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Impact of Employee Remuneration on Productivity

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Any opinions, findings, conclusions or recommendations expressed in this material are those of the authors and do not necessarily reflect the views of UK Essays.

Published: Tue, 06 Mar 2018

CHAPTER ONE

1.0 Introduction

The aim of this dissertation is to investigate the need for and impact of employee remuneration on organizational productivity. The study will focus on relationship between motivational techniques and employee performance. To examine the relationship between the level of job satisfaction of employee performance. It will also investigate the relationship between remuneration and employee performance. And the evaluation and development of reward process, which in turn can lead to improved profitability in an organization. If it is accepted that organizations’ assets are its work force, it is imperative that they ensure that they are fully motivated. This is because if the workers perceive that they are poorly remunerated, their performance is likely to drop and this will have negative effects on the organization.

It is important to note that there are several theories of motivation proposed by various researchers including Abraham Maslow, Alderfer’s ERG Theory, Herzberg’s two-factor Theory, Equity Theory, Expectancy Theory, McClelland’s Theory, Goal Setting Theory, McGregor’s theory X and Y, Ouchi’s Theory Z etc. (Sarin, 2009; 237). These theories have led to the development of various tools of motivation used by organizations to stimulate the interest of their employees. This research will examine the some of these motivation theories and apply them to measure their actual effectiveness on employee performance as well as organizational productivity.

Managing requires the creation and maintaining of an environment for the performance of individual working together in groups towards the accomplishment of a common objectives/ goals. A manager cannot do his job without knowing what his people want. To emphasize the importance of knowing and taking advantages of motivating factors particularly job satisfaction is the concern of the managers. Their job is not to attempt to manipulate people but rather to recognize the motivating factors in designing an environment for performance.

The basic element of human behaviour is one kind of activity, physical or mental. We can look at human behaviour as a series of activities, the question that arises, include to what extent can the activities of human being be undertaken in any point in time that is people do things that lead them to accomplish something, but individual goals can be elusive, sometimes people know exactly why they do things.

Management task is to get things done through other people due to global economic recession which is affecting Nigeria economy, employee are no longer safe due to unnecessary retrenchment, layoff , payoff compulsory leave etc, employee do not want to put in order to encourage active participation from employee for the attainment of organizational goal, there should be job satisfaction.

The word “Employee Remuneration to most people refers to money and usually money in addition to wages and salaries. However, job satisfaction according to Lawal (1992, pg56) is the favourableness with which employee view their work. Stephen P.etal (2009), define job satisfaction as a person’s general attitude towards her job. It is obtained when there is a “proffer fit between job characteristics and wants of employees”, in fact Employee Remuneration is an organizational set up as an embodiment of many factors, Employee Remuneration has a cause effect phenomenon, one area that brings about job satisfaction is the motivation of the workers.

The factors identified by management to be responsible for Employee Remuneration of workers on the jobs are:-

  • Good Remuneration
  • Job Enrichment
  • Job Content
  • Job Rotation
  • Conducive job environment
  • Positive Criticism
  • Participating in all level of decision process
  • Equity share in the organization.
  • Recognition for contribution made in the organization.

Since evaluation of management, professional managers and the writers on management have made a variety of assumptions about what would make the individual employee (that is the worker) to be satisfied, for example, the traditional theory of organization that a system of reward and punishment should be used to elicit the desire behaviour.

This is implemented through compensation package based on productivity of an employee e.g. Taylor differentiate system based on the necessity not out of love of money. Therefore, this assumption naturally lead to the conclusion that was an important factor that satisfied the workers on the job. In late 80’s, managers started to witness frequent encounter with workers who appeared to be suspicious of management and also are unimpressed by money, unconcerned about productivity and self-centred.

Then recognition of for workers become a major challenge to management in view of the fact that a simple solution to the problem did not exist. From the above it therefore implies that for organization to increase employee performance, managers need to be much more sophisticated in understanding of employees behaviour in an organisation. The understanding will provide basic ingredient for the designing and incorporating. Employee remuneration strategies into the policy and objective of the organisation on the total neglect is capable of having a great adverse effect on the organisational objective specially on the long run.

Employee resentment of the scientific management system led to the modification of job design and to maintain employee ‘enthusiasm’ and ‘productivity’, job enrichment became HR managers’ approach to motivation. Employees desire jobs that are challenging, autonomous and will require their intellects. Job enrichment makes provision to fulfil this desire as it involves ‘an increase in the level of responsibility for planning and co-coordinating tasks’ (Stevenson, 2002; 310 cited in Maxwell et al, 2008; 436). According to Kreitner and Kinicki (2001) cited also in Maxwell et al (2008; 436) the theory of job enrichment is a practical application of Herzberg’s hygiene theory, which postulates that employees are motivated when there is an increase in job satisfaction (Maxwell et al, 2008; 436).

1.1 Background to the study

In Nigeria, there is a complete dearth of studies that looked into this effective management tool in organisations. Therefore, this study will carry out primary research amongst employees in a Nigerian banking sector. It is important to find out whether labour performance can be improved through remuneration which can be in term of financial and non-financial remuneration/reward in the Nigerian working environment. Hence, the research into reward and motivation has become necessary in order to alert Nigerian employers on the need for adequate motivation, both financial and non-financial to ensure commensurate employee performance.

