Introduction

In an organization, better financial planning may help to minimize the risk of further economic crisis. So it was importance of designing an effective reward system during current economic crisis to support and promote a balanced lifestyle for employee in order to ensure positive contribution from the employees.

It implies developing a culture that fosters overall growth of the personality of the employees such as taking care of health and entertainment aspects of employees beside the productivity enhancement activities. Efforts must be made by the leadership that the family lives of the employees are comfortable. During economic crisis, many gossips, worries and anxieties will make employees struggling with number of new stressors such as loss of laid-offs which employees may be struggling with loss of laid off colleagues which these colleagues were part of their workplace social network as well as carrying part of total workload.

Besides that, employees may also be struggling with heightened stress due to the impact of the recession at work or at home. And with colleagues let go and less people to carry the workload and make the work-life imbalance will also make the employees feeling stress. Furthermore, during times of economic crisis, gossip can take an incredible toll and leave employees distracted and demotivated as they worry about what might happen.

The economic crisis also had dire financial consequences for many people. They may be struggling with debts that can’t be paid off, or loss of income due to one or both partners losing their job. Some of their family members had suffer lose income may force them need to support more than one household. In many cultures the loss of income will affect an individual’s social status and be considered extremely shameful.

Thus with all of these stresses and problems faced by employees, it was importance of designing an effective reward system during current economic crisis to appease the employees worries and stresses thus can motivate the employees to perform well in job even though it was during economic crisis.

Literature Review

There are hard for an organization to design a reward system appropriate for the current economic crisis. The organization must scrutinize three elements of their reward system that are incentive strength, incentive type, and incentive horizon. There are hard for an organization to measure the performance and multi-tasking of those employees. Thus, subjective performance can be use to keep the incentives balanced and address the incomplete measurement problem.

Besides that, the reward systems must be modify or redesign so that the employees will not just focus on short term profit but on long term profit too. Strong incentives will have strong effect toward the organization. It will get the organization faster to the undesired result. Most incentive systems are far from perfect – worse, they are often seriously flawed. It is therefore important to understand where the incentive systems fall short and how those shortfalls can be addressed.

Objective of the Study

To find out the effect of economic crisis to company’s reward system

The economic crisis due to inflation or deflation may influence or affect the company’s financial or non financial reward system to employees because the company will facing financial problem when happen economic crisis. Thus, this objective is to identify the impact to company’s reward system due to economic crisis.

To understand the background and natures of business being operate by the company

This objective is to realize the context of the company and also what kind of business that manipulation by the company.

To understand the importance of designing an effective reward system for the current economic crisis

This objective emphasis that the company needs to understand it was importance to designing an effective reward system during current economic crisis to retain and help employees be confidence to the company during happen economic crisis.

Find out the problem to design a new effective reward system

When the company wants to design a new effective reward system definitely will facing a lot of issues that constraint the company to achieve it. So this objective is to make sure the company can identify the problem will be faced when design a new effective reward system before they implement it.

How to evaluate performance management and reward system to ensure they provide equality and effectiveness

This objective emphasis that how the company judges the performance of management and how the company evaluates their reward system to make sure the reward system was fair and effectiveness.

To find out constructive ways to improve incentives reward system

This objective is to make sure the company gets the solution to improve their reward system.

Methodology

Background reading

The first thing we do before interview the company is read and refer to the company’s background to ensure that this company’s management have adopt the reward system and thus fulfill the issues that we apply which is focus on the economic crisis.

Interviewing

After we go through the background reading, we had made the appointment with the company’s manager to run the interview session. During the interview session, we had gathered much information about the reward system under this company during the economic crisis. For example, how they design a reward system that helps the organization to solve the problem that occur during economic crisis and so on.

Findings

To find out the effect of economic crisis to company’s reward system

Economy crisis from Business Dictionary can be defined as a situation in which the economy of a country experiences a sudden downturn brought on by a financial crisis. An economy facing an economic crisis will most likely experience a falling GDP, a drying up of liquidity and rising prices due to inflation or falling prices due to deflation. It also refers to an economic scenario where the economies of countries all over the world have taken a beating. The GDP’s of countries are going down are in negative zone. The current economic crises had left a lot of people without jobs, made companies to go bankrupt or cut the jobs, shut the plants and factories, plunged stocks, caused oil and real estate prices to fall, made countries to fall into recession, decreased consumer spending and raised panic among businessmen and workers, is effecting almost everyone and everything in the world negatively.

