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INTERDISCIPLINARY JOURNAL OF CONTEMPORARY RESEARCH IN BUSINESS

COPY RIGHT © 2013 Institute of Interdisciplinary Business Research

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RELATIONSHIP BETWEEN REWARDS AND EMPLOYEE PERFORMANCE: A

MEDIATING ROLE OF JOB SATISFACTION

Payam Gohari1, Ali Kamkar

2, Seyed Jafar Hosseinipour

3,Mahmood Zohoori

4

1Master of Business Administration, Multimedia University, Malaysia,

2Master of Business Administration, Multimedia University, Malaysia,

3PhD student of Policy Study, Perdana school, UTM, Malaysia,

4Master of environmental technology management, Faculty of engineering, UPM,

Abstract

This research attempts to review various research in term of relationships between rewards,

job satisfaction, and employee performance. In this regard, two types of reward are identified,

and they are intrinsic reward and extrinsic reward. Extant research showed that reward can

affect job satisfaction and thereby employee performance, so this study proposes a new

framework based on mediating role of job satisfaction

Keywords: Intrinsic Reward, Extrinsic Reward, job Satisfaction, Employee Performance

1. Introduction

Adopting the changes in the market in all of the firms is considered as one of the important

targets. So, the responsibility of the managers is high for arranging and improving these

relations for being strong and acting strong in market (Beer, 1984) that the composition and

strategies of firms have a lot of alterations. Hence, the managers should adopt the plans for

these alterations to define the missions, predicted outcomes and visions and also getting

sufficient degree of efficiency. For obtaining this objective they should consider the customer

and also employee and also the communication method with them (Harmon, 2007).

Therefore, employee is considered as the important concept to be focused in case of human

resource. Hence, they are considered to shape the important part of the strategies related to

human resource that are adopted by managers in the firm. In this regard, for instance, while

the managers of line assume reward strategies in human resource, they must provide a proper

system of reward for the firm. Even the reward experts are able to give new developed

policies of challenging reward for the company. Anyways, they should be confirmed by the

key managers to perform the. It can be said that the importance of human resource is obvious

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for these managers these days and if they do not define the modern policy it leads to some

negative outcomes for them (Syed Umar Farooq and Muahmmad Imran Ullah; Kalim Ullah

Khan, 2010).

To see the picture from another view, in the current competitive business environment, the

organizations are facing a lot of challenges and among these issues, getting the right

employees and retaining them is one of the most important ones. In addition, today, the

benefit of human resource is measured to be one of the most important advantages of any

organization; and in order to acquire the results with the highest efficiency and effectiveness

from human resource, motivation of employee is very essential. In fact, employees will do

their highest when they feel or hope that their hard work are to be rewarded by their

managers. In this regard, many factors are available that change employees‗ performance such

as worker and employer relationship, working conditions, job security, training and

opportunity of development, and overall rewarding policies of the company. In addition,

among the factors which impact employee performance, motivation, as a result of rewards, is

the most important aspect. Motivation is defined as the growth of different processes which

express and control peoples‗ behavior to achieve some specific goals (Baron, 1983).

Therefore, understanding its importance is very necessary for all organizations‗ managers.

The maximum level of workers‗ performance happens when they feel their endeavor is

rewarded and compensated completely. Some other successful elements on employees‗

performance include work conditions, the connection between employee and employer,

process of training and improvement opportunities, job security and complete policies of firm

rewarding. In addition, motivation, as the result of rewarding, affects the staffs‗ behavior and

their performance directly. Actually, among all effective elements on employees‗

performance, motivation, which is the consequence of rewarding, is the most important and

essential element. This concept consists of different processes which affect employees‗

behavior to achieve some definite goals (Baron, 1983).

Motivation, as the main core of the organizational behavior field in the work environment and

other contexts, is often categorized as ‖intrinsic‖ and "extrinsic‖ (Sansone & Harackiewicz,

2000). Intrinsic motivation, results from the people or from their activity itself; and it impacts

the performance, behavior, and well being of employee directly and positively (Ryan & Deci,

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2000). Besides, the extrinsic behavioral possibilities are also effective determinants of

behavior‗s motivation. Indeed, each type of motivation has its own literature and description.

Organizations categorize their reward process and the way of communicating them to the

employees. In fact, they try to understand clearly the relationship between rewards either

intrinsic or extrinsic (McCormick and Tifflin, 1979) and performance.

Intrinsic rewards are rewards that are inbuilt from the job itself. Therefore, the employee

enjoys them as the result of finishing the task in a successful manner or approaching his

exclusive goals. Extrinsic rewards are the ones that are exterior to the job task, such as pay,

fringe benefits, work condition, job security, service contract, promotion, and the work

environment and condition. Such physical rewards are constant at the organizational level,

and could be out of the control of the managers. On the other hand, intrinsic rewards are the

ones that could be named ‗emotional rewards‗ and some of its examples include using

employee‗s ability, recognition, receiving appreciation, challenging and achievement, and

behaving in an understanding and concerned manner.

