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Full Project – IMPACT OF FINANCIAL INCENTIVES AND REWARDS ON EMPLOYEE MOTIVATION AND PERFORMANCE

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CHAPTER ONE

INTRODUCTION

1.1 BACKGROUND OF THE STUDY

A financial incentive and reward motivates actions which otherwise might not occur without the monetary benefit. Four kinds of incentives are available for employers to use at work. I’m sure that others would categorise these incentives differently, but these four categories works for me. Compensation incentives may include items such as raises, bonuses, profit sharing, signing bonus, and stock options. Recognition incentives include actions such as thanking employees, praising employees, presenting employees with a certificate of achievement, or announcing an accomplishment at a company meeting. Rewards incentives include items such as gifts, monetary rewards, service award presents, and items such as gift certificates. Financial incentive schemes ties pay increase to performance and have been used by organisations worldwide with remarkable success (shadier, 2009). Appreciation incentives include such happenings as company parties and celebrations, company paid family activity events, ice cream socials, birthday celebrations, sporting events, paid group lunches, and sponsored sports teams.

The development in science and technology provides the business world with the techniques of improving performance at a possible lowest cost and distribution of output more effectively and efficiently using sophisticated management techniques. Employees occupy a strategic role and position in any organisation. They are responsible for converting inputs to productive outputs. Since they are the key to the productive outputs, they ought to be effectively and adequately compensated for their labour. The reward for labour, a factor of production is “wages”, it becomes logical that employees be adequately and fairly compensated if they are to be motivated to increase performance in any organisation be it the organised private sector or public sector.

According to (Drucker, 1998) the work of management is to make people productive so as to achieve superior performance, and gain a competitive edge in the globalised arena through effective financial incentives and rewards. Drucker’s belief is anchored on performance, performance, motivation quality and services in managing people in every organisation. Besides, employees must be motivated through adequate incentives plans and reward systems and this will invariably encourage them to be proactive and have right attitude to work, thereby promote organisational performance (Armstrong, 2007).

However, in a highly dynamic organisation, incentives strategies are deployed by employers of labour to ensure that the best brains are retained in the best interest of the organisation. Consequently, performance can only be enhanced if the employees are well motivated through adequate financial incentive packages that are proportional to their performance. This emphasis is often captured in organisational mission statements and goals.

Two major components of compensation are open to management; the financial incentive (material) and the non-financial incentive (non-material) components (Luthans, 1998). Bases on the course of this research, limitation will be on financial incentives and rewards. An incentive is something that motivates an individual to perform an action. According to (Milkovich and Newman, 2008) financial incentives and rewards schemes (short-term and long-term) constitute part of the financial components of employee’s compensation.

The study further investigates the effect of financial incentive packages which serves as a motivator on the employees and consequently improve output of United Bank for African Plc. (UBA) Maiduguri branch as a case study. It also aimed at examining the polices, the organs and the methods used in administering such financial incentive and at least examine the extent to which they are effective and efficient, with the view of assessing their adequacy in the circumstance prevailing in the country and making recommendation where necessary (Kalimullah, 2010).

Since it has been established that all behaviour except involving responses are goals directed, meanwhile, manager can apply financial incentives and rewards policy of organisation in their attempt to directly improve employee’s motivation and performance in organisation towards the goal of their establishment.

1.2 STATEMENT OF PROBLEM

Most incentive plans are designed to assist in increasing efficiency in the organisation. In recent times the banking industry has been experiencing a lot of crises in terms of profit maximisation which led the researcher to assess the degree or importance of employees in the achievement of organisational objectives, and factors responsible for the low performance by employees in the past, also identify the element responsible for employee present high performance. Employees leave organisation due to the fact that they are not motivated enough. Some are not willing to leave because they are enjoying some benefit in terms of promotion, which leads to increase in salaries and wages, bonus and some other incentives.

The questions are often asked as to what employees in general want from their employers. Can there be an end to the clamour for increases in wages? Why do employees work and what induces them to give of their best? Money only plays the role of common denominator of all things. There is a general notion that if only management can identify other things that can motivate the workforce apart from money, perhaps there will be a dramatic reduction in the demand by workers for pay rises. Less time will be spent on the annual ritual of management/employees union negotiation meetings (Badu, 2010).

