the impact of compensation and reward systen on the performance of the nigerian banking industry
Post on 14-Jan-2017
17 Views
Preview:
TRANSCRIPT
THE IMPACT OF COMPENSATION AND REWARD SYSTEM
ON THE PERFORMANCE OF THE NIGERIAN BANKING
INDUSTRY (A CASE STYDY OF SOME SELECTED BANKS IN KEBBI STATE)
BY
AJAYI FEMI MICHAEL
MSC/BUS ADMIN/NOU159256886
A DISSERTATION SUBMITTED
TO THE DEPARTMENT OF BUSINESS ADMINISTRATION
SCHOOL OF MANAGEMENT SCIENCES
NATIONAL OPEN UNIVERSITY OF NIGERIA
IN PARTIAL FULFILMENT OF THE REQUIREMENTS FOR THE
AWARD OF
MASTER OF SCIENCE DEGREE IN BUSINESS ADMINISTRATION
NATIONAL OPEN UNIVERSITY OF NIGERIA.
OCTOBER, 2016
i
DECLARATION PAGE
I, Ajayi Femi Michael hereby declare that this masters dissertation: THE IMPACT OF
COMPENSATION AND REWARD SYSTEM ON THE PERFORMANCE OF THE
NIGERIAN BANKING INDUSTRY.(ACASE STYDY OF SOME SELECTED BANKS
IN KEBBI STATE)
Is my personal research work and findings carried out in the school of management sciences
National Open University Of Nigeria under the supervision of Dr. Aguda Niyi. I do further
reiterate that to the best of my knowledge, no part of this work had been submitted earlier for
the award of any other degree in any university or other higher institution of learning. The
text books, journals and other related literature consulted have been duly acknowledged in the
list of references provided.
……………………………………. ……………………………..
Ajayi Femi Michael Date
ii
CERTIFICATION PAGE
This is to certify that this project dissertation entitled “THE IMPACT OF
COMPENSATION AND REWARD SYSTEM ON THE PERFORMANCE OF THE
NIGERIAN BANKING INDUSTRY(A CASE STYDY OF SOME SELECTED BANKS
IN KEBBI STATE)” was carried out by Ajayi Femi Michael, in the School of Management
Sciences, National Open University Of Nigeria, Lagos for the award of Masters of Science in
Business Administration. .
_________________________ _________________________ Dr. Aguda Niyi PROJECT SUPERVISOR EXTERNAL SUPERVISOR DATE:____________________ DATE:____________________
_________________________ DEAN SCHOOL OF MANAGEMENT SCIENCES
DATE:_________________
iii
DEDICATION This project is dedicated to God Almighty for giving me the grace to successfully complete
this programme and the sense of reasoning and strength to accomplish this project.
I also wish to further dedicate it to the National Open University of Nigeria, for their
revolutionary stride to make education in Nigeria open and readily accessible irrespective of
distance and location.
iv
ACKNOWLEDGEMENT
I give my utmost thanks to God Almighty for giving me the grace to successfully complete
this programme.
I also express my sincere thanks and appreciation to my wonderful and talented Supervisor
Dr. Aguda Niyi for his understanding, support, encouragements and guidance throughout the
period of supervising this dissertation.
I do wish to also acknowledge the prestigious and dynamic National Open University of
Nigeria, for their bravery and resilience in constantly ensuring that its unique and revamped
system of education is progressively popularized. I further salute their efforts in ensuring its
competitiveness with other global educational institutions through partnership and
collaboration with global organizations. I must confess that my experience in NOUN was
quite interesting and refreshing, the quality of study material provided by the institution was
absolutely good and the learning environment was very comfortable and beautiful. Without
an institution like NOUN, it would have been more difficult and stressful for me to complete
my Msc. Programm.
I will also like to acknowledge the Kebbi State Study centre coordinator and the entire staff
of the Centre for their good work and constant provision of guidance throughout the study
period.
Finally my appreciation also goes to my lovely wife Mrs. Comfort Oluwafemi and my sons
Boluwatife Lancelot and Toluwalase Leonidas for their love, understanding and support.
Ajayi Femi Michael
October, 2016
v
ABSTRACT This research work adopts cross sectional survey method to investigate the impact of
compensation and reward system on the performance of a bank organization. Primary data
were collected through the instruments of questionnaires and interview. Structured
questionnaires were designed to collect data from randomly sampled respondents from 5
banks which form the sample for the study. The study thus adopted simple random sampling
technique to select 100 employees from 5 deposit money banks (DMBs) in Birnin Kebbi.
Bank performance was the dependent variable, while other variables like wellbeing;
compensation structure; staff promotion; incentive/ rewards were the independent variables
for this investigation. Analytical techniques like Pearson correlation and regression analysis
were applied to analyze the data collected for the study. The findings revealed that poor staff
wellbeing in the banking industry is counter-productive to the banks. The finding also
revealed that the present compensation system is detrimental to the banks‟ improved
performance. It was found however, that staff promotion has positive effect on bank
performance. The finding also revealed that incentives/reward systems in the banks promote
improved performance of banks. It was also revealed that the BSC model adopted by some of
the banks is inadequate. Based on the findings of this study, it was recommended that banks
should evolve a compensation structure that is developed from a performance management
model that is deeply dedicated to identifying and rewarding performance. The banks should
redesign the BSC model to correct the inadequacies identified. There should be regular
promotions as at when due in order to further encourage staff to put in their very bests to their
jobs. Also, Banks should emphasize rewarding and encouraging peak performance.
vi
TABLE OF CONTENTS Title page …………………………………………………..……………………….. i
Declaration Page ……. ………………………………….…………………………. ii
Certification Page ……………………………………………………………………. iii
Dedication …………………………………………………………………….……... iv
Acknowledgements ………………………………………………………………… v
Abstract ……….……………………………………………………………………. vi
Table of contents …….………………………………………………………….……. vii
List of figures……………………………………………………………………….. xi
List of tables ……………………………………………………………………. xii
Appendix ………………………………………………………………………….. xiii
CHAPTER ONE
1.0 Introduction…………………………………...………………………………………. 1
1.1 Background of Study ……………………………………………………………….. 1
1.2 Research Problem……………………………………………………………………. 3
1.3 Research Question…………………………………………………………………… 7
1.4 Objective of Study…………………………………………………………………… 7
1.5 Statement of Hypothesis…………………………………………………………….. 8
1.6 Significance of Study………………………………………………………………… 8
1.7 Scope of Study……………………………………………………………………….. 10
1.8 Limitation of Study…………………………………………………………………… 10
1.9 Definition of Terms…………………………………………………………………… 11
CHAPTER TWO
2.0 Review of related literature………………..………………………………………… 14
2.1 Introduction………………………………………………………………………… 14
2.2 Theoretical Background…………………………………………………………… . 14
2.2.1.1 The Theory of Wages………………………………………………… 15
vii
2.3 Compensation……………………………………………………………………. 23
2.3.1.1 Theories of Compensation………………………………………….. 29
2.3.1.2 Forms of Compensation…………………………………………… 31
2.3.1.3 Factors Considered in Deciding the Compensation………………. 36
2.3.1.4 Compensation Design…………………………………………… 42
2.4 Performance Management ……………………………………………………… 43
2.4.1 Objectives of Performance Management……………………………………. 44
2.5 Performance measurement model………………………………………………. 49
2.5.1 Balanced Score Card Model(BSC Model)………………………………… . 50
2.5.1.1 Perspectives of the BSC Model…………………………………. 50
2.5.1.2 The Key Performance Indicator………………………………… 53
2.5.2 Porters Five Forces Model…………………………………………………… 55
2.6 Rewards…………………………………………………………………………. 61
2.6.1 Intrinsic Reward……………………………………………………………. 61
2.6.2 Intrinsic Reward in the Workplace………………………………………… 62
2.6.3 Extrinsic Reward…………………………………………………………… 63
2.6.4 Extrinsic Reward In the Workplace……………………………………… 64
2.7 The Employee Reward System………………………………………………. 65
2.7.1 Effect of poor/weak Reward System………………………………………... 66
2.8 Empirical Review………………………………………………………………. 68
CHAPTER THREE
3.0 Research methodology………………………………………………………….. 71
3.1 Introduction……………………………………………………………………… 71
viii
3.2 Research design ……………………………………………………………… 71
3.3 Population of study……………………………………………………………. 71
3.4 Sampling and sample size………………………………………………………. 72
3.5 Method of data collection……………………………………………………….. 72
3.5.1 Primary source of data used………………………………………………….. 72
3.5.2 Secondary source of data used……………………………………………….. 74
3.6 Modeling……………………………………………………………………. 74
3.7 Analytical Techniques………………………………………………………. 76
3.8 Test for Reliability of Model …………………………………………………... 77
3.8.1 Test for Linear Multiple Correlation Coefficient………….……………….. 78
3.8.2 Test of Coefficient of multiple determination ……………………….……. . 78
3.8.3 Test of Adjusted Coefficient of Multiple regression…………………… 79
3.8.4 Student „t‟ Test Statistics…………………………………………………. 79
3.8.5 The F- Statistics…………………………………………………………… 80
CHAPTER FOUR
4.0 Data presentation and analysis………………………………………………… 82
4.1 Introduction…………………………………………………………………..… 82
4.2 Data analysis…………………………………………………….…………….. 82
4.3 Result of Correlation of Staff wellbeing, Compensation Structure, Staff
Promotion and Incentive/Reward system on Banks Performance…………….. 88
4.4 Regression Results of The Effect of Compensation and reward system on
bank performance……………………………………………………………… 90
4.5 Result of T- Test……………………………………………………………… 92
ix
4.6 Interview …………………………………………….........…………………... 95
4.7 Discursions and Implication of Findings…………………………………….... 99
CHAPTER FIVE
5.0 Summary, Findings, Conclusion and recommendations………………………. 104
5.1 summary of Findings………………………………………………………….. 104
5.2 Conclusion………………………………………..…………………………… 105
5.3 Recommendations…………………………….………………………………. 106
x
LIST OF FIGURES
Figure: 2.1 Maslow Hierachy of Needs Pyramid……………………………….. 27
Figure: 2.2 Factors for Determining Compensation……………………………. 37
Figure: 2.3 Phases of Performance Management……………………………… 46
Figure: 2.4 Perspectives of The Balanced Score Card Model…………………. 51
Figure: 2.5 Balanced Score Card………………………………………………. 54
Figure: 2.6 Porters Five Forces Model………………………………………… 56
Figure: 4.2.1 Staff Category…………………………………………………… 83
Figure: 4.2.2 Staff Analysis Based on Unit…………………………………… 83
Figure: 4.2.3 Staff Grade Analysis……………………………………………. 84
Figure: 4.2.4 Staff Qualification Analysis…………………………………….. 85
Figure: 4.2.5 Staff Salary Value……………………………………………… 86
Figure: 4.2.6 Staff Years of Service………………………………………….. 87
xi
LISTS OF TABLES
TABLE: 3.1 ANOVA Table……………………………………………… 81
TABLE: 4.3.1 Correlation………………………………………………… 88
TABLE: 4.4.1 Model Summary………………………………………… 90
TABLE: 4.4.2 Coefficient………………………………………………. 91
TABLE: 4.4.3 The T –Test ………………..…………………………… 92
TABLE: 4.4.4 Summary of F- Test (ANOVA Table)………………….. 95
TABLE: 4.4.5 Balanced Score Card……………………………………. 98
xii
LIST OF APPENDIX
APPENDIX 1: Questionnaire and Analysis of its results……………………….. 112-141
APPENDIX 2: Regression result………………………………………………….142-146
xiii
CHAPTER ONE
1.0 INTRODUCTION
1.1 Background to the study
Employee compensation and reward is synonymous with performance management.
Performance management is usually a fundamental function of the Human capital
management department in any organization. Human capital management is primarily
concerned with managing the relationship between people and work. Armstrong (1992)
It is widely believed by scholars and practicing professionals that employee performance has
implications on production capacity and service delivery. The output capacity of a firm is
often assumed as its strength and one of its adaptations for survival in a competitive
environment.
Compensation and Reward system as an important tool that management can use to motivate
employees and alter their attitudes and make them enthusiastically strive towards
accomplishment of organization goals. Motivation involves influencing an employee to
willingly perform extraordinarily towards accomplishment of predetermined goals. (Cole
1995). For an organization to meet its obligations to shareholders, it is imperative that the top
management must develop a relationship between the organization and employees that will
fulfill the continually changing needs of both parties. Employees expect their organization to
provide fair pay, safe working conditions, fair treatment, recognition and reward for
exceptional performance.
Ordinarily compensation and reward system should boost performance but may also have a
negative impact on organizational performance when the compensation and reward system
used within an organization in addition to its culture fails to recognize and reward
1
performance but rather gives most of its attention to her bureaucratic staff grading system
without doing everything possible to identify and retain staff on which it had an absolute cost
advantage.
Organizations can hardly exist without a workforce. This work force constitutes a large chunk
of the total operational expenses of any organization. The larger the workforce the larger the
associated cost of maintaining and retaining such massive level of work force. Hence the
need to prudently manage all processes that will keep staff cost at the minimal level.
When organization operational policy fails to adequately take note of the inherent cost
implication of staff on its balance sheet and also provide vivid source of generating funds
through its operations that will adequately mitigate the effect of identified staff costs on their
balance sheet it is safe to assume that such organizations in a matter of time will run into
financial crises emanating from cost of keeping and retaining several unproductive staff.
(Michael 2015).
The productive level of a staff or work force group could always be influenced by
compensation structure. A compensation structure that is developed from a performance
management model that is deeply dedicated to identifying and rewarding performance and
subsequently at a reasonable level reprimand poor performance could trigger an organization
culture that will encourage staff to put in their best as they see a clear relationship between
performance and reward.
It is important to note that each compensation policy a firm decides to employ has related
cost implication. Efficient consideration and management of cost implication of
compensation policy is vital to the growth and survival of firms.
One of the problems identified in the Nigerian banking industry is the staff compensation
2
policy used by banks to pay their staff. Some banks have adopted a model that ensures that
each staff adds financial value to the organization by assigning varying degrees of business
targets to staff according to their ranks, irrespective of their department. But it was observed
that most banks, have not attached necessary targets to their non marketing staff and have in
turn suffered high staff cost of retaining large number of unproductive staff, thereby
resulting to persistent loss making by most branches.
The compensation and rewards system in banks is the interest of this research work as a
major cause of the lingering poor performance of the Nigerian banking industry.
This research shall extensively investigate compensation and reward as the endpoint of
performance management in consonance with the Balanced score card performance
measurement model.
1.2 Research Problem
The banking industry has for almost a decade now witnessed constant and persistent
disengagements of staff, divestment of foreign subsidiaries, rationalization of branches due to
flagrant loss making, persistent loss of income to divisions, directorates or even the bank at
large, and several others are ominous signs connoting that the existence of banks in Nigeria
is threatened.
It is observed that many banks have remained in an ailing condition despite government
relentless efforts to make banks in Nigeria very sound and stable.
Some specific problems identified in this research work include the following.
The banks have Poor Compensation Structure. The salaries of executives and senior staff
3
members of the banks are too large for the present income generated by banks to sustain and
usually their salaries are not usually tied to direct performance target and in some banks no
targets are assigned to such outrageous salaries. The aggregate of these salaries engulf most
income made by the banks as the task of this group of staff do not add any form of financial
value that commensurate to their pay. They are rated by group performances rather than by
individual performance contribution. The present compensation model in use in banks is
toxic to the health of the bank. There is a need for senior staff pay cut or assignment of
business targets that will at least justify their monthly salaries, or even implemented the duo
to revert the present status.
Another problem is lack of effective performance Management Model. At this point in time
in the banking industry where every kobo is important, it is apparent that banks need to
operate a performance model that will energize the staff to work very hard to get businesses
for the banks. But it is observed that most banks lack effective staff performance monitoring
and measurement system-a performance measurement system which is unbiased i.e that
gives more to where income is coming from. The systems in operation in various banks
reveal that laggards take the lion share of income as salaries. This research has identified the
shortcomings of present compensation model as a model that allow laggards to grow to
sensitive positions that require prudent skills and attitude. It is also not cost effective and cost
efficient as people get paid without having to personally contribute financially to the
company income through meeting business targets. Furthermore it was observed that the
present model affect the promotion of staff. Staff are not promoted as at when due, as there
are no adequate funds to meet up with cost implications of staff promotion. Finally it is safe
to assume that the present model is bias as it gives much haven to unproductive workers.
4
Poor staff retention and succession management plan is another serious problem that was
identified. An assessment of the banks showed that they hired most of their top managers
rather than growing them from within the system over time. Any serious organization grows
its managers from within-such organization has no entry level point i.e any staff that shall
man their management level desk must have grown through the organization and can never
be hired from outside. Staff retention is achieved through effective talent management system
that identifies and sieves performers from laggards and tries to develop these star performers
to grow and occupy strategic positions within the organizations.
Unfair labour practice also constitutes part of the problems facing banks. Within the Nigerian
banking industry workers are perpetually denied their right to membership of trade unions or
workers committee as specified by the part II of the International Labour Act(2006).
Violation of workers right to association and prohibition of formation of workers union is a
deliberate attempt of banks to continuously exploit their staff. One of the fundamental goals
of workers union is to protect workers‟ rights at work and also bargain for better conditions
of service. Unfair employee compensation may also be tantamount to unfair labour practice
(ULP) which is any failure to act, or unfair act of an employer towards a worker concerning
promotion, demotion, trial periods, training or benefits; suspending a worker or disciplinary
action; refusing to re-employ a worker as agreed; and may also occur when an employer
makes circumstances difficult for a worker who was forced to make a protected disclosure,
(Rycroft, 2009). ULP has been known to be a major catalyst for the development of a
demoralized workforce who in turn directly and actively militates against achievement of
predetermined goals.
5
Denial of staff promotion was prevalent among many banks due to the present ailing
condition of the banks. Staffs have suffered a high degree of denial of earned promotions.
Unfortunately staff promotions were based on years of service rather than a combined
approach of service year and individual staff contribution in terms of financial value added,
and so, performing staff are not adequately recognized.
Stagnated wage levels for the support staff that constituted over 60% of the workforce in
banks is another monumental element affecting the performance of this group of staffs within
the banking industry. This is a regressive wage system intentionally targeted at the support
staff group within the banking industry. The stagnated wage system provides a meager
amount as a monthly salary and does not attach any value to employee number of service
years, additional qualification, and employee performance. It is a demeaning wage system
that lacks respect for workers dignity and right to good life, because it allows workers to
spend their productive and energetic period of life receiving and living on a meager salary as
their total monthly emolument. This practice has been observed to be repugnant to natural
justice, equity, good conscience and fairness. It adds to woes of the poor. The continuing
stagnation of the income levels for support staff has put the larger workforce within the
banking industry at the most disadvantaged position in terms attainment of a more humane
condition of living.
Outsourcing is a major trend in the banking industry. Outsourcing is the practice of sending
certain job functions outside a company instead of handling them in-house so as to gain a cost
advantage. But this has been abused in the Nigerian banking industry and many other
companies as a way to grow by using it to restrain staff cost by putting some of its workers
on outsourced pay roll, which offers a static wage system. Outsourcing if well practiced
6
should not ordinarily mean the flagrant and intentional violation of workers‟ rights to dignity
and good life. This research work views the current practice in the Nigerian banking industry
as tantamount to civilized slavery where the might of a productive worker is priced for a plate
of meal. Most workers within this category suffer degradation, lack of recognition, pain,
harassment, housing hardship, etc. They are exposed to varying degrees of needs problems as
enumerated in the work of Abraham Maslow „Hierachy of needs‟.
This research work shall therefore address these identified problems as related to
compensation and reward system in Nigerian banks with a view to arrest the lingering poor
performance of the Nigerian banking industry.
1.3 Research Question
Following from the above therefore, the following research questions shall guide the
investigation.
i. What is the relationship between workers wellbeing at work and employees
productivity?
ii. What is the impact of the present compensation system on the banks performance?
iii. To what extent does staff promotion affect workers productivity?
iv. What is the relationship between incentives, reward and the performance of
organization?
