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1.1 Background to the Study
It is the concern of organizations all over the world on effective human capital strategies to enhance their productivity. It is clear that employee’s productivity in the expanding organization is a key factor in organization performance. Employees, technically known as human resources in modern organizations, are rightly considered as the most important assets (Ong & Teh, 2012). In developed countries such as USA, JAPAN, UK and Germany organizations recognize employees as the important asset that needs high consideration in promotion (Lawler & Worley, 2006). The rationale behind the use of rewards to employees is that motivated employees become satisfied in terms of fulfilling their wants, both financial and non financial. Failure to do so, employees will be tempted to leave the organization. (Azasu, 2009). On one hand, employees prefer receiving intrinsic rewards in terms of praise and recognition for certain work accomplishments, while other employees are happy with extrinsic reward in terms of salaries, bonus and incentive offered to employees (Lawler, 2008, Sajuyigbe, Bosede & Adeyemi, 2013).
In developing countries such as China, India and Thailand also employees reward is one of highly demanded factors in influencing organization performance. One of the most important factors in rewarding employees for organization performance is through recognition and appreciation (Ajila & Abiloa, 2004).
In Tanzania like any other country employees are motivated by rewards. There is a
need for organization to reward its employees for creating a successful competitive
Environment. This is one of the essential for the organizations to achieve high work performance. Some employees are highly motivated by extrinsic rewards such as increase in pay, promotions and bonus, others employees are motivated with intrinsic rewards such as appreciation, praise and recognition on (Bana & Kessy, 2007).
Paying employees for productivity has been the cornerstone of industrial and business development for centuries. Financial reward has always been important in managing employee’s performance, but over the last 25 years other elements of compensation have been developed to provide employers with more scope to reward, and thus, motivate employees. Performance management influences performance by helping people to understand what good performance means and by providing the information needed to improve it. While reward management influences performance by recognizing along with rewarding good performance as well as providing incentives to improve it. The rewards that an enterprise apply to both individual and team performance are critical in determining how affective the reward strategy will be. Also performance management involves the value an enterprise workforce could make to the overall business goals and how it could be groomed and cultivated to add most value to competitive advantage. This necessitates the need to identify how these rewards impact employee performance and how well the current reward system does this, within the chosen manufacturing companies forming the basis for this research.
The productivity and success of every organization is highly dependent on its staff (Ali, 2013; Gabcanova, 2011; Markova & Ford, 2011; Vlachos,2009). Thus maximizing the overall organisation performance requires an understanding of those factors that encourages the employees to put in extra effort at work and also in enhancing their performances (Hafiza,Shah,Jamseheed&Zaman, 2011). Reward system and management is one important Human Resource Management strategy for attracting and retaining high quality employee as well as facilitating them to improve performance (Dewhurst, Gutridge& Mohr, 2010; Ibrar& Khan, 2015).
According to Anku-Tsede&Kutin(2013) reward system can be seen as a means of actively engaging and the renewing the employee’s sense of community and mission of an organisation. In this view, an effectively administered system of rewards can provide incentive for quality workmanship and performance. Likewise, a poorly administered reward system can lead to low morale, unproductive performance and in the extreme cases a high percentage of employee turnovers. Organizations provide rewards to members in the form of wages and salaries, promotions, long service awards and certificates, end of the year bonus and other fringe benefits. These rewards are to motivate behaviour that will contribute to the achievement of the goals of organizations.The questions that readily come to mind are, what sort of behaviour does an organization want? How can reward process promote that behaviour? What motivates an organization to design reward packages for the employees? Nearly all organizations invest in the provision of rewards to motivate their employees in order to get the desired results. According to equity theory, the adequacy of such rewards will to a large extent depend on the value the employees place on the inputs they bring to the job in the form of education, experience, training, time, effort etc, with the outcomes (rewards) such as pay, promotions, praises and recognitions they receive as a result of performing the job (Fajana, 2002).