Since the decade spanning the mid-1970s and the mid-1980s, the current crisis represents the most significant set of economic events internationally. Economic crisis have causes major changes in government regulation of companies. Accordingly, the ongoing global economic crisis is likely to bring about many changes in corporate management especially in the reward system. It is important for every employer to find what motivates each employee. Every company has some form of reward system. Reward systems are primarily to things that employee value. According to the person saying this phrase, a reward system is the world’s greatest management principal. If the organization rewards a certain kind of employee behaviour, good or bad, that is what the company will get more of. Every existing company has some form of reward system, whether it is outspoken or not, it exists. People correspond positively to praise, and praise in the right moment creates loyalty and affinity. Rewards come in two different types either in form of incentive motivation or personal growth motivation. It is important to bear in mind that a reward system can contain both positive and negative rewards. The negative rewards, often seen as punishment, usually manifest themselves through an absence of positive rewards. On the other hand, positive rewards would be autonomy, power, salary increases, bonuses and more negative rewards would be interference in job from superiors, zero salary increase, and no promotion.

Furthermore, reward systems are often used as a management tool for achieving desirable objectives. One of the most common purposes is to motivate employees to perform better. This can be achieved through monetary and non-monetary rewards. Monetary rewards can be either short-term incentives which are in form of bonuses based on one year’s performance or long term incentives which are in form of options or shares based on performances on a time period greater than one year. Another type of monetary reward is the salary increase. The non-monetary rewards include development possibilities, promotion and extra vacation days.

The current economic crisis has created a much more stressful environment for employees and must be handled effectively by managers and human resource officials to help the organization to achieve its business objectives. In order to improve effectively the stressful environment caused by the downturn for the employees is another big challenge for the business organizations on human resource department. Human Resource department will need to support leadership and management to handle stressors so to keep the staff engaged and motivated. The best Human Resource strategy during economic crisis is to develop each person to be efficient, effective, challenged and satisfied. In times of economic disorder, corporate world shifts from excess to essential from routine and comfort to one of survival. This focus often requires designing new priorities, relationships and strategies. To ensure the business organization to survive in tough times and in the future, human resource must play a new and expanded role in employee recruitment, corporate organization, training and institutional learning. Human Resource Department should create evaluating environment that rewards effort, initiative and talent to motivate the employees to greater performance especially when facing economic crisis since established a good reward system may help an organization to share profits with the employees and making them feel they are appreciated although the organization was facing economic crisis. If the organization still sharing profits with employees in the worse time which is the economic crisis time, they will feel the organization very care the employees’ benefits and thus the employees will work hard to help the organization to do the best even though is facing economic crisis.

On the others hand, some organization will reduce the expenses of the organization when facing economic crisis such as reduce the salary of the employees and the worse will also cut the job by fired some employees. Different views have also been pointed out regarding if there should exist a reward system or not. However, most of the people feel that a reward system should be exist even though it was during economic crisis period. This is due to the need of attracting and retaining key performers. If the organization removed the variable part of the reward system especially during economic crisis period, it will cause de-motivating to the employees. This was explained by saying that to be given something that later is removed would almost certainty make the former receiver more dissatisfied than if he never received it in the first place. In short, a reward system should be exist although it was during economic crisis period since remove it would cause de-motivation.

To understand the background and natures of business being operate by the company

The name of the company we chosen is Ipoh S.Y. Recycle Plastic Sdn. Bhd., which is a company specialized in recycling plastic waste. This company located at PT.5992, Off Persiaran BG. Perdana 10, Perindustrian Batu Gajah Perdana, 31550 Pusing Daerah Kinta Perak Darul Ridzuan. This company was established by Mr. Tan Thean Yat and Ms Chooi Yoke Kwan in 2005. The recycled products are extensively used in the market and mainly supplying to the plastic companies to manufacture other products.

The company previously was known as Soon Yik Plastic Trading. The old factory was located in Chandan Raya Industrial area, Menglembu, Ipoh, Perak Darul Ridzuan. In 2005, the company was growing steadily and the business expanding rapidly, so Ipoh S.Y. Recycle Plastic Sdn. Bhd. was established.