1.4 Objective of study
This research work aims to investigate the impact of compensation and reward system on the
performance of Nigerian banking industry. It is assumed as one of the reasons for the
persistent decline in the performance of banks and why the ailing conditions of banks have
lingered. The specific objectives of this research work include the followings:
7
i. To examine the relationship between workers‟ wellbeing at work and their
productivity.
ii. To establish the relationship between compensation structure and productivity.
iii. To investigate the relationship between promotion and productivity
iv. To investigate the relationship between incentives, reward and performance of
organization.
1.5 Statement of Hypothesis
To achieve the objective of this research work, the following hypotheses shall be tested. The
hypotheses are stated in Null form and shall be tested in order to either confirm or reject the
Null hypothesis as the case may be.
H𝑜1 -There is no significant relationship between workers wellbeing
and their productivity.
H𝑜2- There is no significant relationship between compensation
structure and productivity.
H𝑜3- There is no significant relationship between promotion and
productivity.
H𝑜4- There is no significant relationship between incentive, reward
and organizational performance.
1.6 Significance of study
This study shall demonstrate the imperative of appropriate compensation and reward system
as a panacea to the persistent decline in the performance of banks Nigeria.
8
This study shall also improve managerial understanding of the impact of performance
measurement on organizational performance and overall healthiness, dwelling richly on the
experiences within the Nigerian banking industry.
The study results will enable the management to establish the effects of human resource
management strategies on employee‟s performance, hence identify the areas where
improvements are needed. It will also help the management in planning for the development
and implementation of effective and efficient human resource strategies that will lead to
improved performance of the banks. This will in turn help in ensuring economic growth and
stability of the country. Other researchers who may need reference to information on role of
compensation strategies on employees‟ performance will also benefit by being able to assess
previous approaches used to solve similar management questions and revitalize their
compensation models. In addition they will be able to spot flaws in the logic, errors in
assumptions or even management questions that are not adequately addressed by the
objectives and designs of the current performance management technique in use in their
organizations.
A compensation model that will considerably improve the employee‟s performance in
Nigerian banking industry will also be developed. If same is employed, it will trigger a
revolution in the performance of staff and the organization as a whole.
This study re-amplifies the balanced score card model and reflects it in a way that will
address the challenges currently facing the banking industry in terms of staff cost and present
economic recession.
9
1.7 Scope of Study
This study shall investigate the compensation and reward system in some selected banks in
Birnin Kebbi, Kebbi State. Name of selected banks will not be disclosed for the purpose of
anonymity and due to the sensitivity of the subject matter of investigation, as utmost
disclosure of the findings on selected banks will be disclosed without prejudice. 5 banks in
Kebbi state were randomly selected and covered in this investigation.
It focused on compensation and reward system as one of the internal factors affecting the
performance of banks, with emphasis on the monumental erroneous use and application of
the balanced score card model (BSC Model) as one of the factors that have actively
contributed to the persistent failure of banks in Nigeria.
The researcher distributed questionnaires as well carried out a few interviews with the
respondents among the sampled banks.
1.8 Limitation of study
One of the major constraints of this research was finance. The researcher incurred a huge cost
to finance the cost of carrying out the research work all over the banks covered.
Another limitation was the oath of secrecy signed by the banks staffs, which have made it
difficult for staff to make adequate disclosures. Some of them were also reluctant to collect
the questionnaires.
The oath of secrecy almost frustrated this research work, as the employees refused to collect
the questionnaires. But after pleading with the branch management, they ended up collected
10
them and gave back their responses under the condition of anonymity as the questionnaires
were designed in a way that does not require the respondent to identify him/herself. So
responses offered were anonymous.
Despite all the seeming challenges however, the research was still able to overcome them and
meet up to the required standard. The impediments were also mitigated by conducting the
research within Kebbi State alone.
1.9 Definition of terms.
COMPENSATION -compensation is the act of compensating or the state of being
compensated with something such as money, given or received as payment or reparation for a
service or loss.
PAY STRUCTURE- It consists of the various salary grades and their different levels of
single jobs or groups of jobs.
PERFORMANCE- It is a process of collecting, analyzing and reporting information
regarding individual or group or organization. It depicts the extent to which an employee
achieves work targets assigned to him.
EMPLOYEE- An individual, who works part-time or full time under a contract of
employment, whether oral, written express or implied.
EMPLOYER- A Legal entity who controls and direct a servant or worker under an express
or implied contract of employment and pays him wages or salary as compensation.
11
MANPOWER- Power in terms of people available or required for work.
EMPLOYEE WELLBEING- This refers to the physical, moral, psychological, social,
economic, and mental health of a worker at work
INCENTIVE-This is a form of payment made in excess of the normal pay to employees so
as to stimulate, motivate or encourage performance.
WAGES- these are the payment made to manual workers
SALARY- is a fix periodical payment to a non-manual employee
KEY PERFORMANCE INDICATOR (KPI‟s) are performance measures that indicate
progress towards a desirable outcome.
STAFFCOST-are cost associated with recruitment, maintenance and retention of staff within
an organization.
OUTSOURCING-Outsourcing is the practice of sending certain job functions outside a
company instead of handling them in house, so as to gain a cost advantage.
UNFAIR LABOUR PRACTICE(ULP) Unfair labour practice means any failure to act or
unfair act of an employer towards a worker concerning, promotion, demotion, trial periods,
training or benefits; suspending a worker or disciplinary action; refusing to re-employ a
worker, as agreed; and may also occur when an employer makes circumstances difficult for a
worker who was forced to make a protected disclosure.
12
SCORE CARD- a statement showing a comparison of employee actual performance against
set assigned targets to determine the degree to which an employee have met his target.
BANKING INDUSTRY-Comprises of all the banks operating in Nigeria the Nigerian
banking industry currently consists of 19 commercial banks, regional commercial bank and
one non interest bank.
13
CHAPTER TWO
2.0 REVIEW OF RELATED LITERATURE
2.1 Introduction
This chapter presents a review of literature on compensation and reward system. It also
covers the theoretical background as well as the conceptual framework. The chapter shall as
well be rounded off with the review of empirical studies on the subject matter.
2.2 Theoretical Background
Personnel management is primarily concerned with managing the relationship between
people and work. Armstrong (1992)
Huselid as sighted in Barney' (1991) opines that human resources can be a source of
sustained competitive advantage when four basic requirements are met.
Value additive to the firm's production processes, he further insisted that the levels of
individual performance must matter but it is suggested that individual contribution
must be assumed more importance and given more attention than group
Skill required – firms are not interested in keeping large number of staff but
competent and skilled staff with rare skills.
Limited imitation-There are varying degrees of staff competence, technically
competent staff can rarely be imitated. so is it very difficult to replicate the combined
human capital investments of a firm's employees . Barney(1991) propounded that
human resources are not subject to the same degree of imitability as equipment or
facilities. This makes it difficult for competitors to replicate a value additive and
highly skilled workforce.
14
Finally, he posit‟s that a firms human resource especially the strategist‟s who
provides sustainable advantage should never be replaced with technology. If a
contrary decision is to be taken it must be weighed against prior investment in human
capital and long run impact of the technology to be adopted.
Bailey (1993) contended that human resources are frequently "underutilized" because
employees often perform below their maximum potential and that organizational efforts to
elicit discretionary effort from employees are likely to provide returns in excess of any
relevant costs.
Bailey identification of cost implication on staff retention and performance and his four
cardinal point resource based theory of firm is also addressed in this research work. His
opinion on value additive staff emphasizes cost effective retention of staff is credible
contribution that the banks in Nigeria have not adequately considered in compensation
management and administration.
2.2.1 The Theory of Wages.
Propounded by David Ricado , a classical economist born in 1772 and lived to 1823.
Graham (1988) defined wage as the payment made to manual workers while a salary is a fix
periodical payment to a non-manual employee. It is usually expressed in annual terms
implying a relatively permanent employment relationship, although normally paid at monthly
intervals. He further explains that “salaried workers are usually termed „staff‟ while, wage
earners are called „casual workers.
Wages are something received by a worker or paid by an employer for time on the job;
15
money received or paid usually for work by the hour, day, or week, or month; a calculation or
statement of money earned for a period of time from one hour (hourly wage) up to one year
(annual wages). Now let us discuss about wage level.
What is a Wage Level?
May be defined as the money an average worker makes in a geographic area or within in an
organization. It is only an average; specific markets or firms and individual wages can vary
widely from the average.
How are Wage Levels are Set?
Wage levels are calculated using position importance and skill required as criteria. While
there are minimum wage set by federal law for most jobs, But the actual wage paid is entirely
between you and your prospective employee.
What is “Stagnated” Wage Levels?
This is a regressive wage system, which does not attach any value to employee number of
service year, additional qualification, employee performance or at large may be said to lack
respect for workers dignity and right to good life. Workers spend their productive and
energetic moments of life receiving a meager salary as total monthly emolument. This
practice have been observed to be repugnant to natural justice, equity, good conscience and
fairness. It adds to woes of the poor. The continuing stagnation of the income levels for the
most disadvantaged inhibits growth of workers income and attainment of better human
conditions of living. (Michael 2015)
16
What is a Wage Rate?
A wage is an amount of money paid to a worker for some specified quantity of labor. When
expressed with respect to time, it is typically called the wage rate. The wage rate is the pre-
tax amount of payment, usually monetary, paid per unit of labor. It is the main monetary item
that the worker and the employer focus on.
Affirmatively, Wages mean any form of economic compensation paid by the employer under
some contrast to his workers for the services rendered by them. Wages, therefore, may also
include family or spouse allowance, relief pay, financial support and other benefits. But, in
the narrower Sense wages are the price paid for the services of labour in the process of
production and include only the performance wages or wages proper. Graham (1988)
proposed those wages are of two parts - the basic wage and other allowances.
The basic wage is the remuneration, by way of basic salary and allowances, which is paid or
payable to an employee in terms of his contract of employment for the work done by him.
Allowances-, are usually paid in addition to the basic wage to maintain the value of basic
wages over a period of time. Such allowances may include Spouse allowance, holiday pay,
overtime pay, bonus and social security benefits. These are usually not included in the
definition of wages.
Labor and Wages
The type of job one does and the financial compensation he or she receives are very
17
important in our society. Job type is linked to status as is wealth. While the type of job one
performs is arguably more important status wise then wealth, both are important to
Americans. In the past we used to use other descriptions to classify workers. The terms blue
collar or white collar employees were used to describe the type of vocation.
Blue Collar - Manual laborers
White Collar - Officer workers
Pink Collar - Jobs associated with women like nursing, secretarial, etc. This being a rather
sexist term is no longer used. Today we classify our work roles into three categories called
labor grades. These labor grades are described below:
Skilled Labour
These are workers who have received specialized training to do their jobs. They have
developed and honed a special skill and may or may not need to be licensed of certified by
the state. Some examples of skilled labor are: carpenters, plumbers, electricians, business
executives and managers, artisans, accountants, engineers, police, mechanics, etc. These may
be blue or white collar workers.
Unskilled Labor
These are workers who have received no special training and have few specific skills. As our
society has grown into an increasingly technological one, the members of this group have
developed more and more skills. A mechanic, for example, used to be considered unskilled
labor. Today that is no longer the case. Mechanics require a great deal of skill and training to
work with today‟s modern engines. Examples of unskilled laborers are construction workers,
sanitation and custodial workers, painters, factory assembly line workers, etc. These are blue
18
collar workers.
Professionals
Arguably the elite of the labor grades, these are those workers who need an advanced degree
to do their jobs. The three primary groups of professional are doctors, lawyers and teachers.
These are white collar workers. These labor grades are often said to be non competing labor
grades because workers rarely move from one grade to another and do not compete salary
wise with each other. There are reasons why they do not compete with each other.
The cost of education and training may be a significant obstacle. They might lack the
opportunity to make such a move and they might also have a lack of initiative.
Ricardo (1817) further opines that there are two key theories that explain why salaries are the
way they are in a particular field. These two theories are:
a. Traditional Theory of Wage Determination
In this theory the law of supply and demand dictates salary. These days programmers are in
short supply and are in great demand thus they will command a higher salary. Likewise
doctors and lawyers whose specialized skills people need command a high wage. If you
looked at the bill my electrician gave me you would know he is in demand!
b. Theory of Negotiated Wages
Those employees who work in unions where the union negotiates salary on behalf of all
workers fit into this theory. Since I am a teacher my salary is set by collective bargaining
with my union. I may be the best teacher in the world sought after by many students and
parents but it wouldn‟t matter.
However, different methods of wage payment are prevalent in different industries and in
various countries. There may be payment by time or payment by results, including payment
at piece rates. Wages are fixed mainly as a result of individual bargaining, collective
19
bargaining or by public or State regulation. How wages are determined has been the subject
of several theories of wages.
Below are various theories of Wages:
(1) Subsistence theory
(2) Wages fund theory
(3) The surplus value theory of wages
(4) Residual claimant theory
(5) Marginal productivity theory
(6) The bargaining theory of wages
(7) Behavioural theories
The theories of wages shall now be discussed in detail:
(1) Subsistence theory
This theory, also known as „Iron Law of Wages,” was propounded by David Ricardo. This
theory (1817) postulates that: “The laborers are paid to enable them to subsist and perpetuate
the race without increase or diminution.” The theory was based on the assumption that if the
workers were paid more than subsistence wage, their numbers would increase as they would
procreate more; and this would bring down the rate of wages. If the wages fall below the
subsistence level, the number of workers would decrease - as many would die of hunger,
malnutrition, disease, cold, etc. and many would not marry, when that happened the wage
rates would go up. In economics, the subsistence theory of wages states that wages in the
long run will tend to the minimum value needed to keep workers alive. The justification for
20
the theory is that when wages are higher, more workers will be produced, and when wages
are lower, some workers will die, in each case bringing supply back to subsistence-level
equilibrium. The subsistence theory of wages is generally attributed to David Ricardo, and
plays a large role in Marxist economics. Most modern economists dismiss the theory, arguing
instead that wages in a market economy are determined by marginal Productivity
2. Wages fund Theory
This theory was developed by Adam Smith (1723-1790). His basic assumption was that
wages are paid out of a predetermined fund of wealth which lay surplus with wealthy persons
- as a result of savings. This fund could be utilized for employing laborers for work. If the
fund was large, wages would be high; if it was small, wages would be reduced to the
subsistence level. The demand for labour and the wages that could be paid them were
determined by the size of the fund.
3. The Surplus value theory of Wages
This theory owes its development to Karl Marx (1818-1883). According to this theory, the
labour was an article of commerce, which could be purchased on payment of „subsistence
price.‟ The price of any product was determined by the labour time needed for producing it.
The labourer was not paid in proportion to the time spent on work, but much less, and the
surplus went over, to be utilized for paying other expenses. Marx himself considered his
theory of surplus-value his most important contribution to the progress of economic analysis
(Marx, letter to Engels of 24 August 1867).It is through this theory that the wide scope of his
sociological and historical thought enables him simultaneously to place the capitalist mode of
production in his historical context, and to find the root of its inner economic contradictions
21
and its laws of motion in the specific relations of production on which it is based.
4. Residual claimant Theory
Walker (1840-1897) propounded this theory. According to him, there were four factors of
production/business activity, viz., land, labour, capital and entrepreneurship. Wages represent
the amount of value created in the production, which remains after payment has been made
for all these factors of production. In other words, labour is the residual claimant.
5. Marginal productivity Theory
This theory was developed by Phillips Henry Wicksteed (England) and John Bates Clark
(USA). According to this theory, wages are based upon an entrepreneur‟s estimate of the
value that will probably be produced by the last or marginal worker. In other words, it
assumes that wages depend upon the demand for, and supply of, labour. Consequently,
workers are paid what they are economically worth. The result is that the employer has a
larger share in profit as has not to pay to the non-marginal workers. As long as each
additional worker contributes more to the total value than the cost in wages, it pays the
employer to continue hiring; where this becomes uneconomic, the employer may resort to
superior technology.
6. The bargaining theory of wages
John Davidson propounded this theory. Under this theory, wages are determined by the
relative bargaining power of workers or trade unions and of employers. When a trade union is
involved, basic wages, fringe benefits, job differentials and individual differences tend to be
determined by the relative strength of the organization and the trade union.
22
7. Behavioural theories
Many behavioral scientists - notably industrial psychologists and sociologists like Marsh and
Simon, Robert Dubin, Eliot Jacques have presented their views or wages and salaries, on the
basis of research studies and action programmes conducted by them. Briefly such theories
are:
i. The Employee‟s Acceptance of a Wage Level-This type of thinking takes into
consideration the factors, which may induce an employee to stay on with a
company. The size and prestige of the company, the power of the union, the
wages and benefits that the employee receives in proportion to the contribution
made by him - all have their impact.
ii. The Internal Wage Structure-Social norms, traditions, customs prevalent in the
organization and psychological pressures on the management, the prestige
attached to certain jobs in terms of social status, the need to maintain internal
consistency in wages at the higher levels, the ratio of the maximum and minimum
wage differentials, and the norms of span of control, and demand for specialized
labour all affect the internal wage structure of an organization.
2.3 Compensation.
Banjoko (1996) points out that the payment of wages and salaries is a reflection of a
transaction between the employees and employer involved in the employment contract.
Compensation can be defined as a managerial tool used to further the existence of a company.
It may not be crafted and limited to a particular form, but may be constantly adjusted
according to the needs, goals or objective of an enterprise and sometimes may even be
subjected to availability of resources.
23
Gary Dessler (date) defines compensation in these words “Employee compensation refers to
all forms of pay going to employees and arising from their employment.” The phrase „all
forms of pay‟ in the definition does not include non-financial benefits, but all the direct and
indirect financial compensations.
According to Bergmann (1988), compensation consists of four distinct components:
Compensation = Wage or Salary + Employee benefits +Non-recurring financial rewards+
Non-pecuniary rewards.
Banjoko (1996) suggested that salary can be administered in three ways:
i. Adhoc: Here, there is no attempt to evaluate jobs before assigning payment rates to them.
Increases in pay are therefore given erratically, often, at the demand of workers through the
union.
ii. Merit review: Here, jobs are evaluated before fixing wages and salary range. Workers are
appraised normally and given personal increases which will move their pay at varying speed
through the range. In other words, individual efforts and merit are rewarded.
iii. Incremental Scale: Here, all jobs are evaluated and graded with a salary range and
standard annual increment which is, automatic.
Compensation aids in:
1. Recruitment and retention of qualified employees- Good pay attract a pool of prospective
applicants. Organizations will through it recruitment process select the right staff with
needed qualification and skill. Once this rare genius are identified, good pay ,fringe
benefits and conducive working conditions aid the workers retention.
2. Increasing or maintaining morale/satisfaction- is assumed by theorist as a motivational
factor. Wikipedia enumerated the Abraham Maslow‟s (a psychologist) hierarchy of
24
needs theory as follow premises:
- That man is a wanting animal and his wants depend on what he has.
- That needs are arranged in hierarchy-once one need is satisfied it gives way for
another need to be satisfied.
He observed that these needs overlap and one of them predominates. The predominant need
is called the pre-potent need. Thus individual will tend to satisfy the pre-potent of most
powerful/pressing need at a given time. A pre-potent need must be totally or partially
satisfied before the next higher need is felt and its satisfaction desired. These needs are
satisfied by the compensation a worker earns.
The hierarchy of needs is:
- Physiological needs-Physiological needs are the basic physical requirements for
human survival. If these requirements are not met, the human body cannot function
properly and will ultimately fail. Physiological needs are thought to be the most
important; they should be met first. Air, water, and food are metabolic requirements
for survival in all animals, including humans. Clothing and shelter provide necessary
protection from the elements.
- Safety needs-Employee safety at work should be guaranteed. Safety and Security
needs include: Personal security, Financial security, Health and well-being, Safety net
against accidents/illness and their adverse impacts.
- Love and belonging-the third level of human needs is interpersonal and involves
feelings of belongingness. Friendship, Intimacy ,Family .According to Maslow,
humans need to feel a sense of belonging and acceptance among their social groups,
regardless if these groups are large or small.. Humans need to love and be loved –
both sexually and non-sexually – by others. Many people become susceptible to
25
- loneliness, social anxiety, and clinical depression in the absence of this love or
belonging element. This need for belonging may overcome the physiological and
security needs, depending on the strength of the peer pressure.
- Esteem-All humans have a need to feel respected; this includes the need to have self-
esteem and self-respect. Esteem presents the typical human desire to be accepted and
valued by others. People often engage in a profession or hobby to gain recognition.
These activities give the person a sense of contribution or value. Low self-esteem or
an inferiority complex may result from imbalances during this level in the hierarchy.
