation options (Bau and Dowling, 2007) and view their rewards system through “total rewards” perspective. The holistic view of total rewards includes both monetary (all monetary payments-pay, benefits, etc.) and non-monetary (learning and growth opportunities, feedback and appreciation for work, etc.) rewards (Heneman and Tansky, 2002). Research works measuring various components of rewards and its motivational effects are largely based on formal and structured work environments and have overlooked its influence in young firms (Pajo et al., 2010). Therefore, studying motivational effect of holistic view of reward system in an informal and unstructured work environment, such as present in new ventures would help newly founded businesses to manage their talent effectively (Khoreva et al., 2017).

Additionally, Baron and Hannan (2002) highlighted that in the highly uncertain and ambiguous work environment of new ventures, few people typically need to cover all business functions resulting in high degree of workload and greater stress negatively affects their productivity at work. Keeping employees happy can boost their productivity as well as work efficiency and new ventures cannot deliver good services from unhappy employees. Moreover, the positive psychology field has asserted the need to the study the pursuit of employee happiness and betterment issues in the entrepreneurial settings (Vo, 2016).

Happiness refers to the feeling of frequent positive affect and a sense of work and life satisfaction (Hofmann et al., 2014). Huang (2016) documented that individuals’ happiness has a positive effect on individual performance, as happy employees remain enthusiastically involved in different tasks of the organizations. Within work happiness literature, various components of total rewards have been linked to happiness such as employee income (Oishi et al., 2011), meaningfulness at work (Golparvar and Abedini, 2014), learning and growth opportunities (Rego and Pina E Cunha, 2009), etc. However, little empirical evidence on work happiness as an outcome of total rewards components (Latukha, 2016) in new Indian ventures has been found. The study, therefore, aims to bridge highlighted gaps.

Additionally, work engagement literature has been conceptualized as a mediating mechanism and is embedded in three dimensions: vigor, absorption and dedication (Schaufeli et al., 2002). Organizational rewards model assumes employee engagement as a driving force of the employees’ positive attitude at work. This driving force may assist employees to overcome the stress and burnout at workplace and feel happy for the accomplishment of assigned task (Saks, 2006; Crawford et al., 2014). However, little empirical evidence exists that examines work engagement as a mechanism through which job resources (total rewards components) affect employee work attitude (i.e. employee work happiness). Therefore, the research question addressed in the study is as follows: RQ1.

How do perceptions of total rewards components influence employee happiness at work?

The purpose of this study is to examine the conceptual and empirical linkages between total rewards components and workplace happiness. In addition, the study also aims to evaluate the role of work engagement as a mechanism via which the perceptions of job resources (total rewards) affect employee work attitude (work happiness).

2. Need and rationale of the study

In today’s competitive world of work, human resource (HR) are assumed to be a key source of an organization’s survival and success. Specifically, in new ventures, each individual contributes to its survival and success (Glaub et al., 2014). However, studies in entrepreneurship (new ventures) domain are skewed toward the topics of firm’s growth (Edwards and Rahman, 2016). Therefore, highlighting employee perspective in the unique and dynamic working environment of new ventures would be a contribution in the field of HR and entrepreneurship literature.

Furthermore, past evidence suggests that substantial research works have been done on rewards and its consequences in context of large organizations (Thomas et al., 2017) with little focus on young firms. The compensation models developed in the context of large firms are not necessarily applicable to young firms (Bau and Dowling, 2007). A few studies have highlighted the motivational effect of rewards in informal and dynamic work environment of new ventures. For example, Bau and Dowling (2001) investigated the impact of financial and non-financial incentives on employee motivation to join German software start-ups. Park et al. (2014) have studied the impact of monetary and non-monetary rewards on innovation of technology-based new ventures of France. There remains a sparse research studying consequences of rewards in informal work environment of new ventures in India (Park et al., 2014).

Moreover, employees in organizations of different countries have shown preference of different reward components for happiness (Dolan et al., 2008). Research reveals that the employees of western countries feel happiness if their work is interesting, whereas employees in India feel happiness at obtaining secure jobs (Omar and Noordin, 2015). Therefore, the findings of existing literature suggest that components of total rewards that influence employees’ happiness are context based. There is considerable amount of literature existing on employees’ happiness in western context (Pan and Zhou, 2013). These studies reflect the understanding of reward system and its impact in those specific countries. Despite the appreciation and continuation of linkages between various components of rewards and work happiness, there remain very few research works that have examined work happiness as an outcome of holistic view of rewards (monetary, material and non-monetary rewards) explicitly, especially in an Indian context (Latukha, 2016). Therefore, the present study would be an important contribution to the Indian entrepreneurship and positive psychology literature.

In addition, while investigating the research in the areas of reward management and work happiness, Bakker et al. (2012) found that there is a need to study the relationship between work engagement and work happiness as both variables affect employee productivity and their intention to stay in an organization. Although, literature exists that has examined work engagement and work happiness relationship independently, there is a lack of empirical evidence that has investigated this relationship in Indian firms together (Malinen et al., 2013; Bakker and Oerlemans, 2014).

3. Theoretical framework and development of hypotheses

3.1 Total rewards

According to Chen and Hsieh (2006), rewards include everything that employees recognize as fair return in exchange of the efforts and time spent at work. Organizations offer rewards as an appreciation of certain behavior in the form of financial and non-financial incentives after the accomplishment of assigned tasks (Danish and Usman, 2010). Total rewards include both monetary (all monetary recognitions) as well as non-monetary (learning and growth opportunities, appreciation for work, etc.) rewards (Heneman and Tansky, 2002).

