ABSTRACT
Reward
Strategy is seen as one of the most important strategies in the human resource
management function, as it influences the productivity or employees and growth
of organization. Recently, numerous special journal issues have emerged on compensation,
often focusing on organization differences. Similarly, there
is a strong movement to “at-risk” reward, where employee pay is tied to
performance. The objective of this study is to investigate and analyze
the relationship between compensation and workers productivity. In this study,
the researcher tried to link compensation with employee’s productivity. More
specifically it aimed to find out which aspects of the compensation functions
well, and which aspects could be further developed and improved in order to
increase employee satisfaction. The data for this
study were collected from the primary and secondary data. This primary source
of data was obtained from the respondents through the use of questionnaires and
personal interview. The secondary sources of data were obtained from textbooks
journals, bulletins and internal materials. With inference from the
implications of the findings, the research recommended that good and well
designed reward strategy, in fact, play a major role in providing for an
integrated and coherent range of human resource management processes which are
mutually supportive and contribute as a whole to improving organizational
effectiveness. The research recommended that the company under study should
encourage the employees to perform better in specific tasks. By concentrating
too much on the biggest compensations, the organization may forget that smaller
compensations might have the same, if not greater effect on productivity.
CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
In corporate
organizations and companies nowadays, working conditions and compensation have
been large, especially since World War II. The statement that working
conditions and employee’s compensation is the live wire of an organization is
not an overstatement.
A well designed and functional compensation is an efficient way to
increase employee work motivation. The appropriate type of compensation is
developed in accordance to the company's compensation philosophy, strategies
and policy. However, it might be challenging to find the right way to combine
the company’s integrated policies and practices together with the employee’s
contribution, skill and competence. (Armstrong,
2006).
Compensation is an important
tool that management can use to channel employee motivation in desired ways. In
other words, compensations seek to attract people to joint the organization to
keep them coming to work, and motivate them to perform to high levels. The compensation
consists of all organization components – including people processes rules and
decision making activities involved in the allocation of compensation and
benefits to employees in organizations.
Organizational
performance is a complex phenomenon largely affected by the ability and
motivation of the workforce in any firm. Monetary and non-monetary compensations
are provided in organizational setting with a view to motivating and
influencing individuals, team and organizational behaviour for the achievement
of strategic objectives and performance of organizations (Randhawa 2008).
In consideration of the
era of global hyper competitiveness in the business world, compensations are
fundamental imperatives to derive maximum employee inputs, retention,
commitment from workers and industrial harmony between the workforce and
manufacturing concerns.
However, a good number of
firms do not provide appropriate mix of compensations to stimulate individual
and sub-unit behaviour to attain strategic goals resulting in dwindling performance
in the manufacturing sub-sector of the Nigerian economy.
Compensation practices
are positively related with retaining and enhancing the skilled employees that
are considered assets of an organization. (Mondy and Noe, 1993) has divided compensation
in two types’ financial compensation and non-financial compensation. Financial compensation
is further divided into direct and indirect financial compensation. Direct compensation
includes bounce, good salary packages, profits and commission indirect financial
compensation are all those benefits that are not covered by direct financial compensation.
Non-financial compensation consists of responsibilities, opportunities,
recognition promotion, vacations, work place environment, sound policies,
insurance, medical, retirement etc. All these compensations affect the
performances of the employees in different manners.
1.2 STATEMENT OF THE PROBLEM
Modern organizations are
making very significant changes in their compensations in order to better fit
the dynamic, highly competitive business environment. Firms increasingly are
using things such as skill-based pay, which compensations employees for the
number and types of skills they possess instead of the type of job they have.
Similarly, there is a strong movement to “at-risk” compensation, where employee
pay is tied to performance. Under this system, the employee’s bonus does not
become part of his or her base pay. Instead, the bonus must be re-earned each
year. These changes, and numerous others, are designed to help offset compensation
costs by gains in productivity, and to develop more flexible workforces. Compensation
costs have risen sharply in recent years, primarily because of escalating
benefit costs. Employers now spend a huge amount of money on employee benefits.