The main activity of the company is collect plastic waste, doing classification and selecting the suitable plastic to go through a strict production system to recycle the plastic waste to become plastic granite. The recycled products not just supplying to the local market, also export to the oversea markets, like China, India and other countries.

At the beginning Ipoh S.Y. Recycle Plastic Sdn. Bhd. was a miniature trading company. It was a single unit factory employing 5 workers and 3 machines were operating. After several years of hard works and some effective business strategies, the company was growing rapidly. In following, the company is expanding from a small factory to a 7 lots factory. It was a turning point for the development in 2005. Nowadays, the company was employing more than 30 workers and having about 20 advanced machines in functioning.

For the production system, the company is emphasizing on machine operation. So, the company has invested huge capitals to buy the more advanced and high efficiency machines to ensure the production to reach the required standard. To maintain the plastic granite quality stability and supply good quality products, it must have a well-equipped production system. In order to supply and maintain the high quality plastic granite, Ipoh S.Y. Recycle Plastic Sdn. Bhd. continuously to improve their technical training and machines efficiency. So, the company will send some workers to study at oversea countries that are more advanced and competitive, like China, Japan and Philippine to search for the information and understand their access secrets in every year.

Ipoh S.Y. Recycle Plastic Sdn. Bhd. is doing the resources collecting business to protect the environment contamination. Company tries to minimize the contamination to respond to the government environment protection campaign. This can help to create a better and health living environment.

To understand the importance of designing an effective reward system for the current economic crisis

Below are some of the importances of designing an effective reward system during economic crisis:

To motivate staff for better working performance

As we mention above, an effective reward system can lead to better working performance especially during the economic crisis. It is because when the economic turn down, the percentages of unemployed will definitely increasing and there are lots of people fighting for a job. If a company did not taking advantage of the crisis to lay off employees but still designing an effective reward system to encourage their staff, for sure, this will motivate their staffs to work hardest and seriously for the company and that will carrying out a better performance than ever before.

The staff’s motivation is definitely important and it is a key for the whole organization to run well. A staff with a better motivation will improve their performance when working for the organization, so it will increase the sales of the organization directly. The reward system is the way to affect the motivation of the employees. A good reward system will bring a lot benefit to the organization and also for the employees. So, it is a win-win situation that can encourage the sales of the company and also the happiness or satisfactions of the employees.

Besides of monetary reward system that can increase the motivation of the employees, a most simple and economical way to boost the employee’s motivation is sincere praise and personal gesture by the manager. This is a way that can improve the motivation and is it better than giving out monetary reward.

To improve employee productivity and quality of work

In a competitive business climate during the economic crisis, more business owners are looking at improvements in quality while reducing costs so that they can stand strong in the economic crisis and defeat other competitors. In the meantime, a strong economy has resulted in a tight job market. So while a businesses need to get more from their employees, their employees are looking for more out of them.

Employee reward system is one method of motivating employees to change work habits and key behaviors to benefit a business. One of the reward systems that can affect the productivity of an organization is time related. This method is pay to the employees according to the time that they work for the organization. Therefore, the employees who wan get pay more from the organization will be work harder to fulfill the time that they work for the company. However, this method may cause the quality of the product decrease because the employees are emphasis on the time they work and not the quality of the production.

So, to crop this problem incur, the company must recruit a quality control team to control the quality of those product that produce by the employees to make sure the quality is acceptable and can send to the customers. On the other hand, if the company did not recruit a quality control team, it can give out a reward system that based on the quality of the product that produces by the employees. So, the employees will also focus on the quality of the product and not just focus to fulfill the time they work for.

To encourage brainstorming among staff

Innovation and creativity are both important in the crisis economy because the organization needs something new that can bring profit to the organization and enjoying competitive advantage which the other competitors did not have it. For encourage the employee to more innovation and creativity, the reward system can motivates the employees to take risk, develop successful new products, and generate more new product ideas. Those reward systems include such practices as providing freedom for creativity, financial rewards, promotions, and other recognition.

All the reward systems will lead or encourage the employee to have more innovative or creative to find new product, for example, some company giving freedom and budget to those scientist or engineer to produce something new. Besides that, manager can think the other creative way to lead the employees towards the organization goals. If the way is work, then the company will give incentives to the manager. Moreover, some time the organization giving out a reward to keep their certain significant employees which help the organization a lot. Those rewards might be increase salary, freedom and budget to them to do research and development, giving any benefit in kind, and so on.