Reward systems is a broad construct that generally represents anything that employees may value and are willing to acquire in exchange for his or her contribution to work.Chiang & Birtch (2008).Pratheepkanth (2011) describe reward system to include all organisation components which may include people, processes, rules and decision making activities involved in the allocation of compensation and benefits to employees in exchange for their contribution to the organisation. From both definitions, rewards can be described as tangible benefits one can receive from engaging in a specific task. This opinion is reiterated by Torrington, Hall, Taylor and Atkinson (2011) who argue that although there are few people who claim to enjoy work for the sake of it, most people work in large part because it provides a means sustaining livelihood. This implies that people generally are concerned with the amount of benefits (whether financial or non-financial) attached to their work. The positive relationship between reward systems (especially financial rewards) on employee performance has been established in past studies (Lazear,2000;Osa,2014;Prendergast,1999;Metha ,2014; Saleem, 2011.).
Other commentators have put forward the notion that non-financial rewards are also important facilitators of organisational performance with the argument that financial performance on its own is incapable of effectively motivating employees towards optimum performance (Babakus, Yavas, Karatape&Avci, 2003; Bason, 2003; Dewhurst et al.(2009); Perry,Mesch&Paarlberg, 2006; Neckermann&Kosfeld, 2008; Dewhurst et al. (2009) for instance advanced the notion that non-financial rewards have a more significant influence on employee performance than financial rewards with the argument that financial rewards are mostly effective in boosting employees’ energy in the short-term and in most cases can have damaging unintended consequence. Three major non-monetary rewards reported to have significant effect on employee morale are: (i) praise from immediate managers, (ii) leadership attention (i.e. one on one conversation) and (iii) the opportunity to lead projects or task forces. In addition, Neckermann and Kosfeld, (2008) identify significant non-financial rewards to include social recognition from managers and colleagues alike in the form of appreciation for job completed, acknowledgement and certificates of recognition, were reported to be better drive improved performance than financial/monetary rewards .
The debate on whether to use monetary or non-monetary rewards has led to the development of the concept, Total Reward System. WorldatWork (2011) defines total rewards as holistic approach that strategically incorporates several employment factors (such as compensation, benefits and work-life amenities) in unison, to deliver desired employee attraction, motivation and retention. Thompson (2002) also defines total reward to typically encompass not only traditional, quantifiable elements like pay and benefits, but also more intangible elements such as scope to achieve and exercise responsibility, career opportunities, learning and development, the intrinsic motivation provided by the work itself and the quality of working life provided by the organisation. Kaplan (2007), also sharing this view, define total rewards as a holistic approach aligning business strategy and people strategy, aimed at bringing about maximum return and builds up employment brand, all of which create sustainable competitive advantage for organisations. According to Armstrong (2007) the conceptual basis of total reward is the bringing together of the different reward processes (that are interrelated, complementary and mutually reinforcing) with the focus of stimulating a deeper and long-lasting impact on the motivation and commitment of employees.
Similarly, Nazir, Shah and Zaman (2012) describe total rewards as an enclosing of aspects of work benefits that employees attach value to; whether it concerns provision of healthy work environment, better opportunities of learning and development or the benefits package linked to the pay. Hence, an effective reward system incorporates both the financial incentives (such as pay, fringe benefits and other money-related plans) and non-financial incentives (such as vacations/holidays, recognition and appreciations) in driving employee motivation for improved performances. Given that employees’ morale and improved productivity go hand in hand, it is therefore imperative for organisations to foster a properly administered reward system which not only has the capacity to improve the quality work efforts and employee but also act as a strategic tool for attracting skilled employees to the organisation (Armstrong & Brown, 2005; Herman, 2009). Notwithstanding, most organizations are still finding it difficult to establish an effective reward system that fairly suits the organizational demands in relation to employee performance and over organizational profitability (Osa, 2014; Roberts, 2005; WorldatWork, 2011.). Dewhurst et al. (2009) argue that the present economic situation has pushed successful companies around the world to adjust their reward systems – moving from financial to non-financial sensitive systems; whereas some organizations (to their detriment) are still sticking to the traditional method of rewards that emphasis bonuses and payment compensation. Additionally, the findings that the workers’ needs and desire from work differs from one individual to another require organization management to develop reward systems that is tailored towards the individual needs of their staffs (Dewhurst et al. 2009). Nevertheless, as emphasized by Brian (2006), rewarding and recognizing employee can be a tricky task as there is no generalized model towards its implementation; arguing that a successful system in one organization can be a failure in another.
