IMPACT OF REWARD SYSTEM ON THE PERFORMANCE OF SELECTED MONEY DEPOSIT BANKS IN ANAMBRA STATE, NIGERIA

CHAPTER ONE INTRODUCTION

1.1      Background of the Study

Reward system is an important tool that management can use to channel employee motivation in desired ways. In other words, reward systems seek to attract people to join the organization to keep them coming to work, and motivate them to perform to high levels. The reward system consists of all organizations components – including people, processes, rules and decision making activities involved in the allocation of compensation and benefits to employees in exchange for their contribution to the organization (Puwanenthiren, 2011).Reward systems are ways of promoting individual and organizational behaviour needed to achieve the organizational strategy and the organization’s goals (Lawler, 1995; Kerr and Slocum, 2005).

In order for an organization to meet its obligations to shareholders, employees and society, its top management must develop a relationship between the organization and employees that will fulfill the continually changing needs of both parties. At a minimum the organization expects employees to perform reliably the tasks assigned to them and at the standards set for them, and to follow the rules that have been established to govern the workplace. Management often expects more: that employees take initiative, supervise themselves, continue to learn new skills, and be responsive to business needs. At a minimum, employees expect their organization to provide fair pay, safe working conditions, and fair treatment. Like management, employees often expect more, depending on the strength of their needs for security, status, involvement, challenge, power, and responsibility. Just how ambitious the expectations of each party are, vary from organization to organization. For organizations to address these expectations an understanding of employee motivation is required (Beer, Spector, Lawrence, Mills, and Walton, 1984).

A well designed and functional reward system is an efficient way to increase employeework motivation. The appropriate type of reward is developed in accordance to thecompany’s reward philosophy, strategies and policy. However, it might be challengingto find the right way to combine the company’s integrated policies and practices together with the employee’s contribution, skill and competence. (Armstrong, 1999).

Kerr and Slocum (2005) define the reward system as to who gets rewarded and why. They also suggest reward systems to be powerful means of influencing organisational culture, and that reward system is a primary method of achieving control. Also, with regards to reward systems they state: the reward system defines the relationship between the organization and the individual member by specifying the terms of exchange: It specifies the contributions expected from members and expresses values and norms to which those in the organization must conform, as well as the response individuals can expect to receive as a result of their performance. (Kerr and Slocum, 2005). The reward system is a group of neural structures that are critically involved in mediating the effects of reinforcement. A reward is an appetitive stimulus given to a human or some other animal to alter its behavior. Rewards typically serve as reinforcers. Messmer, (2008) assert that a reward system is a structured method of evaluating and compensating employees based on their performance. Reward system Procedures, rules, and standards associated with allocation of benefits and compensation to employees (Kerr and slocum, 2005).

The current financial crisis the world is experiencing has made the reward system, with focus on bonuses and viable remuneration, a highly debated topic in media. Reward systems are often used as a management tool for achieving desirable objectives. One of the most common purposes is to motivate employees to perform better (Ax, Christer and Kullven, 2006). When workers are motivated, they are more likely to perform better. Improved worker performance quickens the achievement of corporate objectives. 

Organizations are established to accomplish specific objectives. The organization that wishes to achieve these objectives must have a competitive and perhaps a comprehensive total reward system that is aligned with the organization’s business strategy and that reflects the competitive reality of the labour market. In a world where people have become more and more demanding about their lives and surroundings, the reward system could be used to motivate employees by satisfying these demands. However, there exists a lack of understanding in how to motivate all those high demanding individuals, making most of the reward systems sub-optimized. To create an optimal reward system, we need to better understand what really motivates, and what does not.

Individuals working for organisations are all different; their needs, thoughts and experiences are different and they are all motivated by different things. Thus, it would be more correct if the rewards also were individualized. It is important for every employer to find what motivates each employee. In a perfect world, the company has resources to ensure that all employees have a meaningful job, but this is far from reality. People want to feel that what they do make sense. What motivates us will change over time. What was seen as meaningful 25 years ago may not feel as meaningful today. We are motivated by different things depending on where we are in our development. A young worker is likely to be keener on development possibilities, while an older one is more anxious about security and to be able to use his experience (Jagult, 2005).

