UNIVERSITY OF ECONOMICS HO CHI MINH CITY
International School of Business
------------------------------

Nguyen Thi Ngoc Suong

IMPACT OF REWARDS MANAGEMENT
SYSTEM ON EMPLOYEE'S JOB
PERFORMANCE THROUGH WORK
MOTIVATION: A STUDY IN COMPANIES
IN HO CHI MINH CITY

MASTER OF BUSINESS (Honours)

Ho Chi Minh City - Year 2014


UNIVERSITY OF ECONOMICS HO CHI MINH CITY
International School of Business
------------------------------

Nguyen Thi Ngoc Suong

IMPACT OF REWARDS MANAGEMENT SYSTEM ON
EMPLOYEE'S JOB PERFORMANCE THROUGH
WORK MOTIVATION: A STUDY IN COMPANIES IN
HO CHI MINH CITY

ID: 22120069

MASTER OF BUSINESS (Honours)


Page |5

Chapter I. INTRODUCTION
This chapter represents about introduction of the research which includes
research background, management problem, gap, objectives, questions significance,
scope and structure of the research.
1.1 Research background
Nowadays, it is considered that human resource is the most important factor
leading to the success or failure of a business all over the world, especially in Vietnam.
Development of human resource is one of the most important works in the development
strategy in any organization. A company can have a modern technology, good quality of
service, and even good infrastructure, etc but it may hardly survive and build competitive
advantages in the long term period if lacking of labor force doing work effectively.
As Lawler (2003) said, the way that people are treated increasingly determines
whether an organization will prosper or even survive. An effective organization has to
make sure that there is a strong cooperation and satisfaction among employees. And in
order to make employee perform their best in the organization, there is a need of effective
motivation at various employee’s levels (Bedeian, 1993).
Motivation is a process that energizes, directs, arouses and sustains the behavior
and performance of the employees (Luthans, 1998). Thus, motivation is the process that
stimulates the employees to put their full efforts in order to achieve a desired task (Ishfaq
Ahmed, 2011). And one considerable way to make employees motivated and perform the
best in their job is using rewards management system (Deeprose, 1994). Because, the
rewards have major impact on organizations capability to catch, retain and motivate high
potential employees (Fay and Thompson, 2001).
1.2 Management problem
As the largest commercial and economic center of Vietnam, the economic
activities of Ho Chi Minh City are always vibrant, and strongly attractive for foreign
investments. The economy in this city has grown at a rate of approximately 10% per year

been suddenly decreased due to the tough economic situation. Hence, it leads to the less
motivation on employees. (Hai Anh, 2013). It means the important point is how to


Page |7

recognize which kind of rewards should be applied for which kind of employee.
Undoubtedly, employees with different attitudes, behaviors, experiences, they need
different way to promote their creativity and capacity as well. Therefore, in order to
motivate an employee so that he can perform his best in the job, it requires a flexible
rewards system. Although there are many studies about employee’s motivation and job
performance in Viet Nam context, there is no official study mentioning about how to
apply rewards management system effectively for various kinds of employees so that
they all can be motivated. This study is try to fulfill this gap by re-measuring the
relationship as well as impact of rewards management system on employee’s
performance with the mediating role of motivation, focusing on four main factors of
rewards named pay factor, benefits, promotion and recognition.
1.4 Research objective
As a consequence of above issue, objective of the study is to investigate the
impact of rewards management system on employee’s performance with the mediating
role of motivation then provides the support to management level on how to apply
rewards management system effectively.
1.5 Research question
The research will address the following specific questions:
1. Is there any relationship between rewards management system, employee's work
motivation and job performance?
2. How does rewards management system impact on work motivation?
3. How does work motivation impact on employee’s job performance?
4. How to apply rewards management system effectively?
1.6 Research significance

Chapter 3 describes the research design which is utilized. Specifically, the
chapter describes the sample of the study, measurement approached, how to follow to
collect the data, and the technique used for data analysis.


Page |9

Chapter 4 focuses on transferring, analyzing the primary data then reports on the
results of the empirical analysis. And based on the results, this chapter is to provide
respective discussion as well as findings associated with above literature review.
Chapter 5 comes to conclusion based on findings of the research with
recommendation.
This chapter reflected on the objectives, significances as well as benefits of the
research. The following chapter will provide some insights into the concepts that have an
impact on employee's work motivation and job performance.


P a g e | 10

CHAPTER 2. LITERATURE REVIEW
The focus of this chapter is to provide understanding of rewards management
system, work motivation and employee’s job performance as well as important
relationship among rewards management system, motivation and employee’s job
performance by focusing on the relating theories contents, arguments.
2.1 Motivation
The term of motivation is usually explained as desires, emotions, needs that make
someone do something. In general, motivation is what causes us to act such as drinking a
glass of water to reduce thirst or reading book to gain knowledge, etc.
Motivation is "a set of processes concerned with the force that energizes behavior
and directs it towards attaining some goal" (Baron, 1983). It inspires people to work

security, social, self-esteem, and self-actualization. In that order:
Physiological needs: these include most basic needs such as need of food, water,
oxygen, salt, sugar; need to rest, to sleep, to have sex, etc. When applying to
organizations, according to Maslow, organizations have to pay employees with a suitable
salary so that they can afford enough their living conditions.
Safety needs is the second level of needs. These needs are activated after
physiological needs are met. They are needs of finding safe circumstances, stability, and
protection. Organizations have to provide employees safe working equipment, health
insurance plans, fire protection so that they can do their jobs in safe and free environment
without any fear or harm.
Belonging needs: present as the third level of needs. They are activated after the
second level of needs is satisfied. Since people are social beings, they have a need to
belong to and be accepted by various groups as well as a need find out meaningful
relations with others. Considering in organizations, leaders and managers should
encourage employees to participate in company events, picnics, team building activities,
etc.


