Full Project – Effect of workers monetary and non-monetary compensation on employees performance

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CHAPTER ONE

INTRODUCTION

1.1 BACKGROUND OF THE STUDY

Employees are valuable resource of any organization. Labor productivity now a day has been main concern of organizations. It is customarily accepted that employees discover valuable source of competitive edge for firms. When a firm is implementing a value creating strategy not simultaneously being implemented by any current or potential competitors, then we can say the firm has a competitive advantage (Nebeker et al. 2014). And when a firm is implementing a value creating strategy not simultaneously being implemented by any current or potential competitors and when these other firms are unable to duplicate the benefits of this strategy, then we can say the firm has a sustained competitive advantage (Barney, 2015). In order to achieve a competitive advantage, the firm is required to make a choice about the type of competitive advantage it seeks to attain and the scope within which it will attain it. Choosing the competitive scope or the range of the firm’s activities can play a powerful role in determining competitive advantage because it aims to establish a profitable and sustainable position against the forces that determine industry competition.

It has been found that there is a significant relationship between compensation strategies and employee performance (Shin-Rong and Chin-Wei, 2012). For example, Mayson and Barret (2016) found that a firm’s ability to attract, motivate and retain employees by offering competitive salaries and appropriate rewards is linked to firm performance and growth. On the other hand, Inés and Pedro (2015) found that the compensation system used for the sales people has significant effects on individual salesperson performance and sales organization effectiveness. Therefore, in an ever competitive business environment, many companies globally, in Africa, regionally and locally are today attempting to identify innovative compensation strategies that are directly linked to improving employee performance (Denis and Michel, 2011).

In Canada, according to Long (2017), companies tend to initiate compensation strategies in the aspects of direct and indirect financial compensation as well as benefits that motivates and ultimately improves performance. The financial compensation such as wages, salaries or performance-related payments is evidently adhered to in many organizations in order to retain employees and outwit their rivals. The employee benefits in the country are designed to protect employees and their families from loss of income due to health problems or other work-related financial disruptions, and can improve the employees‟ general quality of life through special programs and services in the workplace (Ali and Raza, 2015). They include additional health coverage that is not included in the provincial plan such as medical, prescription, vision and dental plans, group disability, employee assistance plans, retirement benefit plans, and so on. The provision of various compensation mechanisms has in the short or long run enhanced employee performance which has in turn created a competitive environment over the companies that lags behind with respect to offering better compensation strategies.

In Africa with specific attention to Nigeria, majority of employees who change from one job to another move as a result of finding better pay (Raza and Hanif, 2013). The authors indicate that more than seven out of ten people in Nigeria that are more than 70% of employees who are interested in changing their employer normally gave the reason of low income in their present job that makes them seek for new employment environment. Several authors such as Ali and Raza (2015) are of the opinion that employees only stay in an organization to give their best when they believe the remuneration process is commensurate to their input. This has constituted a high rate of employees leaving their employers, moving sometimes away from their city or the country just to find greener pastures. Evidently, in the country, many organizations still grapple with issues relating to proper compensation of employees in order to increase their performance standards. This therefore calls for a study of this magnitude to find out whether the same is applicable in Kenya or otherwise.

In Tanzania like any other East African country, employees are motivated by rewards. There is a need for organization to reward its employees for creating a successful competitive environment. This is one of the essential for the organizations to achieve high work performance. Some employees are highly motivated by extrinsic rewards such as increase in pay, promotions and bonus, others employees are motivated with intrinsic rewards such as appreciation, praise and recognition on (Bana and Kessy, 2017). However, which of the rewards motivate Tanzanian workforce and leads to higher organizational performance especially in commercial is not well understood thus most of the organizations in the country to date still face challenges with respect to getting better use of their employees due to un-standard compensation thereby resulting to poor performance of many organizations and ultimately low productivity. In Kenya, an employee is the engine for socio-economic growth of the nation and must, therefore, take a leading role in stimulating such growth (GoK, 2016). This therefore implies that employees in both public and private sectors should properly be compensated to motivate them to perform better. According to Andrews (2016), while it may be considered that salary attached to a post represents appropriate remuneration of its holder for proper and efficient performance of day-to-day duties; there are circumstances in which benefits are warranted. The objective of these benefits is to attract and retain qualified and competent employees. However, Ongori (2015) asserts that many companies in the recent have witnessed exodus of employees to other rivals, this has been attributed to poor compensation strategies which has prompted the shifting of employees in search of firms that could consider compensating them better and thereby reciprocate through good performance. In light of this, the study therefore joins the debate by attempting find out the true picture regarding the available compensation strategy and how they influence employee performance at Coca-Cola depot, Bida Branch. At Coca-Cola depot, Bida Branch, compensation is usually narrowed to cash and as a result, employers only have a tunneled vision when it comes to the issues of compensation for their employees. Other aspects of compensation which makes up the total compensation package for the employee are not given much attention (Bigsten, Kimuyu and Söderbom, 2013). Employees themselves fail to recognize the fact that their compensation is a package and not only related to cash. The byproduct of the above understanding of compensation is that it is poorly managed and most of the time employee performance is affected adversely. Therefore, the problem the researcher investigated into was to understand the contribution of various compensation strategies on employee performance at Coca-Cola depot, Bida Branch.

