Online Tutoring Impact of Reward & Recognition System on Team

Impact of Reward & Recognition System on Virtual Team Effectiveness

Research Background

In the current progress towards de-centralization and globalization of the work processes, many multinational firms have been responding to changing competitive landscape by introducing virtual teams in their portfolios. Under this strategy, the firms tend to form teams that comprise of geographically dispersed individuals who coordinate their tasks and communicate using information technologies (e-mails, video conferencing etc.) According to a report by AFW (2002), it was revealed on basis of survey from 376 business managers that about 20% of the managers were deployed in Germany as a part of virtual teams while 40% worked at least once temporarily in virtual teams (Hertel, Geister, & Konradt., 2005). Despite of its growing popularity, a little focus is made on motivating and managing the virtual teams using rewards & recognition systems (Bell & Kozlowski., 2002).

For every organization, it is important to acknowledge the work of the individual to provide them assistance in terms of promoting the satisfaction of the work environment. The motivational factor impacts the performance of the workforce positively (Ebrahim, Ahmed, & Taha, 2009). This is because once the team working in the organization get to know that their hard work and the creativity are given due consideration and is well-appreciated, their productivity and the accuracy increases. The main purpose of the report is to analyze the impact of reward and the recognition system on the effectiveness of virtual teams.

Virtual teams are defined by Bailey & Kurland (2002) as the group of people who work interdependently with shared objective across time, organizational boundaries and space by staying connected through technology. Virtual teams might be located across country or across the globe in different cultures and significantly different work environment. However, the virtual teams are different from traditional on-premises teams; still the factors like rewards & recognition can motivate them.  The factors of the appraisal system which include the reward and recognition while working with the virtual teams are important for any organization that requires their employees to work on the common goal of the organization (Ng & Tung, 2018). The employees can get motivated with financial rewards but other than this, the non-financial reward also creates a positive impact on the performance of employees (Clancy, D. K., & Collins, D. 2014).

The virtual team or workgroup is now being developed by most of the companies to get the skilled and qualified staff from any part of the world. Most of the time the large business entities invest in the low economic countries by establishing their subsidiaries there to get the maximum advantages of the demand through their effective production capacity (Gaudes, Hamilton-Bogart, Marsh, & Robinson, 2007). Once the subsidiary of the partner company has been developed the company would prefer to hire qualified staff and skilled labor from the local economy instead of shifting the workforce from country of origin or where there headquarter is located to save the cost.

In the modern world, the increase in the advanced technology system makes it possible for the companies to manage their overseas staff significantly by using the multiple tools of information system which is used to manage and control the process (Gaan N. , 2012). The organizations now prefer to build their remote team to avoid the restriction of any particular place of work or else many key projects of the companies are being outsourced as well to save the in house cost. Various technologies can also be used to hire the employees and labor remotely (Wong & Burton, 2000). Virtual teams can also be defined as the employees working towards the common goals of a project in which the efforts made by them are collaborative. The environment provided to these employees is virtually oriented (Renfordt, 2018).

Virtual teams, operating globally are located in the various foreign countries where the operations of the parent company are located (Staples, Hulland, & Higgin, 1999). The management of these virtual teams requires significant approaches by the companies along with the system of recognizing their work and rewarding them based on their performance. The process of managing the virtual teams starts with the process of assembling the responsibilities of the team in which company has to define the period of probation in which it is the role of the team leader to observe the performance of employees and to identify that either they are capable enough to provide them permanent employment, whereas the other process include the training of the staff based on their work and to provide the information related to the code of conducts (Killingsworth et al., 2016).

The process of evaluating the performance of each individual is the critical stage where the leader or the manager of the team analyzes the accuracy and the productivity of the employees in achieving the targets and fulfilling their responsibilities. These mentioned processes are effective enough to gain tangible benefits (Beecham, 2014). The motivation is very important from the employee perspective either working in the company or in virtual workgroups. The manager is required to decide the schedule of meeting with the group or the individual member of the team in which he/she can proactively discuss their progress. Once the employee observes the interest of the organization in them, they would not hesitate in discussing the dynamics of their responsibilities and even provide the feedback (Bhiladvala & Johansson, 2020).

