The Impact of Compensation on Employees’ Performance in the Nigerian Banking Industry
Chapter One
Objective of study
This research work aims to investigate the Impact of compensation and reward system on employees performance in some selected banks in Nigeria. 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:
- To examine the relationship between workers‟ wellbeing at work and their productivity.
- To establish the relationship between compensation structure and productivity.
- To investigate the relationship between promotion and productivity
- To investigate the relationship between incentives, reward and performance of organization.
CHAPTER TWO
REVIEW OF RELATED LITERATURE
Conceptual Framework
Compensation
Compensation is all forms of financial returns and tangible services and benefits employees receive as part of an employment relationship (Milkovich & Newman cited in Abdul, Muhammad, Hafiz, Kashif, Ghazanfar & Muhammad, 2014) i.e., compensation surrounded by the employee wages and salaries, incentive-payments, bonuses, and commissions. Employee compensation contains all forms of pay and rewards received by employees for the performance of their jobs” (Snell & Bohlander, 2010). According to Dessler (2011) employee compensation means all forms of pay or rewards going to employees and arising from their employment and it may be direct financial payments (Pay in the form of wages, salaries, incentives, commissions, and bonuses) and indirect financial payments (Pay in the form of financial benefits such as insurance).
Different Compensation System
Many researcher and scholars have explained about compensation and job performance from the different point of view or aspects and these are Performance-Based-Compensation, Merit-BasedCompensation, Outcome-Based Compensation, Competency-Based-Compensation, Equity Based-Compensation and so on. A short brief on these mentioned compensation system is prescribed below:
Performance-Based-Compensation: In 1988, Baker, Jensen, & Murphy provided an explanation on performance-based compensation plans, indicates that explicit financial rewards are an important part of a worker’s compensation. Delery and Doty cited in Nuray and Moazzam, (2016) demonstrated performance-based compensation as the single strongest predictor for job performance. Furthermore, a study conducted on compensation and performance (Coopers & Lybrand cited in Nuray & Moazzam, 2016) associated with performance-based incentive program at every level of an organization. Besides that, Banker, Lee and Potter (2000) focused on performance- based compensation which increases an organization’s overall productivity by attracting and retaining more productive employees. In contrast, individual performance evaluation may involve discretion and subjectivity, as well as nonfinancial and financial performance criteria (Bushman, Indjejikian, & Smith cited in Nuray & Moazzam, 2016) which also concerns with the compensation policy and strategy.
Merit-based-Compensation Several prominent scholars(Fein; Lawler cited in Nuray & Moazzam, 2016) support on meritbased-compensation, described that merit-based compensation system for job performance lead to higher organizational performance and it is necessary for motivating employees where merit-based rewards also concerned. On the other hand, some other researchers reported that there is an effect of merit pay compensation system on managers but statistical analysis indicated that the merit pay program had no effect on organizational performance, suggesting that merit pay may be an inappropriate method of improving organizational performance (Pearce, Stevenson, & Perry, cited in Nuray & Moazzam, 2016).However, although merit pay and bonuses for managers are common forms of compensation, there have been no rigorous tests of their effectiveness (Dyer & Schwab, cited in Nuray & Moazzam, 2016) for the better job performance in an organization.
Outcome-Based CompensationOutcome-based compensation is increasingly being used by many organizations especially in service industries. Banker, Lee, Potter, and Srinivasan cited in Nuray and Moazzam, (2016) identified some major reasons for this outcome-based compensation that are for motivating employees, gaining strategic advantages, understanding and focusing customer needs and satisfaction and so on. From the another point of view, Schlesinger, Heskett, and Zeithaml et al., cited in Nuray and Moazzam, (2016) emphasized on Outcome-based compensation in order to enhance customer satisfaction and gain a competitive advantage, getting high customer interaction, ensuring more production and consumption by which organizations can reach its target level, also can utilize the opportunities from buyers and sellers to command price premiums through the outcome-based compensation (Forbis & Mehta, cited in Nuray & Moazzam, 2016).