However, the purpose of this study is to provide an examination of the relationship of intrinsic

and extrinsic rewarding on employees‗ performance

2. Literature Review

2.1 The Relationship between Rewarding and Performance

In the real world, it is very important to reward high performance levels because this

motivates and controls the performance. Indeed, reward strategies confirm the level and the

merge of non-financial and financial rewards required to attract, maintain and inspire skillful

competent, and capable employees to make the organization prosperous. Although some of

these benefits are financial forms, such as options for salary sacrificing and competitive pay,

there are a lot of non-financial benefits which firms can provide its employees. They are, in

fact, some factors that may motivate the staff. Therefore, for a manager, it is necessary to

know what really inspires employees and perhaps they are not the same things that stimulates

other employees.

The obvious reward practice should be carried out by the simplification of the connection

between the given reward and the additional effort (Porter et al., 1975). There also have been

cautions about the rewards‗ ways managed within the reward system. In this regard, Porter et

al. (1975) suggested that to achieve positive motivational properties, the organizations‗

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distributed incentive rewards have to be performance-dependent. Indeed, managers who

attempt to run a fair rewarding system seem to be more prosperous in performance rather than

those who reward in an unfair manner (Jnssen, 2001). In this case, although the necessity of

being fair in rewarding others seems to be understood clearly from a theoretical view, bias in

the performance evaluations has often been reported in different economic studies

(Prendergast, 1999). Thus, clear fairness is needed to manage an optimistic association with

the reward victory in an organization.

The controllability concept is defined as the amount of the employees‗ capability to influence

on or control the outcome (Baker, 2002). The effect of a certain quantity or an attempt on the

quantity of employees‗ performance has to vary at the lowest amount as possible to manage

such a control over one‗s reward. Therefore, it can be assumed that the stronger level of the

obvious controllability over the reward practice concludes higher degree of the reward

effectiveness towards realizing the employees‗ performance at a higher level. Furthermore,

the reward system should be connected to stimulate and motivate employees‗ performance;

and this depends on the company‗s strategy, attraction and retaining knowledgeable

employees, abilities, and required skills (that are needed to understand the firm's strategic

aims), and to manage a helpful structure and culture (Galbraith, 1973).

Thus, the rewarding process itself has to affect the performance of employees in the

affirmative manner as is expected by managers. In this regard, the performance measurement

can be used hypothetically to know more training needs, promotions for candidates,

management problems, dismissals, and job rotation (Bretz et al., 1992).

On the effects of motives, in his research, Jibowo (1977) adopted the same procedure to

Herzberg (1959) and provided some support on the impact of motivators on job performance.

In another study conducted by Centres and Bugental (1970), the authors also managed their

study based on Herzberg‗s two-factor theory on motivation, by dividing job variables to two

categories: motivators and hygiene factors. They discovered that at higher professional levels,

intrinsic (non-financial) job factors or motivators were more valued, while extrinsic job or

―hygiene factors‖ (financial ones) were valued more at lower professional levels. Therefore,

they concluded that a firm that fulfills both extrinsic and intrinsic rewards could be the best

one. Additionally, Bergum and Lehr‗s (1964), investigated the influence of financial

motivators and on the performance; and they showed that people who received individual

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motivation, acted better than those who were in the control system. In another related study,

Daniel and Caryl (1981) carried out a study based on the exploration of the investment

model‗s ability to forecast job promise and obligation as well as job satisfaction. The study

results showed that job satisfaction was best foreseen by the job reward; and job commitment

was best forecasted by a combination of cost values, rewards, and the amount of investment.

Indeed, the extrinsic and intrinsic rewards motivate the employees; and this motivation leads

to realize a higher performance level. In addition, the study showed that there was no

significant difference between job satisfaction motivational levels along various workers

categories in different firms (Assan, 1982).

Furthermore, Egwuridi (1981) did a research on the motivation of Nigerian workers and

applied a sample of workers at both low and high occupational levels. At the end of the study,

the hypothesis was not completed and verified which tested if low-income workers would be

intrinsically motivated, and also there was not any proof to verify the hypothesis that higher-

paid workers would place a greater value on intrinsic job-motivators than low-paid

employees. This study obviously confirms the amount of worth placed on extrinsic job

factors. In this case, the poor compensation depends on the profits made by firms (Akerele,

1991). On the other hand, wage and salary difference between low and high income earners

can affect cause a low morale, low productivity, and lack of commitment (Nwachukwu,

1994). For example, the efficiency of Nigerian employees on several elements has shown to

be up to the employer‗s mismanagement to provide appropriate compensating ways for hard-

workings of an honored group; and this is very discomforting to working layer and will

decrease their efficiency levels.

