Management

Reward System at Commonwealth Bank



Reward System at Commonwealth Bank

Introduction

Commonwealth Bank of Australia has existed since 1911 and has more than 8 million customers, 1011 and 3350 distributors' agencies. The Commonwealth Bank is one of the "big four" Australian banks, with National Australia Bank (NAB), ANZ and Westpac. It was introduced to the Australian Stock Exchange in 1991 and the government has privatized the financial company in 1996.

Discussion

Reward System at Commonwealth Bank

Motivation and reward systems are two very important concepts in an organization that managers should understand. Employees that are positively motivated will have higher levels of productivity; whereas employees with lower levels of motivation and job satisfaction may produce less (Cameron & Pierce 1994, pp. 363-423).

Some of these motivational theories are based on employee drives, others are based on employee needs, and others are based on behaviour. However, the major source of motivation is reward systems, which is implemented in Commonwealth Bank. Employees at Commonwealth Bank are rewarded in many ways; some include incentives that are linked with performance, wage incentives, profit sharing, gain sharing, and skill-base pay (Foss & Laursen 2005, pp. 246-276).

Incentives that are linked to performance have some advantages and difficulties. Some of the advantages include the fact that it creates a perception of equity; it reinforces desirable behaviours, and provides an objective basis for rewards. The difficulties include the cost to the employer and the employee, the complexity of the system, the declining of a variable pay, union resistance, delay in receipt, rigidity of the system, and the narrowness of the performance (Cameron & Pierce 1994, pp. 363-423).

Performance-based pay system at Commonwealth Bank

Pay for performance is not a new idea. Organizations all over the world use this type of system when offering bonuses based on predetermined results or commission, including Commonwealth Bank. Pay-for-performance programs, also known as incentive pay or merit pay, are a solid approach to rewarding top-quality performance by employees in many types of organizations including financial institutions. Unfortunately, the perception of such incentive pay approaches is rarely viewed as “fair and accurate” by all of an organization's employees and this perception, even if it is misplaced, can adversely affect even the most thoughtfully and carefully designed and implemented pay-for-performance program (Smoldt & Cortese 2007, pp. 210-213). Some of the disadvantages of Performance based systems are:

First Ethical Issue:

Rewards become the prize and the tangible result of performing well in a job. Creating ...