The general problem inherent in the organisational set up is low salaries, irregular promotional structure and lack of recognition of employee’s achievements. All these tend to reduce employees’ morale and consequently affect their performance. The aim of this research therefore is to find out the type of financial incentives and rewards package that needs to be given to workers, and whether workers given the right financial incentives and rewards can put in their best to contribute to the performance and growth of the organisations to achieve the corporate objectives.

1.3 OBJECTIVES OF THE STUDY

The main objective of the study is to examine the effect of financial incentives and rewards as an instrument for improving employee motivation and performance in an organisation. The specify objectives are to:

Assess the effectiveness of financial incentives and rewards on improving employee’s motivation and performance.
Examine employee’s performance and increase their performance through motivation.
Assess the overall results of organisation in terms of performance.

1.4 RESEARCH QUESTIONS

This research will attempt to retain answers to the question agitating the minds of management of United Bank for African Plc. (UBA) as to what to do to adequately motivate employees to contribute their quota to their company’s performance and growth. The study will answer the following research questions:

How can employees be motivated by the financial incentives and rewards given to them by the bank?
How can UBA improve on the overall results of the organisation in terms of performance?
To what extent does the financial incentive implemented by the company affect their performance?

1.5 RESEARCH HYPOTHESES

In other to attain the goals of this study the following research hypotheses were formulated:

H_o: The employees are not fully motivated by financial incentives and rewards given to them by the bank.

H_i: The employees are fully motivated by financial incentives and rewards given to them by the bank.

H_o: The financial incentives and rewards implemented by the bank do not significantly affect their performance.

H_i: The financial incentives and rewards implemented by the bank do not significantly affect their performance.

1.6 RESEARCH METHODOLOGY

The method of investigation used was the survey method which involves both primary and secondary sources. The secondary data is mainly made up of information collected from published book, bulletins, journals, internet etc. while on the other hand the primary data is collected through field research like oral interview and questionnaire. This type of data tends to ensure the integrity of the study and to strengthen its reliability and dependability since it is used for the purpose for which it was originally collected.

This study covers the two major categories of staff in UBA, the top management, middle management, and junior staff categories. This was done in order to determine whether workers are adequately motivated and how it affects their job performance. Having finished with the data collection, percentages, tables and bar graphs were used to organise, summarise and analyse the data. The Chi Square analysis was used to test the hypothesis proposed.

1.7 SCOPE AND LIMITATION OF THE STUDY

The scope of this study will cover the impact of financial incentive policies for improving employee motivation and performance of United Bank for Africa Plc. (UBA). Maiduguri branch, to fulfil the objectives of the bank by examine the present of the bank and real development in Maiduguri metropolis with special emphasis on financial incentives and rewards of the employees. Also, examine the bank’s present and future polices as they affect employees motivation and increase performance in order to focus attention on financial incentives and rewards as an instrument for organisational effectiveness.

The study will however be limited to the activities of the employees of United Bank for Africa Plc. (UBA) Maiduguri branch only. Some limitations that were identified and encountered in the process of this study are the difficulties in running around to gather material for this study considering the present economic of the state, money and insurgence in the state is facing, high level of security surrounding the work area and offices and also for the fact that other resources where involved delayed the completion of this work.

Another limitation is that the researcher being a student who has to read other courses as well as to take normal lectures during the period of the research may be limited by time given for the study being too short.

Attitude of respondents which the researcher (especial when he is unable to communicate in Hausa) found it difficult initially to source required information from the members.

1.8 SIGNIFICANCE OF THE STUDY

The significance of this study cannot be over emphasised. It is particularly useful to the organisation in question, United Bank for Africa Plc. (UBA) Maiduguri branch and to other banks. It will serve as a guide to show the different financial incentive scheme and packages the bank can adopt as well as the need to inculcate the principle of responsibility, motivation and fairness in every organisation.

The research work will also be useful for academic purpose in the sense that it is an improvement on past academic work of other researchers on the subject of financial incentive as an instrument for improving employee motivation and performance in organisation. It also serves as a reference point for subsequent researchers.

The need for the study therefore becomes stronger and consequently the desire to find out how and to what extent effective financial incentive policy could help in improving employee’s motivation and performance.

Finally, this research work is significant to the society at large as it includes the need for efficiency and effectiveness which will encourage growth and development in the banking sector.

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