People with low self-esteem often need respect from others; they may feel the need to
seek fame or glory. However, fame or glory will not help the person to build their
self-esteem until they accept who they are internally. Psychological imbalances such
as depression can hinder the person from obtaining a higher level of self-esteem or
self-respect.
- Self-actualization- "What a man can be, he must be." This quotation forms the basis
of the perceived need for self-actualization. This level of need refers to what a
person's full potential is and the realization of that potential. Maslow describes this
level as the desire to accomplish everything that one can, to become the most that one
can be. Individuals may perceive or focus on this need very specifically. For example,
one individual may have the strong desire to become an ideal parent. In another, the
desire may be expressed athletically. For others, it may be expressed in paintings,
pictures, or inventions. As previously mentioned, Maslow believed that to understand
this level of need, the person must not only achieve the previous needs, but master
them.
Some criticisms against this theory are the assertion my Maslow that a non self actualized
26
man is an incomplete man is not true. This is because some people fixate on certain needs and
can be more actualized and satisfied at that level more that the so called self actualized man.
It is also a fallacy to assume that there is self-actualized man because men usually go for
higher achievement until they are dead. The self concept will affect the need level which an
individual will operate. Based on self concept an individual might feel he is more satisfied by
associating with people than achieving his job.
Lastly there is an apparent rigidity in the theory and it‟s rare that individuals satisfy these
needs in such a way as stipulated by Maslow.
Fig 2.1-Maslow hierarchy of needs pyramid
Source: Adapted
from Cole G.A (1995) Personnel Management.
Implication.
- When employees within an organization see a clear relationship between performance
and reward, job satisfaction sets in. These employees, become highly motivated and
give their best to the organization in return.
- Maslow theory has given a ground for attainment of work objective through growing
a dedicated and unstoppable workforce that will willingly and enthusiastically strive
27
Accomplishment
recognition,respect for other and by others
Self Actualization Needs
Esteem Needs
Love and Belongingness Needs
Safety Needs
Physiological Needs
friendship,family,sexual intimacy
food ,water,shelta sleep clothing
security of body,employment resources,family ,health
tirelessly.
- Rewards encourage peak performance, once employee sees a beneficial relationship
between performance and reward; he is bound to put in more efforts, so that he can
benefit more.
- Achieving internal and external equality- They include income distribution through
narrowing of inequalities, increasing the wages of the lowest paid employees,
protecting real wages (purchasing power), the concept of equal pay for work of equal
value compensation management strives for internal and external equity. Internal
equity requires that, pay be related to the relative worth of a job so that similar jobs
get similar pay. External equity means paying workers what comparable workers are
paid by other firms in the labor market. Even compensation differentials based on
differences in skills or contribution are all related to the concept of equity.
- It brings about efficiency. Efficiency objectives are reflected in attempts to link to link
a part of wages to productivity or profit, group or individual performance, acquisition
and application of skills and so on. Arrangements to achieve efficiency may be seen
also as being equitable (if they fairly reward performance) or inequitable (if the
reward is viewed as unfair).
- Macroeconomic stability - through high employment levels and low inflation, of
instance, an inordinately high minimum wage would have an adverse impact on levels
of employment, though at what level this consequence would occur is a matter of
debate. Though compensation and compensation policies are only one of the factors
which impinge on macro-economic stability, they do contribute to (or impede)
balanced and sustainable economic development.
28
- Efficient allocation of labor in the labor market- This implies that employees would
move to wherever they receive a net gain, such movement may be form one
geographical location to another or form on job to another (within or outside an
enterprise). The provision or availability of financial incentives causes such
movement. For example, workers may move form a labor surplus or low wage area to
a high wage area. They may acquire new skills to benefit form the higher wages paid
for skills. When an employer‟s wages are below market rates employee turnover
increases. When it is above market rates the employer attracts job applicants. When
employees move from declining to growing industries, an efficient allocation of labor
due to structural changes takes place .
- When compensation and reward is properly administered, there are less occurrences
of confrontations between employers and workers union.
- Reward desired behavior- pay should reinforce desired behaviors and act as an
incentive for those behaviors to occur in the future. Effective compensation plans
reward performance, loyalty, experience, responsibility, and other behaviors.
2.3.1 Theories of Compensation
Several notable scholars and practicing professionals have given their various contributions
to the definition of compensation and reward.
Flippo (1980) views compensation as one of the most difficult functions of personnel
management of determining rates of monetary compensation. Not only is it one of the most
complex duties, but it is also one of the most significant to both organisation and the
employee. The management of this very important monetary aspect of employee‟s
compensation is what is referred to as Wage and Salary administration. The need to
29
administer and control wages and /or salaries is to ensure equity both within and outside the
organisation itself and with respect to widening the local and national employment situation
Whitmore and Ibbeton (1977) in addition to the work of Flippo postulated that two major
considerations arise in the administration of wages and salaries:
- The need to regularly review the wages and salary situation in those areas where
similar employment conditions and types of work pertain.
- The need to hold under constant review the steadily changing factors which influence
the total field of payment within the organisation itself.
Sydney and Beatrice Webbs propounded The Webbs‟ Theory. This approached
compensation from the standpoint of unionism. The founders of the famous London School
of Economics, who happened to be a husband and his wife. The theory postulates that
workers are primarily bound together for the purpose of improving and maintaining their
working conditions. Therefore, the workers regard it as a way to economically motivate each
other. Webbs believe that workers are directly concerned with the wages and all related
allowances, compensation packages, and hours of works. The Webbs argue that workers find
themselves in a union because they realize that they are powerless fighting singly; hence the
need to present a united front through their union in fighting for their rights and privileges.
Essentially, the Webbs postulate that when workers organize themselves into trade unions,
they are interested in creating a potent means through which to pursue and achieve their
economic freedom.
Karl Marx‟s – view of compensation was from group approach. He reiterated the importance
30
of group and the tremendous forces possessed by groups to take over power in a capitalist
economy. The capitalist is most time ruthless and insensitive to workers need. Max
postulated that trade union is association of workers in which the workers organize
themselves to overthrow the capitalist sector, which has been exploiting their labour and then
compete among themselves for available jobs. According to Max, the only way by which the
workers can make their lots better is by forming unions, with which they will overthrow the
capitalist, their employers who constitute themselves as the masters. Hence, the workers
would be in a good stead to control the means of production and thereby improve their
working conditions.
2.3.2 Forms of Compensation
Bergmann(1988) identifies the following forms of compensation
Basic Wages/Salaries
Basic wages / salaries refer to the cash component of the wage structure based on which other
elements of compensation may be structured. It is normally a fixed amount which is subject
to changes based on annual increments or subject to periodical pay hikes.
Wages represent hourly rates of pay, and salary refers to the monthly rate of pay, irrespective
of the number of hours put in by the employee. Wages and salaries are subject to the annual
increments. They differ from employee to employee, and depend upon the nature of job,
seniority and merit.
Dearness Allowance
The payment of dearness allowance facilitates employees and workers to face the price
increase or inflation of prices of goods and services consumed by him. The onslaught of price
31
increase has a major bearing on the living conditions of the labour. The increasing prices
reduce the compensation to nothing and the money‟s worth is coming down based on the
level of inflation. The payment of dearness allowance, which
may be a fixed percentage on the basic wage, enables the employees to face the increasing
prices.
Incentives
Incentives are paid in addition to wages and salaries and are also called „payments by results‟.
Incentives depend upon productivity, sales, profit, or cost reduction efforts.
There are:
(a) Individual incentive schemes, and
(b) Group incentive programmes. Individual incentives are applicable to specific employee
performance. Where a given task demands group efforts for completion, incentives are paid
to the group as a whole. The amount is later divided among group members on an equitable
basis.
Bonus
The bonus can be paid in different ways. It can be fixed percentage on the basic wage paid
annually or in proportion to the profitability. The Government also prescribes a minimum
statutory bonus for all employees and workers. There is also a bonus plan which compensates
the managers and employees based on the sales revenue or profit margin achieved. Bonus
plans can also be based on piece wages but depends upon the productivity of labour.
Commissions
Commission to managers and employees may be based on the sales revenue or profits of the
32
company. It is always a fixed percentage on the target achieved. For taxation purposes,
commission is again a taxable component of compensation. The payment of commission as a
component of commission is practiced heavily on target based sales. Depending upon the
targets achieved, companies may pay a commission on a monthly or periodical basis.
Mixed Plans
Companies may also pay employees and others a combination of pay as well as commissions.
This plan is called combination or mixed plan. Apart from the salaries paid, the employees
may be eligible for a fixed percentage of commission upon achievement of fixed target of
sales or profits or Performance objectives. Nowadays, most of the corporate sector is
following this practice. This is also termed as variable component of compensation.
Piece Rate Wages
Piece rate wages are prevalent in the manufacturing wages. The laborers are paid wages for
each of the Quantity produced by them. The gross earnings of the labour would be equivalent
to number of goods produced by them. Piece rate wages improves productivity and is an
absolute measurement of productivity to wage structure. The fairness of compensation is
totally based on the productivity and not by other qualitative factors.
Fringe Benefits
Fringe benefits may be defined as wide range of benefits and services that employees receive
as an integral part of their total compensation package. They are based on critical job factors
and performance. Fringe benefits constitute indirect compensation as they are
usually extended as a condition of employment and not directly related to performance of
33
concerned employee. Fringe benefits are supplements to regular wages received by the
workers at a cost of employers. They include benefits such as paid vacation, pension, health
and insurance plans, etc. Such benefits are computable in terms of money and the amount of
benefit is generally not predetermined. The purpose of fringe benefits is to retain efficient and
capable people in the organization over a long period. They foster loyalty and acts as a
security base for the employees.
Profit Sharing
Profit-sharing is regarded as a stepping stone to industrial democracy. Profit-sharing is an
agreement by which employees receive a share, fixed in advance of the profits. Profit sharing
usually involves the determination of an organization‟s profit at the end of the fiscal year and
the distribution of a percentage of the profits to the workers qualified to share in the earnings.
The percentage to be shared by the workers is often predetermined at the beginning of the
work period and is often communicated to the workers so that they have some knowledge of
their potential gains. To enable the workers to participate in profit sharing, they are required
to work for certain number of years and develop some seniority. The theory behind profit-
sharing is that management feels its workers will fulfill their
responsibilities more diligently if they realize that their efforts may result in higher profits,
which will be returned to the workers through profit-sharing.
House Rent Allowance
Organizations either provide accommodations to its employees who are from different state
or country or they provide house rent allowances to its employees. This is done to provide
them social security and motivate them to work.
34
Conveyance
Organizations provide for cab facilities to their employees. Few organizations also provide
vehicles and petrol allowances to their employees to motivate them.
Leave Travel Allowance
These allowances are provided to retain the best talent in the organization. The employees are
given allowances to visit any place they wish with their families. The allowances are scaled
as per the position of employee in the organization.
Medical Reimbursement
Organizations also look after the health conditions of their employees. The employees are
provided with medi-claims for them and their family members. These medi-claims include
health-insurances and treatment bills reimbursements.
13th
month allowance
Thirteenth month bonus is paid to the employees during festive seasons to motivate them and
provide them the social security. The bonus amount usually amounts to one month‟s basic
salary of the employee.
Special Allowance
Special allowance such as overtime, mobile allowances, meals, commissions, travel
expenses, reduced interest loans; insurance, club memberships, etc are provided to employees
to provide them social security and motivate them which improve the organizational
Productivity
Non-Monetary Benefits
These benefits give psychological satisfaction to employees even when financial benefit is
not available. Such benefits are:
35
(a) Recognition of merit through certificate, etc.
(b) Offering challenging job responsibilities,
(c) Promoting growth prospects,
(d) Comfortable working conditions,
(e) Competent supervision, and
(f) Job sharing and flexi-time.
2.3.3 Factors Considered in Deciding the Compensation
Employers decide on what is the right compensation after taking into account the following
points.
The Job Description of the employee that specifies how much should be paid and the parts of
the compensation package. The Job Description is further made up of responsibilities,
functions, duties, location of the job and the other factors like environment etc. These
elements of the job description are taken individually to arrive at the basic compensation
along with the other components like benefits, variable pay and bonus. It needs to be
remembered that the HRA or the House Rental Allowance is determined by a mix of factors
that includes the location of the employee and governmental policies along with the grade of
the employee. Hence, it is common to find a minimum level of HRA that is common to all
the employees and which increases in proportion to the factors mentioned above.
The Job Evaluation that is a system for arriving at the net worth of employees based on
comparison with appropriate compensation levels for comparable jobs across the industry as
well as within the company. Factors like Experience, Qualifications, Expertise and Need of
the company determine how much the employer is willing to pay for the
employee. It is often the case that employers compare the jobs across the industry and arrive
36
at a particular compensation after taking into account the specific needs of their firm and in
this respect salary surveys and research results done by market research firms as to how much
different companies in the same industry are paying for similar roles.
Fig 2.2 Factors determining compensation
Source: Adapted from Gupta(2005)
External Factors Affecting Employees Compensation
Regulatory Compliance
To protect the working class from the exploitations of powerful employers, the government
37
External Factors
Regulatory compliance
Deman and supply of labour
cost of living
prevailing wage rate
labour and collective bargaining
Internal Factors
Financial capacity of firm
Top management philosophy
job Requirement
Organizational Politics
Empolyee related factors
Workers productivity
Job requirement
has enacted several laws. Laws on minimum wages, hours of work, equal pay for equal work,
payment of dearness and other allowances, payment of bonus, etc., have been enacted and
enforced to bring about a measure of fairness in compensating the working class. Thus, the
laws enacted and the labour policies framed by the government have an important influence
on wages and salaries paid by the employers. Wages and salaries can‟t be fixed below the
level prescribed by the government.
Demand and Supply of Labour
Wage is a price or compensation for the services rendered by a worker. The firm requires
these services, and it must pay a price that will bring forth the supply which is controlled by
the individual worker or by a group of workers acting together through their unions. The
primary result of the operation of the law of supply and demand is the creation of the going
wage rate. It is not practicable to draw demand and supply curves for each job in an
organization even though, theoretically, a separate curve exists for each job.
Cost of Living
Another important factor affecting the wage is the cost of living adjustments of wages. This
tends to vary money wage depending upon the variations in the cost of living index following
rise or fall in the general price level and consumer price index. It is an essential ingredient of
long-term labour contract unless provision is made to reopen the wage clause periodically.
Prevailing Wage Rates
Wages in a firm are influenced by the general wage level or the wages paid for similar
occupations in the industry, region and the economy as a whole. External alignment of wages
38
is essential because if wages paid by a firm are lower than those paid by other firms, the firm
will not be able to attract and retain efficient employees. For instance, there is a wide
difference between the pay packages offered by multinational and Indian companies. It is
because of this difference that the multinational corporations are able to attract the most
talented workforce.
Labour Union
Organized labor is able to ensure better wages than the unorganized one. Higher wages may
have to be paid by the firm to its workers under the pressure or trade union. If the trade union
fails in their attempt to raise the wage and other allowances through collective bargaining,
they resort to strike and other methods hereby the supply of labour is restricted. This exerts a
kind of influence on the employer to concede at least partially the demands of the labour
unions.
Internal Factors
Financial capacity of Firm
Employer‟s ability to pay is an important factor affecting wages not only for the individual
firm, but also for the entire industry. This depends upon the financial position and
profitability of the firm. However, the fundamental determinants of the wage rate for the
individual firm emanate from supply and demand of labour. If the firm is marginal and
cannot afford to pay competitive rates, its employees will generally leave it for better paying
jobs in other organizations. But, this adjustment is neither immediate nor perfect because of
problems of labour immobility and lack of perfect knowledge of alternatives. If the firm is
39
highly successful, there is little need to pay more than the competitive rates to obtain
personnel. Ability to pay is an important factor affecting wages, not only for the individual
firm but also for the entire industry.
Top Management Philosophy
Wage rates to be paid to the employees are also affected by the top management‟s
philosophy, values and attitudes. As wage and salary payments constitute a major portion of
costs and /or apportionment of profits to the employees, top management may like to keep it
to the minimum. On the other hand, top management may like to pay higher pay to attract top
talent.
Productivity of Workers
To achieve the best results from the workers and to motivate him to increase his efficiency,
wages have to be productivity based. There has been a trend towards gearing wage increase
to productivity increases. Productivity is the key factor in the operation of a company. High
wages and low costs are possible only when productivity increases appreciably.
Job Requirements
Job requirements indicating measures of job difficulty provide a basis for determining the
relative value of one job against another in an enterprise. Explicitly, job may be graded in
terms of a relative degree of skill, effort and responsibility needed and the adversity of
working conditions. The occupational wage differentials in terms of
a) Hardship,
b) Difficulty of learning the job
40
c) Stability of employment
d) Responsibility of learning the job and
f) Change for success or failure in the work.
This reforms a basis for job evaluation plans and thus, determines wage levels in an industry.
Employees Related Factors
Several employees related factors interact to determine his remuneration. These include
i) Performance: productivity is always rewarded with a pay increase.
Rewarding performance motivates the employees to do better in future.
ii) Seniority: Unions view seniority as the most objective criteria for pay
increases whereas management prefer performance to effect pay increases.
iii) Experience: Makes an employee gain valuable insights and is generally
rewarded
iv) Potential: organizations do pay some employees based on their potential.
Young managers are paid more because of their potential to perform even if
they are short of experience.
Organizational Politics
Compensation surveys, job analysis, job evaluation and employee performance are all
involved in wage and salary decisions. Political considerations may enter into the equation in
the following ways:
41
i) Determination of firms included in the compensation survey: managers could
make their firm appear to be a wage leader by including in the survey those
organizations that are pay followers.
ii) Choice of compensable factors for the job evaluation plan: Again, the job
value determined by this process could be manipulated
iii) Emphasis placed on either internal or external equity and
iv) iv) Results of employee performance appraisal may be intentionally disported
by the supervisor .Thus, a sound and objective compensation system may be
destroyed by organizational politics.
2.3.4 Compensation Design
Compensation design determines the value of specific, properly executed accomplishments
toward the achievement of desired outcomes. The value of the accomplishment, not the level
of activity, is used to establish the nature and amount of compensation. Ultimately,
compensation design should foster a productive and equitable, long-term relationship among
members, and between each member and the organization. The process begins by identifying
desired outcomes for the organization or operating unit. Importance and value are attached to
the results people achieve with reference to the need of the organization. Compensation is
based on the achievement of results that are critical to organizational success. Attracting,
retaining and motivating employees in today‟s business environment requires utilizing a host
of tools including base pay, incentives, equity, performance management, and benefits.
Balancing these tools in an equitable, affordable and real manner can present difficulties for
42
even the most dedicated employers. No universal, standard programme exists that can meet
every organization‟s needs. In order for the total rewards programme to work, it must fit the
organization‟s culture and strategic initiatives and compensation objectives.
These objectives are as follows
External competitiveness to recruit and retail
- To reward performance through salary without grade promotions
- Rewards for skill acquisition
- Internal equity among employees
- Pay for the person rather than just the job
- Built-in controls and cost constraints
- An understandable and equitable system
- Parallel career paths for managers and technical employees
- Flexibility to adapt quickly to market changes
- Management flexibility to assign a range of duties
2.4 Performance Management
Fletcher(1996) Performance management is a system approach which involves developing
organization‟s mission and objectives, enhancing communication within organization,
clarifying individual responsibilities and accountabilities, then defining and measuring
individual performance and rewarding performance, and finally improving staff performance
and developing career progression in the future. There is an apparent difference of definition
43
between Schineier and Fletcher, it is the communication. Fletcher pointed that enhancing
communication within the organization so that employees are aware of the objectives and the
business plan, and employees can continue communication in the production process for
exchanging information, discussing problems and seeking feedbacks. Thus, I would combine
the definition of performance management system from Armstrong, Fletcher and Schneier.
Clear and detailed employee performance objectives play a crucial role in helping companies
to perform in accordance with their business plan and achieve their strategic goals. Then, the
managing performance activities like seeking feedback and coaching, also evaluation and
rewarding are included in the theories of both authors. In addition to Fletcher (1996) view,
there would be a need for a continuous communication activity in the managing performance
phase as well. The Communication between managers and employees and communication
within employees could make employees understand the objectives and make managers
supervise the progress of daily work.
