Full Project – IMPACT OF REWARD SYSTEM ON EMPLOYEES’ PERFORMANCE

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CHAPTER ONE

 

1.0                            INTRODUCTION

 

1.1    Background to the study

Employee compensation and reward is synonymous with performance management. Performance management is usually a fundamental function of the Human capital management department in any organization. Human capital management is primarily concerned with managing the relationship between people and work. Armstrong (1992)

It is widely believed by scholars and practicing professionals that employee performance has implications on production capacity and service delivery. The output capacity of a firm is often assumed as its strength and one of its adaptations for survival in a competitive environment.

Reward system as an important tool that management can use to motivate employees and alter their attitudes and make them enthusiastically strive towards accomplishment of organization goals. Motivation involves influencing an employee to willingly perform extraordinarily towards accomplishment of predetermined goals. (Cole 1995). For an organization to meet its obligations to shareholders, it is imperative that the top management must develop a relationship between the organization and employees that will fulfill the continually changing needs of both parties. Employees expect their organization to provide fair pay, safe working conditions, fair treatment, recognition and reward for exceptional performance.

Organizations can hardly exist without a workforce. This work force constitutes a large chunk of the total operational expenses of any organization. The larger the workforce the larger the associated cost of maintaining and retaining such massive level of work force. Hence the need to prudently manage all processes that will keep staff cost at the minimal level.

 

When organization operational policy fails to adequately take note of the inherent cost implication of staff on its balance sheet and also provide vivid source of generating funds through its operations that will adequately mitigate the effect of identified staff costs on their balance sheet it is safe to assume that such organizations in a matter of time will run into financial crises emanating from cost of keeping and retaining several unproductive staff. (Michael 2015).

 

The productive level of a staff or work force group could always be influenced by compensation structure. A compensation structure that is developed from a performance management model that is deeply dedicated to identifying and rewarding performance and subsequently at a reasonable level reprimand poor performance could trigger an organization culture that will encourage staff to put in their best as they see a clear relationship between performance and reward.

 

It is important to note that each compensation policy a firm decides to employ has related cost implication. Efficient consideration and management of cost implication of compensation policy is vital to the growth and survival of firms.

1.2    Research Problem

The banking industry has for almost a decade now witnessed constant and persistent disengagements of staff, divestment of foreign subsidiaries, rationalization of branches due to flagrant loss making, persistent loss of income to divisions, directorates or even the bank at large, and several others are ominous signs connoting that the existence of banks in Nigeria is threatened.

It is observed that many banks have remained in an ailing condition despite government relentless efforts to make banks in Nigeria very sound and stable. Some specific problems identified in this research work include the following.

The banks have Poor Compensation Structure. The salaries of executives and senior staff members of the banks are too large for the present income generated by banks to sustain and usually their salaries are not usually tied to direct performance target and in some banks no targets are assigned to such outrageous salaries. The aggregate of these salaries engulf most income made by the banks as the task of this group of staff do not add any form of financial value that commensurate to their pay. They are rated by group performances rather than by individual performance contribution. The present compensation model in use in banks is toxic to the health of the bank. There is a need for senior staff pay cut or assignment of business targets that will at least justify their monthly salaries, or even implemented the duo to revert the present status.

 

Outsourcing is a major trend in the banking industry. Outsourcing is the practice of sending certain job functions outside a company instead of handling them in-house so as to gain a cost advantage. But this has been abused in the Nigerian banking industry and many other companies as a way to grow by using it to restrain staff cost by putting some of its workers on outsourced pay roll, which offers a static wage system. Outsourcing if well practiced

 

1.3     Research Question

Following from the above therefore, the following research questions shall guide the investigation.

1. What is the relationship between workers wellbeing at work and employees productivity?
2. What is the impact of the present compensation system on the banks performance?
3. To what extent does staff promotion affect workers productivity?
4. What is the relationship between incentives, reward and the performance of organization?

 

 

1.4     Objective of study

This research work aims to investigate the Impact of reward system on employees’ performance. It is assumed as one of the reasons for the persistent decline in the performance of banks and why the ailing conditions of banks have lingered. The specific objectives of this research work include the followings:

1. To examine the relationship between workers‟ wellbeing at work and their productivity.
2. To establish the relationship between compensation structure and productivity.
3. To investigate the relationship between promotion and productivity
4. To investigate the relationship between incentives, reward and performance of organization.

 

1.5   Statement of Hypothesis

 

To achieve the objective of this research work, the following hypotheses shall be tested. The hypotheses are stated in Null form and shall be tested in order to either confirm or reject the Null hypothesis as the case may be.

 

H ₁ -There is no significant relationship between workers wellbeing and their productivity.

 

H ₂– There is no significant relationship between compensation structure and productivity.

