SMT.

CHANDIBAI HIMATMAL MANSUKHANI COLLEGE

ULHASNAGAR- 421003

PROJECT REPORT ON
ECONOMICS

SUBMITTED BY
AKASH RANA
(ROLL NO: 46)

M.COM (SEM.I): REWARD SYSTEM AND STRATEGY OF TATA CO.

SUBMITED TO
UNIVERSITY OF MUMBAI
2015-16

PROJECT GUIDE
Prof.kishore karia

PAGE 1

Department of Commerce

Certificate
This is to certify that, Mr. AKASH RANA of M.Com.I, Sem.I (Roll NO46) has successfully
completed the project titled REWARD SYSTEM AND STRATEGY OF TATA CO. under my
guidanceforthe AcademicYear201516. Theinformationsubmittedistrueandoriginalaspermy
knowledge.

Prof. kishore karia

(ProjectGuide)

Prof.GopiShamnani Dr.PadmaV.Deshmukh
(Coordinator,M.ComCourse)
(I/CPrincipal)

ExternalExaminer
PAGE2

ACKNOWLEDGEMENT

I acknowledge the valuable assistance provided by SMT.CHANDIBAI HIMATMAL

MANSUKHANI COLLEGE, for two years of degree course in M.Com.
I specially thank the principal Dr.PadmaV.Deshmukh for Allowing us to use the facilities
such as library, computer laboratory, internet etc.
I sincerely thank the M.Com co-ordinator Prof.GopiShamnani for Guiding us in the right
direction go prepare the project.
I thank my guide Prof. kishore kariawho has given his/her valuable time, knowledge and
guidance to complete the project successfully in time.
My family and peers were great source of inspiration throughout my project their support is
deeply acknowledged.

Signature

PAGE 3

DECLARATION
I, AKASH RANA OF SMT.CHANDIBAI HIMATMAL MANSUKHANI COLLEGE OF M.Com
SEMESTER I, hereby declare that I have completed the project on REWARD SYSTEM AND
STRATEGY OF TATA CO. in the academic year 2015-16. The information submitted is true
and original to the best of my knowledge.

(AKASH .P. RANA)

M.Com part-1, ROLL NO: 46
SEMESTER I

PAGE 4

INDEX
SR.NO

PARTICULAR

INTRODUCTION

2
3

Executive Summary
Objective

Company profile

Literature review

7
8
9
10
11

PAGE.NO

Reward System linked to Performance- Theoretical

Background

Types of rewards
Management of rewards and incentive
Performance appraisal
Reward System linked to Performance in Tata
Communications

SWOT analysis

12

CONCLUSION

13

BIBLOGRAPHY

Page 5

INTRODUCTION
Rewards are what employees receive for performing well. Sometimes these rewards come from
the organization in the form of money, recognition and promotions. Rewards can also consist of
feelings from having performed well in work. It can be said that rewards are very powerful
motivators of performance.

Organizations need various types of performance from their employees. They need them to
become active members of the organization, they need them to do their job as it has been defined
and they need their employees to improve their performance. In order to achieve improvements
in performance different reward systems must be applied.
In the contemporary world, rewards for better performance and success matter more than the
actual achievement itself. Indeed, as the global financial crisis showed, rewards were everything
for the bankers as they strove for more reckless bets and increasing risk taking. Because of the
system of flawed incentives, rewards were seen to the ultimate prize that was greater than the
actual process of winning. Hence, rewards management has to be seen in the context of what
are proper and just rewards and what are disproportionate rewards. The point here is that
rewards ought to justify the performance and not exceed them. What we mean by this is that it is
okay to reward a high performer for his or her stellar performance but not to the point where in
the pursuit of rewards, the individual throws caution to the winds and indulges in unethical
behavior.
For the present day generation, rewards matter more than the actual performance and this
is reflected in their increasing demands from the employers for salary hikes and bonuses.
If not anything else, the millennial generation believes that excessive rewards are their due.
Though this is not to say that only this generation behaves that way (this pattern can be seen in
the Generation X as well), it is the case that undue emphasis is being placed on the rewards alone
as opposed to the fulfillment one gets by getting the job done in a proper manner. If the baby
boomer generation taught us anything, it is that doing the job for fulfillment sake is more
important than the reward system in place. Of course, it goes without saying that in a world of
diminishing resources, everyone is concerned with earning as much money as possible, and
hence some of this behavior is indeed justified.
However, the point needs to be made that while rewards are one way to motivate individuals and
incentivize good performance, they are not the be all and end all that everyone likes to believe.
Hence, a proper reward system in organizations would be aligned with the correct strategic
fit between internal motivation and external rewards and only when they are in balance
can organizations grow in a healthy manner.

Page 6

EXECUTIVE SUMMARY
In a competitive business climate, more business owners are looking at
improvements in quality while reducing costs. Meanwhile, a strong economy has

resulted in a tight job market. So while small businesses need to get more from
their employees, their employees are looking for more out of the businesses.
Employee rewards and recognition programs are one method of motivating
employees to change work habits and key behaviors to benefit a small business.
But first, we will look into managing the compensation aspect. The objective of
this paper is to discuss the rewards and recognition policies and the process
involved with reference to Tata Consultancy Services and its comparative analysis
with other players in the industry. This report also brings out the flaws in the
present system as well as suggests measures to overcome them.TCS follows a
model which is far ahead of other traditional system, which is Economic Value
Added (EVA). It is not just any reward structure, but an integrated management
process aimed at achieving long term goals, instead short term. It makes sure that
the unit performs in a sustainable and increasing manner. So in the same way every
individual employee would be able to improve his/her performance considerably.

Page 7

OBJECTIVES: To Study of various reward systems in TCL.

Study of linkage between PMS & reward system.

To identify the gaps in the current reward system.

Reward System is an official system and this is done by performance-based

measures, objective or subjective.

To reward employees fairly, equitably and consistently in correlation to the

value of these individuals to the organization.