2.4.1 Objectives of Performance Management
a). empowering, motivating and rewarding employees to do their best.
b). Focusing employees tasks on the right things and doing them right
c). Proactive managing and resourcing performance against agreed accountabilities and
objectives
d). maximizing potentials of individual and teams to focus on achievement of organizational
objectives.
There is a dichotomy between the general performance management and the HR related
44
performance management. However the similarities of general performance management and
HR related performance management are the goal setting, planning, evaluation, feedback and
rewarding activities. However, the HR related performance management focus on the
management of employee or managers, then motivating employees and managers. Moreover,
general performance management was defined more widely than HR related performance
management. It considers the definition of goals and the measurement of goal attainment not
just financially but also in terms of meeting all stakeholder aspirations.
HR-performance management aims at developing potential capabilities of human resource.
The performance management must be in line with the company's long-term policies
(Kandula, 2006). Performance management involves managing employee efforts, based on
measured performance outcomes. Therefore, determining what constitutes good performance
and how the different aspects of high performance can be measured is critical to the design of
an effective performance management process. It is important to note that performance
management effectiveness increases when there is ongoing feedback, behavior-based
measures are used and preset goals and trained raters are employed (Lawler, 2003).
According to Schneier, Beatty and Baird (1987), a performance management system is
classified into 3 phases - Development, & planning phase, managing & reviewing phase and
rewarding phase.
Figure 2.3 Below shows the contents of three phases according Schneier, Beatty and Baird
(1987).
45
Source: Drawn according to interpretation-Original source: Schneier, Beatty and Baird,
(1987:98)
From above figure and according to Schneier et all(1987), the performance management
system consists of three phases: developing and planning performance is the Phase 1 which
includes outlining development plans, setting objectives and getting commitment activities;
managing and reviewing performance is the Phase 2 which includes assessing against
objectives, seeking feedback, coaching and document reviews activities; rewarding
performance is the last phase which has personal development, results of performance and
link to pay activities.
Motivation of employees at work is one of the fundamental aim of performance management.
Since employee performances are captured, reported accurately and the subsequently
rewarded. Workers motivation is a very important for an organization because of the
following benefits it provides:
Puts human resources into action
Every concern requires physical, financial and human resources to accomplish the goals. It is
through motivation that the human resources can be utilized by making full use of it. This can
46
PHASE 1
•Developing & Planning performance
• - outlining development
• setting objective
• getting commitment
PHASE 2
•Managing and reviewing performance,
• asses against objectives
• Feedback, couching, document reviewa
PHASE 3
• PerformanceRewarding
• Personal Development-
• Link to pay
• - Results
be done by building willingness in employees to work. This will help the enterprise in
securing best possible utilization of resources.
Improves level of efficiency of employees
The level of a subordinate or a employee does not only depend upon his qualifications and
abilities. For getting best of his work performance, the gap between ability and willingness
has to be filled which helps in improving the level of performance of subordinates. This will
result into-
a. Increase in productivity,
b. Reducing cost of operations, and
c. Improving overall efficiency.
Leads to achievement of organizational goals
The goals of an enterprise can be achieved only when the following factors take place :-
d. There is best possible utilization of resources,
e. There is a co-operative work environment,
f. The employees are goal-directed and they act in a purposive manner,
g. Goals can be achieved if co-ordination and co-operation takes place
simultaneously which can be effectively done through motivation.
Builds friendly relationship
Motivation is an important factor which brings employees satisfaction. This can be done by
keeping into mind and framing an incentive plan for the benefit of the employees. This could
47
initiate the following things:
h. Monetary and non-monetary incentives,
i. Promotion opportunities for employees,
j. Disincentives for inefficient employees.
In order to build a cordial, friendly atmosphere in a concern, the above steps should be taken
by a manager. This would help in:
Leads to stability of work force
Stability of workforce is very important from the point of view of reputation and goodwill of
a concern. The employees can remain loyal to the enterprise only when they have a feeling of
participation in the management. The skills and efficiency of employees will always be of
advantage to employees as well as employees. This will lead to a good public image in the
market which will attract competent and qualified people into a concern. As it is said, “Old is
gold” which suffices with the role of motivation here, the older the people, more the
experience and their adjustment into a concern which can be of benefit to the enterprise.
From the above discussion, we can say that motivation is an internal feeling which can be
understood only by manager since he is in close contact with the employees. Needs, wants
and desires are inter-related and they are the driving force to act. These needs can be
understood by the manager and he can frame motivation plans accordingly. We can say that
motivation therefore is a continuous process since motivation process is based on needs
which are unlimited. The process has to be continued throughout.
We can summarize by saying that motivation is important both to an individual and a
48
business.
Motivation is important to an individual as:
- Motivation will help him achieve his personal goals.
- If an individual is motivated, he will have job satisfaction.
- Motivation will help in self-development of individual.
- An individual would always gain by working with a dynamic team.
Similarly, motivation is important to a business as:
- The more motivated the employees are, the more empowered the team is.
- The more is the team work and individual employee contribution, more profitable and
successful is the business.
- During period of amendments, there will be more adaptability and creativity.
- Motivation will lead to an optimistic and challenging attitude at work place
The balanced score card model (BSC Model) is one of the outstanding and popular method of
tracking and measurement of performance. This is due to its flexibility. Each of its 4 category
could be defined by unlimited numbers of performance indicator which may vary from one
department/organization to another, hence making it a perfect performance measurement tool
for every organization.
2.5 Performance measurement models
A model is a theoretical construct representing economic processes by a set of variables and a
set of relationships between them. Sometime it may also connote representation of a system
49
using mathematical concepts and language. The performance measurement model are
mathematical and theoretical construct that tries to evaluate the activities of an employee by
assigning values to them and comparing actual against set benchmark.
2.5.1 Balanced Scorecard Model (Bsc Model)
Kaplan and Norton (1996) developed and defined the balanced scorecard as a strategic
planning and management system that is used extensively by organizations whether private or
government, and even non-profit organizations worldwide to align business activities to their
visions and strategy and further monitor organization performance against set benchmarks.
2.5.1.2 Perspectives of the BSC Model
The BSC performance measurement model is so unique because of its four categories,
cardinal stand points or perspectives from which it measures individual and organizational
performance.
Kaplan and Norton (1996) identified the four perspectives as:
- The learning and growth Perspective
- The business process perspective
- The customer perspective
- The Financial perspective
50
Fig 2.4 Adapted from Robert S. Kaplan and David P. Norton,(1996)
The Learning & Growth Perspective
This perspective includes employee training and corporate cultural attitudes related to both
individual and corporate self-improvement. In a knowledge-worker organization, people --
the only repository of knowledge -- are the main resource. In the current climate of rapid
technological change, it is becoming necessary for knowledge workers to be in a continuous
learning mode. Metrics can be put into place to guide managers in focusing training funds
where they can help the most. In any case, learning and growth constitute the essential
foundation for success of any knowledge-worker organization.
Kaplan and Norton emphasize that 'learning' is more than 'training'; it also includes things
like mentors and tutors within the organization, as well as that ease of communication among
workers that allows them to readily get help on a problem when it is needed. It also includes
51
technological tools; what the Baldrige criteria call "high performance work systems."
The Business Process Perspective
This perspective refers to internal business processes. Metrics based on this perspective allow
the managers to know how well their business is running, and whether its products and
services conform to customer requirements (the mission). These metrics have to be carefully
designed by those who know these processes most intimately; with our unique missions these
are not something that can be developed by outside consultants. It covers Product sales
The Customer Perspective
Recent management philosophy has shown an increasing realization of the importance of
customer focus and customer satisfaction in any business. These are leading indicators: if
customers are not satisfied, they will eventually find other suppliers that will meet their
needs. Poor performance from this perspective is thus a leading indicator of future decline,
even though the current financial picture may look good.
In developing metrics for satisfaction, customers should be analyzed in terms of kinds of
customers and the kinds of processes for which we are providing a product or service to those
customer groups.
The Financial Perspective
Kaplan and Norton(1996) do not disregard the traditional need for financial data. Timely and
accurate funding data will always be a priority, and managers will do whatever necessary to
provide it. In fact, often there is more than enough handling and processing of financial data.
With the implementation of a corporate database, it is hoped that more of the processing can
52
be centralized and automated. But the point is that the current emphasis on financials leads to
the "unbalanced" situation with regard to other perspectives. There is perhaps a need to
include additional financial-related data, such as risk assessment and cost-benefit data, in this
category.
2.5.1.3 The Key Performance Indicators (KPI‟s)
The key performance indicators (KPI‟s) are performance measures that indicate progress
toward a desirable outcome. Strategic KPIs monitor the implementation and effectiveness of
an organization's strategies, determine the gap between actual and targeted performance
and furthermore also determines organization effectiveness and operational efficiency.
Performance indicators are attached to each perspective segment.- which are usually referred
to as key performance indicator (KPI).the number of indicators varies from one type of
organization to another, strategy and corporate objectives. Values are attached to each
indicator which will be use to measure against staff performance. For example in the diagram
below the indicators under the financial category are
Deposit target of staff =N40m
Loan target of staff=N0.5m
53
Fig: 2.5 Balanced score card of a marketing staff of a bank, showing measuring performance
from 4 category against 7 indicators. Actual performance is measured against Target and
staff is rated.
Source : Adapted from Michael(2016)
54
BALANCED SCORE CARD FOR NANA UCHE AYO FOR MONTH ENDED AUGUST 2016
BSC Model Name NANA UCHE AYO Perspective Performance(%)Target (%) Status
4 category, 7 indicatorsStaffID NU149052 Customer 20 20
August 2016 score cardGrade SA Financial 50 50
Role ACCOUNT OFFICER People 0 5
Location LAGOS Process 21 25
KEY 91 100
CATEGORY KEY SCORE RATING
PERFORMANCE INDICATOR MARKED PURPLE Good RATING CATEGOGY
Fair STAR PERFORMER
CUSTOMER Poor
Performance Measure Weight(%)Description Actual Target PerformanceStatus
DORMANT ACCOUNTS 20 DORMANT ACCOUNTS REACTIVATION 26 20 20
20 20
FINANCIAL
Performance Measure Weight(%)Description Actual(000) Target (000)PerformanceStatus
CASA-DEPOSIT 40 AVERAGE DEPOSIT POTFOLIO 317,805.25 45,000.00 40
LOANS 10 AVERAGE LOAN POTFOLIO 20179.58 500.00 10
50 50
PEOPLE
Performance Measure Weight(%)Description Actual Target PerformanceStatus
E-LEARNING 5 number of learning programNUMBER OF E LEARNING PROG 0 1 0
PROCESS 5 0
Performance Measure Weight(%)Description Actual Target PerformanceStatus
ACTIVE POS ISSUED 10 NUMBER OF POS ISSUED 3 5 6
DEBIT CARDS ISSUED 10 NUMBER OF DEBIT CARDS ISSUED 65 20 10
MOBILE BANKING 5 NUMBER OF MOBILE ACTIVATIONS 22 20 5
25 21
Good KPIs serve the following functions:
Provide an objective way to see if strategy is working
Offer a comparison that gauges the degree of performance change over time
Focus employees' attention on what matters most to success
Allow measurement of accomplishments, not just of the work that is performed
Provide a common language for communication
Help reduce intangible uncertainty
Are valid, to ensure measurement of the right things
Are verifiable, to ensure data collection accuracy
2.5.2 Porter‟s Five Forces Model
This model is an organizational related model of performance measurement. it view
performance from the view of organization as a group under a competitive environment
rather than from the standpoint of individual‟s. Porter‟s Five forces model focuses on five
key areas: the threat of entry, the power of buyers, the power of suppliers, the threat of
substitutes, and competitive rivalry.
55
Fig 2.6 Porters Five Forces Model
Source: Porter (2006)
A). The threat of entry.
This defines the level of threat posed by new entrants to existing organization or threat posed
by existing organization to new entrant, which to a large extent determines the continuous
existence or subsequent failure of an organization. Often driven by the extent to which there
are barriers to entry. These barriers must be overcome by new entrants if they are to compete
56
COMPETITIVE
RIVALRY
Bargaining
Powers of
Suppliers
Bargaining
Powers of
Buyers
Threat Of New Entrants
Threat Of Substitute Products
successfully. Johnson et al (2005), suggest that the existence of such barriers should be
viewed as delaying entry and not permanently stopping potential entrants. Typical barriers
are detailed below.
- Economies of scale.- For example, the benefits associated with volume manufacturing
by organizations operating in the automobile and chemical industries. Lower unit
costs result from increased output, thereby placing potential entrants at a considerable
cost disadvantage unless they can immediately establish operations on a scale that will
enable them to derive similar economies.
- The capital requirement of entry-These vary according to technology and scale.
Certain industries, especially those which are capital intensive and/or require very
large amounts of research and development expenditure, will deter all but the largest
of new companies from entering the market.
- Access to supply or distribution channels-In many industries, manufacturers enjoy
control over supply and/or distribution channels via direct ownership (vertical
integration) or, quite simply, supplier or customer loyalty. Potential market entrants
may be frustrated by not being able to get their products accepted by those individuals
who decide which products gain shelf or floor space in retailing outlets. Retail space
is always at a premium and untried products from a new supplier constitute an
additional risk for the retailer.
- Supplier and customer loyalty- A potential entrant will find it difficult to gain entry to
an industry where there are one or more established operators with a comprehensive
knowledge of the industry, and with close links with key suppliers and customers.
- Cost disadvantages independent of scale- Well-established companies may possess
cost advantages which are not available to potential entrants irrespective of their size
57
and cost structure. Critical factors include proprietary product technology, personal
contacts, favorable business locations, learning curve effects, favorable access to
sources of raw materials, and government subsidies.
- Expected retaliation-In some circumstances, a potential entrant may expect a high
level of retaliation from an existing firm, designed to prevent entry – or make the
costs of entry prohibitive.
- Government regulation- This may prevent companies from entering into direct
competition with nationalized industries. In other scenarios, the existence of patents
and copyrights afford some degree of protection against new entrants.
- Differentiation- Differentiated products and services have a higher perceived value
than those offered by competitors. Products may be differentiated in terms of price,
quality, brand image, functionality, exclusivity, and so on. However, differentiation
may be eroded if competitors can imitate the product or service being offered and/or
reduce customer loyalty
B). The Power of Buyers
The power of the buyer will be high where:
- there are a few, large players in a market. For example, large supermarket chains can
apply a great deal of price pressure on their potential suppliers. This is especially the
case where there are a large number of undifferentiated, small suppliers, such as small
farming businesses supplying fresh produce to large supermarket chains.
- the cost of switching between suppliers is low, for example from one haulage
58
contractor to another
- the buyer‟s product is not significantly affected by the quality of the supplier‟s
product. For example, a manufacturer of foil and cling film will not be affected too
greatly by the quality of the spiral-wound paper tubes on which their products are
wrapped.
- buyers earn low profits.
- buyers have the potential for backward integration, for example where the buyer
might purchase the supplier and/or set up in business and compete with the supplier.
This is a strategic option which might be selected by a buyer in circumstances where
favorable prices and quality levels cannot be obtained.
- buyers are well informed. For example, having full information regarding availability
of supplies.
C). The Power of Suppliers
The power of the seller will be high where (and this tends to be a reversal of the power of
buyers):
- there are a large number of customers, reducing their reliance upon any single
customer.
- the switching costs are high. For example, switching from one software supplier to
another could prove extremely costly.
- the brand is powerful (BMW, McDonalds, Microsoft). Where the supplier‟s brand is
powerful then a retailer might not be able to operate a particular brand in its range of
products.
- there is a possibility of the supplier integrating forward, such as a brewery buying
59
restaurants.
- customers are fragmented so that they have little bargaining power, such as the
customers of a petrol station situated in a remote location.
D). The threat of Substitutes
The threat of substitutes is higher where:
- There is product-for-product substitution, eg for fax and postal services
- here is substitution of need. For example, better quality domestic appliances reduce
the need for maintenance and repair services. The information technology revolution
has made a significant impact in this particular area as it has greatly diminished the
need for providers of printing and secretarial services
- there is generic substitution competing for disposable income, such as the competition
between carpet and flooring manufacturers.
Competitive Rivalry
Competitive rivalry is likely to be high where:
There are a number of equally balanced competitors of a similar size. Competition is likely to
intensify as one competitor strives to attain dominance over another.
- the rate of market growth is slow. The concept of the life cycle suggests that in mature
markets, market share has to be achieved at the expense of competitors
- there is a lack of differentiation between competitor offerings because, in such
60
situations, there is little disincentive to switch from one supplier to another
- the industry has high fixed costs, perhaps as a result of capital intensity, which may
precipitate price wars and hence low margins. Where capacity can only be increased
in large increments, requiring substantial investment, then the competitor who takes
up this option is likely to create short-term excess capacity and increased competition
- there are high exit barriers. This can lead to excess capacity and, consequently,
increased competition from those firms effectively „locked in‟ to a particular
marketplace.
In summary, the application of Porter‟s five forces model will increase management
understanding of an industrial environment which they may want to enter.
2.6 REWARDS
Rewards are positive outcomes that are earned as a result of an employee's performance.
Reward may not be possible without a performance measurement system that tries to monitor
and score employee against assigned targets. These rewards are aligned with organizational
goals. When an employee helps an organization in the achievement of one of its goals, a
reward often follows. According to Deci and Ryan there are two general types of rewards that
motivate people: intrinsic and extrinsic.
2.6.1 Intrinsic Rewards
Intrinsic motivation- refers to behaviour that is driven by internal rewards. In other words,
the motivation to engage in a behaviour arises from within the individual because it is
intrinsically rewarding. In that it is something that you have to offer yourself and its driven
61
by personal interest or enjoyment in the work itself. Because intrinsic motivation exists
within the individual, achieving it does not depend on others. Some people believe that the
most powerful rewards come from inside a person. (Coon & Mitterer, 2010)
Think of that sense of accomplishment you feel once you have overcome a significant
challenge or completed an assignment or work project that required a good deal of effort.
Intrinsic motivation provides that personal pat on the back or natural high that reflects a
person's ability, competency, growth, knowledge and self-control over their endeavors.
(Brown, 2007) Employees who are intrinsically motivated tend to work at higher levels of
productivity and strive to develop professionally. Intrinsic rewards include things such as:
personal achievement, professional growth, sense of pleasure and accomplishment.
2.6.2 Intrinsic Rewards in the Workplace
In a knowledge economy where the greatest asset an employee can offer an organization is
their intelligence, experience, problem solving ability and change-savvy person. intrinsic
rewards are especially important to workers. In fact, Frederick Herzberg, who is one of the
leading theorists of workplace motivation, found intrinsic rewards to be much stronger than
financial rewards in increasing employee motivation. This is not to say that employees will
not seek financial rewards in addition to intrinsic rewards, rather it just means that money is
not enough to maximize motivation in most employees. People want to feel like their
contributions matter.
For example, an employee might want to reach a sales quota set by his manager to earn the
bonus that is attached to it, but unless the employee feels a sense of accomplishment as part
of making those sales, the motivation to achieve the quota is less powerful. To help
62
employees with their intrinsic motivation, managers should:
- provide meaningful work
- allow workers to make choices through a high level of autonomy
- provide opportunities for employees to show their competence in areas of expertise
- facilitate professional development so that employees can expand on their level of
knowledge
- offer frequent opportunities for employees to reward themselves
- allow employees the opportunity to connect with those with whom they serve to
obtain valuable feedback
- give them a path to monitor their progress with milestones along the way
2.6.3 Extrinsic Rewards
Extrinsic motivation is based on tangible rewards. Unlike intrinsic motivation that is self-
administered, extrinsic motivation is external to the individual and is typically offered by a
supervisor or manager who holds all the power in relation to when extrinsic rewards are
offered and in what amount. Extrinsic rewards are usually financial in nature, such as a raise
in salary, a bonus for reaching some quota or paid time off. However, extrinsic rewards can
also be as simple as getting the better office, verbal praise, public recognition or awards,
promotions and additional responsibility.
These material rewards can be motivating to employees because pay, time off, advancement
and recognition are important to most workers. Just imagine how de-motivating it would be
to be underpaid, overworked and unappreciated, and you can quickly see how important
extrinsic rewards are to organizational success. An extrinsically motivated person will work
63
on a task that they do not particularly care for simply because of the anticipated satisfaction
that will come from some extrinsic reward. For example, the employee may not be interested
in the product he is selling, but reaching the quota means the bonus, therefore he is motivated
to put forth the effort he needs to meet the sales quota.