Based on all the current studies and by considering the relationships between all of the

findings, one can normally find out that a valid compensation package, which includes

financial rewards, causes higher efficiency and performance for the organization. This

compensation package includes both intrinsic and extrinsic rewards. Extrinsic rewards

consists of external and tangible rewards to the performed efforts and employees‗ tasks, it can

be in terms of promotions, salary/pay, bonuses, incentives, job security, etc. Overall, the

highly-involved employees who are necessarily more oriented to their jobs depend more on

intrinsic rewards than extrinsic ones (Wood, 1974).

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One of the main issues in this regard is the degree of performance difference based on either

intrinsic or extrinsic rewards which persuade the researchers to take into consideration the

discussion on the antecedents of associating rewards to performance.

Employees‗ motivation at work is the centre point of the organizational behavior. Motivation

in the workplace and other relevant contexts is typically defined as being ―extrinsic‖ or

―intrinsic‖, basically (Sansone & Harackiewicz, 2000). Extrinsic behavioral contingencies

are significant elements to motivate behavior. Additionally, each motivation type (extrinsic

and intrinsic) has its exclusive system; and when both meet, there is conflict. This conflict is

based on Deci et al.‗s (1999) statement that extrinsic (tangible) rewards have a negative

influence on intrinsic rewarding criteria. However, Eisenberger et al. (1999) strongly

disagreed with the conclusions and recommendations by Deci et al. as they thought them to be

problematic and more practical research was needed in their minds.

Some psychologists introduced the intrinsic ―needs‖ first, and then other management

articles developed the important differences between intrinsic motivations as a theoretical

combination to inhabit within people and motivating tasks. For example, Herzberg (1966)

believed that tasks are intrinsically inspiring as they are identified by key ―motivators‖ like

accountability, achievement, challenge, advancement opportunity, and diversity. Along with

Herzberg as a pioneer, others identified task variety, task significance, task identity, task

autonomy and feedback as key tasks typical of generating internal stimulation (Hackman and

Oldham, 1976).

Additionally, recently in the psychology articles, intrinsically motivated behavior is assumed

to be obtained from and to satisfy innate mental needs like needs for independence and

capability (Deci et al., 1996). In this regard and according to Deci (1980), peoples‗

perceptions (opposed to external) are controlled to satisfy these needs and includes the basic

specifications of differentiated extrinsically motivated behavior from intrinsically motivated

behavior.

On the other hand, the intrinsic motivation was developed singly and was researched after the

behaviorists‗ belief of extrinsic probabilities; but when these two meet, they conflict with each

other. Deci (1971) argued, based on his research results, that not only the strengthened

extrinsic is not required for inspiring, but also those tangible rewards actually challenge the

intrinsic motivation of the behavior. Indeed, Deci developed his findings focusing on the

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cognitive assessment theory (1980), which implies that the effect of extrinsic rewards on

motivation is dependent on the receiver‗s comprehension of the rewards. The author also

borrowed from the self-awareness theory (Bem, 1967), which mentions that people study their

own behavior, make attributions or inferences about their behaviors‗ reasons, and bring up

connection and treatment in upcoming behaviors that are consistent with the trait. In this

regard, according to the high validation effect and self-esteem theory (Lepper et al., 1973),

when persons attribute their treatments to external rewards, they decrease interest as

behavior‗s reason; and here, the intrinsic motivation is at the lower level. On the other hand,

extrinsic rewards, which are highly dependent rewards, are mentioned to be important to

people and are probable to cause external attributions, which indicate perceptions that are

responding to environmental control, rather than intrinsic motivation. Thus, employees‗

perceptions, instead of the external control, and the characteristics of the employees‗

motivation form two DVs in this study by distinguishing extrinsic from intrinsic motivation.

In this regard, Deci et al. (1999) from a meta-analysis concluded that, ―finally it is clear that

the accepted reality of the discouragement effect is a reality‖. In addition, Deci and his peers

declared that the conclusions by their literature are strong enough: ―completion-contingent

and engagement-contingent rewards have a striking and dependable influence on intrinsic

motivation‖. This finding has been extended to the management world, while some

researchers argued strongly on the other side of the extrinsic rewards‗ use (e.g. Kohn, 1996).

However, in spite of the clear characteristics of these claims, the question still exists about the

strength and consistency of the undermining effect. In this case, some theoretical views and

studies have maintained that the effects of intrinsic and extrinsic rewards are not in

association, but they are generally additive (Mawhinney, 1990; Porter & Lawler, 1968; Staw,

1977).