The reward system for virtual teams is an essential factor to keep them motivated and satisfied. It is important for the companies operating their subsidiaries in other counties to remain in touch with their foreign employees (Lawler, 2018). This can be a better approach to appreciate the success of the team by endorsing their specific actions with regards to achieving the targets of the company (Liao, 2017). The non-financial reward system can also be used by the companies for keeping their virtual teams efficient and happy.

Though the primary motivational factor for employees is financial in terms, but it is definitely not the case with every employee (Ng & Tung, 2018). Therefore, the factors including the efforts in recognizing the achievements and providing the opportunity for virtual employees to work in a favorable work environment can enhance and develop their skills. The structure of this report has been designed in ways to provide the research background of the topic which will then be followed by the critical literature review and the research design, while the key section of ethical consideration will also be included in the later part of the research (Marlow et al., 2017).

Research Questions & Objectives

The paper intends to cover three objectives i.e.

• To study the influence of reward and recognition system on productivity and efficiency of virtual teams.
• To analyze the variety of reward and recognition systems preferred by project leaders handling virtual teams.
• To analyze the perspectives of leaders towards reward & recognition systems as a mean of motivating virtual teams.

Based on the above recognized objectives, the following questions have been structured to be explored in this research.

RQ1:   What is the impact of reward and recognition system on productivity and efficiency of virtual teams managed by project leaders?

RQ2:   Which types of rewards and recognition systems are preferred by project leaders that can positively influence the virtual teams?

RQ3:   In a leaders view, does having reward & recognition system at place motivate virtual teams or not?

Literature Review

Rewards are considered to be an important element of any formal organization. According to Lawler (2018), effective organizations must focus on understanding why individuals must commit effort, time and ideas for it. The study examined the relationship between rewards and virtual teams’ effectiveness by describing and understanding the different types of virtual teams. The study outlined four major types of virtual teams i.e. parallel, production & service, project and management. According to Lawler (2018), each type of virtual teams requires different rewarding systems due to distinctive operating characteristics. The study also pointed out that rewarding excellence of the virtual teams needs special consideration of cultural differences. Virtual team leaders are required to develop creative ways of recognizing and rewarding the individual & team accomplishments of the virtual team members (Hertel et al., 2005).

Kirkman et al. (2002) identified the role of virtual team leaders in designing effective reward & recognition systems for the virtual team members. The authors conducted several interviews for gauging the technical skills required by leaders so that they can collaborate with virtual teams. According to the study, using valid team performance measures as the basis for team recognition and reward can aid the leaders in motivating the virtual teams (Heary, C., & Hennessy, E. 2012). Careful development of team performance can aid the managers in aligning the virtual teams with the overall strategic organizational objectives (Bal & Gaundry, 1999).

Ebrahim et al. (2009) also conducted a literature review study on virtual teams for understanding the external factors that influence the effectiveness and efficiency of the individuals. The study highlighted that the development of a fair & motivating reward system is an important factor to consider. It has been emphasized in the study that for motivating virtual team performance, their efforts & skills must be recognized and rewarded (Ng, P. K., & Tung, B. 2018). The literature review analysis suggested that reward structure is an important contributory factor of the success of a virtual team. It was concluded that the reward systems rank high amongst external support mechanisms.

The studies by Suchan & Hayzak (2001) and Frust et al. (1999) also examined the role of rewarding and recognition system in motivating the virtual teams. The studies indicated that for developing optimally effective virtual teams, the leaders must develop a reward system that recognizes the required behavior and skills of individuals. The challenge of creating a fit between characteristics of the team and characteristics of reward system has to be faced and met by the global leaders. According to Chan et al. (2004), the key is to design a reward system that fits within the organizational context and team’s characteristics. Chan et al. (2004) also pointed out that reward systems can motivate the performance of the virtual employees under certain conditions. These conditions include employees’ perception towards organization and the links of important rewards and effective performance. According to Chan et al. (2004), an individual is motivated for behaving in a certain way when he/she has high belief on getting attractive outcomes.