Competency-Based-CompensationThe word competency was brought into the public arena in the USA in the early 1980s by Boyatzis cited in Nuray and Moazzam, (2016). He defined competency as „an underlying characteristic of an individual which is causally-related to effective or superior performance‟.
CHAPTER THREE
RESEARCH METHODOLOGY
INTRODUCTION
In this chapter, we described the research procedure for this study. A research methodology is a research process adopted or employed to systematically and scientifically present the results of a study to the research audience viz. a vis, the study beneficiaries.
RESEARCH DESIGN
Research designs are perceived to be an overall strategy adopted by the researcher whereby different components of the study are integrated in a logical manner to effectively address a research problem. In this study, the researcher employed the survey research design. This is due to the nature of the study whereby the opinion and views of people are sampled. According to Singleton & Straits, (2009), Survey research can use quantitative research strategies (e.g., using questionnaires with numerically rated items), qualitative research strategies (e.g., using open-ended questions), or both strategies (i.e., mixed methods). As it is often used to describe and explore human behaviour, surveys are therefore frequently used in social and psychological research.
POPULATION OF THE STUDY
According to Udoyen (2019), a study population is a group of elements or individuals as the case may be, who share similar characteristics. These similar features can include location, gender, age, sex or specific interest. The emphasis on study population is that it constitutes of individuals or elements that are homogeneous in description.
This study was carried to examine the impact of compensation on employees’ performance in the Nigerian banking industry. Selected banks in Birnin Kebbi, Kebbi State forms the population of the study.
CHAPTER FOUR
DATA PRESENTATION AND ANALYSIS
INTRODUCTION
This chapter presents the analysis of data derived through the questionnaire and key informant interview administered on the respondents in the study area. The analysis and interpretation were derived from the findings of the study. The data analysis depicts the simple frequency and percentage of the respondents as well as interpretation of the information gathered. A total of eighty (80) questionnaires were administered to respondents of which only seventy-seven (77) were returned and validated. This was due to irregular, incomplete and inappropriate responses to some questionnaire. For this study a total of 77 was validated for the analysis.
CHAPTER FIVE
SUMMARY, CONCLUSION AND RECOMMENDATION
Introduction
It is important to ascertain that the objective of this study was to ascertain the impact of compensation on employees’ performance in the Nigerian banking industry. In the preceding chapter, the relevant data collected for this study were presented, critically analyzed and appropriate interpretation given. In this chapter, certain recommendations made which in the opinion of the researcher will be of benefits in addressing the challenges of compensation on employees’ performance in the Nigerian banking industry
Summary
This study was on the impact of compensation on employees’ performance in the Nigerian banking industry. Four objectives of the study are: To examine the relationship between workers‟ wellbeing at work and their productivity, to establish the relationship between compensation structure and productivity, to investigate the relationship between promotion and productivity and to investigate the relationship between incentives, reward and performance of organization. A total of 77 responses were received and validated from the enrolled participants where all respondents were drawn from selected banks in Birnin Kebbi, Kebbi State. Hypothesis was tested using Chi-Square statistical tool (SPSS).
Conclusion
The study concluded that The impact of compensation on employees’ performance in the Nigerian banking industry since wage and salary compensation, retirement benefit compensation and fringe benefits compensation had a positive and significant effect on employee performance because the wage and salary compensation promotes the willingness of employee to use their creativity in workplace, the retirement benefit compensation eliminates poor attendance in a workplace and the fringe benefits compensation promotes attention and focus of employee to render service without fear or favour
Recommendation
Managements of deposit money banks should ensure that there are 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. Managements of deposit money banks in should enforce effective compensation plans to reward performance, loyalty, experience, responsibility, and other behaviors. Managements of deposit money banks Commercial banks should also introduce generous benefits like post-retirement medical treatment, regular promotion, job security etc as a tool for retaining talent. Apart from the salaries paid, the employees of deposit money banks should be eligible for a fixed percentage of commission upon achievement of fixed target of income or performance objectives
References
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