Furthermore, a lot of methodological criticisms and revisions on the original Deci‗s

information have been provided over the years (e.g. Mawhinney, 1990). For instance, the

negative impact of extrinsic rewards are shown to be more powerful in kids than college

students (Deci et al., 1999b); and this is another conclusive step to working adults.

Additionally, many studies related to the recent meta-analysis (Deci et al., 1999) applied just

schemes in which the reward contingency was maintained and was no more in effect.

However, important work tasks are usually done repeatedly; what matters from a practical

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view is if reward effects insist and whether the impacts are kept over an interval after the

withdrawal (Eisenberger et al., 1999).

Deci critically mentions that compared with laboratorial studies, a few studies have found

positive or irrelevant correlations between intrinsic and extrinsic rewards (Eisenberger &

Cameron, 1996). In this case, the ―earned rewards‖ mean that people are no longer under a

high controlled workplace, and controlling is achieved over peoples‗ efficiency. Thus,

extrinsic rewards must enhance supposed self-control and independence (Eisenberger et al.,

1999). Relevantly, the workplace performance-pay merits can moderate pessimistic influences

of extrinsic rewards; which reduce intrinsic motivation just when they are unsuitable, related,

and out of the individual‗s controls (Staw, 1976).

There are many studies which investigated the relationship between rewards and employees‗

motivation; so, a lot of results exist about the relationship between them. In order to maximize

the performance of workers, the employers/managers must develop some policies and

techniques, and provide a system for these processes and select the rewards which stimulate

the employees to satisfy them. The pay is a reward which has been shown to have a direct

association with reward strategies and efficiency, depending on the firm‗s size. Indeed, in the

current competitive market environment, it is required to determine a logical balance between

the employee commitment and organizational performance (Bishop, 1987).

There are some individual qualifications that affect the employees‗ performance such as

perceptive styles (Scott and Bruce, 1994), attitudes (Williams, 2004), demographic

characteristics like educational background, age, and R&D experience (Roberts, 1991;

Rothwell, 1992).

Organizational priorities including the collaboration of external supplier, spending on R&D

(Hadijimanolis, 2000), leader‗s authority (Hage and Dewar, 1973), and system of rewards

(Eisenberger and Cameron, 1996; Janssen, 2000; Mumford, 2000) are commonly mentioned

to be factors that impact individuals‗ innovative performance. In fact, a professional reward

system is a valid inspiring element; however, an inappropriate reward system can be

ineffective factors for the employees. Indeed, both extrinsic and intrinsic rewards motivate the

workers and cause higher levels of productivity (Reio & Callahon, 2004).

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Many organizations have realized an enormous progress by matching with their business

strategies via appreciation programs for employees and a valid balanced reward. In addition,

motivating the employees‗ efficiency can be improved by providing a prosperous appreciation

whose antecedents will finally improve the organizations‗ performance. In fact, the whole

success of a firm is raised from how an organization maintains its employees motivated and

how they evaluate employees‗ performance in running job compensation.

Sometimes managers consider the extrinsic rewards more; however, intrinsic ones are also

striking to motivate the employees. Psychological or intangible rewards such as recognition

and appreciation play an important role in stimulating employees and increasing their

performance (Deeprose, 1994). Indeed, the employees‗ commitment is on recognition and

rewards (Andrew, 2004). In addition, the powerful existence and success of the organizations

is defined through how they make their working people more satisfied (Lawler, 2003). On the

other hand, the intrinsic rewards happen during managing the job itself like satisfaction from

finishing a task in an effective manner, being appreciated by the boss, independence, etc.;

however, extrinsic ones are tangible rewards such as bonuses, pay, promotions, fringe

benefits, etc. (Ajila and Abiola, 2004). Relevantly, a direct relationship has been verified

between job uncertainty and turnover; and a small pessimistic association has been confirmed

between job insecurity and organizational commitment (Filipkowski and Johnson, 2008). In

addition, there is a significant and direct association between extrinsic rewards and motivation

of employees; even though, it is demonstrated that the firms do not pay sufficient budget for

financial rewards (Hafiza et al., 2011).

Furthermore, it is concluded that a direct and positive link exists between rewards and

employees‗ motivation. This means that reward is directly related to employees‗ motivation

(Farooq & Imran Ullah, 2010). In this regard, when there is a change in the rewarding offer,

the work motivation of employees will change too. And while the rewarding ways get

improved, the employees‗ motivation will also get better. Additionally, there are important

effects from both nonfinancial and financial compensations to the performance of employees‗

(Arik et al., 2011). Indeed, when an employee receives a reward, it is a valid way of

motivating him since the reward causes satisfaction for the employees; and it has straight

effects on the employees‗ performance.

The factors, which are shown to affect the employees‗ performance, include (Lawler, 1985):

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1. The gap between the degree of received reward and the level of the reward the employee

expects to receive.

