Reward Management

Reward management is concerned with the formulation and implementation of

strategies and policies the purposes of which are to reward people fairly, equitably and

consistently in accordance with their value to the organization and to help the

organization to achieve its strategic goals. It deals with the design, implementation and

maintenance of reward systems (reward processes, practices and procedures) which aim

to meet the needs of both the organization and its stakeholders.

Reward is special payments for special work. Reward refers to all forms of financial

returns and tangible services and benefit employees receive as a part of an employment

relationship.

Fairness is important in reward allocation process and to retain good employees in the

organization manager must be concerned about fairness and appropriately reward those

who deserve it

Organizations are interested in reward management for two important reasons. First, the

absolute cost of payments bearing on cost effectiveness depends on organizations to

organizations. Second affect, on employees work attitude and behavior, employee work

effectively, to undertake training and accept additional responsibility (Bratton & Gold,

1999, p. 191,192).

According to our analysis, this author demonstrating reward, in a scenario to influence

employees to work more with greater productivity as well as to reduce cost with

effectiveness. Reward can change the behavior of employees, if employee get the reward

he will satisfy with his job and his behavior is good towards others employees. He will be

loyal to the organization. If he cannot get the good reward with respect to his job his

behavior may be change towards the employees and not loyal to the organization, so the

working condition of office is change this will effect to other employees well.

Objectives of Reward Management

There are three main objective of reward management in an organization to attract and

retain competent employees. It encourages and attracts qualified and competent

employees to retain in the organization. Reward system is design and managed to

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improve productivity and control labor costs through motivation. Reward system should

comply with pay legislation (Bratton & Gold, 1999, p. 192).

Types of Rewards

Basically organizational reward is two types include intrinsic rewards and extrinsic

rewards. Intrinsic rewards are internal to individual and are normally derive from

involvement in certain activities or task it includes achievements, feelings of

accomplishment, informal recognition, job satisfaction, personal growth and status.

Extrinsic rewards are directly controlled and distributed by the organization and are more

tangible than intrinsic rewards it includes formal recognition, incentives benefits, pay

promotion social relationship and work environment (Byars & Rue, 2000, p. 272).

As far as literature is concerned, organizations mostly used two types of rewards like

wise Intrinsic (non monitory) and extrinsic (monitory). Intrinsic reward is depended to

the extrinsic one. Both play a vital role to motivate employees optimistically to increase

efficiency and effectiveness. One important aspect of rewards is that they are used to

control employees’ behavior to the extent to achieve organizations tasks as competently

as they can. On account of rewards employees’ feels job security, and job satisfaction

with them. According to our analysis these are very important considerations to influence

performance of employees as well.

Alternative to reward management

There are different alternatives to reward management like wise, pay for knowledge

system, group incentive gain sharing plan, profit sharing, cost saving (Scanlon plan), and

cafeteria style benefits. These all are used to help reward management strategies to make

them more gainful (Bratton & Gold, 1999, p. 212).

Criteria of reward management

A criterion is very important to maintain a strong base for any system to run it without

ambiguity and bottlenecks. Criteria for reward management give a fair idea about

organization internal culture, philosophy of organization, defines its mission, vision,

values as well as its overall road to success.

Customer satisfaction

Work quality

Problem solving

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Work quantity

Setting and achieving objectives

Improving work processes

Attendances

Acquiring new skills (Deeprose, 2006, p. 36).

Relating rewards to performance

The free enterprise system is based on the premise that rewards should depend on

performance. This performance reward relationship is desirable not only at the

organizational level or corporate level but also at the individual level. The underlying

theory is that employees will be motivated when they believe such motivation will lead to

desired rewards. Unfortunately, many formal rewards provided by organizations can not

be connected to performance. Rewards in this category, including paid vacations,

insurance plans, and paid holidays, are almost always determined by organizational

membership and seniority rather than by performance. Other rewards, such as promotion

can and should be related to performance.

