CHAPTER ONE
1.0 INTRODUCTION
1.1 Background to the study
Employee compensation and reward is synonymous with performance management. Performance management is usually a fundamental function of the Human capital management department in any organization. Human capital management is primarily concerned with managing the relationship between people and work. Armstrong (1992)
It is widely believed by scholars and practicing professionals that employee performance has implications on production capacity and service delivery. The output capacity of a firm is often assumed as its strength and one of its adaptations for survival in a competitive environment.
Compensation and Reward system as an important tool that management can use to motivate employees and alter their attitudes and make them enthusiastically strive towards accomplishment of organization goals. Motivation involves influencing an employee to willingly perform extraordinarily towards accomplishment of predetermined goals. (Cole 1995). For an organization to meet its obligations to shareholders, it is imperative that the top management must develop a relationship between the organization and employees that will fulfill the continually changing needs of both parties. Employees expect their organization to provide fair pay, safe working conditions, fair treatment, recognition and reward for exceptional performance.
Ordinarily compensation and reward system should boost performance but may also have a negative impact on organizational performance when the compensation and reward system used within an organization in addition to its culture fails to recognize and reward performance but rather gives most of its attention to her bureaucratic staff grading system without doing everything possible to identify and retain staff on which it had an absolute cost advantage.
Organizations can hardly exist without a workforce. This work force constitutes a large chunk of the total operational expenses of any organization. The larger the workforce the larger the associated cost of maintaining and retaining such massive level of work force. Hence the need to prudently manage all processes that will keep staff cost at the minimal level.
When organization operational policy fails to adequately take note of the inherent cost implication of staff on its balance sheet and also provide vivid source of generating funds through its operations that will adequately mitigate the effect of identified staff costs on their balance sheet it is safe to assume that such organizations in a matter of time will run into financial crises emanating from cost of keeping and retaining several unproductive staff. (Michael 2015).
The productive level of a staff or work force group could always be influenced by compensation structure. A compensation structure that is developed from a performance management model that is deeply dedicated to identifying and rewarding performance and subsequently at a reasonable level reprimand poor performance could trigger an organization culture that will encourage staff to put in their best as they see a clear relationship between performance and reward.
It is important to note that each compensation policy a firm decides to employ has related cost implication. Efficient consideration and management of cost implication of compensation policy is vital to the growth and survival of firms.
One of the problems identified in the Nigerian banking industry is the staff compensation policy used by banks to pay their staff. Some banks have adopted a model that ensures that each staff adds financial value to the organization by assigning varying degrees of business targets to staff according to their ranks, irrespective of their department. But it was observed that most banks, have not attached necessary targets to their non marketing staff and have in turn suffered high staff cost of retaining large number of unproductive staff, thereby resulting to persistent loss making by most branches.
The compensation and rewards system in banks is the interest of this research work as a major cause of the lingering poor performance of the Nigerian banking industry.
This research shall extensively investigate compensation and reward as the endpoint of performance management in consonance with the Balanced score card performance measurement model.
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