2. Comparison based on what reward others receive in the same situation.

3. Satisfaction of employees based on both financial and nonfinancial rewards that impact the

total job performance.

4. The difference of employee‗s desires on the received rewards, and the value that they think

is more available in a reward than the others.

5. A lot of extrinsic rewards which satisfy the employees since they are related to other

rewards.

As the fast-changing world develops especially through technology and innovation,

companies need to reevaluate their behaviors to communicate with both their employees and

clients. A need also exists for them to organize the design of the processes and systems, tasks,

and reevaluate and enhance current management procedures (Harmon, 2007). In this case,

there are other ways of rewarding that focus on the financial appreciation, some of which

include the praise that employees acquire from the management, the opportunity to run

important tasks or projects, and even the leadership consideration (Dewhurst et al., 2010).

This is often because of the fact that the well-rewarded staff feel that they are being valued by

the firm they do. They are also cheered to work better and harder if they know that their well-

being is considered seriously by their managers, and that their self-development and career are

also being taken care of and honed by their organization. Therefore, it is a continuous and

constant challenge for firms to really work on comprehending what parameters add to their

employees‗ improved satisfaction levels. Furthermore, in addition to working on their

customers‗ satisfaction, it is important that firms also work on the identification of the

motivators that nurture the workforce performance, and make appropriate and enough

suggestions for their employees.

The reward systems inspire the staff to provide their highest attempts towards assigned tasks.

These systems also distribute other objectives like authorized submission, assumed fairness

towards staff, controlling cost of labor, and improvement. Among many exclusive background

that influence staffs‗ innovative performance are treatment and attitudes (Williams, 2004),

perceptive design (Scott & Bruce, 1994), and personality and demographic factors like

education, age, background, and issues of R&D experience (Rothwell, 1992; Roberts, 1991).

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In the case of the organizational priorities, collaborating with external provider, paying for

R&D (Hadijimanolis, 2000), compensation system (Eisenberger & Cameron, 1996; Mumford,

2000; Janssen, 2000), and leader‗s impact (Hage & Dewar, 1973) are often referenced to

parameters that impact individuals‗ performance.

Furthermore, the employees‗ satisfaction leads to higher performance (Lawler, 1985). For

example, based on a study by Jibovo in Nigeria, a positive relationship exists between

motivators‗ influence and employees‗ performance. Additionally, at a higher level of

occupational posts, intrinsic job factors or ―motivators‖ are valued more, while at lower

positions ―extrinsic factors‖ are valued better (Bugental, 1970).

In this regard, many researches in the motivation field have concluded that the organization‗s

reward programs have a necessary role in stimulating employees to perform creatively

(Eisenberger, 1992; Eisenberger & Rhoades, 2001; Armeli & Pretz, 1998). Also, a number of

managers have applied extrinsic rewards to develop the employees‗ creativity (e.g.

appreciation and financial incentives) (Van Dijk & Van den Ende, 2002; Fairbank &

Williams, 2001). Furthermore, based on Milkovich & Newman‗s (2002) research, employees‗

work output includes ―relational returns‖ and ―total compensation‖. The relational returns

include employment security, recognition type, and promotion opportunities. On the other

hand, total compensation comprises of direct pay like living costs as well as long-term and

short-term stimulus, and indirect benefiting pays such as income security and allowances.

Totally, reward policies activated in the organizations, are often applied as a significant

managerial tool which can give efficiency and effectiveness to the firms by affecting

individual and group treatments (Lawler & Cohen, 1992).

The system of rewards may also influence the team members and employees‗ motivation

(Hackman, 1990). However, rewards‗ effect is ambiguous on group success, and there are few

models to give direction to precise different reward types that enhance special outcomes in

group workings. For instance, skill-based pay is a type of reward which is given based on

employees‗ skills width, work-related knowledge, and abilities (Milkovich & Newman, 2002).

In hindsight, a more professional expertise means having a higher potential to perform the

task with a broader comprehension of the work so that more payment awareness causes more

productivity. Job-based payment is referred to the rewarding which is based on amount of

work difficulty, job specifications, and duty (Uen & Chien, 2004). Studying individual

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attitudes is based on an old history that has provided a vast literature on attitude-behavior

relations (Ajzen, 2001). Furthermore, performance-based payment is the reward paid

according to the performance of individuals, teams or organizations, including payments like

team incentives, profit division, and value pay (Milkovich et al., 2002). Overall, rewarding

could be done in two different ways. One of them is saying ―thanks‖ formally through a

certificate and symbol, while the other could be based on providing a tangible reward to make

an effect (Syedain, 1995).

