Managing Employees

Reward Systems in an Entrepreneurial Organization

Written by Samuel Muriithi for Gaebler Ventures

Reward systems are a critical fundamental of the entrepreneurial organization. This is because they have the ability to shape the behavior of the employees and the overall organization culture in the same way as the attitude of the business owner can. It is therefore imperative that management look into the organization's various reward systems with an aim to establishing whether these are working for or against the desired enterprising culture.

Entrepreneurial reward systems affect the organization in more ways than just being the employees' indicator of what the management would expect of them.

Reward Systems in an Entrepreneurial Organization

They are certainly important in helping define the firm's strategic direction. They are also very important in the quest to enhance the employees' commitment to look for and take advantage of various opportunities.

The traditional idea of reward systems was usually tied to the achievement of short term goals and targets by individuals and the efficiency in use of various assets and resources with respect to employees' responsibilities and statuses within the organization. The reward systems in such organizations are generally related to getting a higher pay through added responsibilities and promotions.

In entrepreneurial organizations the reward systems are markedly different in that emphasis is placed not on the individual but on teams. What is actually rewarded here is the value creation that has been realized. Entrepreneurial reward systems, unlike those in the traditional setting which focused on error-free performances, are often inclined to the risk-taking effort inputted and as such they help the employees realize that failures are part and parcel of efforts that may or may not end up in success.

Entrepreneurial reward systems are also designed such that they are not solely about monetary gain and higher status. The rewards will motivate employees by:

  • Adding their potential to contribute and achieve more as they work
  • Recognizing their efforts and success
  • Making their work more interesting and
  • Adding to their responsibilities

The desired entrepreneurial reward systems should additionally allow employees more freedom to decide how they can work better. The employees should also get more opportunities to learn and develop their skills and work with other people who have savored success. The rewards will help enhance an optimal entrepreneurial climate where information and communication are free-flowing, where the culture is initiative-conducive, where change is welcomed, and where all are proud to be associated with the organization. In this way the employees will be able to feel a better overall sense of achievement.

Samuel Muriithi is a business owner in Nairobi, Kenya. He has extensive international business experience in the United States and India.

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