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The strategic unit of every organization is the staff, which includes numerous employees who have different qualifications and duties. According to Phillips and Gully (2014), staff is a unique system that requires constant management and control with the aim to avoid negative influences on employees and business. Thus, numerous scientific studies prove that human resource management (HRM) has an essential function within any organization that facilitates establishing reliable and fair employment relations with employees and appropriate controls, as well as efficiently addressing related processes, including searching, selection, hiring, training, development of employees, and rewarding them (Phillips & Gully, 2014; Kumar, 2011). Employees are vulnerable to numerous internal and external factors and issues that may affect their interests and rights. In addition, companies may suffer from inefficient system of HRM that may lead to legal responsibility or judicial proceedings (Phillips & Gully, 2014). Thus, the most frequently occurred cases of discrimination at the workplace and lack of rewards and compensation system negatively affect the employees by violating their rights, as well as HRM, making it an inefficient system that may bring losses for the company.
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Workplace discrimination remains a serious concern of many organizations that show inefficiency of HRM. Kumar (2011) states that discrimination takes place when an employee is treated unequally or differently than other personnel. In addition, according to Phillips and Gully (2014), workplace discrimination occurs when an employer takes adverse action against a person who is an employee or prospective employee because of the following attributes of a person: age, religion, gender, race, marital status, background, etc. Kumar (2011) distinguishes indirect and direct discrimination in the workplace. Direct discrimination happens when an employer treats an employee less favorably than others (Kumar, 2011). Indirect discrimination refers to a specific working condition or company’s policy that negatively or positively influences a certain group of people (Kumar, 2011). The majority of countries strive to address and avoid discrimination at the workplace and protect employees’ rights by the law (Kumar, 2011). Consequently, all employers are responsible and are required to make sure that employees and people who apply for a job are treated fairly, as discrimination violates the employees’ rights, influences their wellbeing, and overall performance of all employees, as well as causing losses for the company.
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Most studies prove that discrimination has a negative impact on employees, employers, and organization’s management. First, it prevents individuals from accessing the labor market or progressing within it (Pager & Western, 2012). Okechukwu, Souza, Davis, and de Castro (2014) have examined the effects of perceived discrimination on work outcomes among 139 Hispanic male and female employees. They concluded that discrimination increased work-related stress, decreased job satisfaction and organizational commitment, and provoked role conflict and misunderstandings between employers and employees (Okechukwu et al., 2014). The scientists also state that employees with high level of salaries and job experience are exposed to ethnic-based discrimination less than their colleagues (Okechukwu et al., 2014). Similarly, discrimination among women in most cases was proved to relate to feeling powerless and low prestige on the job. Okechukwu et al. (2014) reported that more than one-fifth of minorities experience discrimination in the workplace, which resulted in reduced organizational commitment, lower productivity at work, and greater likelihood of quitting the job.
In addition, in their numerous researches the scientists prove the negative influence of discrimination in the workplace on the employees’ wellbeing and health. Pager and Western (2012) state that employees’ mental state and blood pressure may be affected by the stress resulting from a discriminatory event such as being fired from a job or as a reaction to chronic daily discrimination in the workplace. Furthermore, it was found that racial discrimination led to increased cardiovascular reactivity (Pager & Western, 2012). Pager and Western (2012) have identified the strongest factors that contribute to discrimination, including decline in physical health of employees, lack of respect, great workloads or disorganized schedules, long-lasting conflicts in the workplace, and lack of efficient communication between employees and employers, as well as bad feedbacks.
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Furthermore, discriminatory practices of employers affect the overall performance of all employees. According to Okechukwu et al. (2014), the most common type of discrimination employees experience is that related to promotions, bonuses, and benefits. Thus, if an employee observes that the company’s managers gives promotions on the base of gender, race, age or other discriminatory factors, his level of performance within the organization and professional abilities are negatively affected (Okechukwu et al., 2014). In addition, discrimination affects the employee’s level of satisfaction and morale (Okechukwu et al., 2014). Furthermore, unfair working environment can cause anger and tension that leads to outbursts at work and at home (Okechukwu et al., 2014). Personnel who experience regular discrimination are more likely to leave companies, increasing company’s turnover levels, which also negatively impacts the company’s performance (Okechukwu et al., 2014).