The primary organizational variable used to reward employees and reinforce performance

is pay. But relating rewards to performance demands that performance be accurately

measured, and this is often not easily accomplished. It also requires discipline to actually

relate rewards to performance. Another reason is that many union contracts require that

certain rewards be based on totally objective variables, such as seniority. While no

successful formula for implementing a pay for performance program has yet been

developed, a number of desirable preconditions have been identified and generally

accepted:

Trust in management

Absence of performance constraints

Trained supervisors and managers

Good measurement systems

Ability to pay

Clear distinction among cost of living, seniority, and merit

Well communicated total pay policy

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Flexible reward schedule

(Byars & Rue, 2000, p. 301)

The performances relating to rewards are very important to link. It is used, to increase

employees’ morale optimistically. It also enhances confidence level and job satisfaction

because of feeling of job security. On important implication of it is that employees

performance can be measured continuously which forces employees to work harder and

harder to perform better and also increase organizations productivity positively. Above

mentioned points also give a fair idea to employees that how organization system is

working with rewards relating to their performance pattern which reduces bottlenecks

and ambiguity to all levels.

Job satisfaction and Rewards

Job satisfaction is an employee’s general attitude toward the job. The organizational

reward system often has a significant impact on the level of employee job satisfaction.

However, if pay raises are related directly to performance, an employee who receives a

healthy pay increase will more than likely also experience feelings of accomplishment

and satisfaction.

The five major components of job satisfaction are

Attitude towards work group.

General working conditions.

Attitude towards the company.

Monetary benefits.

Attitude towards management.

(Byars & Rue, 2000, p. 301-303)

For above description, we have understood that rewards are a useful tool to increase

morale and employees satisfaction level as well. By rewards organizations can improve

and mold employees’ attitude towards more productivity and effectiveness. Employees

feel more job security by getting rewards, and also satisfaction level boost and grow

gradually with continuous improvement in their competencies as well as performance.

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Rewards and HRM cycle

Reward management is directly related to the other elements of the HRM cycle, in the

selection process pay can be a major factor in attracting highly qualified and competent

people to the organization. It can also facilitate low turnover ratio. A reward system that

directly links pay to performance will require an appraisal system that is reliable and

valid. To determine the complexities of pay the author developed the frame work of

reward management, it contains three basic elements internal equity, external

competitiveness and the objective. (Bratton & Gold, 1999, p. 196)

Purpose of above description is to give more preference to reward management approach,

as success of whole HRM is depend upon systematic and successive reward managerial

policies which cover up all issues. Because employees would be more satisfied if their

needs and wants are best satisfied by organizations, so if some one needs to use full

potential of human resource then focus would be towards rewarding objectives and

policies.

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Reward Management System in Coca Cola International

INTRODUCTION OF COMPANY

The Coca-Cola Company is the world's largest beverage company. Along with Coca-

Cola, recognized as the world's most valuable brand, it markets four of the world's top

five soft drink brands. They are facing a lot of problems regarding sales of product in the

market of Pakistan. A improving but still away from final destination, the company faced

a lot of hindrances.

Supply chain is to distribute their products at the right place, right time and with right

quantities to satisfy demands in order to remain highly competitive. Distribution channel

is a root cause of accompany and plays a key role in Sale Management. Coke and its

competitors are trying to remain highly competitive in every field. Research

methodology, case study design, data analysis, Results, Measurement system Summary

and references are in it.

REWARD MANAGEMENT SYSTEM

Coca Cola’s management is willing to use top managerial expertise because of its

superior brand image in the market. Customers are happy to buy its beverage products as

well as competitors are also conscious to bench mark its managerial competencies. Coca

Cola’s rewarding system to employee is excellent as they are caring with excellent

rewarding parameters just to retain, motivate and influence employees towards

organizational goals with their best potential utilization. They are rewarding relating with

employees performance in a way to increase productivity and effectiveness.

They are using in directly different motivational aspects like Maslow’s hierarchy of

needs, ERG theory and two factor theory of Hurtz Berg. But more importantly they are

not specifically using one of them; they just relate their main concepts with their reward

system to define it properly (Qaiser Saeed, personal communication, May 7, 2008).