The management of rewards is the method of implementing and increasing policies, strategies

and systems that help the firm to realize its goals by keeping the peoples‗needs, and by

developing their commitment and motivation (Robert, 2005). In this regard, the marketing

experts (e.g. Grantham, 2007) have been concerned about communications between value and

the needs to find out how they can deliver this value to the operation of the employees. For

example, there is a direct link between job insecurity and the intention for turnover; and a

small negative association exists between job insecurity and commitment in the organizations

(Filipkowski & Johnson, 2008). As a consequence, as firms‗ information are provided in a

special form, productivity will be increased and kept longer than the time it is presented in

different forms (Johnson et al., 2010).

Reward process needs to be unbreakable and to be a motivation towards achieving the total

organizational performance. Indeed, the employees with high performance level expect that

their outstanding offerings will be recognized and respected by the top-level managers.

Nowadays, a reward tactic has been adopted by many firms in both private and public

sections. For example, in the downsizing world, doing more and better with less

recognition/reward is very important to increase the levels of self-esteem and to create

kindness between managers and employees (Bowen, 2000).

On the other hand, recognition and reward deficiency is a crucial reason for employees‗

turnover (Urichuk, 1999) and a poor reward system can be a de-motivator for the staff instead

of stimulating them.

Rewarding employees is vital to help the majority of firms to achieve their aims. In addition,

there are a few firms which appreciably are able to inspire the working joy in performing jobs

and responsibilities while there are not enough promising rewards (Mayo, 1998).

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Furthermore, rewarding provides a tool for encouraging the efforts, quality and convincing

employees that the firm appreciates their attempts (Evans and Lindsay, 2003). However, today

the employers waste too much money to pose the rewarding types that are not the employees‗

favorite (Darling, 1997). Therefore, it is logical that before investing in recognition and

reward types, firms review their employees‗ reward preferences since different people reply

differently to different stimulations (Goetsch and Davis, 2003). The reward programs are

necessary in establishing an integrated strategic view to organizational motivation; and when

reward system is managed poorly, the reward program makes the staff unhappy, and exhausts

the firm‗s resources (Darling et al., 1997).

The reward process should also be verified by the clear relationship between the extra attempt

and the given reward to do it (Porter et al., 1975). To access positive motivational properties,

the distributed rewards made by organizations must be based on performance and any

divergence in this ratio leads to unfairness (Locke & Henne, 1986). In this regard, managers

who provide fair reward are better than those who do not. In other words, the employees who

feel equality and fair in being given reward based on their effort, will be satisfied more and

will attempt to act better for the future to get the other promised employers‗ reward (Janssen,

2001). On the whole, it seems that rewarding is clearly comprehended hypothetically,

accurately unbiased, and inflated; while the performance assessments have often been

provided in economic researches (Prendergast, 1999).

To expand the discussion on performance, the concept of controllability is the amount of

workers‗ ability to influence or control the outcomes. The impact of this concept is related to

an assured degree or extent of attempts on the employees‗ performance which have to differ

as low as possible to have such a control on one‗s reward. Thus, as the controllability level is

higher, the performance level and its effectiveness are more effective (Baker, 2002).

The staff must recognize that the rewards depend on performance. In fact, the rewards are

directly linked to performance. They should also know that they have required abilities or

skills to perform at the necessary job level in the firm. If they do not believe it, rewards will

not help to improve performance levels. Instead, a valid form of direction and training may be

a substitution (Brian, 1991). The reward system must be linked to motivate the performance

of employees and this is dependable on the company's strategy, skills, to attract and retain

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knowledgeable people, and capabilities required to comprehend the company's strategic goals,

and to create a supportive structure and culture (Galbraith, 1973). On the other hand, as it was

mentioned before, the current employees‗ performance could be enhanced by managing a

well-developed performance assessment, as well as bonus and reward system. Therefore,

rewarding system itself could impact the employees‗ performance positively as is expected by

the managers (Bretz et al., 1992). Performance ratings can also be theoretically used to

identify the training needs, candidates for promotions, management problems, job rotation,

and layoff or hiring.

Different scholars (e.g. Kalim et al., 2010; Clark, 2001; McShane & Vin Glinow; 2005;

Oyebanju, 2009; Blau and DeVaro 2007; Francesconi 2001 ) have highlighted different types

of financial reward such as Pay/Salary, Fringe benefit, Bonus benefits, and Promotion.

In another point of view, several scholars (e.g. Frey, 1997; Ryan & Deci, 2000; Reio &

Callahon, 2004) have emphasized on non-financial reward including recognition,

empowerment, and delegation.

2.3 Herzberg Theory

Herzberg added some important factors to the models provided by Maslow and Porter. In

other words, he altered these theories, and then criticized it; and it has been one of the most

important and best motivational theories till now. Therefore, in this study, the Herzberg‗s

theory is used because it is broadly known as one of the major theories on motivation factors,

which has both practical and theoretical consequences.

