Rewarding employees in turbulent economies for improved organisational performance. Exploring SMEs in the South-Eastern European region
| DOI | https://doi.org/10.1108/PR-02-2015-0024 |
| Date | 05 September 2016 |
| Published date | 05 September 2016 |
| Pages | 1259-1280 |
| Author | Rea Prouska,Alexandros G. Psychogios,Yllka Rexhepi |
| Subject Matter | HR & organizational behaviour,Global HRM |
Rewarding employees in
turbulent economies for
improved organisational
performance
Exploring SMEs in the South-Eastern
European region
Rea Prouska
Middlesex University Business School, Middlesex University, London, UK
Alexandros G. Psychogios
Hull University Business School, University of Hull, Hull, UK, and
Yllka Rexhepi
City College, International Faculty, The University of Sheffield,
Thessaloniki, Greece
Abstract
Purpose –The purpose of this paper is to explore the application of total reward practices in small
and medium-sized enterprises (SMEs) in the South-Eastern European (SEE) region and the reward
elements positively affecting organisational performance.
Design/methodology/approach –The sample consists of 199 SMEs operating in SEE countries
which are either under economic crisis or transition: Greece, Bulgaria, Romania, Albania, Kosovo and
the Former Yugoslav Republic of Macedonia.
Findings –SMEs in the SEE region ar e implementing a total rewards mo del which is characterised
by a weaker application of individual aspects and by a stronger application of transactional,
relational and communal aspects. Within the communal aspects of the model, the study found three
elements of the work environment that positively affect organisational performance; work-life
balance, employee involvement voice mechanisms, and organisational culture supporting personal
and professional development.
Practical implications –The study contributes to HR practice; the authors found that a better work
environment is positively related to improved organisational performance in these SMEs. This means
that in times of economic crisis or transition when HR budgets are limited such non-financial strategies
can be a viable alternative to costly financial rewards to such organisations.
Originality/value –The study contributes to both theory and HR practice by shedding light on how
employee rewards are affected in economies under crisis and transition, how SMEs can motivate their
employees when faced with significant financial limitations, as well as explores which reward elements
can lead to enhanced organisational performance in such organisations.
Keywords Transition economies, SMEs, Quantitative, Economic crisis, South-Eastern Europe,
Organizational performance, Total rewards
Paper type Research paper
Introduction
Reward systems play a crucial role in attracting new employees, eliciting good work
performance and maintaining employee commitment and engagement (Day et al., 2014;
Kerrin and Oliver, 2002; Tomaževičet al., 2014). “Total reward”includes all types of
financial and non-financial, direct and indirect, intrinsic and extrinsic rewards
Personnel Review
Vol. 45 No. 6, 2016
pp. 1259-1280
©Emerald Group Publis hing Limited
0048-3486
DOI 10.1108/PR-02-2015-0024
Received 9 February 2015
Revised 19 August 2015
Accepted 1 February 2016
The current issue and full text archive of this journal is available on Emerald Insight at:
www.emeraldinsight.com/0048-3486.htm
1259
Rewarding
employees in
turbulent
economies
(Armstrong, 2010; Jiang, 2009) and its application contributes to employee well-being,
satisfaction and productivity (Kaplan, 2007; Lyon and Ben-Ora, 2002). However, the
total reward theory has been developed and mainly applied in Anglo-American
contexts which have traditionally been characterised by financial stability (Brown,
2005) and in larger mainstream organisations that adopt formal HRM practices (Cassell
et al., 2002). Although there is a wide range of literature discussing the effects of the
recent economic crisis and austerity on businesses and more specific literature
exploring the impact of this crisis on people management (Marchington and Kynighou,
2012; McDonnell and Burgess, 2013; Nijssen and Paauwe, 2012; Psychogios and Wood,
2010), there is little evidence on the impact of the crisis on the application of employee
rewards. Even more so, the evidence surrounding the impact of the crisis on HRM
application in economies under recession or transition, such as those in the South-East
European (SEE) region and specifically in small and medium-sized enterprises (SMEs),
is scarce. It is, therefore, relevant and timely to explore this issue.
Our study focuses on changes in the total reward systems applied in the period
2011-2014 and enquires about projected outcomes for 2015. Three major research
questions are explored:
RQ1. What is the total reward system currently (2014) applied by SMEs across SEE
countries (Greece, Romania, Bulgaria, Albania, Kosovo and Former Yugoslav
Republic of Macedonia (FYROM))?
RQ2. How has the economic instability affected the application of total reward
strategies in SMEs in this region between 2011 and 2014 and what are the
projected implications for 2015?
RQ3. Which aspects of the total reward systems applied posit ively affect
organisational performance?
The next two sections provide the background to our study exploring the literature
surrounding the SEE context and reward strategies in SMEs.
The SEE institutional setting of HRM
There is a growing literature exploring the SEE context under the business systems
(Whitley, 1999) and varieties of capitalism frameworks (Amable, 2003; Hall and
Soskice, 2001), although research still remains largely fragmented in this area. For
example, Lane and Myant (2007) and Hanckéet al. (2007) discuss the SEE context from
a“varieties of capitalism perspective”. In addition, there are also country-specific
studies, such as Upchurch and Marinkovic’s (2011) exploration of wild capitalism in
Serbia and Wood’set al. (2014) research on variations in institutional regimes in the
SEE region. Our aim is to add to this growing body of knowledge by exploring the
application of employee rewards in SMEs operating in Europe’s peripheral business
systems in the SEE region. We study SMEs in a country under economic crisis (Greece)
and in five post-communist countries in transition; Kosovo, Romania, Bulgaria, Albania
and FYROM.
It has been argued that post-communist SEE countries have been experiencing
continuous and dramatic change since 1989 in their political, social, economic,
institutional and cultural systems (Sahadev and Demirbag, 2010; Upchurch and
Marinkovic, 2011). The process of economic integration continues to proceed at an
uneven pace and it involvesderegulation, external shocks,increased capital mobility and
heightened competition (Cooke et al., 2011; Szamosi et al., 2010). The post-communist
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