Page 8

INTRODUCTION TO THE COMPANY PROFILE

TATA GROUP AND ITS HISTORY:

Tata Group is an Indian multinational conglomerate company headquartered in
Mumbai, Maharashtra, India. It was founded in 1868 by Jamsetji Tata as a trading
company with Rs. 21000 capital. It has operations in more than 80 countries across
six continents. Tata Group has over 100 operating companies with each of them
operating independently. Out of them 32 are publicly listed. The major Tata
companies are Tata Steel, Tata Motors, Tata Consultancy Services (TCS), Tata
Power, Tata Chemicals, Tata Global Beverages, Tata Teleservices, Titan Industries,
Taj Hotels and Tata Communications.
The Group's major companies are beginning to be counted globally. Tata Steel
became the sixth largest steel maker in the world after it acquired Corus. Tata
Motors is among the top five commercial vehicle manufacturers in the world and
has recently acquired Jaguar and Land Rover. TCS is a leading global software
company, with delivery centers in the US, UK, Hungary, Brazil, Uruguay and
China, besides India. Tata Tea is the second largest branded tea company in the
world, through its UK-based subsidiary Tetley. Tata Chemicals is the world's
second largest manufacturer of soda ash. Tata Communications is one of the
world's largest wholesale voice carriers.
Tata Group remains a family-owned business, as the descendants of the founder
(from the Tata family) own a majority stake in the company. Tata Sons is the
promoter of all key Tata companies and holds the bulk of shareholding in these
companies.
Page 9
The chairman of Tata Sons has traditionally been the chairman of the Tata group.
About 66% of the equity of Tata Sons is held by philanthropic trusts endowed by
members of the Tata family.
The Tata Group and its companies & enterprises is perceived to be India's bestknown global brand within and outside the country as per an ASSOCHAM survey.

In 2009, annual survey by the Reputation Institute ranked Tata

Group as the 11th most reputable company in the world. The
survey included 600 global companies. The Tata Group has helped
establish and finance numerous quality research, educational and
cultural institutes in India.
The group was awarded the Carnegie Medal of Philanthropy in
2007 in recognition of its long history of philanthropic activities.
The combined market capitalization of all the 32 listed Tata
companies was INR 6.8 Trillion ($ 109 billion) as of March 2014.
Tata receives more than 58% of its revenue from outside India.
The Group employs around 350,000 people worldwide. The Tata
name has been respected in India for 146 years for its adherence
to strong values and business ethics. It encompasses seven
business sectors: communications and information technology,
engineering, materials, services, energy, consumer products and
chemicals.

Page 10

TATA GROUP AT A

GLANCE

#45

$109 Billion

Annual Revenue
Worldwide Brand

(Source: Brand Finance, 2012)

544502 (till 2013)

~ 60% Non India

Employees Worldwide

#11
Most Reputed
Company

Over 150 Years in

operations

(Source: Reputation
Institute, 2009)

UK
On Forbes List of
Groups Largest Market
outside India

Over 100
Operating Companies in
7 Sectors
across 6 Continents

OUR BUSINESSES
Chemical Sector
Tata Chemicals
Rallis India
Tata Pigments Limited
General Chemical Industrial Products
Brunner Mond
Magadi Soda Company
Page 11

Only Indian Entity

Worlds 20 Most
Reputed Companies

Consumer Products

Energy

Tata Power
Tata Power Delhi Distribution
Limited
Tata Power Solar
Jamshedpur Utilities and Services
Company
Tata Projects

Tata Tea Limited

Tata Global Beverages
Titan Industries
Voltas
Tata Swach
Tata Salt

Engineering
Tata Motors
Tata Technologies Limited
Tata Consulting Engineers
Limited
Telco Construction Equipment
Voltas Global Engineering Centre
Tata Advanced Materials

Information systems and

communications
Computational Research
Laboratories
Tata Consultancy Services Ltd.
Neotel
Tata Teleservices
Virgin Mobile India
Tata Communications
VSNL International Canada

Services

Steel

Tata AIG General Insurance

Taj Hotels
Tata Housing Development
Company Limited
Tata Africa Holding
Ginger Hotels
Tata Capital

Tata Steel
Tata Sponge Iron
Tata Bearings
TM International Logistics
Tayo Rolls
Tata Steel Europe

Page 12

LITERATURE REVIEW
Employee reward system In a competitive business climate, more business owners
are looking at improvements in quality while reducing costs. Meanwhile, a strong
economy has resulted in a tight job market. So while small businesses need to get
more from their employees, their employees are looking for more out of the
businesses. Employee rewards and recognition programs are one method of
motivating employees to change work habits and key behaviors to benefit a small
business. But first, we will look into managing the compensation aspect.
COMPENSATION MANAGEMENT Traditional PM has mainly been financial
measuring ratios such as ROI (Return on Investment), RI (Residual Income) and
EPS (Earnings per Share). These metrics account for the costs associated with
capital and help firms spot areas in which capital is being invested unprofitably.
Although these financial data have the advantage of being precise and objective,
the limitations are far greater, making them less applicable in today competitive
market. Organizations that have adopted the traditional PM, have experienced great
difficulty in trying to fit the measures with increasing new business environment
and current competitive realities. While the traditional financial metrics are valuebased, they are nonetheless lagging indicators. They offer little help for forwardlooking investments, where future earnings and capital requirements are largely
unknown investments such as new product introductions and capital or new market
entry. This will lead to narrow short-term decision-making based on bottom-line
financial results. On the other hand, most of the criticism of traditional PM stems
from their failure to measure and monitor multiple dimensions of performance, by
concentrating almost exclusively on financial measure. They solely concentrate on
minimizing costs and increasing labor efficiency while neglecting other operational
performance measures such as quality, responsiveness and flexibility.

