Full Project – IMPACT OF MONETARY INCENTIVE ON ORGANIZATIONAL PERFORMANCE WITH A VIEW TO THREE SELECTED BANKS IN LAGOS

IMPACT OF MONETARY INCENTIVE ON ORGANIZATIONAL PERFORMANCE WITH A VIEW TO THREE SELECTED BANKS IN LAGOS

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CHAPTER ONE

INTRODUCTION

1.1   Background of the Study

The most valuable asset an organization could possess is the human resource because according to Armstrong (2006) the workers individually and collectively contribute to the achievement of an organization’s objectives. As a result of the importance of human resource its management impacts significantly on employees’ turnover and productivity and corporate financial performance (Adams, 1999). The current business environment is changing rapidly and very unstable.

Alderfer (1972) assert that the economic environment is changing rapidly and it is typified by variables such as deregulation and globalization of the markets, unstable customer and investor demands and continually increasing product-market competition. This has become the standard for most corporate organizations. Thus, the banking sector, as a result of the dynamic environment needs highly competent and motivated human resource for it to remain competitive in the global market and changing technological environment.

The banking environment in Nigeria is replete with stiff competition especially after the recapitalization exercise induced by the government in 2005 (Ojo, 2008)  and the global recession in 2008. The competition is not only limited to the market but also talented employees. The banks that seek competitive advantages need competent employees. Those that have competent employees must guide jealously what they have by encouraging them to stay while those who do not have competent staff strive to snatch the available ones from their competitors by enticing them through various forms of motivation including offering attractive monetary incentives. So, the banking sector strives hard to motivate its employees for them to be productive.

Armstrong (2006) posits that the unfortunate thing is that managers look at motivation using simple assumptions. Because different employees have different needs and goals and adopt different strategies to achieve these goals, motivating them is more intricate than the ways managers apply motivation in their organisations. As a result of these, Armstrong defines motivation as “the factors that influence people to behave in certain ways. It is about getting people to move in the direction you want them to go in order to achieve a result.” One form of motivation strategy management of banks use is the offering of high and attractive monetary incentives. Incentives according to Hartman, Kurtz and Moser (1994) “are one technique by which employers carry out their end of the employment contract – that is compensating employees for their efforts.” In recent years employers have increased the rate in which they used money to influence employees’ behaviour (Kaarboe and Olsen, 2003).

However, Bergum and Lehr (2005).asserts that because people are suspicious of self-interest and incentives, motivating employees through incentives is being opposed because to him it is inconceivable that people’s actions could be associated to a response to incentives. The practice of using monetary incentives to attract employees from one bank to the other may be a disadvantage to career development because the tendency will be for bankers to move from one bank to the other without considering prospect of their career. Jensen posits that Cole (2002) attacks the use of incentives for compensation not only for the executives but also in the society because “economics views rational behaviour as self-interested and that this proposition is wrong both in a positive sense and in a normative sense (because if they did behave in a self-interested way, the world would be a more brutish and undesired place).” Drucker (1999) agrees with Brennan on the fact that people may not sometimes behave in a rational way but that there is no evidence that support his view on incentives.

Employee performance is very paramount in organization and it is believed that job satisfaction leads to employee performance. Egwuridi (1981) assert that Fowler (2001) expectancy theory suggests that performance leads to job satisfaction through the provision of intrinsic and extrinsic rewards. With these argument for and against the use of monetary incentives to motivate employees in the banking sector in Nigeria it is imperative to empirically examine if the use of monetary incentives motivates bankers to high level of performance.

The banking industry in Nigeria has gone through many stages of evolution and growth since its inception in 1894 by the colonial government. The industry has been regulated and deregulated. There have been distress problems which have led to liquidation of many banks. These problems cannot be divorced from employees’ poor performance. Poor performance of employees sometimes is linked to low motivation. One important component of employee’s motivation is monetary incentive. Various banks in Nigeria are using monetary incentives to motivate their employees. This strategy has led to some employees being snatched by one bank from the other. The questions are that (1) does monetary incentive alone lead to employees motivation in the banking industry (2) does monetary incentive lead to employees job satisfaction (3) is monetary incentives effective in motivating employees attitudes?

1.2    Research Problem

This study is meant to examine the influence of incentives on employee performance in the banking industry. This is necessary because the banking industry is very important in the economic development of a nation. The banking industry is a crucial sector for the development of the real sector as well as other sectors of the economy (Sanusi, 2010). The performance of the industry depends on the employees and their attitude and behaviour. When the employees are motivated they will exhibit positive behaviour such as increasing their efforts for the growth and profitability of the industry; this at the end will result in positive growth in the economy. It is doubtful if monetary incentives actually influence employee motivation, job satisfaction and performance in the banking sector in Nigeria since the performance of the banks are not being felt in the economy of the country and banking failures are constant experience. It is therefore, imperative to empirically determine the impact of monetary incentives on employee motivation, satisfaction and performance in the banking sector in Nigeria.

1.3   Aims and Objectives of the Study

The aim of this study is to empirically examine the relationship between monetary incentives and organizational performance in the banking industry in Nigeria.

As a result of the above aim, the following are the objectives of the study:

1. To review literature on monetary incentives, employees satisfaction, motivation and performance
2. To empirically investigate the effect of monetary incentives on employee performance in the banking industry in Nigeria

iii.       To investigate the relationship between monetary incentives and motivation of employees in the banking industry in Nigeria

1. To examine the effect of monetary incentives on employees job satisfaction in the banking industry in Nigeria.

1.4       Relevant Research Questions

1. How can monetary incentives, employees’ satisfaction, motivation and performance be reviewed?
2. Does monetary incentives have any impact on employees’ performance in the banking?

iii.       What is the relationship between monetary incentives and motivation of employees in the banking industry in Nigeria?