Unilever Nigeria Plc
Unilever Nigeria Plc. was established in 1923 as a soap manufacturing company – Lever Brothers West Africa by Lord Leverhulme. Today, it is the oldest surviving manufacturing organization in Nigeria (Unilever Nigeria Plc. 2016).After a series of mergers/acquisitions, the Company diversified into manufacturing and marketing of foods and personal care products. These mergers/acquisitions brought in Lipton Nigeria Ltd. in 1985, Cheesebrough Industries Ltd. in 1988 and Unilever Nigeria Ltd. in 1996. The Company changed its name to Unilever Nigeria Plc. in 2001 in line with the global strategic direction of the business. The Company was quoted on the Nigerian Stock Exchange in 1973 and with equity holdings of 58.53% Unilever, and 41.47% Nigerian investors, the company is a true Multi-local Multinational organization with very outstanding international and local brands in her portfolio. The international brands include Close-Up toothpaste, Pepsodent toothpaste, LUX beauty soap, Lifebuoy soap, Rexona, Vaseline lotion and Vaseline Petroleum Jelly in the Personal Care Unit of the business; Blue Band Margarine, Lipton Yellow Label Tea and Knorr bouillon cubes in the Foods Unit; and OMO Multi-Active Detergent ,Sunlight washing powder and Sunlight Dish washing liquid in the Home Care Unit. Other Regional and local products include the Pears Baby Products range and Royco bouillon cubes. As at 2015, the organisation currently has over 1,200full time employees across three core departments: administration, technical/production and sales and marketing.
Cadbury Nigeria Plc
Cadbury Nigeria Plc was incorporated in Nigeria on 9th January 1965 as a company limited by shares. It became a publicly listed company with its shares traded locally on the Nigerian Stock Exchange in 1976 (Cadbury Nigeria Plc. 2016). The company is principally engaged in the manufacture and sales of branded fast moving consumer goods mostly to the Nigeria market, but also exports to other West African countries. The company’s brands fall into three principal categories, namely: Refreshment Beverages, Confectionery and Intermediate Cocoa Products. Cadbury Bournvita, Cadbury 3-in-1 Hot Chocolate are the main brands in the refreshment beverage category. In the Confectionery category, the main products are TOMTOM Classic, TOMTOM Honey Lemon, TOMTOM strawberry and BUTTERMINT. Lastly, the main brands within the intermediate cocoa products include; Cocoa Powder, Cocoa Cake and Cocoa Butter.
Nestle Nigeria Plc
Nestle Nigeria Plc is a Nigeria-based food manufacturing and marketing company founded in 1961 (Nestle Nigeria, 2016). The Company operates through two segments: Food and Beverages. The Food segment includes the production and sale of Maggi, Cerelac, Nutrend, Nan, Lactogen and Golden Morn. The Beverages segment includes the production and sale of Milo, Chocomilo, Nido, Nescafe and Nestle Pure Life. The Company manufactures and markets a range of brands, which include Infant Formula-Nestle NAN, Nestle LACTOGEN, Infant cereals-Nestle NUTREND, Nestle CERELAC, Family cereals-Nestle GOLDEN MORN, Confectionery-Nestle CHOCOMILO, Nestle KITKAT, Bouillon-MAGGI Cube, MAGGI Mix’py and Table Water-Nestle PURE LIFE. Its products include MAGGI Star Cube, MAGGI Crayfish, MAGGI Chicken, Ginger & Garlic, Golden Beef and Classic. It promotes food cultures through MAGGI Star Cook participatory cookery program in neighborhoods, and MAGGI Women Forum, a home management program targeted at semi urban and rural women.
1.2 Statement of the Problem
Osa (2014) reveals that several organisations are still finding it difficult to establish an effective reward system that fairly suits the organisational demands in relation to employee performance and over organisational profitability and this position is also shared by Dewhurst et al(2009) and Roberts (2004).There is a natural disparity between what people think they should be paid and what organizations spend in compensation thus affecting employees sense of accomplishment and this is a challenge employees in organizations face (WorldatWork, 2011). The unsteadiness in the FMCG sector can throw those who work in it into all manners of psychological conditions such as feelings of job insecurity, occupational stress, burnout and loss of sense of accomplishment leading to reduction in their task performance and overall performance on the job (Iwu & Ukpere, 2012).