Page 13

INTRODUCTION OF REWARD SYSTEM - A THEREOTICAL

BACKGROUND
Wilson (1995) defines reward systems as follows:
A Reward system is any process within an organization that encourages,
reinforces, or compensates people for taking a particular set of actions. It may be
formal or informal, cash or noncash, immediate or delayed.
It can also be defined as a structured method of evaluating and compensating
employees based on their performance.
Rewards are what employees receive for performing well. Sometimes these
rewards come from the organization in the form of money, recognition and
promotions. Rewards can also consist of feelings from having performed well in
work. It can be said that rewards are very powerful motivators of performance.
Organizations need various types of performance from their employees. They need
them to become active members of the organization, they need them to do their job
as it has been defined and they need their employees to improve their performance.
In order to achieve improvements in performance different reward systems must be
applied.
In a competitive business climate, more business owners are looking at
improvements in quality while reducing costs. Meanwhile, a strong economy has
resulted in a tight job market. So while small businesses need to get more from
their employees, their employees are looking for more out of the businesses.
Employee rewards and recognition programs are one method of motivating
employees to change work habits and key behaviors to benefit a small business.
IMPORTANCE OF REWARD SYSTEM
It is important for one's employees to know they are valued. W.P. Brick (2012)
elevates this importance in Public Manager by writing, "Recognition and employee
engagement are so critical to the operations and culture of a modern workplace
they can only be ignored at great peril." In Entre Leadership, Dave Ramsey (2011)
adds, "Where there is no recognition, it is very difficult to have passionate,
creative, motivated team members". When it comes to valuing employees, the
manager has nothing to lose when giving the recognition but much to lose by
withholding praise. This is not to say that employees should be recognized for
anything and everything, but that when a job is done exceptionally well, there
should be recognition.
Employee reward and recognition programs are of immense importance to an
organization and will benefit the employee along with the organization.
Page 14

Most of what has been mentioned is considered common sense, but common sense
does not seem very common. People should be rewarded and recognized for a job
well done but often get overlooked in a corporation's pursuit of profit and a market
advantage. But employee rewards and recognition can bring an organization profit
and a market advantage! It all comes down to a firm's ability to understand the
human need for acceptance, the definitions for rewards and recognition, the
importance and benefits, and finally the various means of financial and
nonfinancial options. Whether it costs money or is free for an organization, there is
a need for employees to be acknowledged and it must be intentional.
REWARDS VS. RECOGNITION
Although these terms are often used interchangeably, reward and recognition
system should be considered separately. Employee reward systems refer to
programs set up by a company to reward performance and motivate employees on
individual and/or group levels. They are normally considered separate from salary
but may be monetary in nature or otherwise have a cost to the company. While
previously considered the domain of large companies, small businesses have also
begun employing them as a tool to lure top employees in a competitive job market
as well as to increase employee performance.
As noted earlier, although employee recognition programs are often combined with
reward programs, they retain a different purpose altogether. They are intended to
provide psychological rewards a financial benefit. Although many elements of
designing and maintaining reward and recognition system are the same, it is useful
to keep this difference in mind, especially for small business owners interested in
motivating staffs while keeping costs low.
DIFFERENTIATING REWARDS FROM MERIT PAY AND THE
PEFORMANCE APPRAISAL
In designing a reward program, a small business owner needs to separate the salary
or merit pay system from the reward system. Financial rewards, especially those
given on a regular basis such as bonuses, profit sharing, etc., should be tied to an
employees or a groups accomplishments and should be considered pay at risk
in order to distance them from salary. By doing so, a manager can avoid a sense of
entitlement on the part of the employee and ensure that the reward emphasized
excellence or achievement rather than basic competency. Merit pay increases, as a
result, are not part of an employee reward system. Normally, they are increase for
inflation with additional percentages separating employees by competency. They
are not particularly motivating since the distinction that is usually made between a
good employee and an average one is relatively small.
Page 15

In addition, they increase the fixed costs of a company as opposed to variable pay
increases, such as bonuses, which have to be re-earned each year. Finally, in
many small businesses teamwork is a crucial element of a successful employees
job. Merit increases generally review an individuals job performance, without
adequately taking into account the performance within the context of the group or
business.
PURPOSES OF REWARD SYSTEMS

To recognize individual and team efforts

To re-enforce positive behaviors
To create a better working environment
To have a system that recognizes as many people as possible.
To attract and retain good employees
To reduce the absenteeism
To facilitating organizational culture and strategic objectives.
DESIGNING A REWARD PROGRAM
The key characteristics of developing a reward program are as follows:
Identification of company or group goals that the reward program will support.
Identification of the desired employee performance or behaviors that will
reinforce the companys goals.
Determination of key measurements of the performance or behaviors, based on
the individual or groups previous achievements.
Determination of appropriate rewards.
Communication of program to employees.
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Reward system are concerned with two major issues: Performance and Rewards.
Performance includes defining and evaluating performance and providing
employees with feedback. Rewards included bonus, salary increase, promotions,
stock awards and perquisites.
Large corporations with several different businesses may have multiple reward
systems. And while they may share some fundamental philosophies and values,
they may differ accordingly to the particular business setting, competitive situation,
and product life cycle. Thus, multiple reward systems can support multiple cultures
within one organization.
These components will be designed, developed and maintained on the basis of
reward strategies and policies which are created within the context of the
organizations between strategies.
1. Improve Organizational Effectiveness: Support the attainment of the
organizations mission, strategies, and help to achieve sustainable, competitive
advantage.
2. Support and Change Culture: Under pin and as necessary help to change the
organizational culture as expressed through its values for performance innovation,
risk taking, quality, flexibility and team working.
3. Achieve Integration: Be an integrated part of the management process of the
organization. This involves playing a key role in a mutually reinforcing and
coherent range of personal policies and process.
4. Manageable: It helps to manage the undue administrative burdens imposed on
managers and members of the personal department.
5. Motivate Employees: Motivate employees to achieve high level of quality
performance.
6. Increased Commitment: Enhance the commitment of employees to the
organization that will a) want to remain members of it, (b) develop a strong belief
in and acceptance of the values and goals of the organization; and (c) be ready and
willing to exert considerable effort on its behalf.
7. Fairness and Equity: Reward assesses can upgrade competence and encourage
personal development.
8. Improved Skills: The employees can upgrade competence and encourage
personal development.
9. Improved Quality: Help to achieve continuous improvement in levels of quality
and customer service.
10. Develop team working: An effective award system improves co-operation and
effective team working at all level.
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REWARD SYSTEM LINKED TO MOTIVATION

One of the primary purposes to use rewards in companies is to motive the
employee to perform well. When we talk about motivation from managerial
prospective it is important to bear in mind that: You cant motive other people.
You can only influence what theyre motivated to do.
In other words we do things because it will fulfil some current or future personal
goal or desire we have. It is therefore important for the corporate management to
identify what motivates their employees and try to join their personal objectives
with the ones of the company.
MASLOW HIERARCHY OF NEEDS
The motivation process can be described in the term of need theory which states
that it is an unsatisfied need that motivates behavior. The best known theory within
this category is written by Abraham H Maslow (1908-1970). An American
psychologist in 1954. Maslows hierarchy of needs is one of the most famous
theories in the term of individual motivation. Human need are by him divided into
five different levels, physiological, safety, belongings, esteem and selfactualization. Maslows hierarchy of needs always illustrated in the pyramid,
shown in the following figure.