Banks have been keen on growth and expansion and this has led to continuous war for talent to operate in subsidiaries in the regional market and to steer innovation. In top demand are people who are technologically literate, globally astute and capable of not only developing but also executing strategy, setting off a scramble for staff among the top firms. However, in as much as banks worked to get people with the greatest potentials to occupy positions, employee maintenance has become a challenge for many of them due to the high labour costs involved, constituting up to 60 per cent of the total costs (Cherotich, 2012). 

In attempts to remain competitive and profitable, banks have resorted to cost reduction, the first casualty being the human capital investment like cutting back benefits and recruitment, freezing or cutting salary increases, promotion and development programmes like training. Unfortunately, focus is on payrolls to reduce the cost to income ratio with most banks aiming below 50 per cent level. Employees interpret the labour cost cutting measures as a breach of trust, making it more difficult for firms to retain key talent (Perry, Mesch, and Paarlberg, 2006). The outcomes of such an event are reduced staff motivation and satisfaction leading to low output levels, loss of morale, lowered organizational commitment, work withdrawal behaviours such as absenteeism and lateness, increased turnover, mistrust, uncertainty and insecurity.

This presupposes that, for organisations to achieve their goals, employees’ performance should be, at least optimum.  Workers have to be motivated to perform above average or encouraged to maintain high performance level.  Hence, in today’s business culture, rewards, recognition and an enjoyable workplace have become extremely important for many reasons. Motivation is the key that gets people to do what they do. Armed with the knowledge of what is most important, creative solutions and the appropriate financial resources can be devoted to addressing the key issue. Without this knowledge, too much well-meaning effort might be expended trying to fix things that are not all that important to employees (Kreitner and Kinicki, 1998). It is in the light of this that issues concerning the employees are considered the driving force of every organization and must be given the needed attention, as it will affect their performance and the organization at large. One of the key issues that concern every worker in an organization has to do with the reward or compensation for their effort.

1.2      Statement of the Problem

The types of reward in most organizations usually are not performance based. Thus they are not linked in any way to business structure and employee recruitment, retention, motivation, performance, feedback and satisfaction. Moreover, the recipients of these rewards in most organizations do not participate in the planning and the implementation of the reward systems in organizations. Further, there are a number of loopholes in the administration of the various ways of rewarding employees in organizations. Again, most organizations view reward system as only the monetary compensation given to employees to compensate them for their performance, whereas rewards should be everything that goes into motivating the individual employee to give out his best. The study will evaluate the reward systems of the banking system in Nigeria and establish whether their current reward systems have any bearing on corporate performance.

It is an undisputable fact that rewards can enhance workers’ performance and hence improve corporate performance. The extent to which a worker does his or her work effectively and efficiently depends on the level of motivation received. It is known that individuals differ in likes and interest, as what motivate one may not motivate the other. Thus, the study wants to determine the components of reward system in the banking system of Nigeria and the extent to which the existing reward system has improved corporate performance.

Finally, among the empirical studies that dealt with reward system in organizations and its relationship with factors such as employee motivation, employee performance, employee satisfaction and effect on quality of work done, showed reward to have a positive effect. However, different rewards seem to have a different impact on employee attitude, satisfaction and performance. However, there are mixed findings when it comes to individual rewards and their effect on performance. 

1.3      Objectives of the Study

The main objective of this study is to determine the impact of reward system on performance in selected Money Deposit Banks in Anambra State. The specific objectives were to:

1. Determine the effect of contingency pay on productivity in selected Money Deposit Banks in Anambra State. 
2. Ascertain the extent to which employee recognition enhance employee performance in selected Money Deposit Banks in Anambra State.
3. Determine the extent of the relationship between variable payand customer satisfaction in selected Money Deposit Banks in Anambra State.
4. Identify the effects of career opportunity on manpower development in selected Money Deposit Banks in Anambra State.

1.4      Research Questions

The following questions guided the study: 

1. What are the effects of contingencypay on productivity in selected Money Deposit Banks in Anambra State?
2. To What extent does employee recognition enhance employee performance in selected Money Deposit Banks in Anambra State?
3. What is the extent of the relationship between variable pay and customer satisfaction in selected Money Deposit Banks in Anambra State?
4. What are the effects of career opportunity on manpower development in selected Money Deposit Banks in Anambra Stat?

1.5      Research Hypotheses

The following Hypotheses were tested in order to achieve the stated objectives of this study:

H_1(i):  Contingency pay has significanteffect on productivity in selected Money Deposit Banks in Anambra State.

H_1(ii):  Employee recognition significantly enhancesemployee performance in selected Money Deposit Banks in Anambra State.