- Background of the Study
Compensation Management is one of the most complex and dynamic issues in organizational performance. For an organization to achieve its stated objectives, there is the need to effectively manage compensation, taken into cognizance one of the core aspect of resource management known as compensation management (Anyebe, 2003). The ability of a manager to achieve its stated objectives to a large extent depends on the effective implementation of compensational packages in order to motivate the subordinates and employees within and beyond their expectation. Compensation Management plays a crucial and functional role because it is the heart beat of human resource management. It is also vital to both employees and the employer (Begbie, Bussin, &Schurink, 2011). This is because employees typically depend on wages and salaries, and must be equivalent to the work done. However, to managers, compensation decisions influence the cost of doing business and thus, their ability to sell at a competitive price in the product market (Barry et al, 1995) It is an obvious fact that effective implementation of favorable compensation management will not only aid in stabilizing and retaining employees but also helps in reducing labour turnover within the organization. Employees’ compensation can be seen as all forms of financial returns and tangible benefits that employees receive as part of an employment relationship. It can be referred to as the totality of the financial and non-financial rewards an employee receives in return for his/her labor or services (Bernadin 2005).
Sola &Ajayi (2001) see compensation management as a process of establishing the structure of wages level for the various positions designing incentive systems, setting individual wages and incentives within the established structures. It is an integral part of human resources management that affects the performance of employees because it establishes the degree of relationship between employer and the employee. The manufacturing sector is one of the sectors responsible for the food and beverage industry. It is one of the sub-sectors of the manufacturing sector but responsible for the manufacturing of daily products, beverages, seasoning, convenience foods confectionaries and staple foods (Harrison, &Liska, 2008).
The turbulent management-labour crisis over continuous agitation for increased pay in the public services all over the world is challenging public sector organizations to utilize their employees more effectively to improve organizational performance (Hewitt, 2009). In Nigerian Civil Services, pay has become the driving force for seeking employment in the industry. It therefore becomes imperative that organizations establish and adopt a compensation system that can motivate employees to work while at the same time not eating too deep into the organization’s resources New Delhi (Chiang, &Birtch, (2008). Remuneration does not simply compensate employees procedures that will attain maximum return on Naira spent in Compensation is payment in the form of hourly wages or annual salary combined with benefits such as insurance, vacation, stock options, etc. that can positively or negatively affect an employee’s work performance. Compensation is the remuneration received by an employee in return for his/her contribution to the organization. It is an organized practice that involves balancing the work-employee relation by providing monetary and non-monetary benefits to employees. Compensation is an integral part of human resource management which helps in motivating the employees and improving organizational effectiveness (Danish & Usman, 2010).
Employees are pivotal to the achievement of organisational goal and enhancing the competitive advantage of the organisation in the global world and within the industry where the business firm is operating. Hence the leadership role of the employee’s in achieving this cannot be underestimated and to this done adequate measure must be put in place by the organisation through well managed compensation structure (Pearce, 2010). Therefore, compensation management as one of the fundamental functions of human resource department is meant to attract, retain, developed employees toward attaining organisational effectiveness, efficiency and competitive advantage in the globalised world (Adeoye, 2001; Tsai, 2005; Adeoye, Elegunde, Tijani&Oyedele, 2012).
Compensation management is a veritable instrument that affects the decision of job applicants and employees within the organisation. It has aided the firms to achieve their competitive edge over their competitors in the industry (Heneman& Judge, 2000; Ivancevich, 2004; Hyondong, 2006). Furthermore, a lot of monetary resources are invested on crafting, organising as well as administering organisational remuneration arrangement. Despite its vital contribution toward the success and development of the firm, scholars and even practitioners have lamented that there is a slow pace in the advancement of compensation research (Heneman & Judge, 2000; Kersley & Forth, 2005). In most recent times, the plan release cum adoption of reward management, have gone through a major shift that are dramatic in nature. This has reflected the motivational aspect in the employees’ leadership roles and performance (Heneman & Judge, 2000; Purcell et al., 2003).
In the context of organisational effectiveness, leadership roles cannot be underestimated and the critical existence of an organisation is largely anchored on the leadership that exists within the sphere of the firm. It is reiterated that the wire link between the vision, strategic direction and change of the organisation is leadership. Leadership has been in existence for as long as people on earth have co-existed and it is present in all the cultures (Rukmani et al., 2010; Fibuch, 2011). Bontis and Serenko (2009) and Ilies et al., (2006) viewed leadership from the managerial perspective and opined that managerial leadership is the grace to be able to encourage, arouse, mentally excite, propagate, anchor, visibly coordinates the organisational goals, and show good examples to subordinates. Articulate leaders must be ready to give feedbacks about the different aspects of the subordinates’ effort that may have positive result on self-efficacy, job satisfaction, and commitments of employees with focus on areas of improvement (Shea and Howell, 2009; Jawahar, 2006; Bontis&Serenko, 2009).
1.2 Statement of the Problem
In today’s work environment, there is more change and uncertainty, there is increased need for empowered employees, there is decline in traditional incentives, there is rise of nontraditional incentives and there is increased use of variable compensation. In organization, compensation is usually narrowed to cash and as a result, employers only have a tunneled vision when it comes to the issues of compensation for their employees. The company has also attempted to give attention to employee compensation strategies. However, employees themselves have failed to recognize the fact that their compensation is a package and not only related to cash. The byproduct of the above understanding of compensation strategy is that it is managed to a moderate extent and most of the time employee performance could be affected and vice versa. The study therefore sought to address this gap by investigating the effect of compensation management in organizational performance.