To achieve business goals and objectives

Every company has their own different goal to achieve by using their particular resource. To achieve such goal and objective, the manager of the organization may need to know how to assign work and motivate their team to achieve the goal. Hence, a reward system can motivate the employees to achieve the goal with the manager. The employees will has more motivation when they get something reward or benefit if they help the company earn profit or achieve the goal. Therefore, an efficiency reward system may encourage all the employees of the organization work harder and full of satisfaction when they contribute themselves to the organization and then finally get some compensation that they think valuable for them.

For example, some company may set up a competition between two team and one of the team that earn profit more than another team will get reward on it. So, these type of competition may encourage them have more motivation to earn profit for the company. Based on the question, the organization may hire fewer employees to work for them during the economy crisis and the payment for the employees may lower than normal. Thus, that is important for the company to assign a reward system, so that it can push the employees to work harder and achieve the company’s goal then they also can get their compensation from the company.

To create a better working environment

The reward system can help the organization to create a better working environment, it is because the reward system can encourage those employees has more motivation to work for the organization and they will co-operate with each other to help the company toward the goal so that they can get back reward from the organization. Due to the high motivation environment, those employees will influence each other in the organization, so the employees will give full contribution on the organization to get the rewards. Besides that, all the employees will co-operate with each other so that they can easier to finish a task or an objective.

Besides that, a negative reward system may give out by the organization to those employees that did not perform well. The negative reward often seen as punishment usually manifests themselves through an absence of positive rewards. Examples of negative rewards are interference in job from superiors, zero salary increase, and no promotion. Due to the negative reward system, the employees will not do anything wrong and do the job well to maintain or to get more rewards from the organization. So an efficiency reward system is a very important or significant system that can help the organization a lot during the economy crisis.

Find out the problem to design a new effective reward system

The problem of designing a new effective reward system is a very common problem in most of the company. If we are force to create a new effective system, we need the co-operation of the managers. Managers who have been working in the company since the year it started will need to help build a share vision, and increase each individual workers motivation to see the plan succeed. This is when the problem of designing a new effective system in the company. The managers are the key of success and also the key of failure to the new rewards system which require leaders who lead through inspiration rather than command and control.

The managers of Ipoh S.Y. Recycle Plastic Sdn. Bhd. should seriously all come together with to review, discuss, challenge, and agree on the strategic decisions rather than just having their own system in their own department itself. They should put a clear purpose and intent and must be able to push for consistency of the new system.

Set all rules that can help to achieve an orderly ethos in achievement and positive relationships are value equally between the sanction and punishment

The managers should set all rules that can help to achieve an orderly ethos in which achievement and positive relationship are value equally between the sanctions and punishment. The sanction is where the consequences of breaking rules need to be clearly satisfied praise and awards. Praise is a formal and public recognition of good behaviour, for example, when an employee finishes the job before a job dateline or can be able to produce more product than it is required by the company, an award should be given to him or her , it can be either be a monetary term or non-monetary. As for the punishment, the consequences of breaking rules need to be taken out clearly, if an employee is always late for work and slack during working hours, they should be able to give punishment such as minus the salary or giving warning letter by hoping that the employee do not repeat the same mistake again. If the managers can be able to set a rules of getting the employee clear, it should help with the problem of designing a new system. They should make it clear for the employees to follow the new set of rules and regulation.

Take notes of employee emotions

Besides by setting a new rules and regulation, managers should also take notes of the employee emotions. Many managers nowadays have less concern about the employee emotions. Some of the employee might not focus more on the salary but they will focus more on recognition in the company. For example an employee have been working in the company since it open from a small company until now, the employee might be hoping for a recognition in the company.

But if the company did not take the correct action of reward system to the employee, the employee might have negative impact to the new effective system, because they do not want to change and they would not have the sense of belonging to the company and they would also not work hard in the company because they think that the company do not care for them. A change to the current company system is hard and need a lot of courage and time in order to get the system works. It is a long term plan rather than a short term plan.

Carefully plan about the new system and find out the consequences of good and bad of it

The implementation is where failure most occur is when the system is implementing. The managers did not have a careful planning about the system and to find out the consequences of good and bad of it. The inappropriate measures of the leaders, provided motivation, and allow for follow through and sustained attention. Managers of the company should need to create a helpful identify focal point, which is easily understood terms, showing the cause and effect linkage between key component. The implementation should be appropriate to the new system.