Considering the importance of reward systems in employee performance of manufacturing organizations, it is disheartening to note that salaries and wages reward systems and practices in the manufacturing sector are largely disconnected from the demands of fairness, prevailing realities and moderation (Ejumudo, 2014). The environment created by the reward system has the potency of constituting a cog in the much-desired process of initiating and sustaining motivation by a team of competent, efficient, goal-driven, proactive and value-adding employees in the organizations thus leading to counterproductive behaviors which consequently leads to reduction in employee performance, reduction sales and profits by the organizations and business failures (Ejumudo, 2011).
According to Obikeze (2012), a greater percentage of the employees in manufacturing companies have been major culprits of lateness to work and not keeping appointment to customers, very unfriendly and even become hostile while attending to customers, some lose focus and consequently supply wrong brand of products to customers and these result in long waiting time for customers to receive the needed goods and services, and the consequent low performance as some customers lose patience and consequently take their leave and even go the alternatives. The poor attitudes of the sales force such as lateness to work, delayed sales calls, lack of information for customers problems, could contribute to the low growth of employee performance in manufacturing companies and these arises from the poorly structured and in some cases unavailable reward system through lack of fringe benefits to workers, recognition and appreciation offered by the manufacturing companies to their employees Obikeze (2012).
Various organizations staff has shown that they have diverse needs that require a comprehensive total reward system to meet the needs of various employees. As a result organizations has been faced with the challenge of implementing and offering competitive rewards to the workforce for the purpose of enhancing their performance as the lack of special recognition to acknowledge outstanding individual or team achievements with small cash awards, individual performance rewards based on specific employee performance criteria and stock ownership rewards to professionals who meet specific goals have been neglected by management in several organizations (Kawara, 2014). Due to these, the conceptual and adaptive performance of the employees has been on the decline leading to customer losses as the employees feel less motivated towards work and organizational profit will decline (Hafiza, Shah, Jamseheed, & Zamam, 2011).
The ability to attract and retain effective and efficient employees, as well as keep them highly motivated has become a great challenge among organizations that has led to reduction in the employees performance with employers now requiring their employees to do more while giving less in terms of rewards and employees on their part, are asking for more incentives with the inability of organizations to strike a balance resulting in reduced task performance by the employees (Nnaji & Egbunike, 2015).
The poor productivity of Nigerian workers has been blamed on several factors, among them is employer’s failure to provide adequate compensation for hard work and the indiscipline of the privileged class that arrogantly displays their wealth, which is very demoralizing to working class and consequently reduced their productivity (Sajuyigbe, Olaoye & Adeyemi, 2013). Markova and Ford (2011) mentions that the real success of companies originate from employees’ willingness to use their creativity, abilities and know-how in favor of the company and it is organization’s task to encourage and nourish these positive employee inputs by putting effective reward practices in place.
Lautizi, Laschinger, & Ravazzolo, (2009) stated that the current level of satisfaction by employees is quite low and the reward system offered by organizations play a vital role and this has led to the dismal performance of the organizations and their inability to emerge from its doldrums. The poor reward system in the manufacturing companies has also led to the employee performance rates within the last decade become a nationwide epidemic. Employees in the organizations no longer feel the sense of loyalty that once existed and have left employees feeling detached from the organizations lead the employees to focus more on job hunting rather than increasing their performance thereby hurting the general performance of the organizations. Muhammad (2014) stated that in today’s business scenario only high salary and designation is not significant for employees to retain them in organizations, but others factors also play important role in their performance improvement, other factors such as recognition and appreciation systems, sense of accomplishment and fringe benefits has been found to be a missing vital link that could help achieve increased employee performance but most organizations lack it and there by their lack of organizational growth.
According to Zameer, Ali, Nisar and Amir(2014) reward systems in most organizations fail because they are not usually performance based the lack of proper remuneration system and all these leads to decreasing employee performances.Wasiu and Adebajo (2014) reveals that most Nigerian organisations fails to pay adequate attention to the wellbeing of the employees and in most cases the remunerations they receive is not even proportionate with the efforts and skills that they put into work and organisational activities. Akinbowale, Jinabhai and Lourens, (2013) reveals that most organisations in Nigeria consider the employee as an additional cost (or liability) to their profit making goal and as such as they do not remunerate them appropriately. Instead of regarding the employees as the most valuable asset, attention is rather paid to other organisational resources such as materials, machineries and process of operations with the underlying drive for the organisations being to improve the production process with little or no consideration for human efforts. Ajila and Abiola (2004) describe the attitude of most Nigerian management towards workers as a social concern and stressed the importance of investigating this problem at the industrial settings that are resulting in their indifferent attitude towards reward systems as a means of maximising employee productivity.