In his theory, Fredrick Herzrberg mentioned that employees would not be satisfied just by

meeting their lower-level needs. Indeed, gaining basic benefits and salaries, and having an

appropriate working environment would not essentially make the staffs delighted and happy

with their jobs. Therefore, focusing on his theory, employees attempt to find higher needs‗

level fulfillment referring to their psychological minds like appreciation, improvement, and

higher accountability.

This theory also implies to job improvement and makes an attempt to plan the tasks to

develop opportunities for personal success, individual growth and recognition, and challenge

(Herzberg, 1966).

Herzberg‗s two-factor theory includes hygiene and motivation factors which have been shown

to be effective on the improvement of employees‗ performance. According to the theorist,

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motivation factors are required to motivate the workers to do their jobs as well as possible,

with their highest ability levels. On the other side, hygiene factors are necessary to ensure that

the staff is not unhappy and dissatisfied. In other words, the author discussed that the factors

leading to job satisfaction (and motivation) were dissimilar to those leading to job

dissatisfaction. Therefore, he enhanced the motivation-hygiene theory to clarify these results.

He named the satisfier factors as motivators, and called the dissatisfier as the hygiene ones.

The reason of applying the "hygiene" name is that these factors are maintenance ones which

are necessary to set apart from dissatisfaction; and they do not give satisfaction themselves.

Herzberg theorized that different people have different views to tasks. For instance, when

someone does his/her job on necessity, that type of action can head to ―movement‖. On the

other hand, if a person decides on working since he/she wants it, instead of a need, one can be

confirmed to be motivated. Additionally, when a staff wants to do a task, a high probability

exists that the performance could be accomplished in the best way and it would not be well-

done by the one who performs and acts because of the need (Herzberg, 1968).

The reason for separating hygiene and motivation factors is that Herzberg found that the

factors leading to satisfaction are different from those which cause dissatisfaction; and these

two feelings cannot simply be investigated as opposites of the other.

Furthermore, Herzberg mentioned that two different perspectives of human needs are

available. First, there are physiological requirements which can be satisfied by financial

elements and money (for example, to buy some necessities like shelter and food or spending

money on healthcare). Second, there are some kinds of psychological needs to grow and

improve; and the need is satisfied by behaviors which cause the person‗s growth. These

factors determine the dissatisfaction and satisfaction factors which are not separate from the

work, but are rather external factors.

Herzberg also believed that the punishment, threat or the providing stimulus process can force

people to do something; however, they have short-term impacts since the motivating factors,

which determine if there is satisfaction or not, are intrinsic to the job; and do not arise from

bond incentives and encouragement.

Overall, if managers pay attention to the hygiene-motivation theory and apply it, they will be

able to provide hygiene factors to set apart the employee from dissatisfaction. Furthermore,

they can provide intrinsic factors to the work to make the employees satisfied in their job

positions.

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In addition, to conclude the discussion over the theory, Herzberg believed that job

improvement is needed for intrinsic motivation as a part of a continuous management process.

According to him:

The job must be challenging enough to nurture the full employee‗s capabilities;

Staffs that hide growing ability levels should be provided increasing responsibility

levels; and

If the task to bring out the whole employee‗s potentials is not designed, then the

company should note the automating of the task or replacing the person with someone

who has a lower skill level. In this case, if other people cannot be utilized fully, then a

motivation problem exists in the process.

People can recognize how much their company values them, and are also able to evaluate

their own self-worth. In this case, Herzberg believes that his studied factors are the major

driving satisfaction force and they help to encourage the employee to work better and harder,

because of the motivation. Simply put, motivators can increase the inner happiness. On the

other side, hygiene factors can just enhance the external happiness. In this regard, some

studies against that of Herzberg's theory argued that the two-factor conclusion is observed

since it is normal for individuals to recognize satisfaction and blame dissatisfaction on

external factors. Additionally, job satisfaction does not necessarily involve a high motivation

or productivity level. Overall, Herzberg's theory has been generally applied in spite of its

caveats. Indeed, its long-lasting value is that it finds that the real motivation develops from

within a person.

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Table 1: Motivator Factors (intrinsic) and Hygiene Factors (extrinsic)

2.4 Reward and Job satisfaction

The Maslow‘s work (Maslow 1954) was very influential in shaping and also developing

different concepts related to organizational behavior for example job satisfaction. According

to this theory, some experts have worked on job satisfaction from a view of desire fulfillment

(Kuhlen 1963; Worf 1970). But anyways, during the past twenty years, this method is not

popular any more and most of the experts are focusing on the cognition process instead of the

needs which are underlain. So in opposite to traditional perspective, the job satisfaction is

known as all of the affection of a person about his or her related job. (Gruneberg 1976). This

perspective was mainly developed according to process of cognition that during the years

have led to attitudinal view and now is the leader in the job satisfaction study. (Spector 1997).

