Full Project – The remuneration strategies for workers in a depressed economy

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CHAPTER ONE

1.0 INTRODUCTION

1.1 BACKGROUND OF THE STUDY

A depressed economy is an economy which experiences a prolonged period of recession or a significant and prolonged downturn in the economy. Characteristics of an economic depression include declining business activities, failing prices, rising unemployment, increasing inventories, public fear and panic. In times of depression, consumers’ confidence and investments decrease, causing the economy to shut down. The classic example of this occurred in the 1930s, when the Great Depression shook the global economy.

In the midst of depressions, businesses still have to survive despite its negative effects on the citizenry, the existence and continuity of businesses and the economy at large. Among others, these negative effects includes a reduction in revenue, profit and personal income, rising unemployment rate due to mass retrenchment, crime rate will amplify and thus resulting to insecurity in the economy.

While individuals will have to make so many lifestyle changes to survive in a depressed economy whether by cutting down costs, saving more, getting a Job in a rather secured industry, Or by developing other sources of income, businesses too must do the same. For wise business owners, it is a time to re-strategize and re-position to ensure they operate, to ensure they survive the depressed environment they operate in.

An organization’s success lies in a motivated workforce as highly motivated employees strive to produce at the highest possible level and exert greater effort than employees who are not motivated (Bagraim, 2006: 70). Daft and Marcic (2007: 475) also believe that employee motivation, organisational performance, and profits are interconnected and cannot be separated. The most talented and innovative employees are not solely motivated by financial rewards such as money, but seek satisfaction from their work.

According to Shields (2007:30), reward management is not solely concerned with financial rewards. It is also concerned with non- financial rewards such as recognition, communication, work environment, training and career development. The financial rewards range from base pay, pay for performance, pay for skills and competencies, and indirect financial rewards such as benefits. Individuals are motivated by different factors, but employers usually use money as a strategy for retaining employees.

Archer(2009) notes that the transition from personnel management to human resources management has increased awareness of the importance of human resources in the success of the organization. Archer (2009) maintains that employees are equally critical to the overall business success as are technology and other physical resources. The skills, knowledge, attributes, and brainpower that employees possess make the organisation have a sustained competitive advantage over other organisations.

This study focuses on Nigeria Breweries PLC and PZ Cussons Aba Ltd (Nigeria Breweries PLC and PZ Cussons Aba), a large organization. In the confectionery industry similar to Sasko, Lobels Bread is affected by the. economic conditions experienced In the country such as inflation, which has eroded the purchasing power of the country’s currency; hence, leading to high standards of living. These conditions have led to the exodus of skilled labour such as engineers and artisans to neighbouring countries. Management at Lobels sees a great need to retain its employees by designing a competitive remuneration package that motivates employees and achieves organisation goals.

Employers face challenges of choosing rewards that respond to individual needs and improving the profits and financials of the organisation. Tschohi (2009: 1) states that globally, the economy is in a dismal state and companies are downsizing and freezing salaries In order to survive. Tschohi (2009:2) further suggests alternative remuneration strategies, which are less costly such as employee recognition, better career programmes, improved organisational communication, and job enactment programmes.

Armstrong and Murlis (1994: 23) believe that organisations should implement remuneration systems that encompass both financial and non-financial aspects as this would ensure the satisfaction of different employees’ needs, thus, increasing levels of employee commitment and performance. Non-financial remuneration systems Include factors such as recognition, promotion, increased responsibilities, and personal growth. These endeavours are aimed at motivating employees through satisfaction of their esteemed needs and accomplishing organisational goals as the success of the organisation is linked to human capital.

Organisational success is measured by the steady increase of shareholders wealth profit, sales, return on investment, and increases market share up to seventy-five percent of market value is embedded in intangible assets, most notably human capital or employees. Imperfect knowledge of the value of those individuals and unsatisfactory methods of remuneration allows talent to ebb away (Baron, 2003).

Pienaar (2007:21) postulates that the link between people and profits is established. Organisation that treat employees like people have higher rates of productivity and lower rates of turnover. He further maintains that high employee turnover is costly. Organsations will have to replace the people who have to replace the people who have been lost together with loss of knowledge, experience and customer relationship.

Shareholders desire increased growth in their Investment each year and to continually produce higher returns, necessitating to having a motivated workforce who will perform at higher levels. To do this on a continuous basis requires reward and remuneration. Systems that are most applicable in the motivation and retention of employees. Due to recession, companies are working with constrained budgets and cost containment has become a priority.

As the economy is recuperating from the recessionary period, companies in Nigeria including Nigeria Breweries PLC and PZ Cusson Aba are continually changing the reward system in order to survive and to be competitive. The design of the compensation policy at Nigeria Breweries Pic and PZ Cusson Aba is mainly driven by the economic conditions. Swanepoel, Erasmus, Van Wyk and Schenk (2003:494) discuss various internal and external forces that influence the compensation design such as economy, union, and government.

An opportunity therefore presents itself to undertake an investigation of the reward and remuneration systems adopted by Nigeria Breweries PLC and PZ Cusson Aba in the motivation and retention of employees.

The above discussion offers the basis for the exploration of the main problem of the study.

1.2 STATEMENT OF THE PROBLEM

The sub-problems that need to be addressed are:

a) What are the rewards or remuneration objectives and strategies as revealed in the literature.
b) What reward and remuneration systems as revealed in the literature study will motivate and retain employees, and improve organisational success?
c) What is the reward, or remuneration system currently used at Nigeria Breweries PLC and PZ Cussons Aba?
d) How can the results obtained from the resolution of the three sub-problems above be integrated into a model to be used by Nigeria Breweries PLC and PZ Cussons Aba?

