Motivation and reward systems

Reward systems are identified as one of the human resource management (HRM) practices that may impact motivation. Reward systems may consist of several components, including financial and nonfinancial rewards, in fixed and variable amounts. Reinforcement, expectancy, and equity principles are discussed to explain why reward systems have motivating properties. The influence of reward systems on motivation is not straightforward, because the psychological meaning of pay has to be taken into account. Each system may have unintended consequences because of the psychological interpretation of the rewards. In an international context, it is reasonable to assume that cultural differences affect the interpretation and meaning of reward systems, as the values that affect their meaning may differ between cultures. As such, a reward system may have differential motivational effects in different cultures. Some research findings regarding these differences are presented, and some issues for future research are discussed.