Finally, discrimination affects company’s profitability. If a company’s voluntary turnover is high, it is probably losing skillful and competent employees (Phillips & Gully, 2014). In addition, recruitment and training of new workers are costly processes, which also influence company’s productivity, as new employees require time to adapt to new working environment, build teamwork, and achieve company’s goals efficiently (Phillips & Gully, 2014). Furthermore, according to the study of Phillips and Gully (2014), once discriminated against, an employee will invest in his job and company’s performance less. Discrimination complaints may also cause additional expenses for companies, which will probably require advocacy assistance to address those issues (Phillips & Gully, 2014). In addition, the company may waste a lot of time required to handle discrimination complaints in the court proceeding, as well as damaging its image and reputation among clients, partners, and competitors. Furthermore, speaking about former employees badly may negatively influence relationships with potential workers in the future.
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Lack of Rewards and Compensation Programs
Inefficiency or lack of rewards and compensations within organization is another worldwide concern. Rewards and compensations within HRM are important issues for the performance of any organization and efficiency of its HRM. A survey conducted by Gupta and Shaw (2014) found that employees stated that they would contribute more to the company’s performance if they were fairly rewarded for their work, efforts, and results. According to Lekovic and Maric (2013), reward management stipulates establishment and implementation of policies, procedures, and strategies that aim to reward employees fairly, consistently, and equitably after evaluating and analyzing their value to the company. Effective recognition and reward system should help the company’s managers to attract, motivate, and retain employees, as well as facilitating their professional and personal development (Lekovic & Maric, 2013). Lekovic and Maric (2013) interpret recognition as senior managers’ awareness of the fact that employees work well and achieve high performance results (Lekovic & Maric, 2013). Consequently, acknowledgement of the employees’ contributing work may involve giving them a reward in the form of monetary bonus, prize, or some social benefits related to insurance, healthcare, or for example, free lunches in the company’s café (Lekovic & Maric, 2013). A reward and compensation system can also support corporate values, such as a focus on the clients’ needs or achievement of all company’s goals and set mission (Gupta & Shaw, 2014). On the contrary, the lack of reward and compensation programs or inefficient management of employees’ rewards affects the level of company’s performance and the achievement of strategic goals.
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According to Tessema, Ready, and Embaye (2013), any reward and compensation system established within the company should be constantly managed, controlled, and updated. Thus, efficient management of reward and compensation processes may have a positive effect upon the company’s performance in several ways. It may facilitate the long-term focus with continuous improvement, promote teamwork, reduce service-operating costs, minimize employees’ dissatisfaction, as well as raising the employees’ interest in the financial performance of the company (Tessema et al., 2013). There are numerous examples of efficient reward and compensation practices worldwide. Some companies prefer to reward their employees for development of their professional skills that may add value to the organizational performance and facilitate job rotation (Tessema et al., 2013). Other organizations recognize exceptional performance of their employees by providing recognition awards and monetary awards for winning employee commitment and attaining long-term beneficial results (Tessema et al., 2013).
The majority of HR managers consider reward compensations strategic issues. Kumar (2011) states that the most important goal of the compensation management within any organization is to pay employees fairly. HR managers should understand the ways in which reward and compensation management influences business goals that will help to create appropriate compensation programs, achieve company’s goals, retain and reward employees, boost motivation, and maximize profits (Kumar, 2011). However, the major problem when defining the package of benefits by the company is an unequal approach to the employees’ benefits, which is evident in the practice of some countries (Kumar, 2011). It includes differences in benefits given by the governments of some countries and taxes. The governments can also provide many benefits for employees, including health care insurance, pension plans, annual vacations, etc. (Kumar, 2011).