 

H ₃– There is no significant relationship between promotion and productivity.

 

H ₄– There is no significant relationship between incentive, reward and organizational performance.

 

1.6    Significance of study

 

This study shall demonstrate the imperative of appropriate compensation and reward system as a panacea to the persistent decline in the performance of banks Nigeria.

 

This study shall also improve managerial understanding of the impact of performance measurement on organizational performance and overall healthiness, dwelling richly on the experiences within the Nigerian banking industry.

 

The study results will enable the management to establish the effects of human resource management strategies on employee‟s performance, hence identify the areas where improvements are needed. It will also help the management in planning for the development and implementation of effective and efficient human resource strategies that will lead to improved performance of the banks. This will in turn help in ensuring economic growth and stability of the country. Other researchers who may need reference to information on role of compensation strategies on employees‟ performance will also benefit by being able to assess previous approaches used to solve similar management questions and revitalize their compensation models. In addition they will be able to spot flaws in the logic, errors in assumptions or even management questions that are not adequately addressed by the objectives and designs of the current performance management technique in use in their organizations.

A compensation model that will considerably improve the employee‟s performance in Nigerian banking industry will also be developed. If same is employed, it will trigger a revolution in the performance of staff and the organization as a whole.

This study re-amplifies the balanced score card model and reflects it in a way that will address the challenges currently facing the banking industry in terms of staff cost and present economic recession.

 

1.7 Scope of Study

This study shall investigate the Impact of reward system on employees’ performance in some selected banks in Nigeria.

It focused on  reward system as one of the internal factors affecting the performance of banks, with emphasis on the monumental erroneous use and application of the balanced score card model (BSC Model) as one of the factors that have actively contributed to the persistent failure of banks in Nigeria.

The researcher distributed questionnaires as well carried out a few interviews with the respondents among the sampled banks.

 

1.8    Limitation of study

One of the major constraints of this research was finance. The researcher incurred a huge cost to finance the cost of carrying out the research work all over the banks covered.

Another limitation was the oath of secrecy signed by the banks staffs, which have made it difficult for staff to make adequate disclosures. Some of them were also reluctant to collect the questionnaires.

The oath of secrecy almost frustrated this research work, as the employees refused to collect the questionnaires. But after pleading with the branch management, they ended up collected them and gave back their responses under the condition of anonymity as the questionnaires were designed in a way that does not require the respondent to identify him/herself. So responses offered were anonymous.

Despite all the seeming challenges however, the research was still able to overcome them and meet up to the required standard. The impediments were also mitigated by conducting the research within Kebbi State alone.

1.9   Definition of terms.

COMPENSATION –compensation is the act of compensating or the state of being compensated with something such as money, given or received as payment or reparation for a service or loss.

PAY STRUCTURE– It consists of the various salary grades and their different levels of single jobs or groups of jobs.

PERFORMANCE- It is a process of collecting, analyzing and reporting information regarding individual or group or organization. It depicts the extent to which an employee achieves work targets assigned to him.

EMPLOYEE- An individual, who works part-time or full time under a contract of employment, whether oral, written express or implied.

EMPLOYER– A Legal entity who controls and direct a servant or worker under an express or implied contract of employment and pays him wages or salary as compensation.

MANPOWER- Power in terms of people available or required for work.

EMPLOYEE WELLBEING- This refers to the physical, moral, psychological, social, economic, and mental health of a worker at work

INCENTIVE-This is a form of payment made in excess of the normal pay to employees so as to stimulate, motivate or encourage performance.

WAGES- these are the payment made to manual workers

SALARY- is a fix periodical payment to a non-manual employee

KEY PERFORMANCE INDICATOR (KPI‟s) are performance measures that indicate progress towards a desirable outcome.

STAFFCOST-are cost associated with recruitment, maintenance and retention of staff within an organization.

OUTSOURCING-Outsourcing is the practice of sending certain job functions outside a company instead of handling them in house, so as to gain a cost advantage.

UNFAIR LABOUR PRACTICE(ULP) Unfair labour practice means any failure to act or unfair act of an employer towards a worker concerning, promotion, demotion, trial periods, training or benefits; suspending a worker or disciplinary action; refusing to re-employ a worker, as agreed; and may also occur when an employer makes circumstances difficult for a worker who was forced to make a protected disclosure.

SCORE CARD- a statement showing a comparison of employee actual performance against set assigned targets to determine the degree to which an employee have met his target.

BANKING INDUSTRY-Comprises of all the banks operating in Nigeria the Nigerian banking industry currently consists of 19 commercial banks, regional commercial bank and one non interest bank.

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Full Project – IMPACT OF REWARD SYSTEM ON EMPLOYEES’ PERFORMANCE