Bacon et al (as cited by
Uzair, 2011), emphasized that employees are key to maintaining competitive edge
by a business. To be successful in global market, a firm needs highly
motivated, skilled and satisfied workforce that can produce quality goods at
low cost. According to Sarvadi (2010), firms that don't match or exceed the compensation
levels of their competitors will have difficulty attracting and retaining top
workers. Properly measuring performance ensures that a compensation program
pays off in terms of business goals since compensations have a real cost in
terms of time and money.
1.3 OBJECTIVES OF THE STUDY
1. To investigate the impact
of compensation on employees’ productivity
2. To explore and determine
the process of modern compensation strategy in relation to employee’s
productivity
3. To observe the
significant relationship between compensation and employees’ productivity
4. Also, to present detailed
principles and process of compensating workers to work effectively so as to
increase employees’ productivity.
5. To examine how good compensation
can enhance individual employee and organizational growth.
1.4 RESEARCH QUESTIONS
1.
Is there significant relationship
between compensation and employees’ productivity?
2.
Does effective compensation have positive
impact on employees’ productivity?
3.
Does compensation lead to increased
organizational performance?
4.
Does compensation have negative
effects on organization’s total profit?
5. Does compensation motivate workers to be
more productive?
1.5 RESEARCH HYPOTHESIS
The following research
hypotheses formulated will be empirically tested and result gotten will serve
as a spring board for recommendations. The following are the hypothesis for the
study:
Ho: Effective compensation does not have positive
impact on employees’ productivity
Hi: Effective compensation has positive impact
on employees’ productivity
Ho: There is no significant relationship between
compensation and employees’
productivity
Hi: There is significant relationship between compensation
and employees’ productivity
1.6 SIGNIFICANCE OF THE STUDY
At the end of this study,
most organizations will understand that basic principles and process of compensating
workers to work effectively by highlighting the problem facing compensation
before and at present.
It will educate those who
are studying Business Administration and management as a course in tertiary
institution and organization and it will serve as reference for researchers.
1.7 SCOPE OF THE STUDY
The research is limited
to the impact of compensation on employees’ productivity; this is carried out
within the context of large organization such as First Bank Plc. This implies,
the area in which data were collected for the study is limited to First Bank,
Ikpoba Hill, Benin City.
1.8 LIMITATIONS OF THE STUDY
One of the major problems
encountered by the researcher is the monetary problem. There was no sufficient
money to make the purchasing of all necessary materials for the research work.
There was also the problem of meeting some personalities in Nigeria Bottling
Company Plc to get information from them. Because of that, the researcher found
it difficult to collect all the necessary information. However, the researcher
made do with the resources available for her research work.
1.9 DEFINITION OF TERMS
Compensation: Compensation consists of an organization’s
integrated policies process and practices for compensating its employees in
accordance with their contribution skills competence and their market worth.
Productivity: Productivity is the output unit/per labour input
into the production process given the level of existing technology.
Remuneration: This is the financial compensation accruing to
employee for his or her performance in the organization.
Motivation: It is the inner drives that arouse direct and
maintain an individual behavior toward accomplishing organization goals.
Job Analysis: According to Raymond, etal (2004) it is the
process of getting detailed information about jobs.
Job Description: Is the setting out of the purpose of job, where
it is fit in the organization structure the content within which the job holder
function and the principal accountability of job older. Main task the employee
has to carry out.
Job Evaluation: Is a systematic process for establishing the
relative work of job within an organization.
Compensation Strategy: It is a definition of the intention of the
organization on how its compensation policies and process should be developed
to meet business requirement.
1.10 HISTORICAL PROFILE OF THE ORGANIZATION UNDER STUDY
First Bank of Nigeria, sometimes referred to
as First Bank, is a Nigerian bank and financial
services company. It is the
country's largest bank by assets As of
June 2013, the bank had assets totaling approximately US$ 21.3 billion (NGN: 3.336
trillion). The bank's profit before tax, for the
twelve months ending 31 December 2012 was approximately US$542.5 million (NGN: 86.2
billion). At that time, the bank maintained a customer base in excess of 8.5
million individuals and businesses. First
Bank of Nigeria has solid short and long term ratings from Fitch, the Global Credit Rating Company, partly due to its low exposure to non-performing
loans. The bank has strong compliance
with financial laws and maintains a strong rating from the Economic and Financial Crimes Commission of Nigeria.
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