Project Topic – IMPACT OF COMPENSATION MANAGEMENT ON EMPLOYEE PERFORMANCE IN NIGER INSURANCE PLC

Project Topic – IMPACT OF COMPENSATION MANAGEMENT ON EMPLOYEE PERFORMANCE IN NIGER INSURANCE PLC

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CHAPTER ONE

1.1       INTRODUCTION

Over time, Nigerian economic system has undergo major restructuring, out of which quite a few industries that are not actually playing key roles in economic development of the nation have been made to become more responsive to the needs of its clientele and the nation‟s economic development. One of such sectors is the insurance sector. Insurance firms are financial institutions which are service and profit oriented. New technologies have made the sector very competitive; that highly motivated efficient and dedicated personnel have become the trade mark of many enduring insurance companies. These indices give such insurance companies an edge over their competitors (Noe and Gertiart, 2004).

Observations reveal that in Nigeria, prior to the intervention of the immediate past Governor of the central Bank of Nigeria Prof. Chukwuma Soludo; that insurance institutions, though a common phenomenon, were unable to attain the level of sophistication and advancement as those in the developed nations. Nevertheless, rapid growth and development in the insurance industry, higher and better education have motivated employees to question their entitlement/wage which they now realize as very meager when compared to the amount of work they do. They have realized that are not adequately compensated and motivated. These and other factors have brought home to the Niger Insurance Plc the need to identify what should serve as adequate compensation package or structure for its employees, in order to make them happy to achieve the organizational goals and objectives (Aina, 1992).

Until recently in Niger Insurance Plc, people were regarded as a cost factor while buildings and machinery are regarded as assets. We now have a reverse trend, estimated by the pace of technological changes whereby, machines and other material resources are presently regarded as expensive items or cost factor while people are as assets. This situation has become so worrisome to the employees in the insurance sector, of which Niger Insurance Plc is one. The employees presently query the size of their remuneration package and the various components that determine the compensation package/in Niger Insurance Plc. This singular action of the employees has impacted negatively on the productivity level of the organization and calls for an in-dept study to ascertain if the organization really perceives compensation as a tool for achieving its goals and objectives.

1.2       STATEMENT OF THE PROBLEM

All organizations are concerned with what should be done to achieve or sustain high level of performance through people. This involves paying close attention to how individuals working in organization can be best compensated and motivated, in form of incentives remuneration, the provision of conducive work environment, etc. These in the long run will promote employees localities and maximum performance.

Obi (2004) observed that often time‟s compensation and motivation are underpinned by simplistic assumptions about how the concepts work, rather than , how they can be adequately planned and effectively applied in organizations. The process of formulating compensation policies is actually more complex that many managers and management envisage. Such managers often ignore the technicalities involved in compensation and management. Moreso, compensation and incentives are most likely to function effectively if they are based on proper understanding what the concepts is all about in addition to their applicability.

Maslow (1954) Herzberg (1957) and Noe (2004) noted that compensation in form of financial rewards help in enhancing employee performance. According to Ifedi (1988), Nigerian workers generally see wages/salaries as the most important yard stick for measuring the value of their contributions to the organizations but suffice if it to state that, even though money is a major motivating factor and a source of satisfaction other factors such as; the nature of work organizational environment style of management relationship with other employees company performance and its outlook for the future can be described as important factors which can boost employees morale and stimulate high performance.

The essence of all compensation and motivation efforts is to increase employee‟s performance/productivity. An unmotivated employee is a threat to any organization because he/she may become antagonistic to management and customers in addition to sabotaging the realization of the goals of the organization.

Adequate compensation scheme/structure has been proven by Maslow (1954) and Herzberg (1957) to be an important factor determining the success or failure of organizations. In view of this management team of NIGER INSURANCE PLC even though they realized the importance of a highly compensated and motivated workforce in the light of stiff competition in the insurance industry, they have not really done much to boost their employees morale enable them give off their best. Designing a good compensation system and maintaining highly motivated employees are the most important and difficult functions of personnel management Niger Insurance Plc is presently facing the employees to adequate compensate the employees to other organizations while productivity has remained on the low ebb. Sequel to this, when the immediate past Governor of the Central Bank Prof Chukwuma Soludo made it mandatory that all insurance companies in Nigeria should have not less than one billion naira, in their respective bank accounts in order to protect the customers; it proved very difficult for many of the insurance companies including Niger Insurance Plc to meet up with the central banks demand. This led to some insurance companies merging with others while, many retrenched their employees including Niger Insurance Plc.