3.2 Total rewards categorization

Prior studies on rewards have categorized total rewards in various ways. According to Milkovich and Newman (2005), total rewards or total return on efforts can be divided into two major categories such as total compensation and relational returns. The first category includes direct as well as indirect pay and incentives. The second category includes recognition, challenging work, job security and learning and growth opportunities. According to De Gieter et al. (2006), total rewards categorization includes three major categories such as financial rewards, material rewards and psychological rewards. The first category includes all monetary payments. The second category includes material rewards such as benefits, training and growth opportunities and finally the third category includes psychological rewards such as recognition.

Intrinsic motivation of employees and identification with the goals of the organization play a significant role in newly founded organizations rather than in established firms (Brown and Medoff, 2003). Employees working in new ventures put more emphasis on congenial working environment, interpersonal work relations and team atmosphere compared to other aspects of the workplace (Sauermann, 2017). Therefore, consistent with the above arguments, we find the total rewards categorization recognized by Hulkko-Nyman et al. (2012) as monetary, material and non-monetary rewards as the components of total rewards.

3.3 Work happiness

According to Youssef and Luthans (2007), work happiness refers to the extent to which individuals experience positive affect and satisfaction at work. Pryce indicated that happy employees get faster promotion, get more support from supervisors and co-workers, generate innovative ideas, accomplish assigned task faster and perform task enthusiastically (Pryce-Jones and Lutterbie, 2010). Although, organizations face challenges to assure that their employees are satisfied and happy, Bakker and Demerouti (2014) indicated that the goal of creating positive feelings among employees can be achieved through an effective job resources program (i.e. total rewards system).

Past evidence suggests that employees feel positive about the workplace when they receive material rewards (e.g. training facilities, benefits, career growth opportunities, etc.), social rewards (e.g. good relationship with colleagues) (Abid et al., 2015), non-monetary rewards (e.g. positive feedback, participation in decision making, job security, etc.) (Carpentier and Mageau, 2013) and monetary rewards (e.g. pay rise, etc.) (Oishi et al., 2011). While, they feel unhappy if organizations do not recognize their efforts (Danish and Usman, 2010).

Furthermore, the theoretical underpinning for this study is derived from social exchange theory (SET) (Blau, 1964). When organizations provide adequate job resources (monetary, material or non-monetary rewards), employees become willing to contribute in terms of their knowledge and skills (Bujacz et al., 2014). They feel that the employer is concerned for their welfare and this satisfies people’s psychological need of belongingness (Devloo et al., 2015). This, in turn, may lead to experiences of positive affect and happiness. Accordingly, on the basis of the above arguments and theories, it may be assumed that new ventures providing job resources, such as total rewards components (monetary, material and non-monetary), may predict employees happiness at work.

Thus, we hypothesize that: H1.

Perceptions of total rewards components will be positively related to workplace happiness.

H1a.

Perceptions of monetary rewards will be positively related to workplace happiness.

H1b.

Perceptions of material rewards will be positively related to workplace happiness.

H1c.

Perceptions of non-monetary rewards will be positively related to workplace happiness.

3.4 Total rewards perceptions and work engagement

According to Strom et al. (2014), employees’ engagement level varies according to their perceptions of the return they receive after accomplishing work. Thus, it can be expected that employees will be more likely to involve in the work if they perceive a greater amount of benefits (job resources) for their task performance. Maslach et al. (2001) have documented effects of the lack of employee rewards such as stress and burnout. Accordingly, appropriate employee rewards are essential for enhancing the engagement level of employees at work. SET also suggests that when employees assess or perceive their employer as being invested in their welfare, through adequate resource allocation, i.e. rewards (job resources), they are more likely to reciprocate through positive work outcomes such as work engagement.

Hulkko-Nyman et al. (2012) studied the influence of total rewards’ elements on employee engagement at work. Many research works in the past have studied the relationships between various components of total rewards and employee work engagement, to the best of the researchers’ knowledge previous research works have not studied the relationship of total rewards’ components and work engagement in an unstructured work environment of new ventures.

Thus, we hypothesize that: H2.

Perceptions of total rewards will be positively related to experiences of work engagement.

3.5 Work engagement and work happiness

According to Schaufeli et al. (2002), work engagement includes three dimensions. The first dimension includes vigor which means mental resilience while working. The second dimension includes dedication which means experiencing a sense of achievement and being strongly involved in work. The third dimension includes absorption which means being fully focused on the work. Past research demonstrates that when employees receive rewards in the form of autonomy, appreciation for work, learning and growth opportunities, they are more likely to be enthusiastic and spend extra efforts in achieving the assigned tasks (Bakker et al., 2014). It creates the enthusiasm to learn new skills, increases their energy to action and meet set targets, which helps them produce a wide range of possible solutions, and subsequently enhances their sense of accomplishment. When individuals experience a sense of achievement at work, they tend to experience positive feelings of pride and enthusiasm that may boost their happiness levels (Baranik and Eby, 2016). Self-determination theory also supports the above argument that happiness is experienced when goals are reached or needs are fulfilled (Ryan and Deci, 2000).

Based on the above, we hypothesize that: H3.

Work engagement will be positively related to workplace happiness.

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