1.3 Objective of the Study
The specific objectives are to:
- evaluate the effect of Sense of Accomplishment on task performance in selected manufacturing companies in Lagos state;
- examine the effect of Recognition/Appreciation system on contextual performance in selected manufacturing companies in Lagos state;
- determine the effect of salary&wages on counterproductive behavior in selected manufacturing companies in Lagos state;
- assess the effect of fringe benefits on adaptive performance in selected manufacturing companies in Lagos state and
- determine the effect of combined reward system variables on employee performance in selected manufacturing companies in Lagos State;
1.4 Research Questions
In line with the stated objectives, the study will answer the following questions:
- What is the effect of Sense of Accomplishment on employee’s task performance in selected manufacturing companies in Lagos state?
- What is the impact of Recognition/Appreciation system on employee’s contextual performance in selected manufacturing companies in Lagos state?
- What is the influence of salaries/wages on employee’s counterproductive behavior in selected manufacturing companies in Lagos state?
- Evaluate the extent to which fringe benefits affect employee’s adaptive performance in selected manufacturing companies in Lagos state?
- What is the effect of combined reward system variables on employee performance in selected manufacturing companies in Lagos State?
To provide answers to the research questions, the following hypotheses will be tested in this study:
H01:Sense of Accomplishment has no significant effect on employee task performance in selected manufacturing companies in Lagos state
H02:Recognition/Appreciation system has no significant effect on employee contextual performance in selected manufacturing companies in Lagos state.
H03:Salary/Wages has no significant effect on employee’s counterproductive behavior in selected manufacturing companies in Lagos state.
H04:Fringe Benefits has no significant effect on employee’s adaptive performance in selected manufacturing companies in Lagos state.
H05:JointReward System Variables has no significant effect on employee performance in selected manufacturing companies in Lagos state.
This study investigated reward system and employee performance of selected Manufacturing companies in Lagos state. The researcher would therefore limit the research to three(3)Manufacturing companies namely Unilever Nigeria Plc, Nestle Nigeria Plc and Cadbury Nigeria Plc. Manufacturing companies were selected because reward system is very crucial to these companies and to also ensure an in-depth examination of the research focus in each organization such that the results will provide useful information. The target respondents for this study are staffs of technical/production department. Population arrived at based on survey of the selected companies is Eight hundred and twelve (3105) staff sourced from the annual report of the companies(2016). Sample size based on Taro Yamane (1967) is 459 including provision for thirty percent non-respondent. The study adopted simple random sampling. Data were analyzed using descriptive survey administered through questionnaire which will be employed to empirically investigate the relationship among variables of the study.
The study was carried out in Lagos state because it is considered the nerve centre for commercial purpose. The study assessed the current reward systems adopted in each of the organizations and examined its impact on the employee organizational outcomes. The choice of limiting the study to only three organizations is to ensure an in-depth examination of the research focus in each organization, such that the results provided useful information on the impact of rewards on the measured employee outcomes.
1.7 Significance of the Study
The study is expected to increase knowledge and understanding of the effects of reward system on the performance level of employees in the Nigerian manufacturing industry. The study of management would be enhanced as different approaches have been used to view reward system and employee performance. As such this study would help to increase the knowledge of both management tutor and students as they would gain more insight into this study. Industries would utilize this study to formulate and implement policies that would lead to a fair reward system for private and public servants and which would improve efficiency and effectiveness in organizational processes/staff performance. It is also hoped that firms within the industry utilizes the findings from the current study to formulate and implement policies that would lead to the implementation of fair reward systems, aimed at improving individual and collective performances of employees and in the long run would aid in improving the efficiency and effectiveness of organisational processes.Employers are also expected to learn from this study so that they avoid development and selective implementation of haphazard reward systems through creation of highly qualified and sensitive human resource departments that would select, train and equip employees in order to reduce their withholding of effort at their workplace. The study would be utilized to create more convenient and satisfactory rewards for the employees in industries and thereby yielding a higher result in the output .It is also expected that at the completion of this study, the society would adopt the concept of absolute and sincere reward system that enables individuals to offer their best in every undertaken to ensure success and completion of tasks handled. This implies that the study contributes to the daily implementation of reward systems that enhances the output and performance of individuals at home and at workplace. The government of Nigeria through public service commission would use this study to formulate and implement policies that would lead to a fair reward system.
