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.).