The other traditional though was defined according to factor theory from the job satisfaction

(Herzberg 1959) and stated that both dissatisfaction and satisfaction are two totally separated

aspects.

The motivators which are the intrinsic elements (i.e. elements that are from nature and also the

job experience) were known as satisfiers and contained achievement, recognition, the nature

of work and the responsibility level. On the other side the hygiene factors or extrinsic

elements were known as the dissatisfactory of job which are rules of firm, policies,

regulations, supervision, hierarchy, workplace context, salary and also interpersonal relation.

Herzberg and Mausner‘s Motivation – hygiene theory was a very important factor for

influencing the research of job satisfaction nature and was a key factor in measures

development in order to evaluate the job satisfaction.

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The job satisfaction was known and evaluated as an international construct and also a term

with different dimensions or faces (Price 1997). This research uses an international method

instead of an approach which is faceted and then defines job satisfaction as a level of positive

feelings related to the role of a work (Locke 1976; Kallerberg 1977). By proving job

satisfaction for the employees it was understood that it is relevant to many results in

organization for instance improving the customer satisfaction (Ryan, et al. 1996), decrease of

rates in turnover (Mobley 1977), response rate increase (Ryan, et al. 1996) and better

performance in firm (Launderweerd & Boumans 1988), it is clear that the job satisfaction term

has got so many attention. The experts have tried to recognize different job satisfaction

constituents and evaluate the related importance of them and analyze what impacts these

aspects and also the productivity of workers (Hong Lu, et al. 2005).

Some of the outcomes gathered from qualitative and quantitative researches have been

mentioned in the past studies of job satisfaction source between staff. Anyways, most of them

have been developed inside the healthcare area and nursing with minimum attention on

finance service .(Timonthy, et al. 2001).

Also experts noted that the suggested rewards from the firms might strongly affect the staff‘s

behavior related to the job and the organization that they work in (Lincoln & Kallerberg

1990). According to Herzberg & Mausner‘s two factor theory, the rewards can be both

intrinsic and extrinsic so affecting the satisfaction level of the employees experience related to

their jobs will happen. (Hong Lu, et al. 2005) Therefore related to this, it is crucial to define

the rewards which are either extrinsic or intrinsic. The intrinsic ones are natured from job and

are available in job for example challenge variety and the autonomy as well. The extrinsic

ones on the other side are fringe and pay advantages, advancement and promotion opportunity

inside the firm, workplace environment and the social aspect. Also the studies revealed that

when intrinsic reward is considered as more salient related to job involvement (Driscoll &

Randall 1999), the extrinsic rewards satisfaction will result in ongoing commitment for the

firm and lead to more customer satisfaction and also their loyalty (O'Reilly, et al. 1991).

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3. Proposed Framework

Followed by above discussion, there are evidences to support any linkage between reward, job

satisfaction, and employee performance. (See Figure 1)

Figure 1: Proposed Framework

4. Conclusion

In the current competitive business environment, the organizations are facing a lot of

challenges and among these issues, getting the right employees and retaining them is one of

the most important ones. In addition, today, the benefit of human resource is measured to be

one of the most important advantages of any organization; and in order to acquire the results

with the highest efficiency and effectiveness from human resource, motivation of employee is

very essential. In fact, employees will do their highest when they feel or hope that their hard

work are to be rewarded by their managers. In this regard, many factors are available that

change employees‗ performance such as worker and employer relationship, working

conditions, job security, training and opportunity of development, and overall rewarding

policies of the company. In addition, among the factors which impact employee performance,

motivation, as a result of rewards, is the most important aspect. Motivation is defined as the

growth of different processes which express and control peoples‗ behavior to achieve some

Extrinsic Reward

Pay/Salary

Promotion

Bonus

Fringe Benefits

Intrinsic Reward

Empowerment

Identification and

Appreciation

Delegation

Job

Satisfaction

Employee

Performance

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specific goals (Baron, 1983). Therefore, understanding its importance is very necessary for all

organizations‗ managers.

The maximum level of workers‗ performance happens when they feel their endeavor is

rewarded and compensated completely. Some other successful elements on employees‗

performance include work conditions, the connection between employee and employer,

process of training and improvement opportunities, job security and complete policies of firm

rewarding. In addition, motivation, as the result of rewarding, affects the staffs‗ behavior and

their performance directly. Actually, among all effective elements on employees‗

performance, motivation, which is the consequence of rewarding, is the most important and

essential element. This concept consists of different processes which affect employees‗

behavior to achieve some definite goals (Baron, 1983).

Extant research emphasized on relationships between job satisfaction with reward and

employee performance, so this research tried to highlight the mediating role of job satisfaction

in the relationship between reward and employee performance.

Future study can be concentrated on testing the proposed framework of this study in different

scopes and industries.

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