Page 18

MASLOWS NEEDS CLASSIFIED INTO FIVE CATEGORIES:

Physiological needs are basic needs for survival such as food, water & sleep.
Safety needs consist of variety of safety needs such as security of employment,
health & family.
Social need consist of friendship, family, love & intimacy.
The esteem needs presents the desire to be accepted & valued by others. Here
we find the concept such as self-esteem, confidence, achievement, respect for
others and respect by others.
The need for self-actualization here we find the motivation to ones own
maximum potential, self-fulfillment and try to become everything that one is
capable of becoming. It includes the concept as morality, creativity, spontaneity,
problem solving and some more.
HERZBERGS MOTIVATION-HYGIENE THEORY (TWO FACTOR
THEORY)
To better understand employee attitudes and motivation, Frederick Herzberg
performed studies to determine which factors in an employees work environment
caused satisfaction or dissatisfaction. He published his findings in the 1959 book
the Motivation to work.
The following table presents the top six factors causing dissatisfaction and the top
six factors causing satisfaction, listen in the order of higher to lower importance.

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Factors Affecting Job Attitudes

Leading to dissatisfaction
Company policy
Supervision
Relationship with boss
Work conditions
Salary
Relationship with peers

Leading to Satisfaction
Achievements
Recognition
Work itself
Responsibility
Advancement
Growth

From the above table of results, one observed that the factors that determine
whether there is dissatisfaction or no dissatisfaction are not part of the work itself,
but rather are external factors. Herzberg argues that these provide only short-run
success because the motivator factors that determine whether there is satisfaction
or no satisfaction are intrinsic to the job itself, and do not result from carrot and
stick incentives.
EXPECTANCY THEORY
Expectancy Theory (1964) is a motivational theory written by Victor Vroom, born
1932, in Canada. The theory states that motivation will be strong if the individual
can expect that their effort & contribution will give meaningful rewards. It means
that motivation is more likely when a clear relationship is exists between
performance and outcome and the outcome is satisfying needs.

Motivation in work can be reached in two ways. Firstly, people can motivate
themselves by working with things that satisfied their personal needs. Secondly
people can be motivated by management using incentives such as pay, promotion,
praise.
Page 20

TYPES OF REWARDS
Rewards serve many purposes in organizations. They serve to build a
better employment deal, hold on to good employees and to reduce
turnover. The principal goal is to increase people's willingness to work
in ones company, to enhance their productivity.
Most people assimilate "rewards", with salary raise or bonuses, but this
is only one kind of reward, extrinsic reward. Studies proves that
salespeople prefer pay raises because they feel frustrated by their
inability to obtain other rewards, but this behavior can be modified by
applying a complete reward strategy.
Besides verbal appreciation, tokens of appreciation, rewards (award
trophies, framed certificates, special parking spaces, gift cards, pens or
a free day off.) etc. are generally given to employees. The principal
difficulty is to find a balance between employees' performance
(extrinsic) and happiness (intrinsic)
There are two kinds of rewards:
Extrinsic Rewards- Tangible / Concrete Rewards.
Intrinsic Rewards- Non Tangible / to give satisfaction to Individual.