2.6.4 Extrinsic Rewards in the Workplace
Providing employees with extrinsic rewards is relatively straightforward and usually built
into performance reviews or individual projects. They are particularly useful in the short-term
for motivating employees to work towards one specific organizational goal. Meeting the sales
quota for a bonus is an example of offering an extrinsic reward for a short-term goal.
2. 7 The Employee Rewards System
Reward should be viewed by managers as a tool to attract, motivate and retain exceptional
employees. A reward system must reflect fairness and goodwill to the employee. It should
give much to where much is coming from , it should be non-discrimination in application and
should embrace the equity, diversity and inclusion in approach (Michael, 2015)
Exceptional employees most time are interpreneurs, who Posses diverse skill that an
enterprise are in need of, they work with minimal or no supervision, and most time work to
achieve and score above their assigned target no matter how difficult or unachievable the
measurement parameters have been set by seldom employers with exploitative tendencies. A
good organization ordinarily should identify these categories of employees, reward and
promote them to strategic positions within organizations. These category of employees
should be the ones heading the division, directorates, and even technical assistance to the
64
managing directors and executive directors and with time assume these positions. There will
be a synergetic effects within the organization if strategic position are manned by competent
individual and leaders who have been grown within an organization over time. The benefit
accrued from such synergy may include-
- Increased productivity
- Sustained productivity
- Sustained and even increased profit
- Minimal employee turnover
- Wilful Sharing of knowledge by employees
- Motivated workforce
- Perpetual succession
- Innovations and rapid tactical response to both internal and external threat
- Gaining a competitive advantage
The right people must be originally selected into the organization, motivated to works; and
sound personnel promotion and training decisions must be made in filling no entry level. An
effective personnel performance evaluation system is a crucial cornerstone in this process, as
it provides the data needed for most of the required administrative decisions. This system
plays a key role in motivating people to utilize their abilities in pursuing the organization's
goals(Musgrove & Creighton, 1973).
Serious organizations grow their managers from within (Michael, 2015). Rewards represent
important mechanisms by which employee behaviors can be aligned with the interests of the
organization (Eisenhardt, 1989). Particularly, pay-for-performance is a reward practice that
65
links one's pay increase to one's performance, and could be used to direct, sustain, and
motivate desirable behaviors, such as knowledge sharing (Bartol and Srivastava, 2002),
creativity (Eisenhardt et al., 1998), quality (Cowherd and Levine, 1992) and customer
satisfaction (Delaney and Huselid, 1996). Pay-for-performance establishes the behavioral
criteria by which rewards are allocated and in doing so underpins the alignment of employee
behavior with organizational values and objectives. Therefore, if an employee achieves his or
her performance objectives then the employee receives a pay increase. This simple and
visible link between pay and performance recognizes an employee for a specific level of
accomplishment, therefore nurturing favorable work attitudes, such as satisfaction and
commitment (Heneman et al., 1988). Thus, the effectiveness of pay-for-performance has a
direct influence on high levels of service quality and desirable work attitudes.
2.7.1 Effect of Poor or Weak reward system on organizations
According to Michael(2015) Weak reward system connotes weak relationship with
employees. He identified the following as effects of poor compensation system.
1. Employee turnover- When employees do not see a clear relationship between work
and pay they become demoralized due to the poor compensation system and
inequality within an enterprise. Performing employees feel cheated and tends to fall
out to look for greener pastures. Some of these exits become entrepreneurs who
directly compete with the business or end up becoming machineries of competitors
who hire them to crush out their former employers.
2. Brain drain- Due to the grievance, rift and mistrust between the employee and
employer, a demotivated employee will deliberately refuse to share any knowledge he
66
has to other employees or may even withhold sensitive information that will amount
to financial or reputational loss on the path of the employer.
3. De-motivated work force- when worker morale is low, it affects productivity of
individual, groups and even the organization at large.
4. Increase in wastages- employee reaction to unfair labour practice may be passive.
Passive reactions of employee are much more dangerous and have a disastrous effect
on organizations at the long run. As reacting employees do not air out their grievances
in voices or in writing nor through groups(formal or informal) that exist within an
organization but reacts internally by exhibiting attitudes that runs contrary to
organization objective. For example an employee technically alters a process or
deliberately refuse to correct a process that leads to a chance of loss.
5. Increase in time offs- A demoralize sales personnel officer may decide to spend more
time at home under the guise that he is in the field.
6. Negative attitude to work- poor attitude to work are synonymous with a demoralized
worker. Lateness to work, carefree attitudes, frustration, anger, hatred form part of
employee attitude at work. Non of these attitude are positive reinforcement to and at
work.
7. Dwindling profits- the overall impact of having unproductive or demoralized workers
must always reflect on profit. Once productivity is altered it directly impact on profits.
8. Increased competitors activity- as they buy your turned over employees so they
possess your business secret. In extreme conditions, an aggrieved employee can do
everything possible to bring an enterprise to its knees. An aggrieved soldier who was
denied his right to fight for Sparta brought down ancient Sparta by leading the
67
enemies through a mountain path that were never known to the enemies. Soon did a
historic city in ancient Greece that have never been conquered in battle for many
years brought to her knees within hours. it was an epic fall. The fall was the end of
Sparta.
9. Eventual liquidation of organization- Prolonged and persistent decline in profit
implies looming bankrupsy. Once an enterprise is bankrupt, it means it has ceased to
exist.
2.8 Empirical review.
Quite a number of empirical studies have been conducted on the impacts of compensation and
reward system on employees‟ performance in an organization. For instance, Riaz (2014) studied
the impact of compensation of employee performance on organization commitment on the
performance of employee, by using SPSS as a statically tool and concluded that Compensation in
the form of incentives, salaries will perform an important part to enhance motivation of employee
in Local Revenue Management.
In the research work of Ramzan, Hafiz, Zubair, Ali and Arslan (2014) on the Impact of
Compensation on Employee Performance (Empirical Evidence from Banking Sector of
Pakistan) –they submitted that compensation and employee performance should share a
relationship. SPSS and ANNOVA were used to analyze the significance effects compensation
and rewards on employee Performance
Mukulu et all(2014) studied the effect of reward and compensation strategies on the
performance of commercial banks in Kenya. They submitted that Human resources are one of
the most critical components of strategic success across all organizations.
In the empirical work of Staphen (date) on Performance appraisal, he tried to study to
68
understand job satisfaction and motivation of personnel. Trust in the Performance Appraisal
system is likely to affect motivation.
In the empirical work of Yasmeen et al(2013) on impact of rewards on organizational
performance (a case study of Pakistan Telecom Sector) shows that appreciation and
recognition are two main factors which affect an organization performance in Pakistan
Telecom sector. Therefore results indicate that there exists insignificant and weak
relationship between salary, bonus and organization performance. This shows that intrinsic
rewards play an important role to increase the organization performance. So if organization
provides intrinsic rewards to its employees, the employees are more motivated as compared
to extrinsic rewards.
Nazir and Khan (2013) examined the degree of organizational engagement and job comfort in the
UK Higher Education sectors and universities and conclude that UK Higher Education system
give rewards(cash and non-cash) to members of organization and makes them competent because
it recognized that the members of organization are social agents. Nguithomaskatuaat (2014) study
that reward and compensation have major influence on the function of banks In Kenya by using
SPSS and MS Excel and conclude that rewards and compensation system have an important
effect on the performance of banks employee.
Adewale et al (2014) analyze the impact of compensation system on the job performance of
employees and work on only preferred private institutes in Ogun State, South-West Nigeria by
using questionnaire. He fined that institutes which have more appropriate compensation packages
embed an affirmative effect on employee‟s performance therefore the turnover of employee
become less and they sincere with their job and stay in organization.
Ellis (2011), studied the extent to which compensation management can be used as a tool for
improving organizational performance in a typical public sector organization like the Anambra
69
State of Nigeria Civil Service by using questionnaire and concluded that The outcome of
hypothesis reveals that the reform programs of the Anambra State Government have not had a
significant effect on financial compensation policies and practices of the civil service.
Nazi et al (2013), checked that what is the degree of organizational dedication and job
satisfaction presently in the United kingdom Higher Education sector and universities by using
correlation technique and
concluded that United kingdom Higher Education sector propose both cash and non-cash basis
rewards to members of organization and makes them capable as it count that the member of
organization are social agents.
The research Christen and Lyer (2005) focuses on the relationship of effort job performance and
job satisfaction. The need of the link between the three “effort” as opposed to “job performance”
and then resulted in “job satisfaction” is highlighted. In output of the research is that the positive
and negative elements neglect each other. After working on first element, the effect of job
performance can be achieved and so the job satisfaction but still less than the expected level.
70
CHAPTER THREE
3.0. METHODOLOGY
3.1 Introduction:
This section provides the methods and procedures employed to carry out the research study.
It therefore describes the types and how data were collected and analyzed so that valued
conclusion could be drawn on the relationship between the compensation and reward system
and performance of banks in Nigeria.
The chapter contains model specification, population and sampling techniques, sources of
data, estimation techniques, model testing, among others.
3.2 Research design
This research work adopts cross sectional survey method to investigate the impact of
compensation and reward system on the performance of a bank organization. The survey
instruments were in two Sections: Section 1 elicits demographic information about the
respondents while section 2 consists of five parts to collect information on the variables of
the study. Structured questionnaires were designed to collect data from randomly sampled
respondents from 5 banks which form the sample for the study. The study thus adopted
simple random sampling technique to select 100 employees from 5 deposit money banks
(DMBs) in Birnin Kebbi.
Analytical techniques like Pearson correlation and regression analysis were applied to
analyze the data collected for the study.
3.3 Population of Study
The population of this study consists of the selected five money deposit banks in Birnin
71
Kebbi. The banks include Keystone Bank, Union Bank, GTB, UBA and First Bank Plc.
3.4 Sampling and sample size
This study adopted simple random sampling technique to select 100 employees from 5
deposit money banks (DMBs) in Birnin Kebbi. A number of 20 respondents were drawn from
each bank. Simple random sampling technique was adopted because it gives every member of
staff equal chances of being considered/selected and thus would enhance objectivity of
findings from the study (Ismail & majid 2015)
These staffs shall be duly administered with questionnaires as respondents and their
responses will be used for data analysis and testing of hypotheses.
3.5 Method of Data Collection
Data were collected from both primary and secondary sources. The primary data were
collected using structured questionnaires and in depth interview. Likewise, secondary data
were used through the review of related literatures on the subject. Periodicals, daily
newspapers, CBN published reports and also the worldwide web were used to source for
reasonable data covering the subject matter.
3.5.1 Primary Source of Data
The primary data were collected through the instruments of questionnaires and interview.
They were used to gather information from the respondents. However, when designing the
questionnaire, the researcher was mindful of the different background of the staff
72
(respondents) and the need for coherent responses. The interview carried out by the
researcher, so as to get clearer picture and detailed interpretation some of the responses
emanating from the respondents.
Questionnaires
Primary data were collected from the sampled banks with the use of structured questionnaire
administered on the bank staff and management. Five commercial banks in Birnin Kebbi
were sampled for the purpose of this study. A number of 20 staff from each bank were
served with the questionnaires. Hence a total number of 100 questionnaires were
administered on the participants from all the banks.
The questionnaires were made up of 5 sections, with each section addressing questions
pertaining to each of the 5 variables in the model of this study. The variables include
wellbeing; compensation structure; staff promotion; incentive/ rewards and finally
organizational performance.
Each section contains 20 questions. All the questions were designed using 5 point Likert
scale as follows: Strongly agree=5, Agree =4, Undecided =3, Disagree =2, Strongly Disagree
=1.
All questions were distributed personally and hence the response rate was 100%.
Interviews
The researcher used this data collection instrument as a support to the questionnaires to seek
the opinions of staff from 5 different banks on some of the responses obtained from the
respondents. This was done to further acquire a deeper understanding of inherent staff
conditions at work, feelings and experiences of staff, staff compensation and reward system
73
and performance.
3.5.2 Secondary Source of Data
The researcher also consulted published and unpublished books written by different authors
relating to the research topic, seminars and conferences papers, journals, dailies, magazines
among others. Secondary data from the web were also browsed . The Wikipedia,
Investopedia were also firm sources of secondary data for this study.
However, primary data were used majorly in the analysis because most of the variables
involved in this study are personal issues and require the respondents to give clear and direct
information about the issues. Hence, the data that shall be analyzed in this study shall be
based on the data collected from primary sources.
3.6 Modeling
This section shall present specification of model which permits the qualification of economic
relationship between economic variables. The model for this research work shall be in line
with what is rooted in the extant theoretical framework on the impact of compensation and
reward system on the performance of a bank organization. While bank performance is the
dependent variable, other variables like wellbeing; compensation structure; staff promotion;
incentive/ rewards will be the independent variables.
Functional econometric models for this study shall therefore be specified in line with
Yasmeen et al (2013); Mukulu et al (2014) as follows:
74
Performance = f (wellbeing , compesation, promotion,
incentives/rewards) ……………… (3.1)
Following from the theoretical perspective, the models were specified such that the economic
relationships as stated in the objectives of the study can be tested.
The model in equation 3.1 can be functionally specified in a linear form as follows:
PERFORM = b0 + b1 WELL + b2COMPES + b3 PROMO +
b4I&R + e …………… (3.2)
Where
b0 = Constant
b1 - b4 = Coefficient or parameters which show the extent to
which each of the independent variables affects the
dependent variable.
PERFORM = Bank Performance
WELL = Staff Wellbeing
COMPES = Compensation Structure
PROMO = Staff Promotion
I&R = Incentive/ Rewards
e = Error term which represent other omitted variables.
75
3.7 Analytical Technique
The analytical technique for this study include Pearson correlation and regression analysis
which shall be applied to measure the impacts and relationships among variables. The process
of analysis was carried out in SPSS 17.0 version for windows.
According to Alan, (n.d), multiple regression is a technique that allows additional factors to
enter the analysis separately so that the effect of each can be estimated. It is valuable for
quantifying the impact of various factors simultaneously on a single dependent variable.
Further, it also remedies the problem biasness caused by the omitted variables in simple
regression model.
For example when a variable Y depends on other variables X1, X2….. Xn.
A multiple regression model can be specified as:
Y = b0 + b1X1 + b2X2 + …… + bnXn + e …………………… (3.5)
Where
Y = Dependent variable
X1, X2…Xn = Independent variables
b0 = Constant
b1, b2…. Bn = Coefficient or parameters which show the extent to which each of the
independent variables affects variable Y.
e = Error term which represent other omitted variables.
The OLS regression method is being used in this study because of its simplicity, non-
76
excessive data requirement and the fact that this method has been used in estimating linear
relationship in Econometrics models with fairly satisfactory results obtained. Of course, it is a
good estimation technique in the sense that it has a sampling distribution that is closely
concentrated around the true value of the parameters being estimated.
Fundamental Assumptions of OLS.
According to Awe (2006), the fundamental assumptions of the OLS include the following:
i. The expected mean value of the error term is equal to zero i.e. E (U) = O. The
positive error cancels out the negative ones.
ii. The explanatory variable is exogenous i.e. cov ( X,U) = O Before a variable (X)
can be used as explanatory variable it must be independent of the value of the
error term or any other explanatory variable.
iii. No autocorrelation cov (ut, ut-1) = 0 that is, error in time one does not affect error
in time 2; also Cov (ui, uj) = 0
3.8 Tests for Reliability of the Model
The analytical models of this study were subjected to certain tests do as to determine
the reliability of the results obtained. According to Surwillo (1980) the power of statistical
test lies in its ability to reject the null hypothesis when it is really false.
The test here basically included the following;
i. Test of linear multiple correlation co-efficient
ii. Test of coefficient of multiple determination.
iii. Test of Adjusted co-efficient of multiple determination
iv. Student “t” test statistics.
77
3. 8. 1 Test of Linear Multiple Correlation Coefficient
The linear multiple correlation co-efficient (R) is used to measure the extent of linear
relationship existing among more than two variables „R‟ lies between 0 and 1. The closer it is
to one the better the linear relationship while R = O indicates absence of any linear
relationship „R‟ is given as
R = 1 - Se2
…………………… (3.6)
Sy
2
Where; Se2 = expected variation
Sy
2 = total variation
3. 8. 2 Test of Co-Efficient of Multiple Determination
The determination (R2) refers to the square of the correlation coefficient. It is used to
measure the proportion of the variance in the dependent variable that is explained by the
independent variables
The value of R2 is between zero and one O < R
2 < 1.
The closer the value of R2 is to one the stronger the explanatory power of the estimated
regression plane and hence the greater the estimated relationship.
R2
is given as R2 = 1 - Se
2 …………………… (3.7)
Sy2
Where; Se2 = S(e - e)
2 = unexplained variation
Sy
2 = S (y -y)
2 = Total variation
78
3. 8. 3 Test of Adjusted Co-efficient of Multiple Determination
This is denoted by R2
it is calculated to find out the reliability of R2
Generally, when sample are relatively low compared to the population under study, the co-
efficient of multiple determination R2
usually over-state the true proportion of the variability
of dependant variable explained by the regression. It is necessary to correct this bias by
adjusting the R2
i.e by dividing the numerators and the denominator in the formula for R2 by
the appropriate degree of freedom R2 is given as
R2 = 1- Se
2 / n-k …………………… (3.8)
Sy2 / n-1
Where;
n =sample size
k = number of model variables
Se2 = Unexplained variation
Sy2 = Total variation
3.8.4 Student „t‟ test statistics
This is a statistical tool employed to test for the statistical significance of the model‟s
estimators thereby making for better decision. This empirical study seeks to test the
significance of the impact of compensation and reward system on the performance of a bank
organization. The value of „t‟ is estimated as:
tc = âi …………………… (3.9)
SE âi
tc = bi
SE bi
79
Where
tc = t calculated
âi = estimators / parameters (i.e Estimated a‟s)
SEâi = Standard error of each estimated a‟s
bi = estimators / parameters (i.e. estimated b‟s)
SEbi = Standard error of each estimated b‟s
The value of tc must be compared with the value of tabulated t (t*), given the degree of
freedom of (n - k) and level of significance at 95% or 99%.
The null hypothesis (Ho) that a‟s and b‟s = 0 i.e. all the estimated parameters are not
significantly different from zero is accepted if tc is less than t*. The converse is the decision
rule when tc is greater than t* i.e. if
tc < t*, accept Ho, reject Hi
tc > t* accept Hi, reject Ho
3. 8. 5 The F - Statistics
It usually aims at finding out whether the explanatory variable X1, actually have any
significant influence on the dependent variable Y. The test of the overall significant may be
carried out with the table of the analysis of variance (ANOVA table) as constructed below.
80
Table 3.1: ANOVA TABLE
Source of
Variation
Sum of Square Degree of Freedom Mean of
Square
X1,(Capital base) Sy2 V1 = k – 1 Sy
2/k – 1
Residual Se2 V2 = n – k e
2/n – 1
Total Sy2 n – 1 F
C
FC
= Sŷ2/K-1 …………………… (3.10)
Se2/n-1
Where;
n = sample size
k = Number of variables in the model
Sy2 = Sum of the explained part of the total variation in dependent variable.
Se2 = Sum of the error term of the variable.
The fc value is then compared with F* at 95% and 99% confidence levels with V1 = k - 1 and
V2 = (n - k) degree of freedom.
The decision rule here is the same as that of the „t‟ test above.
81
CHAPTER FOUR
4.0 DATA PRESENTATION AND ANALYSIS
4.1 Introduction:
This chapter attempts to analyze the responses collected from the respondents. Thus, the
responses were gathered by the researcher through the administration of questionnaires to the
one hundred (100) staff who served as the sample size. This sample size represents staffs
from 5 commercial banks in Kebbi State with each having an average of 20 staff. Hence all
the questionnaires were answered and returned which form the basis for analysis of data in
this study.
4.2 DATA ANALYSIS
Data shall be analyzed in two parts. Part one presents the demographic analysis of the staffs
from all the 5 banks investigated. While the second part shall center on the analysis of data
collected with questionnaires based on the compensation and reward system as they affect the
performance of the banks.
The data collected from the respondents were analyzed for easy understanding with the use of
graphs and tables. Some tables present data from more than one dimension, this is to ensure
that the responses from the questionnaires were properly coded for effective understanding.