Many Niger Insurance Plc employees knowing that their salaries could no longer sustain them engaged in other part time paying activities in addition to their jobs to make ends meet. There are others whose employment statuses are very unstable while the few employees with stability of tenure are not adequately motivated and compensated. Having created the above scenario, there is need to find out how the management of Niger Insurance Plc perceive compensation and how to find solution these problems.

1.2  RESEARCH QUESTIONS:

1. What type of compensation packages exist in Niger Insurance Plc?
2. What kinds of decision were taken before establishing the existing compensation packages?
3. Are there some factors that were considered in packaging the compensation package in Niger Insurance Plc?
4. How do the employees evaluate or rate their compensation package?
5. Does the organization reconsider employees contribution by compensating them adequately?
6. How can the organization improve on its compensation scheme/pay structure in order to boost employees moral and attain high performance in Niger Insurance Plc?
7. It is hoped that the answers to these questions will help to clarify the problem of this study.

 

1.3       OBJECTIVE OF THE STUDY

The general objective of this study is to ascertain if compensation is perceived as a tool for achieving organizational goal by the management of NIGER INSURANCE PLC, while the specific objectives of this study are:

1. To ascertain the type of compensation scheme/pay structure in Niger Insurance Plc.
2. To find out how the employees evaluate or rate Niger Insurance Plc compensation scheme/pay structure.
3. To investigate the factors considered by Niger Insurance Plc before packaging their compensation scheme.
4. To find out if adequate compensation scheme/pay can motivate employees to higher performance.
5. To ascertain the nature of decisions that were taken before establishing Niger Insurance Plc compensation scheme/pay structure.
6. To investigate if the organizations management recognized employees contributions with adequate pay.
7. To find out how to improve Niger Insurance Plc’s compensation scheme/pay structure in order to boost employees‟ morale and attain high performance in Niger Insurance Plc.

1.4    SIGNIFICANCE OF THE STUDY

This study is of high significance in that its findings and recommendations will motivate Niger Insurance Plc and other insurance companies to realize the need for them to set clear and achievable objectives and goals for themselves and the employees.

Another significance of this study is that it will compel Niger Insurance Plc management to set goals and objectives that are rewarding to the employees and the organization. This is in view of the fact that, employees may not be interested in pursuing goals and objectives that are not rewarding to them.

This study is also significant because, its findings and recommendations will help NIGER INSURANCE PLC and other insurance companies to develop effective and appropriate instruments for measuring performance linked to the organizational goals and fair compensation package.

The study is highly significant because its contributions will permit NIGER INSURANCE PLC and other insurance companies interested in improving productivity in their organization to realize the dialectical relationship between good compensation packages and high performance. In other words, it will help them to see compensation as a veritable tool for achieving organizational goal and objectives in addition it will make the management of Niger Insurance Plc and other insurance companies not to equate machines and other material resources to human beings or employees which had been their enormous notions before this study. The findings and recommendations of this study will equally permit insurance companies such as Niger Insurance Plc to always consider all plausible factors that can affect their compensation scheme negatively.

Another contribution of this study that is highly significant is the fact that the findings and recommendations will help both the employees and management to constantly evaluate their compensation package in relation to the employees work in the organization as well as the dynamic society. Apart from the above policy makers and researchers, will find the contributions of this study very useful. Last but not the least this study will add to the existing body of literature in the social sciences.

1.5    SCOPE AND DELIMITATIONS OF THE STUDY

This study was carried in theNiger Insurance Plc. Lagos. The study investigated whether the organization perceive compensation management as a veritable tool for achieving organizational objectives in Niger Insurance Plc. The study covered Niger Insurance Plc’s public known as the customers and the employees.

1.6       LIMITATIONS OF THE STUDY

This study was embarked upon at a time when the economic meltdown did not encourage people to invest in life insurance or take a comprehensive insurance. For this reason many of the preferred Niger Insurance Plc’s customers could not be reached. More importantly Lagos is a very large and expensive city in terms of transportation to carry out this survey. Nevertheless, the research was able to cope with this financial difficulty. In addition to this some of the respondents at the management level were not very sincere with heir responses. The researcher had to go out of this way to get the right information for this study. Limitations imposed by constraints of time and money could not permit the researcher to embark on participant observation which could have enhanced first hand knowledge and accuracy of information generated from the employees and management of Niger Insurance Plc. However it can be stated with high degree of confidence that the study in spite of all the constraints accomplished its objectives.

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Project Topic – IMPACT OF COMPENSATION MANAGEMENT ON EMPLOYEE PERFORMANCE IN NIGER INSURANCE PLC