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Various categories of rewards that are given and can be given are:
Basic Pay: Basic Pay is defined as the rate fixed by applicable law or regulation.
Examples of special types of pay included in Basic Pay are:
Night differential pay for wage employees
Environmental differential pay for employees who work under hazardous
situations.
Premium pay for groups such as law enforcement officers
Locality-based comparability payments.
It is an essential factor which is closely related to job satisfaction and motivation.
Although pay may not be a reward as this is a static amount which an employee
will be paid every month, it will be considered as a reward if similar worker is paid
less.
Additional Hours Rewards: This is similar to that of overtime. However, it is
paid to employees if they put in an extra hour of work for working at unsocial
hours or for working long hours on top of overtime hours.
Commission: Many organizations pay commission to sales staff based on the sales
that they have generated. The commission is based on the number of successful
sales and the total business revenue that they have made. This is a popular method
of incentive.
Performance Related Pay: This is typically paid to employees who have met or
exceeded their targets and objectives. This method of reward can be measured at
either team or department level.
Profit Related Pay: Profits related pay is associated with if an organization is
incurring a profit situation. If the organization is getting more than the expected
profits, then employees receive an addition amount of money that has been defined
as a variable component of the salary.
Payment by Results: This is very similar to that of profit related pay. This reward
is based on the number of sales and total revenue generated by the organization.
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Piece Rate Reward: Piece rate reward is directly related to output. The employees
get paid on the number of pieces that they have produced. These pieces will be
closely inspected to make sure that quality standards are being met.
Bonuses: Bonuses will be paid to employees who have met or exceeded their
targets and objectives. This is aimed at employees to improve their performance
and to work harder. There are several types of bonus programs followed by
industries, some are as follows: Current Profit Sharing, Gain Sharing, Spot Bonus
Award, Noncash Bonus, Sign-on Bonus, Mission Bonus, Referral Bonus, Retention
Bonus, Holiday Bonus, etc.
Recognition: Employees will not always be motivated by monetary value alone.
They do require recognition to be motivated and to perform well in their work.
Job Enrichment: This is a common type of recognition that is aimed at employees
to get motivated. Job enrichment allows more challenging tasks to be included in
the day-to-day tasks performed by the employee.
Job Rotation: Unlike job enrichment, job rotation refers to shifting employees
between different functions. This will give them more experience and a sense of
achievement.
Teamwork: Teamwork is also considered as recognition. Creating teamwork
between team members will improve performance at work. Social relationships at
work are essential for any organization.
Empowerment: Empowerment refers to when employees are given authority to
make certain decisions. This decision making authority is restricted only to the day
to day tasks.
Training: Many organizations place a greater emphasis on training. This is
considered as recognition for employees. Training could vary from on the job
training to personal development training.
Benefits: Another element in the total rewards approach includes employee
benefits. Benefits are programs that an employer uses to supplement the cash
compensation that employees receive. These benefits provide a level of security for
employees and their families, and may include health care insurance, time off,
disability insurance and retirement programs. As such, benefits fall under the
satisfier category.
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AWARDS:
This again is an important type of recognition that is given to employees who
perform better. Organizations have introduced award systems such as best
performer of the month etc. and all these will lead employees to perform better.
Rewards are basically the methods to extrinsically motivate employees. These
awards can be MONETARY or NON MONETARY. Some of the commonly given
awards in various organizations are:
Service Awards:
Each year that an employee commits to an employer, he offers great advantages to
the business or organization. Employees gain more knowledge of their position and
responsibilities over time, and the company does not have to set aside time and
money hiring and training new employees. Employers often reward employees
who remain committed with a recognition pin or a certificate acknowledging the
number of years of continuous service. Employers may further reward long-term
employees with an extra gift such as a watch or a special desk set, typically
engraved with the employees name and the date they received the honor.
Employee of the Month:
Some workers will consider being designated Employee of the Month a great
honor. This award is commonly given to the one employee each month who has
given exceptional service, had perfect attendance and gone the extra mile for the
company to ensure all
customers are given the service they expect. These employees are often recognized
during monthly staff meetings with a plaque or certificate recognizing their efforts.
A designated parking space is another good idea, and displaying the plaque where
customers can see it adds to the honor. Employers should take care in choosing
employees in a manner that shows no favoritism. If others perceive that employees
are chosen unfairly, the award can be counterproductive.
Attendance Awards:
Companies depend on employees to be punctual and perform tasks to their
potential so that the work load can be evenly distributed. Employees who strive to
be at work during every scheduled shift and never come in late deserve to be
recognized in a special way. Perfect attendance awards can be given in the form of
a certificate, plaque or even as a cash bonus. Sometimes employers will give
employees with perfect attendance a day off with pay or a gift certificate to a local
restaurant in appreciation for their commitment to the company.
Page 25

Safety Awards:
Safety awards are a great way for employers to recognize employees or teams for
their continued adherence to safety guidelines. This kind is typically awarded when
an employee or a group files no incident or accident reports over a given period of
time, such as a month or year. These acknowledgements are often expressed in
terms of the man (or woman) hours since the team last experienced in injury. Cash
bonuses or gifts such as tickets to popular local events make great safety awards.
Company Advancement:
The ultimate reward that every employee tends to strive for is company
advancement. Employees generally work hard to earn recognition in an attempt to
be promoted to a higher position within the company or receive an annual raise in
pay. Employers should choose candidates for advancement carefully, avoiding
favoritism and ensuring that the most reliable and skilled employees are advanced
to higher positions.
Special Operating Unit Award:
Individual bureaus may establish award programs which are appropriate to their
particular interest in recognizing certain group of employees. There are a large
variety of programs, ranging from recognition for scientific accomplishments to
employee of the year. These award programs can be cash or non-monetary.
Cash-in-Your Account Award:
A small cash award designed to recognize employees for going the extra mile in
getting the job done. These awards do not recognize overall performance, but
rather specific instances of exemplary performance. Awards range from Rs. 1000 to
Rs. 10000 in Rs. 1000 increments.
Suggestion Award:
Under the suggestion program, employee are granted an award for formal
suggestions which have been evaluated and adopted. The amount of the award is
determined by the amount of tangible and intangible benefits of the idea.
On the Spot Award:
A small award which is granted as a means to recognize employees for those dayto-day efforts which contribute in a special way to get the job done.

Page 26

Certificates of Appreciation:
Certificates granted to employees or non-employees who have made outstanding
contributions or who have performed significant services to the Department.
External Awards:
Awards sponsored by other agencies and non-government organizations given to
corporate employees.
Group-Based Reward Systems
Group-based reward systems are based on a measurement of team performance,
with individual rewards received on the basis of this performance. While these
systems encourage individual efforts toward common business goals, they also
tend to reward under-performing employees along with average and above-average
employees. A reward program which recognizes individual achievements in
addition to team performance can provide extra incentive for employees.
WHAT IS PERFORMANCE MANAGEMENT
It can be defined as a continuous process of assessing and measuring the
performance of an individual and aligning it with the organizational goals. It is the
job of the HR people to design an effective performance management system.
Expansion for the word Perform, best explains it.
P Potential
E Enthusiasm
R Reliability
F Flexibility
O Orientation
R Reengineering
M Motivation
Why Link Reward to Performance
To connect two ends of the rope, a knot is required; to make it lengthy and useful
for long run. Likewise, the tie up between the reward and performance should be
made for employee retention and their commitment to work, which ultimately
improvise the contributing factor of the employee. Employees should perform well
to be rewarded and the approach designed for this is Pay for Performance. Apart
from the base pay, which is based on job description, a variable pay should be
announced for their outstanding performance.
Page 27

Although the pay raise motivates the employees to an extent, ultimately they want
them to be appreciated and recognized in a society for their work, here comes the
employee recognition program. Many employees become less committed to work
not because of their low pay structure, but for the lack of recognition. Both types of
rewarding system should be ensured for higher motivation, retention, engagement
and job satisfaction.
A simple example for performance based reward system can be best explained by
the game of cricket. When a bowler or batsman performs well in a match, his
performance is rewarded by the cricket council through the title Man of the
Match and cash award. It motivates the winner and also the team players to
perform well for their team.