Thus, the responses collected from the respondents are as follows:
82
PART A:
Fig 4.2.1:Staff Category
Source: Questionnaire Administered
From the graph above it is vivid that Outsourced staff in the banking industry out-numbered
other staff categories. Outsourced staff account for 70 staff, direct staff numbered 25 and
management staff were 5 in number
Fig 4.2.2 staff analysis based on unit
Source: Questionnaire Administered
83
0
10
20
30
40
50
60
70
80
Management Direct Outsourced
Nu
mb
er
of
staf
f
Staff Category
Management
010203040506070
Marketing
Operations
Audit Remedial
Others
Outsourced 15 55 0 0 0
Direct 8 10 5 1 1
Management 5 0 0 0 0
Nu
mb
er
Of
Staf
f
Chart Title
From table above, operations department in all the banks has the highest number of staff (55
outsourced and 10 direct staff- totaling 65staff) followed by marketing which had 28 staff (15
outsources 8 direct staff and 5 management staff), Audit had 5 staff, only 1 bank had a
remedial staff attached to its branch. 1staff also belong to trade department which is herein
referred to as others.
Fig 4.2.3 Staff Grade Analysis.
Source: Questionnaire Administered
The TO/SA are staff grade for outsourced staff it is perpetually static grade. ET-ABO and
B0-DM are direct staff cadre grade, MANAGERS AND ABOVE are staff grade for
management staff.
The outsource staff grade has the highest number.
84
0
20
40
60
80
TO/SA ET-ABO BO-DM MANAGER & ABOVE
Staff Population By Grade
Fig 4.2.4 Staff Qualification Analysis
Source: Questionnaire Administered
Table above shows a critical analysis of staff qualification. 2 of the staff are PhD holders, 5
had masters degree, 68 possess HND/BSC degrees , while 25 staff had Diploma qualification.
85
0
10
20
30
40
50
60
70
Management Direct Staff Outsourced
Phd 2
Masters 2 1 2
HND/BSC 0 25 43
Diploma 0 0 25
Nu
mb
er
Of
Staf
f
Qualification
Fig 4.2.5 Staff Salary Value (N„000).
Source: Questionnaire Administered
From response above, the pay of each staff category was clearly indicated. Outsourced staff
were paid less than #100,000 other cadre of staff earned far above the outsourced staff salary
benchmark. But in one of the banks some out-sourced staff earned above #100,000. That is an
indication that, one of the banks had a more fair compensation system. Other direct staff and
management staff take a lion share of the total pay in the banks.
86
0
10
20
30
40
50
60
70
10-100 100-250 250-500 500 & aboveOutsourced (TO/SA) 62 2 0 0
Direct (ET-DM) 0 18 10 3
Management (MGR & above)
0 0 0 5
Nu
mb
er
of
staf
f
Staff Salary
Fig 4.2.6 Staff service years in the bank
Source: Questionnaire Administered
The table above shows staff category and number of active years in service. It is important to
note that 40 outsourced staff have spent above 5 years without any promotion. Outsourcing in
the Nigerian banking industry from our literature reviews was fingered to have been subject
to abuse, hence staff in this category are not eligible for promotion. While the direct and
management staffs, though few in number, have spent long number of years in the service of
the banks.
87
0
10
20
30
40
50
60
10yrs & Above
5 - 10 Yrs 2 - 5 Yrs Below 2 yrs
Outsourced 0 40 13 17
Direct 5 18 2 0
Manegerial 5 0 0 0
Nu
mb
er
of
staf
f
Staff years of active service
PART B:
In this section, the results of the empirical analyses are presented, analyzed and interpreted so
as to either confirm or reject the hypotheses earlier stated. It therefore, focuses on the
presentation of results obtained from the correlation and regression of staff wellbeing,
compensation structure, staff promotion and incentive/ rewards on bank performance.
4.3 Result of correlation of staff wellbeing, compensation structure staff promotion and
incentive/ rewards with bank performance.
Table 4.3.1Correlations
performanc
e
wellbein
g
compensatio
n
promotio
n
incentiv
e
Pearson
Correlation
Performance 1.000 -.042 .032 .018 .268
Wellbeing -.042 1.000 -.082 .025 -.059
Compensatio
n
.032 -.082 1.000 .271 .242
Promotion .018 .025 .271 1.000 -.174
Incentive .268 -.059 .242 -.174 1.000
Sig. (1-tailed)
Performance . .431 .447 .470 .126
Wellbeing .431 . .366 .458 .403
Compensatio
n
.447 .366 . .124 .152
Promotion .470 .458 .124 . .231
Incentive .126 .403 .152 .231 .
N
Performance 20 20 20 20 20
Wellbeing 20 20 20 20 20
Compensatio
n
20 20 20 20 20
Promotion 20 20 20 20 20
Incentive 20 20 20 20 20
The result from the Pearson Correlation above shows a negative and weak relationship
between staff wellbeing and banks performance (r= -0.042). Poor staff wellbeing can easily
de-motivate work force and low workers‟ morale will simply be counter-productive to the
organization at large.
There was a weak positive relationship between compensation and banks performance
(r=0.032). Although the correlation was weak in strength, the positive relationship implies
that high levels of banks performance in Nigeria were associated with effective compensation
structure of the banks.
The result also revealed a positive relationship between promotion and banks performance
(r=0.018). The positive relationship implies that observed increased level of banks
performance in Nigeria were associated with promotions of staff of the banks who in turn, put
in their bests to the service of the bank towards achieving the organizational goals.
Incentives and rewards system also turned out to be positively related with banks
performance to the tune of r=0.268. Effective and appropriate incentives and rewards system
89
is a major driver of high performance in any organization.
4.4 Regression result on the effect of compensation and reward
system on banks performance
Tables 4.4.1 and 4.4.2 below show the summary of the relationship between compensation
and reward system of banks and performance.
Table 4.4.1 Model Summary
Mode
l
R R
Squ
are
Adjust
ed R
Square
Std.
Error of
the
Estimate
Change Statistics
R
Square
Chang
e
F
Change
df1 df2 Sig. F
Change
1
.284
a
.081 -.164 .65808 .081 .330 4 15 .854
a. Predictors: (Constant), incentive, wellbeing, promotion, compensation
90
The result from table 4.4.2 above shows a negative relationship between staff wellbeing and
bank performance. In the same vein, compensation structure of the bank also bears a negative
relationship with bank performance. Staff promotion and incentives/reward system
however, have positive effects on bank performance. This implies that regular promotions as
at when due as well as appropriate incentives and good reward system will encourage staff to
put in their very bests to their jobs with the overall effect of improved performance of the
banks.
The model shows a correlation of 28.4% between the independent variables and bank
performance. This is a rather very low relationship indicating that compensation and reward
91
Tables 4.4.2 Coefficientsa
Model Unstandardized
Coefficients
Standardize
d
Coefficients
t Sig. Correlations
B Std. Error Beta Zero-order Partial Part
(Constant) 2.405 .650 3.699 .002
wellbeing -.018 .141 -.032 -.128 .900 -.042 -.033 -.032
Compensatio
n
-.028 .113 -.067 -.246 .809 .032 -.063 -.061
promotion .038 .114 .089 .333 .744 .018 .086 .082
incentive .143 .127 .298 1.129 .277 .268 .280 .280
a. Dependent Variable: performance
system of banks have low correlation with bank performance.
The coefficient of multiple determinations (R2) shows that the independent variables (staff
wellbeing, compensation structure, staff promotion and incentive/ rewards) only explain 8%
variation in the behaviour of bank performance while as high as 92% is accounted for by
variables outside this model.
4.5 Result of T - Test
The Null hypotheses earlier stated were subjected to student-t test to either confirm or reject
the hypotheses as the case may be. Table 4.4.3 below shows the summary of t-test calculated:
Table 4.4.3
The table 4.4.3 above shows that the estimator ao is significant at 95% but not significant at
92
Regression
Coefficient
Cal.(tc) T-
Table
value
(t*) at
95%
T-
Table
value
(t*)at
99%
Ho:
a=0
95%
Hi a
≠0
99%
Ho: a=0
99%
Hi a ≠0
99%
ao 3.699 2.776 4.604 Reject Accept Accept Reject
a1 -0.128 2.776 4.604 Accept Reject Accept Reject
a2 -0.246 2.776 4.604 Accept Reject Accept Reject
a3 0.333 2.776 4.604 Accept Reject Accept Reject
a4 1.129 2.776 4.604 Accept Reject Accept Reject
99% confidence levels at 4 degree of freedom (d.f). The calculated “t” value of 3.699 is
greater than the “t” table value of 2.776 at 95% confidence level but less than 4.604 at 99%
confidence level.
This implies that the Null hypothesis (H0) is rejected at 95% confidence level that is, the
estimated ao is not significantly different from zero hence the alternative hypothesis is
accepted. However, the null hypothesis (HO) is accepted at 99%confidence level while
rejecting the alternative hypothesis.
Hypothesis One:
H𝒐𝟏 -There is no significant relationship between workers
wellbeing and their productivity.
Also the table shows that the estimator aI is not significant since the calculated “t” value of -
0.128 is far less than the “t” table values at both 95% and 99% confidence levels with 4
degree of freedom (d.f). This shows that the estimated aI is not significantly different from
zero. Hence the Null hypothesis (HO) that there is no statistically significant relationship
between workers wellbeing and their productivity is accepted while rejecting the alternative
hypothesis.
Hypothesis Two:
H𝒐𝟐- There is no significant relationship between compensation
structure and productivity.
The table also shows that the estimator a2 is not significant since the calculated “t” value of -
0.246 is also much less than the “t” table values at both 95% and 99% confidence levels at 4
degree of freedom (d.f). This shows that the estimated a2 is not significantly different from
93
zero. Hence the Null hypothesis (HO) that there is no significant relationship between
compensation structure and productivity is accepted while rejecting the alternative hypothesis
that there is significant relationship between compensation structure and productivity.
Hypothesis Three:
H𝒐𝟑- There is no significant relationship between promotion and
productivity.
Also, the table also reveals that the estimator a3 is not significant or not significantly different
from zero since the calculated “t” value of 0.333 is less than the “t” table values of 2.776 at
95% confidence level and 4.604 at 99% confidence level with 4 degree of freedom (d.f).
Hence the Null hypothesis (HO) that there is no significant relationship between promotion
and productivity is accepted while the alternative hypothesis is rejected.
Hypothesis Four:
H𝒐𝟒- There is no significant relationship between incentive/
reward and organizational performance.
The table also shows that the estimator a4 is not significant since the calculated “t” value of
1.129 is also much less than the “t” table values at both 95% and 99% confidence levels at 4
degree of freedom (d.f). This shows that the estimated a4 is not significantly different from
zero. Hence the Null hypothesis (HO) that there is no significant relationship between
incentive/ reward system and organizational performance is accepted while rejecting the
alternative hypothesis that there is significant relationship between incentive/ reward system
and organizational performance.
94
TABLE 4.4.4 SUMMARY OF F-TEST (ANOVA Table)
Calculated
F-Ratio
F- table
value at
95%
F- table
value at
99%
H0 : R2
=0 95%
Hi: R2
≠0 95%
HO:R2 =
0 99%
Hi: R2 ≠0
99%
0.33 3.06 4.89 Accept Reject Accept Reject
The table 4.2.4 above shows that the entire model is not statistically significant. The „F”
calculated value (FC) of 0.33 is much less than the „F‟ table value of 3.06 and 4.89 at 95%
and 99% confidence levels respectively with 4 degree of freedom. Thus, the Null hypothesis
(HO) that compensation and reward system of banks have no statistically significant impact
on bank performance is accepted while rejecting the alternative hypothesis (Hi) that
compensation and reward system of banks have statistically significant impact on bank
performance.
4.6 INTERVIEW
Few marketing staff were briefly interviewed under the condition of anonymity to air their
views about the current performance measurement model employed by the banks. Below are
the summary of their submissions.
Interviewer: what performance measurement model has your bank adopted to rate you?
Interviewee: The balanced score card model with 4 categories and 7 indicators.
Interviewer: is this model applicable to all staff irrespective of department.
Interviewee: No its only applicable to marketers . the operations and other group uses VALA
95
Interviewer: From the questionnaire earlier submitted by you and your colleagues. It was
visible that not all staff have assigned target. Why is this so knowing fully well that each staff
constitutes a cost to each branch?
Interviewee: That’s how management wants it. Some staff have group target(which is
primarily not derived from the effort of the individual, but the effort of others given to
another as a glory to them) and some have none at all. In my own openion,the way the
management have designed the operation of the with only few staff having targets is quite
worrisome and quite inadequate. As i speak to you,i am aware that most of the branches are
not able to survive their staff and operations expenses cost. If most staff are contributors, it
will give a better chance of profitability.
Interviewer: what can you tell us about the Balanced score card model?
Interviewee: The balanced score card performance model(BSC). The BSC model was
designed to improve productivity and motivate staff to work more diligently. But rather than
it creating and fulfilling the desired effect, due to the pay cut that followed the introduction of
the model, and the (80%) benchmark score that qualified any one for the incentive pay. It was
seemingly difficult for anyone to achieve the 80% bench mark, It created a more damaging
and devastating effect as it led to massive resignation of performing/talented DSA’s
nationwide. It is safe to assume that the DSA model in consonance to the BSC model was an
error. The support staff(staff with targets) of the marketing department were the only staff
whose salaries were cut down. Staffs without targets whose salaries were larger were not cut
down. This was a monumental error.
96
The DSA model and the BSC Model may be assumed inadequate due to the following
observations
i. It does not recognize excess performance over assigned target on deposit and risk
asset or any other assigned variable. For example, if your deposit target is N40m and
you have achieved N240m the extra N200m you have achieved over your target is
meaningless in the BSC model, the present model does not recognize or reward
performance
ii. The model lacks respect for profitability-It does not recognize income contribution of
marketer at large. –if your deposit and risk asset , other liabilities or risk products
generates an income contribution of N3m for the bank on monthly basis, it is useless
to this present model. Income/profit should be the most important thing that any
performance measuring model should recognize. Profit is a kind of guarantee for the
continuous existence of any business. the Performance induced pay score bench mark is too high and unrealistic.
The Performance induced pay score bench mark is too high and unrealistic. You have to
score 80% to qualify for an inducement pay
TABLE 4.5
The table below shows the inadequacies in the present score card model in use in the banks.
The information provided was a print out of an automated score card of one of the banks
staff.
It was observed that despite meeting deposit target in excess of 500% no additional score
was added to staff score.
Same was observed on his risk asset(loans) performance ,he exceeded target by 2000% but
no score was given to the excess achieved over target
97
Table 4.5
Noticeable Implication of Model on Branch /Staff/Organization at Large.
i. The Model have led to massive exodus of talented market facing support staff thereby
leading to brain drain in branches. As the new staff that may have replaced the exited staff
may not have the needed technical expertise.
ii. It has created a massive demotivated and demoralized workforce who may not be ready to
embrace anything that will add value to the organization.
98
BALANCED SCORE CARD FOR NANA UCHE AYO FOR MONTH ENDED AUGUST 2016
BSC Model Name NANA UCHE AYO Perspective Performance(%)Target (%) Status
4 category, 7 indicatorsStaffID NU149052 Customer 20 20
August 2016 score cardGrade SA Financial 50 50
Role ACCOUNT OFFICER People 0 5
Location LAGOS Process 21 25
KEY 91 100
CATEGORY KEY SCORE RATING
PERFORMANCE INDICATOR MARKED PURPLE Good RATING CATEGOGY
Fair STAR PERFORMER
CUSTOMER Poor
Performance Measure Weight(%)Description Actual Target PerformanceStatus
DORMANT ACCOUNTS 20 DORMANT ACCOUNTS REACTIVATION 26 20 20
20 20
FINANCIAL
Performance Measure Weight(%)Description Actual(000) Target (000)PerformanceStatus
CASA-DEPOSIT 40 AVERAGE DEPOSIT POTFOLIO 317,805.25 45,000.00 40
LOANS 10 AVERAGE LOAN POTFOLIO 20179.58 500.00 10
50 50
PEOPLE
Performance Measure Weight(%)Description Actual Target PerformanceStatus
E-LEARNING 5 number of learning programNUMBER OF E LEARNING PROG 0 1 0
PROCESS 5 0
Performance Measure Weight(%)Description Actual Target PerformanceStatus
ACTIVE POS ISSUED 10 NUMBER OF POS ISSUED 3 5 6
DEBIT CARDS ISSUED 10 NUMBER OF DEBIT CARDS ISSUED 65 20 10
MOBILE BANKING 5 NUMBER OF MOBILE ACTIVATIONS 22 20 5
25 21
iii. The model has exposed our DSA to undue hardship. And may have successfully triggered
an increased fraudulent tendencies on affected staff. In the nearest future it may give birth to
dangerous tendencies such as systematic armed robbery, cyber terrorism, terrorism and
other extreme retaliatory acts. The effect of this model on staff should not be underestimated
as staffs may decide to unleash terror against the bank as a result of their grievance from
perceived social injustice(a major causative agent of terrorism).
iv. The model has amounted to Frustration. Grievance level of both exited staff and existing
staff need to be checked as it poses a significant threat to the organization future.
Interviewer: with this excellent figure on your score card, have you ever been issued a
commendation letter by your bank?
Interviewee: No Sir. Instead my salary was cut down despite having this level of exceptional
performance.
4.7 Discussion and Implication of Findings
Findings from the analyses show mixed relationships between the explanatory variables and
banks performance. For instance, a negative relationship was reported between staff
wellbeing and bank performance. Unfair labour practice constitutes part of the problems
99
facing banks. Within the Nigerian banking industry workers are perpetually denied their
rights to membership of trade unions or workers committee as specified by the part II of the
International Labour Act (2006). Violation of workers right to association and prohibition of
formation of workers union is a deliberate attempt of banks to continuously exploit their staff.
One of the fundamental goals of workers union is to protect workers rights at work and also
bargain for better conditions of service. Unfair employee compensation may also be
tantamount to unfair labour practice (ULP) which is any failure to act, or unfair act of an
employer towards a worker concerning promotion, demotion, trial periods, training or
benefits; suspending a worker or disciplinary action; refusing to re-employ a worker as
agreed; and may also occur when an employer makes circumstances difficult for a worker
who was forced to make a protected disclosure, (Rycroft, 2009). ULP has been known to be a
major catalyst for the development of a demoralized workforce who in turn directly and
actively militate against achievement of predetermined goals. According to Michael, (2015),
poor staff wellbeing can easily de-motivate work force. When worker morale is low, it affects
productivity of individual, groups and even the organization at large. Employee reaction to
unfair labour practice may be passive. Passive reactions of employee are much more
dangerous and have a disastrous effect on organizations at the long run. As reacting
employees do not air out their grievances in voices or in writing nor through groups (formal
or informal) that exist within an organization but reacts internally by exhibiting attitudes that
runs contrary to organization objective. For example an employee technically alters a process
or deliberately refuses to correct a process that leads to a chance of loss.
The overall impact of having unproductive or demoralized workers always reflect on
dwindling performance. Once productivity is altered it directly impacts on profits.
100
In the same vein, compensation structure of the bank also bears a negative relationship with
bank performance. The banks have Poor Compensation Structure. The salaries of executives
and senior staff members of the banks are too large for the present income generated by
banks to sustain and usually their salaries are not usually tied to direct performance target and
in some banks no targets are assigned to such outrageous salaries. The aggregate of these
salaries engulf most income made by the banks as the task of this group of staff do not add
any form of financial value that commensurate to their pay. They are rated by group
performances rather than by individual performance contribution. The present compensation
model in use in banks is toxic to the health of the bank. There is a need for senior staff pay
cut or assignment of business targets that will at least justify their monthly salaries, or even
implemented the duo to revert the present status.
Some banks have adopted a model that ensures that each staff adds financial value to the
organization by assigning varying degrees of business targets to staff according to their ranks,
irrespective of their department. But it was observed that most banks, have not attached
necessary targets to their non marketing staff and have in turn suffered high staff cost of
retaining large number of unproductive staff, thereby resulting to persistent loss making by
most branches.