1.8 Operationalization of Variables
The research work is based on two major constructs, namely reward system and employee performance, that is,
Y= f (X)
Where; Y = Employee Performance
X = Reward System
This implies that employee performance is a function of the reward systems. The evidence from the literature represents the platform used for the selection of both dependent (Y) and independent (X) variables used in the study. The reward systems was designated as the ‘X’ constructs while, employee performance is presented by ‘Y’ construct. In addition, the employee organisational outcome is operationalized as;
Y = (y1, y2, y3, y4)
X = (x1, x2,, x3, x4)
y1 = Task Performance (TP)
y2 = Contextual Performance (CP)
y3 = Counterproductive work behaviour (CWB)
y4 = Adaptive Performance (AP)
x1 = Sense of Accomplishment(SOA)
x2 = Recognition&Appreciation(RA)
x3 = Salaries&Wages(SW)
x4= Fringe Benefits (FB)
Y = f (X)
y4=f(x4)…………………………………….……………………..… Equation 4
Y = f(x1, x2,x3,x4)……………………………………………………Equation
Regressionally we have,
y1 = α0 +β1×1+ µi…………………..……………..……………..Equation 1
y2 = α0 + β2×2 +µi………………………………………………. Equation 2
y3 = α0 + β3×3 + µi………………….……………………………Equation 3
y4 = α0 + β4×4+ µi…………………….………………….………Equation 4
Y= α0 +β1×1+ β2×2 + β3×3+β4×4+µi…………………….……… Equation 5
These are the equations to be considered in this study.
α = The constant of the equation
βi = The coefficient of the independent variable
µ = Error term or values that account for change but are not part of the survey at present.
1.9 Operational Definition of Terms
Reward: can be defined as anything that an employee may value that an employer is willing to offer in exchange for his or her contributions.
Reward System: comprises of all interrelated organisational processes – including people, process, rules and decision making activities which combine to ensure that reward management is carried out effectively to the benefit of the organisation and the people who work there.
Intrinsic Reward: refers to the reward one derives from the content of the work itself and includes factors such as interesting and challenging work task, self-direction and responsibility, variety, creativity, opportunities to use one’s skills and abilities, sufficient feedback regarding effectiveness of one’s effort, personal satisfaction with job, recognition and appreciation, career development opportunities, etc.
Extrinsic Reward: refers to the reward attained that are external to the job itself and it usually include financial and tangible rewards components such as pay, fringe benefits, job security, promotions, private office space, etc.
Employee Performance: is defined as the undertaking of complex series of actions that integrate the skills and knowledge of the employee(s) to produce a valuable result. It also can be defined to reflect the quality and quantity of the employee’s output, presence at work, accommodative and helpful nature and timeliness of output.
Task Performance: can be defined as the proficiency (i.e., competency) with which one performs central job tasks; reflecting an individual’s proficiency with which he/she performs activities which contribute to the organisation’s goals and objectives.
Contextual Performance: refers to activities which do not contribute to the technical core of the organisation but which support the organizational social and psychological environment in which organizational goals are pursued and includes behaviour such as helping colleagues, being a reliable member of the organisation and making suggestions about how to improve work procedures.
Counterproductive Behavior: defined as behaviour that harms the wellbeing of the organisation and it includes behaviour such as absenteeism, being late for work, engaging in off-task behaviour, theft and substance abuse. It also include overt acts such as aggression and theft or more passive acts, such as purposely failing to follow instructions or doing work incorrectly.
Adaptive Performance: is defined as the extent to which an individual adapts to changes in a work system or work roles and include, for example, solving problems creatively, dealing with uncertain or unpredictable work situations, learning new tasks, technologies, and procedures, and adapting to other individuals, cultures, or physical surroundings.