Page 28

PERFORMANCE MANAGEMENT, REWARDS AND AWARDS

Performance management is the systematic process by which an organization
involves its employees, as individuals and members of group, in improving
organizational effectiveness in the accomplishment of agency mission and goals.
Employee performance management includes:
Planning work and setting expectations.
Continually monitor performance.
Developing the capacity to perform.
Periodically rating performance in a summarized fashion, and
Rewarding good performance.

R e
w a
rd i
ng

P l
an
in
g
R
at
in
g

M o
n ito
rin
g

D ev
e lo p
m en
t

Performance appraisals and rewards are designed to show recognition to

employees. Those who exemplify outstanding abilities in the workplace are
celebrated through an appraisal and reward system. Managers may offer employee
praise in a one-on-one setting, such as a performance evaluation, or in a group
setting among peers.

Page 29
Archer North, a company that designs and develops employee performance
appraisal and corporate evaluation systems, says that social recognition is powerful
and is an effective forum for showing value in employees.
Employee recognition programs boost the morale of employees and positively
change the health of an organization. By instituting performance appraisal and
reward systems, an employer lets its workers know that their hard work pays off
and is appreciated.
Reward system is a part of performance appraisal. When an employee do
performance appraisal he uses reward system to appreciate the work done by the
employee. Every company has its own reward system which has to be linked with
its performance appraisal method. Reward systems are concerned with two major
issues: performance and rewards. Performance includes defining and evaluating
performance and providing employees with feedback. Rewards included bonus,
salary increase, promotions, stock awards and perquisites.
Purposes of Performance Management
The purposes of performance management may be grouped as under:
a) Informational Purpose
To let an employee know how his performance compares with job standards.
To assist in identifying special talents and abilities.
To identify employees needing performance improvement.
To allow employees to evaluate management.
b) Motivational Purpose
To establish closer employer-employee relationships and communicate the job
development. Requirements and standards of performance in a periodic basis.
To provide financial rewards or recognition for a job well done.
To work out plans to solve performance problems.
To encourage initiative, creativity and develop a sense of ownership amongst
the employees.

Page 30
c) Developmental Purpose
To identify individual employee training needs.
To identify individuals for potential development.
To help the employee strengthen current performance and prepare for higher
responsibilities.
To show organizational interest in attracting and retaining capable employees.
d) Managerial Purpose
To translate organizational goals into individual job/performance objectives.
To communicate managements expectations regarding employee performance.
To provide feedback to the employee about job performance in the light of
managements expectations.
To coach the employee on how to improve job performance on a periodic basis.
To diagnose the employees strength and weakness.
To determine what kind of development activities might help the employee
better utilize his competencies / skills on the job.
Functions of Performance Managements:
To communicate vision of its objectives to all its employees.
To set departmental and individual performance targets which are related to
wider objectives.
To conduct formal review of progress towards these targets.
To use the review process to identify training, development and reward
outcomes and

 To evaluate the effectiveness of the whole process in order to improve

effectiveness.

Page 31

Benefits of Performance-based Rewarding approach

An effective Performance-based Rewarding approach can bring out multiple
benefits to an organization and employees,
Decreased attrition rate, which empowers employee retention in long run and
commitment. Due to decreased attrition rate and increased employee retention,
recruitment cost is less which helps in the financial stability of the organization.
Motivate employees to perform better, aligning with the organizational goals.
Employees get a clear insight of what should be done to meet the goals.
Employee involvement (Participation Management) is increased which results
in autonomy, more productivity and satisfaction. Employees feel that they are part
of a big success, enabling more confidence and innovation in work.
Rather than working on routine jobs, employees volunteer to work on
challenging jobs to increase their recognition levels in the working society. It
enforces healthy competition among individuals to perform better.
Employee gets a chance to learn and enhance their skills, which highlights their
development in career.
For the real success of the system, it should be implemented without any bias or
oversight. When employees perform well, he should be acknowledged rightly by
the supervisors. HR department should not make this process to follow over a
night; its importance has to be stressed to the supervisors and employees at all
levels. When a perfect system is implemented, it results in higher retention of
talented employees and greater profits to the organization.

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Management of rewards and

incentives
An important aspect of human resource
management which needs special attention in
extension organizations is the development of a reward system which will attract,
retain, and motivate extension personnel, as well as provide training and
promotional opportunities. Extension organizations in Asian and African countries
have a poor reward system. The extension agents are not only poorly paid but are
paid late and after reminders or visits to head-quarters. Most of the extension
services are run by government agencies and operate under rules and regulations of
public administration. These rules do not have provisions for rewarding superior
performance or for a wage system based on merit. Promotion criteria are based on
seniority and length of service. Thus the bureaucratic structure of extension
services is a basic hindrance to designing a better reward system. Among many of
the government departments, the agricultural department and extension service
have a low public esteem and poor pay structure.
The rewards and incentive system can be improved in several ways.
Rewarding Superior Performance:
Extension organizations have to develop a reward system which encourages
superior performance so that pay and wage administration will be an effective tool
to promote performance, motivation, and satisfaction. A clear job description,
performance standards, and performance appraisal will help in evaluating
extension work and rewarding people for meritorious service. Ways and means
have to be found within the existing framework of public administration for basing
pay on performance. For example, extension workers on the basis of their
performance can be sent for higher education. Nonmonetary rewards such as
recognizing the good ideas of field workers or awarding honorable titles will also
help in improving performance. Extension personnel may also be encouraged to
form professional societies to develop and communicate high standards, as well as
to recognize superior performance.
Page 33