Stagnated wage levels for the support staff who constituted over 60% of the workforce in
banks is another monumental element affecting the performance of these group of staff
within the banking industry. This is a regressive wage system intentionally targeted at the
support staff group within the banking industry. The stagnated wage system provides a
meager amount as a monthly salary and does not attach any value to employee number of
service years, additional qualification, employee performance. It is a demeaning wage system
that lacks respect for workers dignity and right to good life, because it allows workers to
101
spend their productive and energetic period of life receiving and living on a meager salary as
their total monthly emolument. This practice has been observed to be repugnant to natural
justice, equity, good conscience and fairness. It adds to woes of the poor. The continuing
stagnation of the income levels for support staff has put the larger workforce within the
banking industry at the most disadvantaged position in terms attainment of a more humane
condition of living.
Staff promotion and incentives/reward system however, have positive effects on bank
performance. This implies that regular promotions as at when due as well as appropriate
incentives and good reward system will encourage staff to put in their very bests to their jobs
with the overall effect of improved performance of the banks.
Rewards represent important mechanisms by which employee behaviors can be aligned with
the interests of the organization (Eisenhardt, 1989). Particularly, pay-for-performance is a
reward practice that links one's pay increase to one's performance, and could be used to
direct, sustain, and motivate desirable behaviors, such as knowledge sharing (Bartol and
Srivastava, 2002), creativity (Eisenhardt et al., 1998), quality (Cowherd and Levine, 1992)
and customer satisfaction (Delaney and Huselid, 1996). Pay-for-performance establishes the
behavioral criteria by which rewards are allocated and in doing so underpins the alignment of
employee behavior with organizational values and objectives. Therefore, if an employee
achieves his or her performance objectives then the employee receives a pay increase. This
simple and visible link between pay and performance recognizes an employee for a specific
level of accomplishment, therefore nurturing favorable work attitudes, such as satisfaction
and commitment (Heneman et al., 1988). Thus, the effectiveness of pay-for-performance has
a direct influence on high levels of service quality and desirable work attitudes and ultimately
improved performance of the organisation.
102
The finding also revealed that the Balance Score Card model adopted in the banks has created
a massive demotivated and demoralized workforce who may not be ready to embrace
anything that will add value to the organization. The model has exposed our DSA to undue
hardship. And may have successfully triggered increased fraudulent tendencies on affected
staff. In the nearest future it may give birth to dangerous tendencies such as systematic armed
robbery, cyber terrorism, terrorism and other extreme retaliatory acts.
103
CHAPTER FIVE
5.0 SUMMARY OF FINDINGS, CONCLUSION AND RECOMMENDATIONS.
5.1 Summary of Findings.
From the analysis of data from questionnaires administered as well as the responses gathered
from the interview conducted, below are some of our findings.
The finding revealed a negative relationship between staff wellbeing and bank performance.
Unfair labour practice constitutes part of the problems facing banks. Workers are perpetually
denied their rights to membership of trade unions within the Nigerian banking industry.
The finding also revealed that the present compensation system is detrimental to the bank
improved performance. Most staff are paid salaries without contributing any meaningful
income to the branch.
The payment for performance was bias. Its implementation was only targeted at the support
marketing staff alone throughout the bank. Staff who constituted larger cost to the bank were
just paid by the bank with no recourse to whether they had target and met their targets nor
even had no target.
It was also found that staff promotion has positive effect on bank performance. This implies
that regular promotions as at when due will encourage staff to put in their very bests to their
jobs with the overall effect of improved performance of the banks.
104
The finding also revealed a positive relationship between incentives/reward systems in the
banks. An appropriate incentives and good reward system improves efficient service delivery
of staff which in turn culminate in improved performance of banks.
It was also revealed that not all staff had targets. The few numbers of staff that had targets
were only some marketing staff who had lower rank and support marketing staff.
The BSC model as adopted by some of the banks is inadequate. It gave no credence to
income generated by each staff, and neither recognized any performance in excess of
assigned target.
5.2 Conclusion
Effective and appropriate compensation and reward system is essential for attracting,
retaining and motivating employees in today‟s business environment towards achievement of
improved performance by banks. This requires utilizing a host of tools including base pay,
reward/incentives, equity, promotion, performance management, and benefits.
Foregoing from the findings from this study, the researcher made the following conclusions:
i) Poor staff wellbeing in the banking industry is counter-productive to the banks.
Unfair labour practice (ULP) which involves unfair treatment of staff concerning
promotion, demotion, trial periods, training or benefits, suspending a worker or
disciplinary action, refusing to re-employ a worker as agreed, etc are all demoralizing
to workers and these hinder their effective contribution towards achieving the
organisational goals.
ii) The banks have poor compensation structure which adversely affects their
105
performance. The salaries of executives and senior staff members of the banks are
too large for the present income generated by banks to sustain and usually their
salaries are not usually tied to direct performance target and in some banks no targets
are assigned to such outrageous salaries. Whereas, stagnated wage levels are meant
for the support staff who constituted over 60% of the workforce in banks. This is
another monumental factor affecting the performance of these group of staff within
the banking industry. The present compensation structure in banks is counter-
productive.
iii) Staff promotion improves banks performance. This implies that regular promotions
as at when due as will encourage staff to put in their very bests to their jobs with the
overall effect of improved performance of the banks.
iv) Incentives/reward systems in the banks motivate staff to put their bests towards
achievement of their organisations goals. The link between incentives and
performance recognizes an employee for a specific level of accomplishment,
therefore nurturing favorable work attitudes such as satisfaction and commitment
which will ultimately improve the performance of the organisation.
v) The BSC model as adopted by some of the banks is inadequate as it gives no
credence to profit/income generated by each staff, and neither recognized any
performance in excess of assigned target.
5.3 Recommendations
As it has been observed that the present compensation model in use in banks is toxic to the
health of the bank. The assumption that higher salaries improve workers performance may be
untrue. Rather our findings revealed that a reasonable performance inducement pay will serve
106
as the major catalyst that will improved overall performance. hence, there is need for senior
staff pay cut or assignment of business targets that will at least justify their monthly salaries.
Some banks have adopted a model that ensures that each staff adds financial value to the
organization by assigning varying degrees of business targets to staff according to their ranks,
irrespective of their department. Other should also borrow a leaf from this. According to
Michael, (2015), a compensation structure that is developed from a performance management
model that is deeply dedicated to identifying and rewarding performance and subsequently at
a minimal and reasonable level reprimand poor performance could trigger an organization
culture that will encourage staff to put in their best as they see a clear relationship between
performance and reward.
There should be regular promotions as at when due in order to further encourage staff to put
in their very bests to their jobs which will in turn have a positive effect on performance of the
banks.
Banks should emphasize rewarding and encouraging peak performance. When employees
within an organization see a clear relationship between performance and reward, job
satisfaction sets in, and employees become highly motivated and give their best to the
organization in return. Effective compensation plans should reward performance, loyalty,
experience, responsibility, and other behaviours. Apart from the salaries paid, the employees
should be eligible for a fixed percentage of commission upon achievement of fixed target of
income or performance objectives. Special allowance such as overtime, mobile allowances,
meals, commissions, travel expenses, reduced interest loans; insurance, club memberships,
etc should be provided to employees to provide them social security and motivate them which
improve the organizational Productivity.
107
Banks should develop and implement an effective reward system that gives more to where
much is gotten from rather than robbing peter to pay Paul, which is rather unfair. Also
material rewards can be motivating to employees because pay, time off, advancement and
recognition are important to most workers as they drive the organizational success.
There should be a change in management philosophy on how viewed a staff. A staff is seen
as a cost in many organization. This is because they have underutilized the potency of human
resource. Staff should rather be viewed as a value creator by ensuring that the bank only
retains staff in which it has the absolute cost advantage
The banks should redesign the BSC model to correct inadequacies identified. The current
model in use have earlier been criticised by this research work as bias and lacking credibility.
It is rigid and not applicable to all staff. Some banks have more than a model for rating staff
performance rather than a general model that will appear fair to all staff. It gave no credence
to income generated by each staff, and neither recognized any performance in excess of
assigned target. This should be corrected.
Banks should develop and implement an effective performance management system that will
measure all staff based on income generation, and ensure that each staff on a minimum basis
generates the income that pays their salary rather than the present practice which pays staff
according to grade.
It is safe to assume that when Banks in Nigeria implement the recommendations of this
research work, it will improve or rather put to an end, the lingering ailing conditions and sign
of distress synonymous with the Nigerian banking industry.
108
REFERENCES
Akerele, A. (1991); Role of Labour in Productivity, Nigeria Journal Of Industrial
Relation.and financial performance. Academy of Management Journal, 33: 663-
691.Inc.
Armstrong M (2006) A Handbook of human resource management practice,10th
edition,
London :Kogan Page Limited
Armstrong M and Baron A (2002) Managing Performance: Performance management
in action, CIPD, London.
Armstrong M. and Baron A. (1998) Performance Management: The new realities. London:
CIPD
Akubuiro, N. H. (2003). Industrial Relations and Labour Laws. Shomolu – Lagos: PMA
Printers, A Division of PMA Group.
Ayesha A., Amna. G., Tahleel T., &Hina M. (2015) Impact of compensation and reward
system on the performance of an organization: An empirical study on banking sector
of Pakistan. European Journal of Business and Social Sciences, ( 4)(8) ,
319-325
Barney, J.B., (1991). Firm resources and sustained competitive advantage. Journal of
Management, 17(1), 99-120
Banjoko S. (1996) Human Resource Management: An expository Approach. Pumark Nigeria
Limited, Lagos State.
Bailey, T.(1993). Discretionary effort and the organization of work:Employee participation
and work reform since Hawthorne. Working paper, Columbia University, New
York.
Bernardin H.J & Beatty, R W.( 1984). Performance Appraisal: Assessing human behavior
at Work.Boston.MA: PWS-Kent
Bracken D. W., Timmeck C. W., Fleenor J. W. & Summers L. (2001) 360feedback from
another angle‟, Human Resource Management, 40( 1), 3–20.
Central bank of Nigeria, (2005). Draft of CBN annual report: for the year ended 31st
December 2005.
Clark G. (1998) Performance management strategies: As sighted in Mabey, C., Salaman,
G., & Storey, J., Human Resource Management: A strategic introduction (2nd
edition). Oxford: Blackwell
Cleveland J.N. & Murphy ,K.R. (1992). Analyzing performance appraisal as goal directed
behavior. As sighted in G. Ferris & K.R. Rowland (eds).Research in Personnel and
Human Resources Management, Vol 10.Greenwich, CT: JAI Press
Cole G A(1995), Personnel Management, New York,Mc Graw Hill Book Company.
Davis R C and Filley A C(1977) Principle of Management, New York Alexander Hamilton
Institute.
Eisenhardt K.M(1988). Agency-and institutional-theory explanations: the case of retail sales
compensation. Academy of Management Journal 31, 488–511.
Eisenhardt, K.M.,(1989). Agency theory: an assessment and review. Academy of
Management Journal Review 14, 57–74.
Fenwick. M. (2004) International compensation and performance management, in Harzing,
A.W.& Ruysseveldt J. V, International Human Resource Management (2nd edition).
London: Sage.
109
Fisher, C. D., Schoenfeldt, L. F & Shaw J. B, (2004) Human Resource Management, New
Delhi, Biztantra.
Fletcher, C. (2001), Performance appraisal and management: the developing research
agenda:, Journal of Occupational and Organizational Psychology, (74).
Fletcher C. & Perry, E. I. (2001) Performance appraisal and feedback: a consideration of
national culture and a review of contemporary research and future trends‟, in N.
Anderson, D. S. Ones, H. K. Singali and C. Viswesvaran (eds) Handbook
of Industrial, Work and Organizational Psychology, Vol. 1:
Personnel Psychology. London: Sage
Flippo, Edwin B.(1980), Personnel Management Mc-Graw-Hill, Tokyo.
Flamholtz, E. G. 1985. Human resource accounting (2d ed.). San Francisco: Jossey-Bass.
Gerhart, B., & Milkovich, G. T. (1992). Employee compensation: Research and practice. In
M. D. Dunnette & L. M. Hough (Eds.). Handbook of industrial and organizational
research.
Gupta. C.B. (2005): Human Resource Management, Sultan Chand Publishers, New Delhi.
Huselid, M.A.(1995). The impact of human resource management practices on turnover,
productivity and corporate financial performance. Academy of Management Journal,
38(4), 635-670.
Huselid, M. (1995). The impact of human resource management practices on turnover,
productivity, and corporate financial performance. Academy of management journal,
38(3), 635-672.
IBOJO, B.O. & ASABI, O.M. (2014), Compensation Management and Employees
Performance in the Manufacturing Sector, A Case Study of a Reputable Organization
in the Food and Beverage Industry. International Journal of Managerial
Studies and Research (IJMSR) ISSN 2349-0330 (Print) &ISSN 2349-0349
(Online),2( 9), 108-117
International labour Act (2006) Part II Acts 16/1985, 12/1992, 20/1994(s. 19), 22/2001 (s.
4)2, 17/20023, 7/20054
Johnson, G., Scholes K., & Whittington, R. (2006). Exploring Corporate Strategy, (7th
Ed.) London: Prentice Hall
Kandula, S. R. (2006). Performance management . In Performance management. Strategy.
Intervention. Drivers. (1st ed)
Kanfer R. (1990). Motivation theory and Industrial and Organizational Psychology, Pp 75 –
170 in M. Dunnette & L. Hough (eds). Handbook of I/O Psychology, Vol I Palo Alto,
CA: Consulting Psychologists Press
Kaplan, R.S. & Norton, D.P. (1996.) The balanced scorecard: Translating strategy into
action. Boston, Mass: Harvard Business School Press.
Kaplan R. S and David P. N(1996), Using the Balanced Scorecard as a Strategic
Management System. Harvard Business Review: 76
Khan, S.M.(2002) “Effect Of Liking Syndrome On Compensation Need Satisfaction. Indian
Journal of Industrial Relations, 38 (2) , 199-210.
Kuvaas B(2006): Different Relationships between Perceptions of Developmental
Performance Appraisal and Work Performance. Personnel Review , 36 (3): 378-398
Lawler E. E. (1990) Strategic Pay: Aligning organisational strategies and pay systems. San
Francisco: Jossey-Bass.
110
Lindholm N., Tahvanainen M. and Borkman I. (1999) Performance appraisal of host-
country employees: Western MNEs in China‟, in Brewster, C., & Harris, H. (eds)
International HRM: Contemporary Issues in Europe. London: Routledge.
Mathis, Robert L. and Jackson John. H (2003), Human Resource |Management, Thomson
South Western, Australia
Mendonca M. and Kanungo R. N. (1996) Impact of culture on performance management in
developing countries‟, International Journal of Manpower, Vol. 17, No. 4/5: 65–75.
Michael, F. N.(2015), Performance Measurement: Nigeria, Ilorin Press Publishing
company.
Milliman J., Nason S., Zhu C. and De Ciere H. (2002) An Exploratory assessment of the
purposes of performance appraisals in North and Central America and the Pacific
Rim‟, Human Resource Management, Vol. 41, No. 1: 87–102.
Mukulu, E., Ngui, T. K., & Hazel G. G.(2014) Effect of Reward and Compensation
strategies on the performance of commercial banks in Kenya. International Journal of
Education Research 2(1) ,1-20
Musah, S. (2008). Evaluating The Extent to Which People and Performance AMO Model
has Contributed to the Strategic Human Resource Debate. Journal of Management, 15
(1), 67-79.
Nyaw M. K. (1995) Human resource management in the People‟s
Republic of China, in L. F. Moore and P. D. Jennings (eds) Human Resource
Management on the Pacific Rim: Institutions, practices and attitudes, Berlin: Walter
de Gruyter.
OBASAN, Kehinde A.(2012). Effect of Compensation Strategy on Corporate Performance:
Evidence from Nigerian Firms. Research Journal of Finance and Accounting, ISSN
2222-1697 (Paper) ISSN 2222-2847 (Online). 3(7) pg 37-45
Porter, M. E. (1980). Competitive advantage: Creating and sustaining superior
performance. New York: Free Press
Pritchard, R. D. 1992. Organizational productivity. In M. D.Dunnette & L. M. Hough
(Eds.), Handbook of industrial and organizational.
Rashid S, Hafiza H. N & Rab N. L(2013), An Empirical Investigation of Rewards and
Employee Performance: A Case Study of Technical Education Authority of Pakistan.
Middle-East Journal of Scientific Research 18 (7): 892-898, 2013
Razman, M., Zubair H. K., Ali, G. & Arslan, M. (2014) Impact of Compensation on
Employee Performance (Empirical Evidence from Banking Sector of Pakistan).
International Journal of business and social Science. 5(2). 302-309
Rowson A.-M. (1998) Using 360-degreefeedbackinstruments up, down and around the
world: implications for global Implementation and use of multi-rater feedback,
International Journal of Selection and Assessment, Vol. 6, No. 1: 45–8.
Sajuyigbe, A. S. , Olaoye, B .O & Adeyemi, M.A (2013) . Impact of reward on
employees performance: A case study of some selected manufacturing company in
Ibadan, Oyo State, Nigeria. International Journal of Arts and Commerce 2(2 ) pg 27-
33.
Schofield A(1995): Developments in Performance Appraisal in Commonwealth Universities.
In CHEMS Paper No 5, Number117, February 1995 .Edited by C. Universities. 1996.
Whitepaper no 25, (2005-2006): Competence, Opportunities and Meaning. Edited by
T.r.h.c. Ministry. Government Stoltenberg; Britain.
Schneier, C. E., Beatty, R. W. & Baird, L.S, (1987). Performance Appraisal Source book.
Human Resources Development Press, Amberst.
111
Shen J. (2004), International performance appraisals: policies,practices and determinants in
the case of Chinese multinational companies‟International Journal of Manpower,
Vol. 25, No. 6: 547–63.
Suutari V. and Tahvanainen M. (2002) The antecedents of Performance management
among Finnish expatriates‟, International Journal of Human Resource Management,
Vol. 13, No. 1: 55–75.
Torrington D., Hall L. and Taylor S. (2005) Human Resource Management (6th edition).
Harlow: FT/Prentice Hall.
Vroom V. H. (1964) Work and Motivation. New York: John Wiley & Sons
Whitener, E. M., (2001). A Cross Level Analysis Using Hierarchical Linear Modeling.
Journal of Management. 27(5), 515 – 35.
112
APPENDIX 1
NATIONAL OPEN UNIVERSITY NIGERIA
Master of Science Business Administration (Msc.)
QUESTIONNAIRE FOR STAFF
This research is for academic purpose only. It is to establish the impact of
compensation and reward system on corporate performance. Respondents are
assured that any information given will be accorded the necessary
confidentiality. Thank you.
SECTION A
Demographics
1. Staff Category: management [ ] direct [ ] outsourced [ ]
2. Department: Marketing[ ] Operations [ ] Audit [ ]
Remedial [ ] Others [ ]
3. Staff grade: TO/SA[ ] ET-ABO [ ] BO –DM [ ]
MGR AND ABOVE[ ]
4. Qualification: Diploma[ ] HND/BSC[ ] Masters[ ] Phd[ ]
113
5. Professional Qualifications: 0 [ ] 1-2 [ ] 3[ ] 4and above [ ]
6. Salary Value(#,000): 10-100[ ] 100-250[ ] 250-500[ ]
500 and above [ ]
7. How long have you worked in this organization?
Below 2 yrs [ ] 2 – 5 yrs [ ] 5 – 10 yrs [ ]
10 yrs and above [ ]
SECTION B
PART I- WELLBEING AND PRODUCTIVITY
1. You are satisfied with your present reward package.
a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree
2. Staff will do better if they are paid more (or given more incentives).
a) Strongly Agree b)Agree c) Disagree d) Strongly Disagree e) Undecided
3. Staff unhappiness at work affects his morale and efficiency.
a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree
4. You are happy with your current status at work(as an outsourced ,direct or management
staff).