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FINDINGS

Main parameters used as a base of reward system

Inflation rate factor

Market potential (what of individuals worth according to his/her expertise, job

experience etc.)

Matching with his/her presence career path

Personal development of an individual

Sales rewards

Supporting practices

Safety

Re-creational activities

Training and development

Individual goal setting

So all above parameters are used by Coca Cola to make their reward system practices

well in the market, object is to make their employees feel comfort, satisfied, motivated

towards achievement of organizational tasks, competent to perform to the extent to attain

organizational mission and vision terminologies and compete with outside rivals

successfully. Because the management believes that if employees are loyal to the

organization then they perform better to the way to overcome any competitive goal with

accordance to desired results with remarkable customer satisfaction.

Because quality is the whole mark for Coca Cola as customers demands high quality with

greater innovation in tastes. Customers’ tastes and preferences are no doubt change

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dynamically, competition is increasing day by day, so all such things demands greater

satisfaction and performance of employees and Coca Cola’s human resource management

is very conscious to overcome this challenge by effective rewarding of both monitory and

non monitory (Qaiser Saeed, personal communication, May 7, 2008).

According to our survey, which we conducted form internal employees’ of Coca Cola,

the higher management more love to have non monitory rewards like wise, Achievement

Feelings of accomplishment, Informal recognition, Personal growth, Status, while lower

management are more thirsty to have rewards like incentives, bonuses i.e. have more

curiosity to take cash rewards. Maslow’s theory can be best define social, self esteem and

self actualization stage employees have inquisitiveness to take intrinsic rewards while

other ones physiological, safety needs employees are more attracted by cash rewards of

any kind.

More importantly, Coca Cola’s management design superbly their reward system, just for

the sake to overcome employees thirst, mean to say sometimes employees only work hard

when they are being rewarded but Coca Cola’s reward system is distributed by a mixture

of both rewards monitory and non monitory that is one employee some times get intrinsic

rewards in terms of appreciation, status and some times extrinsic one. So, outstanding

managerial expertises are involved to equalize system to perform better.

Criteria of rewarding employees

They are using different techniques to define their reward criteria to work according to

define standards of organization. System is developed by doing great market search so as

to compete rivals to the way to satisfy their internal employees more than that to get more

profitability and customer loyalty.

Grade jump

Designation change

Special assignments (inter departmental transfer)

Financial aspects

Grade jump and designation change

Training and development

Personal development of an individual

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Career grooming

They make close collaborative or communication system with employees so as to fetch

information on the part of their problems to satisfy them all to increases their efficiency

and effectiveness. Because need and wants of employees are changing day by day to

satisfy meaningful needs and wants are very important in the behalf of organization so as

to use best potential of both physical and mental competencies is very important. That’s

why defining criteria of rewarding them have a significant importance for the mutual

benefits of both employees and organization. Rewards have greater importance and

effectiveness in Pakistani cultures, because people have more demand of them (Qaiser

Saeed, personal communication, May 7, 2008).

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The link of performance objectives with the organization

Mission

Organizational goals

Head of Department

Organizational goals Unit office

Locations PGM

Key result areas Functional heads

Direct reports

Performance objectives supervisors

Employees

Performance standards

According to our practical analysis, we came to know that Coca Cola International is

using better linkage of mission and vision to its organizations functions as well. As above

diagram clearly explain how they managed all in a way to get best appropriate results. As

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they have developed a fine system to involve employees in decision making just to make

them company loyal and responsible.

First goals are developed at higher level, then head of departments make their ones, then

unit office, next comes locations PGM, then functional heads then direct reports are being

formulated, supervisors take part and at the end employees also formulate their goals. All

these exceptional policies make Coca Cola International best out of its competitors. At

functional level, human resource, accounts, distribution, and sales & management all

have to develop their own goals according to their departments’ philosophy.