A professional monthly journal or newsletter can help extension agents to

communicate innovative ideas and reinforce superior performance.
Improved Working Conditions at the Field Level:
The reward system must also be internally equitable. The relative importance of
field-level extension functionaries has to be realized in terms of pay compensation
and other amenities. Lower level extension workers often have to work under
unpleasant and isolated conditions. A carefully planned system of field allowance
will compensate this (Baxter, 1990). The living conditions of field extension
workers must be improved by providing adequate facilities for housing, transport
and medical and educational allowances for children.
. A career refers to all of the jobs that people hold during their working lives.
Career planning is the process by which employees plan their career goals and
paths. Career development refers to all of the technical and managerial skills
employees acquire to achieve their career plans. Career advancement, which gives
a picture of future opportunities in terms of promotion, is a motivating factor for
performance and development of skills. Unfortunately, no career structure exists
for extension personnel in many organizations. In developing countries like India,
there are many cases where one joins as a village extension worker and retires in
the same position after serving thirty to thirty-five years. As part of improving the
rewards and incentives system, extension organizations have to develop suitable
career paths and advancement for different categories of extension personnel on a
systematic basis.
As part of career development, extension personnel should be provided with
opportunities to develop their technical and managerial skills to enable them to
occupy higher positions. Extension personnel should have a salary structure as well
as promotion opportunities comparable to other professions like health or
engineering. In Kenya, the pay and career opportunities of extension workers are
comparable to other government employees. Recommendations have already been
made to equate the status of agricultural extension with that of agricultural research
by offering an equal salary structure, professional advancement, and incentives and
rewards.

Page 34

Performance appraisal
In the previous sections, we discussed how extension personnel are recruited and
trained and become part of a work group. These are all vital activities. However,
the ultimate measure of effective human resources within an extension
organization is the performance of extension personnel. Thus performance
appraisal is important for effective human resource management. Performance
appraisal is a process of evaluating employee performance in order to guide and
develop the employee's potential. In many extension organizations which are
government departments, the performance appraisal is nothing more than a
confidential judgments of work done and a character report used to facilitate
disciplinary action or promotion. The employees do not get feedback about their
performance. Extension organizations need to have an open appraisal system to
provide feedback and opportunities for open discussion with employees on their
performance, because they have immense potential to grow and develop. This
system can create a healthy working climate and employee motivation.
The performance appraisal which aims at facilitating employee development has
the following major purposes:
(1) To provide feedback and guidance,
(2) To set performance goals,
(3) To identify training needs, and
(4) To provide inputs for management of pay administration, rewards, and
promotion.
The steps involved in effective performance appraisal are:
(1) Identification of key performance areas and setting yearly objectives under
each KPA,
(2) Identification of critical attributes for effective performance,
(3) Periodic review of performance,
(4) Discussion of performance with employees, and

(5) Identification of training and developmental needs

page 35
Potential Appraisal:
The potential appraisal is a future-oriented appraisal by which the potential of an
employee to occupy higher positions and to assume higher responsibilities is
evaluated. The potential appraisal can help the extension staff to know their
strengths and weaknesses and can motivate them to further develop their skills.
Thus the potential appraisal helps in planning overall career development of
employees. Some of the techniques used for the appraisal are self-appraisals, peer
rating, the management by objectives (MBO) approach, psychological test and
simulated work exercises, case analyses, and leadership exercises.
Performance Review and Counseling
An important purpose of the performance appraisal is to counsel and guide
employees towards greater job effectiveness. Thus a system of performance
counseling is needed in extension organizations. Performance counseling is
provided by the manager to the subordinates to help them in the analysis of job
performance, identification of training needs, and finding solutions to the problems
which hinder job effectiveness. Counseling is an art of communication involving
two people - manager and employee. Counseling differs from training in that the
former involves a dyadic relationship and establishes more mutuality and
confidentiality. The success of performance counseling depends upon the
employee's interest, a climate of openness and mutuality, and the counseling
process. Extension managers can use directive, nondirective, and cooperative
counseling

Page 36

REWARD SYSTEM LINKED TO PERFORMANCE

IN TATA COMMUNICATIONS
TCL has developed an unbreakable bond with sound HR practices in an
environment that defies traditional roles and responsibilities. The company views
its employees as assets, which as to be utilized efficiently. The TCL senior
management constantly keeps track of the vast intellectual assets, their skills sets,
the status of projects on which they are working, and the number of people
available for being placed in other projects. TCL determines its manpower
requirements based on inputs from senior consultants, who provide information on
changes in the technology and the potential demand for new skills in the immediate
future. This enables the HR department to plan and schedule recruitment and
training programs.
Figure 1 illustrates the role of HR, which evidently is that of a facilitator. So
whether it is recruitment or even career development, HR is the catalyst which
initiates and institutionalizes processes. To manage all the function of employees is
herculean task but the smoothness of operations is intriguing. The HR structure,
which allows flexibility and empowerment, is the solution.
TCL takes care of every aspect of Human Resource Management, from recruitment
to training and career development. The company combines its aim of recruiting
skilled employee with the broader objective of improving educational standard in
India. TCL is well recognized in the industry for its emphasis on employee
training. Company is having its own training center in Dighi, Pune, where
induction and other training are conducted by its expert trainer who provide
functional and operational knowledge about the TCL and its subsidiaries. It keeps
decent amount of budget from its annual sales on training.
In addition to training, TCL also believes in grooming its employee into managers.
In their first couple of years at the company, employees are put to work on
different technological platforms and applications. The organization consciously
does not try to develop its employee as specialists, as it knew that they would
become useless once their area of specialization becomes obsolete. This approach
was different from that of many other companies, who stressed specialization of
their workforce.

Page 38
PERFORMANCE MANAGEMENT SYSTEM AT TCL
Performance management system actually operates when whole
system is designed carefully and it has been conveyed properly to
employees in the same way. TCL follows an effective PMS system. The
purpose of the Performance Management process is to have a
systematic administration of the Performance Management activity in
order to create a high performance culture in company and improve
overall performance & capability of TCL.
The goal setting process for employee is done in a manner that it
enables employees to realize about their contribution to the
organizations better performance.
PERFORMANCE APPRAISAL
TCL conducts appraisal twice a year.
Interim Review
Year-end Review
Performance appraisal is based on a review of performance against set
Goals, and assessment of Performance & Potential. It also captures
employee aspirations and the support required by employees from the
organization in the Career Planning section.
GOAL SETTING FOR INDIVIDUAL EMPLOYEE
The Performance Management Process is a continuous cycle that
begins with Goal Setting. Mutual goal setting is a must for developing
agreed-upon measures for performance review. Effective goal setting
provides the framework needed for managers and direct reports to
discuss and monitor progress and to assess results.
All goal setting is done using the SMART technique and could involve quantitatively /
qualitatively measurable goals or milestone linked goals as appropriate. The measures for
the various goals are selected on the basis of their suitability for assessing whether the
desired performance is happening. In case of role change during the year, employee needs
to update his Goal-Setting document, readjust his KRAs and weightages within 2 weeks
of moving into his/her new role.
GOAL SETTING PROCESS
An Employee fills up KRAs and update JD forms in consultation with
Manager and submit it to Manager through its employee portal. Once
manager is validate and approve then it would be consider for review

and If any changes are required, the Manager can make the change or
send the form back to the employee for making the change.