114
a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree
5. All staff have targets.
a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree
6. All marketers have personal targets assigned to them individually.
a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree
7. In the face of dwindling revenue. all staff should be given business targets.
a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree
8. Your employer is fair to you with your current pay
a)Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly
Agree
9. You have a business target assigned to you in person.
a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly
Agree
10. You always meet up with your assigned targets.
a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree
11. You are always rewarded for meeting up with your assigned targets.
a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree
115
12. The business target assigned by your bank is applicable to all category of
staff irrespective of unit.
a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree
13. Along with the marketing staff group/unit, every other unit is assigned with
business targets.
a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree
14. All marketers have incentive attached to their business targets.
a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree
15. All available incentives apply to all staff.
a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree
16. You feel very secured about you job
a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree
17. The sale force have a special compensation.
a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree
18. The sales team enjoy other forms of incentive apart from their salary.
a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree
116
19. Employee willing to retire are provided with some form of benefit.
a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree
20. The banking industry is a safe haven for employees.
a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree
PART II- COMPENSATION STRUCTURE
1. Your employer compensation structure is grade based rather than performance
based.
a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree
2. Your compensation is influenced by your years of service within the
organization.
a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree
3. Pay increment and promotion are applicable to all staff.
a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree
4. Your pay is defined by your contribution to the organization in terms income
generated by your efforts.
a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree
117
5. Your reward is increased/reviewed after every financial year.
a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree
6. Upward review of staff salaries periodically based on your performance will
always continue to enhance your productivity.
a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree
7. You have a say in what comprises your salary package.
a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree
8. You would like other form of performance related benefits to be added to
your benefits.
a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree
9. The reward package for every level of staff is fair.
a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree
10. You are paid overtime for closing late at work
a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree
11. Bank staff have access to loans
a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree
118
12. There are active workers union within the bank, that helps in negotiating
conditions of work with your employers.
a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree
13. Spouse allowance are paid to some selected group of staff
a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree
14. Child allowance is paid to some selected group of staff
a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree
15. All staff are covered under the group life assurance policy.
a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree
16. All staff are covered under the HMO plan.
a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree
17. All staff spouses are covered under the group life insurance policy.
a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree
18. All staff spouses are covered under the HMO plan.
a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree
119
19. All staff child are covered under the group life assurance Plan.
a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree
20. All staff children are covered under the HMO plan.
a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree
PART III- STAFF PROMOTION AND PRODUCTIVITY
1. Staff promotion is something that should be constantly done.
a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree
2. Staff promotion translate to a better life and status for employees.
a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree
3. You have been consistently promoted in the last five years
a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree
4. You feel satisfied about staff promotion in your organization.
a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree
5. Staff promotion is based on achievement of assigned business targets.
a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree
120
6. Staff Promotion is based on years of service as stated in the banks policy.
a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree
7. Staff are always happy when they are not promoted.
a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree
8. Lack of staff promotion improves workers participation and productivity at work
a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree
9. The higher the promotion the higher the pay and related benefits
a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree
10. The higher the rank the higher the risk of being exited
a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree
11. Since promotion are not tied to income contribution of staff, employers view staff with
higher grade as a burden.
a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree
12. There has been more retrenchment than promotion in recent times
a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree
121
13. Staff promotion in recent times has been very minimal.
a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree
14. Scanty staff promotions and persistent promotion denials are signs that banks are in
recession.
a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree
15. Staff promotion will impact on productivity
a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree
16. Arbitrary staff promotion can put laggards at strategic roles
a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree
17. When laggards man strategic desk, it improves productivity
a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree
18. Laggards should always be promoted along side performers
a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree
19. When performers and laggards earn same income it improves productivity
a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree
20. A performance and wage system that keeps laggards on job is more desirable
a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree
122
PART IV- INCENTIVE ,REWARDS AND PERFORMANCE
1. Your bank grows its managers rather than hire.
a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree
2. Your bank have always retained most of its talents.
a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree
3. There is low rate of employee turnover in your bank.
a) Strongly Disagree b) Disagree c) undecided d) Agree e) Strongly Agree
4. staff whose activities mobilize more deposit to the bank are rewarded
accordingly.
a) Strongly Disagree b) Disagree c) undecided d) Agree e) Strongly Agree
5. You affirm that your bank has a well motivated work force
a) Strongly Disagree b) Disagree c) undecided d) Agree e) Strongly Agree
6. You are adequately motivated to work.
a) Strongly Disagree b) Disagree c) undecided d) Agree e) Strongly Agree
7. The present compensation system is adequate.
a) Strongly Disagree b) Disagree c) undecided d) Agree e) Strongly Agree
123
8. If the reward system is revamped it will improve performance.
a) Strongly Disagree b) Disagree c) undecided d) Agree e) Strongly Agree
9. Most of your branches are making profit.
a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly
Agree
10. Staff are constantly promoted when due.
a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree
11. There is a need for upward review of your pay.
a) Strongly Disagree b) Disagree c) undecided d) Agree e) Strongly Agree
12. There is a need for downward review of pay considering the current situation
in the Nigerian banking industry.
a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree
13. Your bank adequately manage employee succession
a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree
14. Adequate workers motivation can improve your branch profitability.
a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree
124
15. Do you agree that target can improve individual productivity
a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree
16. All Staff have adequate social security(Pension) as their pay package
a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree
17. Good incentive helps to attract workers
a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree
18. Incentive helps to retain workers at work
a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree
19. Good incentive helps grows a loyal and dedicated work force
a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree
20. Having an experienced loyal and dedicated workforce translate to improved
productivity and improved profits
a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree
125
PART V- ORGANIZATION PERFORMANCE
1. Your branch made a good profit in the 2015 Financial year end.
a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree
2. Your bank declared profit in 2015 financial year end.
a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree
3. Your branch made an impressive profit in the monthly performance report
published last month
a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree
4. The federal government TSA policy affected your performance as a bank.
a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree
5. The impact of the zero C.O.T policy was felt by your bank.
a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree
6. Your bank compensation policy is fair to every staff category.
a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree
7. Your growth in sales of new account was very significant
a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree
126
8. Deposit mobilization by marketing staff has always been very high
a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree
9. Risk asset mobilization efforts by marketing staff is quite impressive.
a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree
10. There is significant increase in the deposit level in your branch this year.
a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree
11. There is significant increase in the risk asset level in your branch this year.
a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree
12. The non performing loans of your branch have exceeded the acceptable 3%
benchmark.
a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree
13. Your branch maximizes share holders wealth.
a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree
14. Allocated expenses constitute about 30% of operational expenses.
a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree
127
15. Staff costs constitute about 40% of your operating expenses.
a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree
16. Administrative expenses also constitute about 30% of your operating
expenses.
a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree
17. Your bank paid dividend in 2015 financial year
a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree
18. There was increase in the earning per share of your bank in 2015 when
compared to 2014
a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree
19. There is a growth in your performance indices when compared to 3rd
quarter 2015
a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree
20. There is strong indication that your branch will have a positive PBT by 2016
financial year end.
a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree
128
Administered Questionnaire
PART 1 WELLBEING AND
PRODUCTIVITY
1 2 3 4 5
S/N QUESTION SD D U A SA Mean
1 You are satisfied with your
present reward package.
48 10 12 22 8 2.32
2 Staff will do better if they are
paid more (or given more
incentives).
0 5 0 11 84 4.74
3 Staff unhappiness at work
affects his morale and
efficiency.
0 0 0 12 88 4.88
4 You are happy with your
current status at work(as an
outsourced ,direct or
management staff).
62 3 5 8 22 2.25
5 All staff have targets. 92 8 0 0 0 1.08
6 All marketers have personal
targets assigned to them
individually.
0 87 0 13 0 2.26
7 In the face of dwindling
revenue. all staff should be
given business targets.
2 30 10 46 12 3.36
8 Your employer is fair to you 52 8 10 25 5 2.23
with your current pay
9 You have a business target
assigned to you in person.
72 5 0 4 19 1.93
10 You always meet up with your
assigned targets.
71 13 0 1 15 1.76
11 You are always rewarded for
meeting up with your assigned
targets.
52 28 20 0 0 1.68
12 The business target assigned
by your bank is applicable to
all category of staff
irrespective of unit.
68 32 0 0 0 1.32
13 Along with the marketing
staff group/unit, every other
unit is assigned with business
targets.
68 32 0 0 0 1.32
14 All marketers have incentive
attached to their business
targets.
58 37 0 5 0 1.52
15 All available incentives apply
to all staff.
58 42 0 0 0 1.42
16 You feel very secured about
you job
7 23 10 52 8 3.31
17 The sale force have a special
compensation.
42 38 0 12 8 2.06
18 The sales team enjoy other
forms of incentive apart from
their salary.
41 53 0 6 1.71
19 Employee willing to retire are
provided with some form of
benefit.
82 13 5 0 0 1.23
20 The banking industry is a safe
haven for employees.
18 47 2 30 3 2.53
PART II COMPENSATION
STRUCTURE
1 2 3 4 5
S/N QUESTION SD D U A SA Mean
1 Your employer compensation
structure is grade based rather
than performance based.
0 0 0 38 62 4.62
2 Your compensation is
influenced by your years of
service within the organization.
30 40 0 20 10 2.4
3 Pay increment and promotion
are applicable to all staff.
22 78 0 0 0 1.78
4 Your pay is defined by your
contribution to the organization
in terms income generated by
your efforts.
7 78 0 15 0 2.23
5 Your reward is 14 86 0 0 0 1.86
increased/reviewed after every
financial year.
6 Upward review of staff salaries
periodically based on your
performance will always
continue to enhance your
productivity.
3 6 0 43 48 4.27
7 You have a say in what
comprises your salary package.
79 21 0 0 0 1.21
8 You would like other form of
performance related benefits to
be added to your benefits.
0 0 0 21 79 4.79
9 The reward package for every
level of staff is fair.
10 81 0 9 0 2.08
10 You are paid overtime for
closing late at work
0 100 0 0 0 2
11 Bank staff have access to loans 20 40 0 40 0 2.6
12 There are active workers union
within the bank, that helps in
negotiating conditions of work
with your employers.
82 13 0 5 0 1.28
13 Spouse allowance are paid to
some selected group of staff
0 0 0 30 70 4.7
14 Child allowance is paid to
some selected group of staff
0 0 0 30 70 4.7
15 All staff are covered under the
group life assurance policy.
0 0 0 2 98 4.98
16 All staff are covered under the
HMO plan.
0 0 0 2 98 4.98
17 All staff spouses are covered
under the group life insurance
policy.
57 43 0 0 0 1.43
18 All staff spouses are covered
under the HMO plan.
57 43 0 0 0 1.43
19 All staff child are covered
under the group life assurance
Plan.
57 43 0 0 0 1.43
20 All staff children are covered
under the HMO plan.
30 40 0 13 17 2.47
PART III STAFF PROMOTION
AND PRODUCTIVITY
1 2 3 4 5
S/N QUESTION SD D U A SA Mean
1 Staff promotion is something
that should be constantly done.
0 0 0 21 79 4.79
2 Staff promotion translate to a
better life and status for
employees.
0 0 0 4 96 4.96
3 You have been consistently
promoted in the last five years
70 8 0 17 5 1.79
4 You feel satisfied about staff
promotion in your organization.
70 8 0 17 5 1.79
5 Staff promotion is based on
achievement of assigned
business targets.
13 80 0 7 0 2.01
6 Staff Promotion is based on
years of service as stated in the
banks policy.
50 20 0 17 13 2.23
7 Staff are always happy when
they are not promoted.
92 8 0 0 0 1.08
8 Lack of staff promotion
improves workers participation
and productivity at work
98 2 0 0 0 1.02
9 The higher the promotion the
higher the pay and related
benefits
0 0 0 22 78 4.78
10 The higher the rank the higher
the risk of being exited
4 20 10 52 14 3.52
11 Since promotion are not tied to
income contribution of staff,
employers view staff with
higher grade as a burden.
20 15 15 48 2 2.97
12 There has been more
retrenchment than promotion in
recent times
0 9 10 64 17 3.89
13 Staff promotion in recent times
has been very minimal.
2 2 7 72 17 4
14 Scanty staff promotions and
persistent promotion denials are
signs that banks are in
recession.
86 14 0 0 0 1.14
15 Staff promotion will impact on
productivity
0 0 0 4 96 4.96
16 Arbitrary staff promotion can
put laggards at strategic roles
10 9 0 64 17 3.69
17 When laggards man strategic
desk, it improves productivity
86 14 0 0 0 1.14
18 Laggards should always be
promoted along side performers
20 60 5 15 0 2.15
19 When performers and laggards
earn same income it improves
productivity
40 60 0 0 0 1.6
20 A performance and wage
system that keeps laggards on
job is more desirable
13 78 4 5 0 2.01
PART IV -INCENTIVE
,REWARD AND
PERFORMANCE
1 2 3 4 5
S/N QUESTION SD D U A SA Mean
1 Your bank grow its managers
rather than hire.
3 64 0 33 0 2.63
2 Your bank have always
retained most of its talents.
24 32 4 23 17 2.77
3 There is low rate of employee
turnover in your bank.
24 32 4 23 17 2.77
4 staff whose activities
mobilize more deposit to the
bank are rewarded
accordingly.
74 16 7 3 0 1.39
5 You affirm that your bank has
a well motivated work force
72 6 2 13 7 1.77
6 You are adequately motivated
to work.
72 6 2 13 7 1.77
7 The present compensation
system is adequate.
72 6 2 13 7 1.77
8 If the reward system is
revamped it will improve
performance.
4 6 0 14 76 4.52
9 Most of your branches are
making profit.
23 68 0 7 2 1.97
10 Staff are constantly promoted
when due.
13 77 0 8 2 2.09
11 There is a need for upward 0 4 0 5 91 4.83
review of your pay.
12 There is a need for downward
review of pay considering the
current situation in the
Nigerian banking industry.
0 100 0 0 0 2
13 Your bank adequately
manage employee succession
47 28 3 18 4 2.04
14 Adequate workers motivation
can improve your branch
profitability.
0 6 0 82 12 4
15 Do you agree that target can
improve individual
productivity
0 4 0 54 42 4.34
16 All Staff have adequate
social security(Pension) as
their pay package
0 0 0 2 98 4.98
17 Good incentive helps to
attract workers
0 5 0 27 68 4.58
18 Incentive helps to retain
workers at work
0 5 0 78 17 4.07
19 Good incentive helps grows a
loyal and dedicated work
force
0 5 0 27 68 4.58
20 Having an experienced loyal
and dedicated workforce
translate to improved
productivity and improved
profits
0 0 0 86 14 4.14
PART V- ORGANIZATIONAL
PERFORMANCE
1 2 3 4 5
S/N QUESTION SD D U A SA Mean
1 Your branch made a good profit
in the 2015 Financial year end.
0 80 0 20 0 2.4
2 Your bank declared profit in
2015 financial year end.
0 80 0 20 0 2.4
3 Your branch made an
impressive profit in the monthly
performance report published
last month
18 62 0 10 10 2.32
4 The federal government TSA
policy affected your
performance as a bank.
0 20 0 54 26 3.86
5 The impact of the zero C.O.T
policy was felt by your bank.
0 0 0 38 62 4.62
6 Your bank compensation
policy is fair to every staff
category.
40 38 0 12 10 2.14
7 Your growth in sales of new
account was very significant
0 4 0 33 63 4.55
8 Deposit mobilization by
marketing staff has always been
very high
44 51 0 5 0 1.66
9 Risk asset mobilization efforts
by marketing staff is quite
impressive.
20 13 0 34 33 3.47
10 There is significant increase in
the deposit level in your branch
this year.
46 34 0 20 0 1.94
11 There is significant increase in
the risk asset level in your
branch this year.
4 46 0 24 26 3.22
12 The non performing loans of
your branch have exceeded the
acceptable 3% benchmark.
6 4 0 76 14 3.88
13 Your branch maximizes share
holders wealth.
34 46 0 16 4 2.1
14 Allocated expenses constitute
about 30% of operational
expenses.
0 0 0 76 24 4.24
15 Staff costs constitute about 40%
of your operating expenses.
0 0 0 24 76 4.76
16 Administrative expenses also
constitute about 30% of your
operating expenses.
0 0 64 36 4.36
17 Your bank paid dividend in
2015 financial year
17 43 0 17 23 2.86
18 There was increase in the
earning per share of your bank
in 2015 when compared to 2014
17 43 0 17 23 2.86
19 There is a growth in your
performance indices when
compared to 3rd quarter 2015
17 43 0 12 28 2.91
20 There is strong indication that
your branch will have a positive
PBT by 2016 financial year
end.
18 62 0 12 8 2.3
140
Mean values
Variable Y 𝑿𝟏 𝑿𝟐 𝑿𝟑 𝑿𝟒
1 2.4 2.32 4.62 4.79 2.63
2 2.4 4.74 2.4 4.96 2.77
3 2.32 4.88 1.78 1.79 2.77
4 3.86 2.25 2.23 1.79 1.39
5 4.62 1.08 1.86 2.01 1.77
6 2.14 2.26 4.27 2.23 1.77
7 4.55 3.36 1.21 1.08 1.77
8 1.66 2.23 4.79 1.02 4.52
9 3.47 1.93 2.08 4.78 1.97
10 1.94 1.76 2 3.52 2.09
11 3.22 1.68 2.6 2.97 4.83
12 3.88 1.32 1.28 3.89 2
13 2.1 1.32 4.7 4 2.04
14 4.24 1.52 4.7 1.14 4
15 4.76 1.42 4.98 4.96 4.34
16 4.36 3.31 4.98 3.69 4.98
17 2.86 2.06 1.43 1.14 4.58
18 2.86 1.71 1.43 2.15 4.07
19 2.91 1.23 1.43 1.6 4.58
20 2.3 2.53 2.47 2.01 4.14
141
APPENDIX 2
REGRESSION RESULT
/DESCRIPTIVES MEAN STDDEV CORR SIG N
/MISSING LISTWISE
/STATISTICS COEFF OUTS R ANOVA CHANGE ZPP
/CRITERIA=PIN(.05) POUT(.10)
/NOORIGIN
/DEPENDENT performance
/METHOD=ENTER wellbeing compensation promotion incentive.
Descriptive Statistics
Mean Std. Deviation N
Performance 2.8425 .60989 20
Wellbeing 2.2455 1.07390 20
Compensation 2.8620 1.45578 20
Promotion 2.7760 1.41944 20
Incentive 3.1505 1.26790 20
142
Correlations
perform
ance
wellbe
ing
compensa
tion
promot
ion
incent
ive
Pearson
Correlation
performa
nce
1.000 -.042 .032 .018 .268
wellbeing -.042 1.000 -.082 .025 -.059
compensa
tion
.032 -.082 1.000 .271 .242
promotio
n
.018 .025 .271 1.000 -.174
incentive .268 -.059 .242 -.174 1.000
Sig. (1-tailed)
performa
nce
. .431 .447 .470 .126
wellbeing .431 . .366 .458 .403
compensa
tion
.447 .366 . .124 .152
promotio
n
.470 .458 .124 . .231
incentive .126 .403 .152 .231 .
N
performa
nce
20 20 20 20 20
wellbeing 20 20 20 20 20
compensa
tion
20 20 20 20 20
Variables Entered/Removeda
Mode
l
Variables Entered Variables
Removed
Method
1
incentive,
wellbeing,
promotion,
compensationb
. Enter
a. Dependent Variable: performance
b. All requested variables entered.
144
promotio
n
20 20 20 20 20
incentive 20 20 20 20 20
Model Summary
Mode
l
R R
Squar
e
Adjusted
R Square
Std.
Error of
the
Estimate
Change Statistics
R Square
Change
F
Chang
e
df1 df2 Sig. F
Change
1 .284a .081 -.164 .65808 .081 .330 4 15 .854
a. Predictors: (Constant), incentive, wellbeing, promotion, compensation
ANOVAa
Model Sum of
Squares
df Mean
Square
F Sig.
1
Regression .571 4 .143 .330 .854b
Residual 6.496 15 .433
Total 7.067 19
a. Dependent Variable: performance
b. Predictors: (Constant), incentive, wellbeing, promotion, compensation
145
Coefficientsa
Model Unstandardized
Coefficients
Standar
dized
Coeffici
ents
t Sig. Correlations
B Std.
Error
Beta Zero-
order
Parti
al
Part
1
(Consta
nt)
2.405 .650
3.69
9
.002
wellbei
ng
-.018 .141 -.032 -.128 .900 -.042 -.033 -.032
compen
sation
-.028 .113 -.067 -.246 .809 .032 -.063 -.061
promoti
on
.038 .114 .089 .333 .744 .018 .086 .082
incentiv
e
.143 .127 .298
1.12
9
.277 .268 .280 .280
a. Dependent Variable: performance
146
top related