1.3 OBJECTIVES OF THE STUDY

The objectives of this study are:

To determine how the reward or remuneration strategy is utilized by Nigeria’s Breweries PLC and PZ Cussons Aba.
To evaluate remuneration strategies that can be used successfully in motivating and retaining employees.
To evaluate the current rewards system utilized at Nigeria Breweries PLC and PZ Cussons Aba and employee perception.

To propose a reward model that will motivate and retain employees and meet organisational goals.

1.4 RESEARCH QUESTIONS

In order to achieve these objectives the following research questions were asked

How can the reward or remuneration strategy be utilized by both Nigeria Breweries PLC and PZ Cussons Aba?

What is the remuneration strategies used in motivating and retaining employees?

What is the current rewards system utilized In Nigeria Breweries PLC and PZ Cussons Aba and employee perception?

Will the proposed reward model motivate and retain employees and organizational goals?

1.5 STATEMENT OF HYPOTHESES

HO: The reward or remuneration strategy is not utilised by Nigeria Breweries and PZ Cussons Aba.

H 1: The reward or remuneration strategy is utilized by Nigeria Breweries and PZ Cussons Aba.

HO: The financial and non-financial remuneration

strategies for workers cannot be used successfully in motivating and retaining employees in Nigeria Breweries and PZ Cussons Aba.

H1: The financial and non-financial remuneration strategies for workers can be used successfully in motivating and retaining employees in Nigeria Breweries and PZ Cussons Aba.

1.6 SIGNIFICANCE OF THE STUDY

The objectives of any reward system are to attract, motivate and retain highly performing employees, and to improve organisational success. Most organisations use base pay to attract and retain employees, but the costs associated with base pay are high, accounting for 50 percent to 70 percent’ of total overhead costs (Wilson, 1995:70). Employers are faced with a dilemma of providing rewards that are competitive, but not exceeding the constrained budgets.

This research aims to increase understanding of the area of rewards, retention, motivation, and to find variation and connection with other research conducted on the subject. In addition, the research aims to propose a total reward and remuneration model that IS flexible, affordable and competitive. The proposed model will be aligned with the business strategy as suggested by Gilbert and Cornish (2009), who believe that alignment of reward strategy to the overall business strategy enables organisations to deliver the right amount of rewards to the right people at the right time, and for the right reasons.

1.7 SCOPE OF THE STUDY

This work will be limited to studying the impact of remuneration strategies on workers in the depressed economy.

This project is aimed at remuneration strategies for workers in a depressed economy with its scope to Nigeria Breweries PLC and PZ Cussons Aba.

1.8 LIMITATIONS OF THE STUDY

In this course of this research work, the researcher had some limitations to carryout the research work.

The major constraints which served as limitations to the study are as follows:

Questionnaire: The major limitation is in the use of questionnaire in term of objectivity, truthfulness and sincerity in answering the questions. Therefore, the work was limited to answer gotten from the respondents.
Data Gathering: There is difficulty in getting respondent to complete their questionnaire for that reasons, collection time for the questionnaire was extended to enable the respondents complete their questionnaire.
Confidentiality: The frequent rescheduling of interview by top disclose source information’s to disclose some information’s on performance evaluation of the company which they considered confidential and secret also constitute one of the limitations.

1.9 DEFINITION OF CONCEPTS

For the purpose of this study, the following key concepts are defined:

MOTIVATION

This refers to the forces within or internal to a person that arouses enthusiasm and persistence to pursue a. certain course of action. Employee needs differ, ranging from food, achievement and monetary gain. These forces propel employees to behave in certain ways in order to fulfill their needs. Motivation affects performance and productivity; thus, managers are tasked with satisfying employee needs to meet organisational goals (Daft and Marcic, 2007:475).

REMUNERATION

According to Shields (2007: 32), remuneration covers a number of distinct types of financial rewards, which include base pay, direct benefits, and performance pay. The word most commonly used, as a synonym for remuneration is ‘pay’ and the two can be used interchangeably. To pay means to provide money in exchange for some other commodity or service deemed to be of equal value.

Employees receive pay in the form of a wage or salary in exchange for their labour. For the purpose of this study, the term remuneration and pay are used interchangeably.

RETENTION STRATEGY

Armstrong (2000: 208) states that retention strategy aims to ensure that key people stay with the organisation by reducing costs associated with turnover. Lobels Bread uses financial rewards or remuneration as a strategy to keep its talented employees.

STRATEGY

Swanepoel et al, (2003: 169) define strategy as a game plan adopted by an organisation in order to be successful In a competitive environment.

TOTAL REWARD STRATEGY

Total reward strategy in any company has four Interlocked components, which are total pay, positive workplace, compelling future and individual growth. These components are a key to attracting and keeping individuals and for competing globally, (Zingheim and Schuster, 2000: 13).

According to Armstrong and Murlis (1994 :23), total reward encompasses non-financial rewards and financial rewards (remuneration). Remuneration comprises basic pay, benefits and incentives, while non-financial rewards include factors such as career opportunity, recognition, responsibility, and empowerment.

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Full Project – The remuneration strategies for workers in a depressed economy

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Full Project – The remuneration strategies for workers in a depressed economy

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