Greenberg et al. (2007) promoted role of the pay system and recognition in motivating and encourage virtual teams in learning and developing new skills. The motivational principles guide the individuals in mastering the skills that are most rewarded by the organizations. Hence, Greenberg et al. (2007) discussed the skill-based reward system to be sued for targeting the development of certain types of skills amongst the employees. By relying on skill-based reward system, the virtual teams can improve the ability to perform in strategically important way.

Gaudes et al. (2007) also discussed how the reward systems can be used for recognizing excellence of virtual teams. According to the author, the leaders that employ a reward system that is well communicated and is team-based, they can increase cohesiveness, motivation and productivity of the virtual teams. Gaan (2016) also backed up the role of rewards amongst other factors like trust, leadership and effective communication in managing and shaping an effective virtual team. Gaan (2012) pointed out that the global virtual project teams are considered to be most important assets of the multinationals. In order to successfully completing the important tasks and projects, the team leaders are required to collaborate successfully with virtual teams.

Cacioppe (1999) defined recognition system as a non-financial reward that revolves around praising and recognizing the team’s efforts and achievement. Having appropriate reward and recognition system is identified by Ng & Tung (2018) as one of the important factor that motivates the individuals for performing towards organizational goals at high levels. Similarly, Govindarajan & Gupta (2001) also revealed that individual, team-based or mixed reward and recognition systems can enhance the team performance.

Ng & Tung (2018) analyzed that traditional rewards system of rewarding individuals might no longer be a good fit for the virtual teams. According to the study, the whole team must be rewarded for motivating the team effectiveness and driving projects success. Several types of team-reward systems like merit pay, profit-sharing and bonuses were identified to be appropriate enough for driving team performance. Rack et al. (2011) and Horwitz et al. (2006) discussed that team-based rewards can positively affect the team member’s motivation and lead them towards achieving higher productivity and efficiency. As compared with the collocated project teams, the leader of a project teams has to face different challenges as the team members are geographically dispersed. The project team leaders seldom get the opportunity of meeting team members and hence it becomes difficult to assess their performance. Wong & Burton (2000) discussed the importance of designing a team-based rewarding system for compensating the virtual teams.

Ng & Tung (2018) revealed that the most preferred reward & recognition systems in managing the virtual teams include both formal and informal rewarding mechanisms including system rewards (annual leaves, medical insurance etc.), base-pay rewards (basic salary plus bonus), seasonal greetings, local delicacies and gifts each year. The study also pointed out that the positive effect of rewards and recognition systems as established by Brandt et al. (2011) and Rattan (2005) can rightly be extended and applied in management of virtual team context. Ng & Tung (2018) concluded on basis of the survey and interviews from virtual teams that if team-based rewards were provided, the virtual teams would have felt more confident and motivated.

Lawler (2018) discussed another pay system that can be used by the leaders for managing, motivating and appreciating the virtual teams. The skill-based pay system is identified by Lawler (2018) to be one of the new methods that has to be considered by the leaders. Operations of virtual team require more skills and the individuals are required to learn new skills for upgrading. The push towards adopting skill and knowledge based pay system is likely to grow in future as organizations are moving towards virtual team based systems (Lurey & Raisinghani, 2001).

Lawler (2018) discussed the impact of skill-based pay on all four types of virtual teams. For parallel virtual teams, it can be used for encouraging cross-training & virtual team skills while for production & service virtual teams; it can be utilized for motivating virtual self-management skills and help leaders in retaining most skilled team members. For project virtual teams, skill-based reward system can motivate the development of depth expertise and sharpen virtual team operating skills. Similarly, management related virtual teams can use the skill-based pay system for motivating the development of depth expertise, career tracks, cross-functional knowledge and virtual management of team skills.