Page 39
INTERIM REVIEW PROCESS
Interim review is conducted every year to review the performance
midway through, provide performance feedback to employees, revisit
the Goals set for them and make any revisions, if required.
YEAR-END REVIEW PROCESS FLOW CHART
The annual Performance Management process plays a pivotal role in
imparting a comprehensive and formalized view of progress and
growth of employees. Year-end process start in following manner.
1) Self-Appraisal & Managers Review
2) Energy Curve Consolidation
3) Sharing of Rating & Final Review

Page 40
b) Employees (rated VC / BCI during the year-end review) who
demonstrate poor performance during the year.
At the end of the defined performance Improvement Plan review
period, if the employee do not improve to a grade better than VC, the
employee is asked to resign.
INTERNAL JOB POSTING POLICY:
The intent of this policy is to facilitate and enable all regular employee
of Tata Communications to apply and offer their candidature for all
open positions based on their career aspirations, knowledge, skills and
abilities they possess vis--vis the job requirement. All regular
employees who have completed minimum 18 months in the current
role will be eligible for IJP. Its a framework for internal hiring process
whereby employees get the flexibility to choose between various job
options within TCL rather than pursuing options outside of company.
REWARD & RECOGNITION IN TCL:
TCL believes that flexibility and responsiveness in everything is critical
to its long term success. These awards aim to recognize and reward
outstanding individuals and teams who have gone beyond their role
requirements and have taken initiatives that have had a positive
impact on its short term and long term growth objectives. These
awards have been distributed in following ways.
REWARD SYSTEM LINKED TO LEADERSHIP SIGNATURES:
More than ever before, companies are becoming global. Setting up
operations in new geographies, gaining local market share and
leveraging the low cost base through offshoring and outsourcing has
now become a necessary strategic option for large companies. This is
leading to large numbers of managers and leaders working with cross
cultural teams, in different countries. From an employees point of
view, many have co-workers across the globe. This throws up new
challenges.
The Leadership Signature Programme is the DNA of managers at Tata Communications
and has been designed to create a common inspiring culture in the company. The
objective is to groom and develop talent into future leaders who not only provide the
right environment for the employees, but will also enable them to give their best so that
they accomplish tough business goals. They will become good at the how of leadership.
These 6 attributes are linked to reward system which are summarized below:

Page 46

SWOT Analysis:
Strengths:

Competitive staff
Cooperative Executives
Islamic banking
Corporate & Investment Banking Group provides all
requisite banking services for our corporate clientele in an
efficient, dependable, consistent, and competitive manner
the objective being to become your bank of first call for
all your financial needs.
The main strength is that they have provided the name of
person, designation, department and phone number for easy
contact for customers on their websites.
Askari bank established relationship with almost all top
manufacturers and dealers of Samsung, Philips, LG and
Dawlance.
At its website all the features of all the products are given
separately and the eligibility criterion is also given.

Weaknesses:
Profit rates are not higher than the competitors.
Loan rates are higher than the competitors.
360 degree feedback system not applied in Askari bank.

 No break is given to employees, which sometimes make

them frustrated.
Opportunities:
The different products of Askari bank provides it with
opportunities as its competitors are providing loan on easy
term to the farmers for agriculture, livestock and vehicles
like tractors, Suzuki.
Page 50

Threats:
Competitor
ABN Amro Bank
Saudi Pak Bank
Habib Bank
Muslim Commercial Bank

Page 51

CONCLUSION:
There is all the reward systems are being discussed briefly which could
be there in an organization and which could possibly give to the
employees by the management of an organization. There is also defined
that how the reward system could effect the organization and also the
employees life on the work place, it is also defined that how the
compensation could be responsible for the betterment and success of a
working organization.

Page 52

Recommendations:
I just want to add one thing that they would have to overcome the
reference system and give the promotions who would be deserving not
to the person who has the huge reference or relation with some high
profiled.

Page 53

Bibliography:
http://www.google.com
http://www.slideshare.com

http://www.answers.com/topic/employee-reward-and-recognition-systems.com
http://www.opm.gov/retirement-services/calculators/fegli-calculator/basic-pay/com
http://www.ecommerce-now.com/images/ecommerce-now/HRM
%20Strategies.htm
http://www.businessperform.com/articles/performancemanagement/money_in_reward.html
http://www.mbaskool.com/business-articles/human-resource/5260-performancemanagement-linking-reward-to-performance.html
http://www.slideshare.net/search/slideshow?ft=all&lang=%2A
%2A&page=1&q=rewards+system+linked+to+performance&qid=2f88a192-78c14801-8552-ed894b8a68e0&searchfrom=header&sort=&ud=any
http://www.humanresources.hrvinet.com/performance-management-handbook
http://www.hr-guide.com/
http://www.tatacommunications.com/
http://www.inc.com/encyclopedia/employee-reward-and-recognition-systems.html
http://www.citehr.com/
http://ceo.usc.edu/working_paper/performance_management_and_rew.html
http://corehr.wordpress.com/performance-management/performance-appraisalmethods/
http://www.citeman.com
www.project-team-rewards.com

OTHER SOURCES:- (BOOKS AND NOTES )

1. A. M. Sarma- Performance Management & Rewards System
published by Himalaya Publishing House Pvt. Ltd.
2. Prof. Mr. Pravin Late- Organization Behavior published by
published by Himalaya Publishing House Pvt. Ltd.
3. Oxford Dictionary

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