All done at four basic steps, like wise:

Goal setting

Monthly review

Mid year review

Final review

First all goal are formulated according to above diagram, from organizational level to

employees, then monthly review has taken place in it only checking of goals

implementations is going on. Monthly review is at inter departmental level, here no

change can be offered as well as no record can be made but at goal setting both change

and record can be happened. Mid year stage comes with re alignment of goals as well as

new policies ways can be designed to achieve organizational goals. At the end, final

review comes in, in this step check and balance takes place, actual achievement can be

matched with defined are standard one so as to measure out comes or results.

Here after getting results, if organizations see optimistic results with greater productivity,

then they analyze its true reasons so as to reward those ones who have done extraordinary

yearly base performance. All those will have to be rewarded by organization with their

defined rewards like, salary increment, grade jump and designation change (promotions).

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How they motivate employees

The Coca Cola International are very keen to retain motivate and satisfy their employees

to the extent to get utilize their best potentials for organizational purpose. For this

purpose, they are managing their rewarding system to create and innovate opportunities

for employees to work more and get more. It is a main reason which really boosts their

retention program and turn over ratio is discouraged by so impressive rewarding

methodology.

They have 3-5% turn over ration with respect to whole Pakistan, for such big company it

is not to large, very manageable to compete successively. Their reasons of turn over are

following; good abroad job opportunity, industrial pressure, & toughness of work. One

main reason of high motivation is coca Cola’s multinational brand image that every one

wants to join its name with their expertise for more career development. This all make

Coca Cola such meaningful in the eyes of not its workers but also its customers and

competitors as well. They are promoting high finance for it, challenging tasks and good

job profile make employees motivated and satisfied.

How they Retain & Motivate their Employees Successfully

Training sessions (on the job training)

On and off feedback

Close interaction of human resource managers with employees

Short term defining of tasks

At the end of every task, feedback from employees

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These all points are helpful to retain and motivate employees in a way to achieve

organizational goals with larger productivity. Employees feel immense comfort and sense

of job security as well as career grooming in their part as they learn more due to

challenging work profile to their part.

Pay system of Coca Cola International

Grade range

M represents management grade

M1 & M2 Assistant Officers

M3 & M4 Officers

M5 Senior Officers

M6 Executives

M7 Senior Executives

M8 Assistant Managers

M9 Managers

M10 Senior Managers

M11 & M12 Location Heads & Unit Levels

The purpose of giving this whole pay system is that Coca Cola is using pay system as a

base for their reward system. Because of such administration, rewarding may differ

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according to their grade, as from management grade 9 to onwards, their percentage of

benefits rises. There are number of indicators which are used to define ones grade as well

as its designation in the company like wise, grid, education (educational institutes, degree

worth & specialization), experience with regard high profile organizations, and industry

experience and individual competencies.

Ranges of Pay System & Performance

Based upon grades

Survey of top five companies

Inflation rate

Individual’s market worth & expertise

Performance Ratings

Exceptional performance –EP

Contributions significantly exceed the stated objective (s) in terms of quality, quantity

and timeliness.

Successful performance – SP

Contributions meet and sometimes exceed the objective (s), which are based on

challenging goals.

Developing performance – DP

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Contributions meet some / most but not all of the objective (s) and performance

improvement is necessary.

No Performance – NP

Contributions frequently do not meet the stated objective (s).

Performance requires monitoring and substantial direction from the manager

Basically their pay system is highly linked with performance, firstly Coca Cola’s

management prefers grade for defining pay. They prefer to do research by conducting

survey of top five companies, in this step they conduct minimum three year pay

ranges of those companies and take average of them. Then they decided their pay

system with accordance to their management grades. Inflation rate has to be

considered each year at any cost no matter of an individual’s performance increase or

not. Also Coca Cola human resource management looking forward to performance

ratings as mentioned above, it helps them to define a system in an organized

systematic form to remove ambiguity and biased ness.

Types of Rewards of Coca Cola International

Yearly Basis

Employee salary increment

Grade Jump

Designation change

Annual incentive Plan (AIP) (for business performance, but fixed)

Personal Progress report (PPR) (Annual Appraisal)

Monthly Basis

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Making the move (MTM, sales target achieve)

Monthly turn hall (extraordinary performance)

Quarterly Basis

Employee of the Quarter (EOQ, non sales)

Sales Dangle context

Gold Context

EMPLOYEE OF THE QUARTER PROGRAM

Employee of the Quarter (EOQ) program is to honor outstanding performance and

dedication of employees to their work. The purpose of this program is to

recognize/reward and motivate employees to perform better and to create a competitive

environment leading to higher productivity levels. This step has been taken to create

HPWS (high performance work system) through innovative HR policies and best

practices.