1.2 STATEMENT OF THE PROBLEM

In today’s work environment, there is more change and uncertainty, there is increased need for empowered employees, there is decline in traditional incentives, there is rise of nontraditional incentives and there is increased use of variable compensation. Many studies carried such as Kipkorir, Basweti and Nyaoga (2014) found out that there is a non-significant relationship between executive compensation and performance.

Ngui, Mukulu and Gachunga (2014) study established that financial and non-financial rewards can combine to enhance firm performance. As evidenced the studies had mixed results an indication of limited information on the real effects of compensation strategies on the performance of employees in the production sectors specifically with a focus on Federal Medical Centre (FMC) Bida, thus the essence of this study. Again at Federal Medical Centre (FMC) Bida, it is clear what methods are used to determine employee compensation, what direct and indirect financial programs are offered at the company and their effects on employee performance and also the non-financial benefits offered and their effect on employee performance. At the company, compensation is usually narrowed to cash and as a result, employers only have a tunneled vision when it comes to the issues of compensation for their employees. The company has also attempted to give attention to employee compensation strategies. However, employees themselves have failed to recognize the fact that their compensation is a package and not only related to cash. The byproduct of the above understanding of compensation strategy is that it is managed to a moderate extent and most of the time employee performance could be affected and vice versa. The study therefore sought to address this gap by investigating effect of compensation strategy on employee performance at Federal Medical Centre (FMC) Bida

According to Taylor (1911), who is a management scientist and his followers maintained that the basic motive of man at work was compensation. Compensation was seen as a principal motivation instrument. While the motivating power of money and material rewards could not be ignored, emphasis later shifted from economic man to social man. (Ezeani. 2005). The experiment drew attention to the effects of group membership and interaction on production, attitude and job satisfaction. The study gave rise to human relations movement which maintained that man does not just work for money, that other personal and interpersonal considerations, such as personal worth, recognition, friendship, social pressures from group members and status are powerful in determining production and level of job satisfaction. In other words, it has become increasingly clear that beyond economic needs, man has some social-psychological needs that should be stratified in order to elicit behaviour towards increased productivity. While the traditional theories of management as exemplified by the Scientific Management Movement, stress the motivating power of money and material rewards, the classical theories take note of the latter, but, lay greater emphasis on satisfying the psychological needs of the workers. 12 Wage incentives and fringe benefits are motivational factors. From the aforementioned, little or no literature exist on the effect of compensation strategies on employees performance in the Federal Medical Centre Bida, Niger State.

1.3 STATEMENT OF OBJECTIVES

Based on the statement of problem above, the following objectives of the study were stated below

To determine the effect of monetary compensation on employee’s performance
To determine the effect of non-monetary compensation on employee’s performance

1.4 RESEARCH QUESTIONS

Based on the research objective above, the question which the researcher intended to provide solution to is:

Does monetary compensation affect employees performance?
Does non-monetary compensation affect employees performance

STATEMENT OF HYPOTHESIS

This study is exposed to test the following hypothesis:

Hi: Monetary compensation affect employees performance

Ho: Monetary compensation does not affect employees performance

Hi: Non-monetary compensation affect employee performance

Ho: Non – monetary compensation does not affect employee performance

1.6 NEEDS AND SIGNIFICANCE OF THE STUDY

The study will be beneficial to organization compensation strategies; as such, Federal Medical Centre Staff in Bida can utilize the findings of the research as a basis for policy formulation as regard organizational compensation strategies.

The study will also contribute to the existing knowledge on organization compensation strategies. It is also worthy to note that the study can be use as a basis for further research, as the research can be use as a spring board for further research as well as a good reference material to students undertaking similar research.

1.7 LIMITATIONS AND DELIMITATIONS OF THE STUDY

The research work of this nature cannot be conducted without being confronted with one problem or the other. This forms the basis of my limitation. Inability to research on the entire population, due to financial constraint is the one of the foremost difficulties encounter by the researcher. Limited finance made it difficult for the researcher to visit many libraries in order to source for enough materials and data. Also, there is no enough money to visit all other table water industries in Bida to gather more information about impact of small scale enterprises to poverty alleviation.

Time is another problem. This research work would have covered more areas but due to time factor which is too short considering the class work, tests and preparation for exams.

Another limitation is lack of responses from respondents. The inability of the respondents to give adequate information required for this research work hindered the researcher from gathering information about the organization under study. Respondents decided to hold back some vital information as secret and confidential.

Also, inaccessibility of some research materials due to the price tag placed on it and or the confidential nature of the documents.

DEFINITION OF TERMS

Salary: Salary is a form of payment from employer to an employee, which may be specified in an employment contract.
Benefit: A payment or gift, as one made to help someone or given by an employer.

Recognition: It is an act of recognizing someone or identifying someone or something.

Job quality: Job quality that delivers value, job quality is defined by your audience and their expectations of you.
Meeting target: This Is define as defining a deadline and tracking your progress.

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Full Project – Effect of workers monetary and non-monetary compensation on employees performance

Full Project – Effect of workers monetary and non-monetary compensation on employees performance

Full Project – Effect of workers monetary and non-monetary compensation on employees performance

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