1. How effective is monetary incentives on employees job satisfaction in the banking industry in Nigeria?

• Research Hypotheses

The following hypotheses will be tested in this study

H_O1: Monetary incentive does not have any effect on employee performance in the banking industry in Nigeria

H_O2: Monetary incentive does not have any relationship with motivation of employees in the banking industry in Nigeria

H_O3: There is relationship between job satisfaction and employee job performance

 

1.6       Significance of the Study

The significance of the study are stated below:

The study helps students to understand the relevance of monetary and non-monetary reward on job satisfaction through various theories of motivational incentives on employees’ performance.

In addition, it will assist management to engage in staff welfare development in order to improve the output of productivity of employees. This study will also serve as a useful tool for those in the management sciences discipline who would like to carry out further research in this area.

Practically, it assists practicing manager in understanding the impact of incentives on employees’ performance, hence enabling these elements to be incorporated into policy and objectives of the organization.

In addition, it will assist management to engage in staff welfare development in order to improve the output of productivity of employees. This study will also serve as a useful tool for those in the management sciences discipline who would like to carry out further research in this area.

1.7       Scope of the Study

The research work seeks to examine the “Impact of monetary incentive on Organizational Performance with a view to three selected Banks in Lagos. The study as perceived might face some logistic challenges in term of the time and the costs involved in carrying out the research, but nevertheless, it would strive to accomplish its aims and purpose.

1.8       Definition of Terms

Incentive: this is a conscious use of rewards and penalties to encourage good performance in the utility sector.

Non-monetary: Transactions that do not result in a transfer of funds between accounts. Nonmonetary transactions can be something as simple as a change of address or an appreciation note.

Monetary Incentive: A monetary incentive is to reward associates for excellent job performance through money.

Employee: A person who is hired to provide services to a company on a regular basis in exchange for compensation and who does not provide these services as part of an independent business.

Performance: The accomplishment of a given task measured against preset known standards of accuracy, completeness, cost, and speed.

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Dear Respondent,

 

RESEARCH QUESTIONNAIRE

I am a student ……………… of the above named university. As part of the requirements for the award of B.sc degree, I am conducting a study on the topic “The Impact of monetary as a determinant of Employee Performance: A study of three selected banks in Nigerian”

Kindly complete the questionnaire attached. Your responses will be used for academic research and not for commercial purposes.

Thank you for your prompt response and attention.

 

Yours faithfully,

 

 

 

 

Section 1: Demographic Data

1. Your sex
2. Male [ ]        b          Female           [ ]
3. Indicate your age bracket
4. Less than 30 [ ]                 30 but less than 40   c.         40 but less than 50               [ ]        d.            50 years and above  [ ]

• Your marital status

1. Single [ ] b. Married          [ ]                 Divorced        [ ]
2. Widower [ ]        e.         Widow                       [ ]
3. Your highest Educational Qualification
4. Below Bachelor’s Degree or equivalent [ ]        Bachelor’s degree or equivalent           [ ]            c. Masters’ Degree   [ ]        d. Professional qualification          [ ]        e.         Others                        [ ]
5. Status in your Bank
6. Junior Employee [ ] Senior employee [ ] c. Manager [ ]
7. Your Working Experience
8. Below 2 years [ ]                 2 Years and above               [ ]

 

Section 2: Productivity of employees

No	Item	SA	A	I	D	SD
A	Monetary Incentive
1	Salary and wage payment in the banks is one of the best in the country
2	Too much emphasis should not be placed on monetary incentives in the banking sector
3	I prefer non-monetary incentives such as promotion, children education sponsorship
4	Monetary incentives are very important to all employees in the banking sector
5	My needs and that of my family cannot be met with the present salary this bank is paying
6	I prefer salary reduction than job loss
7	I will move to another bank or organization that is ready to pay higher than this bank no matter the risk attached
8	Promotion that monetary incentive is not attached will not be appreciated
9	I want monetary incentive that is attached with performance.
10	My salary is not commensurate with what others in other organizations are receiving.
A	Motivation
11	Increase in my status will have no effect in motivating me in this bank
12	Assurance of job security will motivate me in this bank
13	Public recognition of job well done by management may be a motivator to me
14	Fear of loosing my job will motivate me to greater performance if assurance is given by the management
15	Assurance of getting results for my efforts will motivate me more than financial rewards
16	Participation in decision in this bank will motivate me to high level of performance
17	Retrenchment as a result of merger and acquisition reduce my desire to perform
18	Openness of management of this bank tends to increase my performance
19	Clashes in the my goals and that of the bank’s has no consequence on my motivation to work
20	Management style of not taking good care of employees of this bank has no effect on my performance.
B	Employee
21	This bank does not recognize the importance of employees
22	Some employees do not matter when considering this bank competitiveness
23	Training of employees is not a great priority in this bank
24	This bank easily retrench her employees
25	This bank rather than promote from within hires from outside
C	Performance
26	My salary is not commensurate with my level of productivity
27	Promotion is not entirely attached to employee performance in this bank
28	Employee performance is related to length of service and experience in this bank
29	Productivity in the banking sector does not reflect in the entire economy
30	Relatively, performance in this bank can be compared with other sectors in the economy
D	Job Satisfaction
31	I am satisfied with the working conditions in this bank
32	Relationship I have with my other colleagues create satisfaction
33	The level of communication between me and my boss create job satisfaction for me
34	I am ready to put in extra hours for this bank
35	I will not leave this job to another even if high salary is offered to me.