Nomination Criteria for EOQ

Employees being nominated by the supervisor should meet the following criteria.

Nominees for the quarter must have a permanent status.

Employee should be disciplined; has no disciplinary action taken against him/her

in the past year or so.

Employee should have a good attendance record.

Employee should have no marked absent and should be punctual.

Employee takes responsibility for his/her actions.

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Employee owns the results achieved by him/her.

Employee completes most of the tasks assigned to him/her (as per their objective

and goals).

All the rewards are combined to form Coca Cola International’s reward management

system to the extent to work well. Human resources department have developed a great

system by distributing rewards among yearly, quarterly, and monthly basis. All above

mentioned rewards really influence employees to satisfy their needs and wants to larger

scale. Coca Cola have developed systematic system with number of steps to be followed;

these limitations make their employees so disciplined and competent which help them to

produce more with contrast to their rivals.

Analysis of our survey

Survey from the Different Employees

Summary

Areas under consideration Sales % H.R% Account%

Analysis

Satisfaction of organizational reward system 80-90 65-75 55-65 Better satisfaction

Performance with respect to monetary & non-monetary rewards

75-85 60-70 60-70 Good acceptance

Impact of rewards on performance, motivation & productivity

80-90 75-85 70-80 Greater impact

Employees satisfaction with pay to performance 70-80 65-75 60-65 Good link of performance to organizations goals 60-70 65-75 50-60 Average

According to our analysis, we have considered different areas to discuss Coca Cola

International’s reward management system, so as to make our report more meaningful.

As above, table described the whole research with their corresponding percentages, to

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define system’s productivity, with accordance to different departments like HR, Sales and

Accounts. As percentages shows that sales department have high acceptance level as

compared to other two, because there are more opportunities for sales people to get

rewards of both intrinsic and extrinsic ones.

It seams to us that injustice distribution of rewards, as they are more valuable for sales

people in the organization rather than other departments of HR and accounts. Reasons

according to our analysis is that it is a beverage industry, where more focus is to sell

more and more with high quality and get more customer satisfaction. That’s why,

management create more opportunities for sales people to sell more and get more, in the

form of sales commissions, sales dangle and making the move, all rewards supports more

sale. By generating challenging tasks and high work Profile Company are able to utilize

full potential of sales people.

For us, it is bad for long term perspectives for company point of view, as criteria of

reward management in literature clarifies equal distribution for all as well as long term

focus. Our survey or research work shows that Coca Cola is lacking to these

terminologies, which is not good for company of such good bran image and market

acceptance. Reward system is proved to be more linked with performance and goals for

sales people while other ones have less ambitious towards goals. We have met with other

department employees who are feeling uncomfortable with this system, because of less

opportunities of challenging work who rewarded them with rewards. It proves less

motivation, productivity, and inspiration of all working levels.

Their system is not promoting performance culture, dislocating positive employees’

relationship and psychological contract, as well as less focus towards organizations

values. They are lacking an important linkage with regard to reward practices with both

business goals and employee value. As for as systems true working is concerned, it is not

fair, equitable, consistent and transparent at all levels. So for us it is very important to

have all that like fairness, equity and justice to work system more meaningfully and

successfully.

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Coca Cola International is not currently focusing on alternatives of reward management,

as they all are having immense importance in today’s competitive environment. This

deficiency can lead to long term up sets, for us they have to care of alternatives as well.

RECOMMENDATIONS

Now we are able to give proposal or a fair advice to Coca Cola according to our

comparison between theory and what is going on currently in Coca Cola. In this step, we

have to shed a light over those areas which are valuable, creative and useful for Coca

Cola but they are not considering to them.

