A particularly important factor in organizational relations is the system of rewards and punishments, used by the leader to monitor the activities of group members. This function produces high demands for personal leadership qualities, especially in groups, where much attention is paid not only to economic, but also to ethical aspects. The leader should be aware of the individual motivation of each team member and scale the force of reward and penal measures’ impact in relation to each member of the group (George, 2008).
Rewards and punishments are used for maintaining the power of leader. Reward for the work done leads to the increase of efforts and the increase of employee’s satisfaction from work. Penalty for inadequate performance, as well as reward without regards to the level of performance, influence the efforts and work satisfaction in a different way. Punishment without taking the level of performance into account often negatively affects the quality of work and satisfaction (George, 2008).
The main feature appropriate for the classification of rewards’ and punishments’ forms is the method of stimulating and inhibiting subordinates’ activity, the method of implementing changes into their relationship. According to this principle, the following types of rewards and punishments could be marked: 1) Rewards and punishments associated with changes in rights; 2) Rewards and punishments associated with changes in responsibilities; 3) Rewards and punishments associated with moral sanctions (Podsakoff, 1995).
Reward behaviour. Among the most commonly used measures of individual and team awards entrusting of honorable duties should be first mentioned (for example, entrusting the organization of corporate holiday). The reward measure is also the provision of additional rights. However, it is necessary to bear in mind that extra rights for individual members of the team can lead to the opposition of certain members of the team, to contradictions and conflicts. Therefore, it is important that such promotion is carried out taking into account public opinion group and is a function of the collective in a great measure. One of the most common measures to reward subordinates is awarding with an honorable place in the competition. This should be accompanied by collective and individual rewards – bonuses, prizes, gifts, honorable certificates, etc. (Howell, 2005).
In addition to the administrative regulation of members’ activity and the usage of official encouragement measures, the leader can skillfully use informal social sanctions, which usually originate in small groups. Informal sanctions include techniques, with the help of which people, who know each other closely show their respect to those, whose behavior corresponds to their expectations, and often display dissatisfaction with those, who fall short of their expectations (Howell, 2005).
Punishing behavior. The most common punishment is leader’s critical remark. First, it should be addressed to a concrete abuser of requirements, and secondly, be pronounced in a polite, but formal categorical form and implemented with the help of direct requirements.
Another serious punishment is a reprimand. Its significance lies in the moral condemnation of the behaviour of a member of the team.
Therefore, the effect of this punishment cannot be reduced merely to the formal act of reprimand. If an acute, fundamental discussion with the director or the team on subordinate’s behavior finishes with reprimand, this penalty obtains a serious strength. Such measure as entrusting additional work duties and overtime loading is also often used as punishment (George, 2008).
Another measure of punishment, also conditioning the regulation of rights and responsibilities of team members, is the suspension from work, from the participation in the collective project, making importance for a concrete team member. Using this measure is reasonable in case, when the punished person has a positive attitude to this activity, and highly estimates the opportunity to participate in it with his colleagues. The punishment can also include the postponement of the expected rewards (George, 2008). Nevertheless, it is extremely important to take the theory of justice into account in construction both punishment and reward behavior.
The promise of reward is one of the oldest and often most effective ways to influence other people. Power based on reward influences through positive reinforcement of a subordinate aiming at obtainment of the desired behavior from him. Subordinates do not resist this influence, because in return for doing what the leader wants, they are expecting to receive reward in some form (Podsakoff, 1995).
In some sense, the power based on rewarding is always effective in case, when the leader is able to correctly identify what is a reward for each separate colleague and actually offer this reward. However, in practice the leader has a number of limitations on the ability to issue rewards, because every organization possesses limited resources and can provide a fixed amount of resources for encouraging the staff (Podsakoff, 1995).
Moreover, since individuals and their needs are unique, what is a valuable reward for one person, may seem different for another person or for the same person, but in a different situation. In order to influence behavior, the reward should be perceived as a quite valuable thing. In other words, subordinates should be provided with the rewards, adequate to the agreement on impact. This imaginary adequacy is the main advantage of power based on reward behavior, comparing to the weak sides of power based on punishment.