P a g e | 12

Esteem needs: present as the fourth level of needs which includes need of selfrespect, respect and approval by others. Most people have a need for a high evaluation
which is created by recognition and respect from others. When these needs are satisfied,
people become confidence and powerful. People also feel that they are useful and have
some affects on their environment. Therefore, organizations should encourage employee
many kinds of awards for their distinguished achievements.
Self-actualization needs: occupies as the top level of needs. Once esteem needs are
adequately satisfied, the self-actualization needs become activated in order to maximize
ones’ potential. As Maslow expressed: “What a man can be, he must be”, selfactualization is the desire to become what one is capable of becoming. Individuals satisfy
this need in different ways.
Maslow’s theory provies two important insights for researcher and manager. The

motivated and hence performs higher. Managers could use to achieve this by some
following methods:
Job enlargement: is to give employees the variety of tasks which are not required
the level of challenge but can make the work more interesting.
Job enrichment: is to involve employees in a wider range of more complex,
interesting and challenging tasks beside a complete unit of work. This one can produce a
greater sense of achievement.
Empowerment: is to delegate more power to employees to make their own
decisions over areas of their working life.
2.2.5 Expectancy theory
Developed by Vroom, Expectancy theory attempts to explain why individuals
choose to follow certain courses of actions in organizations so that they can satisfy needs
and thus becomes motivated. According to Vroom, behavior that employees decide to


P a g e | 14

display depends on what they expect to achieve from the behavior and their motivation
depends on their judgment of how they can perform and what they think that perform will
earn.
There are three levels that link to employees motivation: Expectancy- a desired
level of performance, instrumentality- a desired level of outcome or reward and valence,
the last level of how employees want or do not want the second level outcome. The
higher expectancy, instrumentality and valence are the higher level of motivation
becomes for employees to complete the task with high performance.
2.2.6 Equity theory
Developed by John Stacy Adam in 1963, Equity theory attempts to explain that
motivation comes from input like skills, experience, time on job, seniority, etc. and
output like job title, benefits, salary, responsibility of an individual employee. Depending
on the comparison of input and output factors, the employee can conclude whether his

towards achieving strategic goals (Armstrong, 2003).
As Deeprose (1994) posits, effective rewards management system can help an
organization to achieve its business objectives by attracting and retaining competent
people. The term of rewards management system itself is "significant, implying an active
role for employers" in human resource management strategies (Stephen and Geoff, 2011).
The rewards management system works when an organization wants to motivate
employees to perform their best or when employees accomplished the organizational goal.
It can be used to attract new employees while satisfying current employees. It also
increases efficiency and performance of the employees on their job which can contribute
on the success of the organization. Thus, the rewards management system can help to
reduce the turnover rate.
2.3.1 Rewards management system applications
Rewards management system includes both Financial and Non-Financial Rewards
which are also called as Extrinsic and Intrinsic Rewards.
Extrinsic rewards are salary increase, bonus giving, or others tangible rewards.
This type of rewards is beneficial because it can make the job context more favorable
which makes employee stop thinking about leaving the company.


P a g e | 16

Intrinsic rewards are promotion, praise, recognition, empowerment, etc. These
types of rewards come from the content of the job itself, and encompass motivational
characteristics of the job such as autonomy, role clarity and training (Hackman and
Oldham 1976). They help to give personal satisfaction to individual. Intrinsic rewards
make employee motivated and feel happy with the company.
There are as many elements to be addressed in a rewards management system as
many researches, arguments relating to this topic.
As Armstrong and Murlis (1991) suggest, four main areas that should be
addressed in a rewards management system are:


And, performance management that provides the basis for continuing as well as
formal reviews of performance against targets, goal setting per year of the
employee.
Hitt, Esser and Marriott (1992) argued that intrinsic rewards including feeling of

challenge, recognition and responsibility; extrinsic rewards like pay, working conditions
and security donated by management of an organization are valuable.
Sarvadi (2005) proposes a strategic reward system should have four different
elements namely compensation, benefit, recognition, and appreciation. Among them,
compensation which includes both of monetary and non-monetary rewards usually is put
in the top, and then followed by benefit.


P a g e | 17

Another argument developed by Wilson in 1994 mentions that a positive reward
system should be: meaningful and valuable to the individual; based on objective, goals;
and balance between work condition in the workplace (extrinsic rewards) and fulfillment
of individual needs (intrinsic rewards).
2.3.2 Recognition
While most employees appreciate monetary rewards for job well done, many
people simply need to be recognized as an individual or a member of a group when they
did a good work. Recognition is defined as "the timely, informal or formal
acknowledgement of a person’s or team’s behavior, effort or business result that supports
the organization’s goals and values, and which has clearly been beyond normal
expectations" (Kim Harrison, 2004). Recognition can be taken by many forms like:
thanks, praise, respect, job opportunity, safe work environment, right tools to do the job,
etc. It is a key success factor even at any levels of management which can make
employees feel appreciated and valued (Sarvadi, 2005).