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Strategies for Improvement
Business can prevent incidents of discrimination in the workplace by establishing diverse HRM. HRM management focused on diversity is interpreted as a coherent set of practices aimed at promoting equal opportunities for employees and plurality within the company (Phillips & Gully, 2014). In addition, it includes efficient selection criteria based on valuing employees’ identity without preference to any kind of pre-defined categories, training programs aimed at establishing the appreciation for plurality and diversity, flexible career, and performance management practices able to promote evaluation mechanisms (Phillips & Gully, 2014). HRM focused on diversity management by means of training programs that can increase employees’ awareness about diversity in the workplace and the benefits it can bring to the organization. In addition, it may increase the employees’ knowledge about discrimination, ways to prevent it, and use efficient mechanisms and measures to address discrimination cases that have already happened. Similarly, evaluation procedures within diversity management of human resources can objectify the evaluation and avoid biases related to discrimination. Finally, diverse HRM assures employees that the company values its employees and strives to prevent discrimination in the workplace. Consequently, diverse HRM is the key to prevent discrimination cases within organizations, as it focuses on mutual work of managers and employees and increases their knowledge about diverse working environment that prevents discrimination in the workplace.
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Finally, to prevent discrimination employers need to follow legislation and law requirements, for example, the Equal Opportunity Act 2010 (Phillips & Gully, 2014). Employers should create a favorable working environment for employees, establish, support, and control implementation of policies to prevent discrimination, and govern managers and staff in cultural diversity issues. In addition, a company may appoint a grievance officer, who will be responsible for working processes, communication with employees, and avoidance of discrimination acts in the workplace.
The company may also establish a reward and compensation system that should be clearly communicated, consistent, defensible, relevant, integrated with corporate goals, and cost-effective. In addition, managers may use the best international practices to reward its employees, for example, independent evaluation of employees’ performance by recruitment or audit agencies, application of popular job evaluation scales or performance matrix, or comparison of competitors’ performance. Furthermore, establishing the performance-based compensation for teamwork may provide a fair and clear compensation practice for employers. Therefore, human resource managers can use many tools in developing an efficient reward system.
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In addition, the company may use the best practices of other companies in a way of organizing reward and compensation system. For example, The Coca-Cola Company uses the reward and recognition with the aim to increase productivity and efficiency of its employees’ performance. Coca-Cola has established a grading system that helps to evaluate employees’ performance and achievements and set the appropriate rewards in the form of bonuses, additional salary, monetary rewards, or opportunities to participate in developmental programs (Walters, 1995). Thus, the company’s reward system is based on the following factors: rate factor, employees’ career path, market potential, personal development of employees, and sales rewards (Walters, 1995). The management of the company believes that if the employees are loyal to the company’s management, then they will perform better to achieve the set goals and get the required results (Walters, 1995). Therefore, Coca-Cola strives to motivate their employees and provide rewards and compensations on the base of grading system.
Furthermore, the company may adopt a total reward strategy that is considered one of the most efficient HRM approaches nowadays. According to Kumar (2011), the economic recession and international economic tendencies influence companies worldwide to change their reward and compensation strategies. According to Kumar (2011), “total reward is the combination of both the financial and non-financial rewards for employees” (p.130). Establishing a total reward strategy that will ensure a cost-effective and well-integrated approach to compensate and reward employees is possible within any organization. The system will guarantee that the compensations and rewards are predictable and controlled, as well as employees having clear understanding of the connections between their productivity, efforts, and performance results and possible compensation (Kumar, 2011). The total reward strategy is based on Alderfer’s ERG theory and Maslow’s need hierarchy theory that divide job-related factors into hygiene factors and motivators. The scientific studies prove that these theories will help to adopt an efficient total reward strategy focusing on the employees’ diverse needs and the company’s performance goals (Kumar, 2011).
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Employees are valuable a resource of any organization. Therefore, companies should protect their employees’ rights and guarantee favorable working environment. However, nowadays, many employees experience discrimination in the workplace and lack of reward and compensation management that negatively influence their performance. In addition, mentioned factors dramatically affect employees’ wellbeing, health, as well as causing losses for the company and damage its reputation and image. According to the scientific studies, discrimination in the workplace decreases level of all employees’ performance, increases turnover and may cause development of health problems, as well as problems in the employees’ relationships with family members. Similarly, the company that practices discrimination is at risk of losing skillful employees, decreasing its performance and profits, as well as being involved in the court proceedings and damaging its image among clients and partners. However, businesses can prevent incidents of discrimination in the workplace by establishing diverse HRM and increasing employees’ knowledge about diversity in the workplace and the benefits of working in a diverse team. In addition, a rewards and compensation system, relating performance-based pay to teamwork, or total reward strategy may be established by any organization with the aim to set fair employment relationships, motivate employees, increase their performance, and show that they are valuable to the company.