In start of our recommendation, we would like to add that nomination of EOQ criteria

more benefits to sales employees, so it should be highly recommended to have it for all

so as to make system fair. Reward system is an effective technique to support and change

culture of the organization optimistically; it would only be possible if the system is equal

for all employees of organization. We recommended to Coca Cola management to utilize

this system to all employees so as to increase effectiveness and productivity. On more

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important recommendation should be to design both financial and non financial rewards

in a way to give a fair importance of both for top and lower levels.

Reward management of Coca Cola should be highly functional to make employees

committed to organizational goals, vales and standards, also it should push employees in

a way to boost their competencies and work understanding. Reward management of Coca

Cola should be addressed to group tasks, as all rewards are mostly designed for

individual levels like EOQ, make the move and sales dangle, definitely it reduces

productivity. Because now a days, organizations have more curiosity towards group tasks

which needs great interaction and communication between departments and it only work

if all department employees rewarded equally.

For us, it should manageable in a way to remove ambiguity at all levels, so as to increase

organizational efficiency. There should be criteria for employee to consider their opinions

at management level respectfully. It should need to reduce gap between management and

employees so as to increase overall results. For us goals should be specific, measurable,

achievable, and realistic and time bound (SMART), it would definitely increase overall

effectiveness.

We have to recommend Coke to design their system in specific way to define employees’

career path, recognition and future goals; it would definitely positively boost

organization’s performance. Training and development should be more used to Coke to

groom career of their employees at all level, they are doing on the job but we

recommended that a fair amount of budget should be declared for this purpose, then off

the job training sessions of fifteen days or a monthly package may use to boost

performance.

According to our research, they have declared 3% for rewards with respect to whole

revenue, but it is less because system is not working for all departments equally. We are

on the view to increase this budget to minimum 5% so as to treat all employees equally.

Employees should be involved in decision making to increase quality and productivity.

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We are keen to make system significant for the sake to reduce the dissatisfaction of the

employees on promotion criterion, reduce the dissatisfaction of the employees on

appraisal system, reduce the dissatisfaction of the employees on salary, bonus and other

fringe benefits, and improve the work performance, improve the productivity, reduce the

level of occupational stress that arises from feeling of inequality on reward, and reduce

the perceptional gap on reward management system and develop a culture of high

performance. These all points beautifully explain the reward management system

consequences and its more value.

There should be proper check and balance system between goals and performance have

to be introduced, currently yearly bases performance evaluation has been going on, for

high motivational level, high quality it demands quarterly bases. There should be a

system of consultation between employees and management about employees’ career

path, it is easier for management to understand and analyze what employees actually

want and allocate them reward properly. We would like to recommend Coke to introduce

alternative of reward management like wise profit sharing, pay for knowledge program

and goal sharing so as to increase their productivity.

CONCLUSION

Let us bring to a close to our finishing to our prestigious research project, in which we are

very enthusiastic to cover all reward management areas of theory as well as practical

work followed by productive and innovative recommendations with respect to our

findings. In our project, we came to analyze how to relate literature implications to

expediency, this comparison helps us to under stand trends of both sides and make us

able to think over them in a way to generate those strategic points which would best

overcome our corresponding company’s reward management limitations. Our analysis

gives a fair picture, which guided us towards acknowledged recommendations. We have

experienced to immense analytical skills, to give recommendations to the whole scenario.

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REFRANCES

Bratten, J., & Gpld, J. (1999). Human Resource Management (2nd ed.). London: MacMillan Press Ltd.

Byars, L., & Rue, L. (2000). Human Resource Management (6th ed.). North America: McGraw-Hill.

DeCenzo, D., & Robbins, S. (2004). Fundamental of Human Resource Management (8th

ed.). US: Prentice Hall.

Deeprose, D. (2006). How To recognize and reward employees (2nd ed.). US: Amacom.

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Kumar, D. (2006). Strategies to reduce "Perceptional gap” on Reward Management

System, Journal on Management.

Wilson, T. (1994). Innovative Reward Systems for the Changing Workplace. US: McGraw-Hill.

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