The new system must be acceptable in all forms of direction. For example, this company mentions that they always going overseas to look for new machine and more productive way to the business, but when they bring them back they must be able to make them adaptable to the company and also the workers. There for the implementation of a new rewards system must be able to be adaptable to the environment of the company and workers.

Apply the SWOT system

The problem that new design award systems always tend to fail by major company is because they failed to do the SWOT system which is the 4 steps of Strength, weakness, opportunity and threats.

In the strength method, the company must realise the strength that the company has, for example: the company owns the latest machinery to product plastics bags in the country; this is the strength that the company has to take leader advantage of the industry. Besides that, the company also have different company that is provided by van to send recyclable plastic to their company. This has save them a lot of energy and cost that they can do other things to improve the rewards system of the company.

In the weakness method, the company have to know what weakness that the company have. This is the most difficult for the company and leaders to access, it might need to identify the vulnerabilities. The vulnerabilities of the company might be lack of cost of research, as they always have to rely on the overseas company to provide them the latest technologies, if one day they do not provided them the technology they might get into bad situation. The weaknesses might also be employee not well trained and if this happen they might need to send the employees to training. If the employee refuses or did not manage to learn what they have been train is the failure of the reward system. As training is one of the rewards systems, the company must choose a potential employee to training rather than simply sending any employee that will waste the company capital.

As for the opportunity, the location of the company, the facilities of the company, and the potential of the growth in future is important for the growth of the company. In the new reward, the company need to identify the location of the company and allocate the appropriate reward to the company, for example: if the location of the company is at rural area, the company must be able to provide the basic needs to the workers. and the facilities of the company must be complete, workers must be able to have a place to rest and also the basic needs such as easy accessibility of having meals and drinks. If the potential of the company growth is good, the company have to appreciate the workers as they are the key of success of the company in the future.

Threat of the industries

The last method is the threat of the industries, if the company has many other competitors they must always think of a way to keep their business and also their workers. They must realised the potential of competitors pressure that will join in the industries in the future and present. Although the company now have 7 factories in Ipoh, Perak but they still need to realised the threat that will happen in the future and also the in the current situation. The company also need to realise the production economics which can affect the recycle business, although the whole universe now is talking about going green, but still they still need to improve their company’s worker time to time to keep up with the trend of the world. The rewards to the employee must be good in order for them to keep them in the company and to avoid the skilled worker trained by the company to be just be taken off by other same industries company.

The company must be able to realised the treat in the short term and also long term. They need to plan for the short term and long term of the rewards system to make it works. Most company that fails is because they only focus on current situation rather than long situation.

In conclusion, we feel that the reason of problem to design is because of lack of commitment of the top management that have feels that changes does not required commitments and consistency of the company, the time that is needed to plan is not enough and the details of the new rewards system. Top management of the company is also needed to make the new implement appropriate to the workers and the punishment and awards are equally done to avoid unfair situations. The top management also need to focus on long term situation rather than just the short term situation before they implement it to avoid rejection of the company employees.

How to evaluate performance management and reward system to ensure they provide equality and effectiveness

A good performance management can bring benefit to an organization. Below are the methods to evaluate performance management:

Management by objectives (MBO)

Management by objectives is a systematic and organized approach that allows management to focus on achievable goals and to attain the best possible results from available resources. MBO can use to evaluate how employees meet specific goals. It aims to increase organizational performance by aligning goals and subordinate objectives throughout the organization. For example, a sales manager might set an objective for employees that require them to reach a certain sales quota for a certain period. A manufacturing manager might set a goal to reduce product waste. This method’s advantage is it relies on actual outcomes to judge performance, not an employee’s potential for success. MBO includes ongoing tracking and feedback in the process to reach objectives.

360 degree feedback

This method gathers feedback from different parties to give an all-round picture of performance. It often used for managers and supervisors. It can give a valuable insight into how the employee’s work. While the principles of this method are very useful, it can be administratively overwhelming for businesses. If this method would be useful for business, consider taking the principles and implementing a less formal 360-degree process where informal feedback can be used.

Behavioral observation scale (BOS)

Behavioral observation scale is frequency rating of critical incidents