Motivation commences with a ‘need, vision, dream, or desire to achieve’ what seems impossible. Employers desire their employees to have a ‘can-do’ attitude to everything. In their opinion, this attitude assures an increase in productivity (Maxwell et al, 2008; 432). In today’s increasingly changing world, both employee and employers are trying to find ways to make jobs more meaningful and satisfying. One of the ways to do this is to redesign jobs to better meet new requirements. The “re-engineering” of jobs has been a significant labor market occurrence over the last 20 years. The design of jobs as it relates to employee participation, flexible working and employee/group independence has experienced extensive changes. These changes include the use of several recent HR practices e.g. employee involvement programs such as quality circles, more use of job rotation and flexibility, job enrichment, job enlargement, and more work-team self-management (Maxwell et al, 2008; 432-433). Redesigning has several characteristics of which job enrichment is one. The study of job redesign reveals how various classes of workers vary from one to another in form of what they need. According to Kreitner and Kinicki (2001) cited in Maxwell et al (2008; 433), job design or redesign is any set of activities involving the ‘alteration of specific jobs or interdependent systems of jobs with the intent of improving the quality of employee job experience and their on-the-job productivity’.

Employee resentment of the scientific management system led to the modification of job design and to maintain employee ‘enthusiasm’ and ‘productivity’, job enrichment became HR managers’ approach to motivation. Employees desire jobs that are challenging, autonomous and will require their intellects. Job enrichment makes provision to fulfil this desire as it involves ‘an increase in the level of responsibility for planning and co-ordinating tasks’ (Stevenson, 2002; 310 cited in Maxwell et al, 2008; 436). According to Kreitner and Kinicki (2001) cited also in Maxwell et al (2008; 436) the theory of job enrichment is a practical application of Herzberg’s hygiene theory, which postulates that employees are motivated when there is an increase in job satisfaction (Maxwell et al, 2008; 436).

The purpose of this research is highlighting the impact of employee remuneration on organisational productivity. It is aimed at identifying those attitudes of the management of the company towards its employees that will enable the company to achieve its corporate goals. This study is necessary as lack of adequate information can hinder organisations from achieving set goals, which usually amongst many others is profit maximisation.

1.2 Aims and Objectives

The main aim of this study is to know the importance of employee’s remuneration to the job satisfaction of the workforce, and theoretically it is to identify the various motivational incentive and summarise the various view of managers on the impact of these incentives on employee.

Also this study aims to evaluate Access bank plc success vis-a-vis rewarding their staffs.

Objectives

The objective of this study is to examine, “The Impact that Employee Remuneration has on organisational Productivity” in the this, the researcher will attempt to examine the following:-

  • To examine the relationship between motivational techniques and employee performance.
  • To examine the relationship between level of job satisfaction of employee performance.
  • To examine the relationship between employee remuneration and employee performance
  • The evaluation and development of reward process.

The link between employee remuneration and job satisfaction

1.3 STATEMENT OF THE PROBLEM

Human being as individual has a unique characteristic which is distinct from others, therefore in an organisation that has over one thousand workers, it means there would be different kind of characteristics. Employee remuneration as a psychology concept calls for a thorough understanding of employee’s need which will enable the management to blend them with the corporate need in order to have an equitable mix that will enhance the realisation of the overall objectives of the overall objectives of the organisation and employee.

On a closer look at most organisation, the essential intrinsic factors have not been properly addressed by contemporary organisation, no wonder we have high rate of incessant strike witnessed by these organisations over the year.

The problem therefore is how to maintain an equitable compensation package of fulfilling the aspiration of both the employee and employers in such a way that an equilibrium social interaction will be maintained. It is therefore important for the organisation to realize the provision of intrinsic factor that satisfy the need urges, want and aspiration of workers would have a long run effect on the profitability base of the organisation which are fundamental criteria for the measurement of Employees Remuneration.

CHAPTER TWO

LITERATURE REVIEW

2.0 Introduction

In this chapter, the researcher proposes to critically consider a number of theories of motivation that are relevant to the study. In addition, the researcher will examine the impact of employee remuneration, and the relationship between job enrichment and employee performance.

  • To examine the relationship between motivational techniques and employee performance.
  • To examine the relationship between level of job satisfaction of employee performance.
  • To examine the relationship between employee remuneration and employee performance
  • The evaluation and development of reward process.

The link between employee remuneration and job satisfaction

2.1 Motivation Theories

Motivation deals with the factors that shape people’s behaviour. The three components of motivation identified by Arnold et al (1991) cited in Armstrong (2002; 56) are 1) direction 2) effort and 3) persistence. In a work environment, employees can self-motivate by seeking and engaging in activities that will lead them to achieve set goals (intrinsic motivation) or be motivated by management through various reward systems (extrinsic motivation) (Armstrong, 2002; 56).

Earlier views on motivation, albeit not always perfect, have proved to be an important part of the foundation for evolutionary growth. Motivation is a blend of factors that drives people’s actions and it can be classified as individual, group and organizational motivation. The different theories of motivation, in their different ways facilitate our understanding of the complex process of motivation and the fact that there are no straightforward answers to motivating anybody (Armstrong, 2002; 57).

Scientific management sees money as the primary human motivator, while the view of human relations is that social factors are the primary human motivator (Sarin, 2009; 237). Frederick Winslow Taylor, who is known as the father of scientific management, focused on applying the concepts of science to improve production by relying on the use of ‘observation, measurement, analysis and improvement of work methods, and economic incentives’. His study of work methods in great detail identified the best process for doing each job and laid emphasis on output. This theory was not particularly favoured with workers, who believed that it was not fair to increase output without a commensurate increase in reward (Stevenson, 2002; 21 cited in Maxwell et al; 2008; 433). The instrumentality theory of motivation derived its roots from the scientific management theory of Taylor and also emphasized the importance of money as the main reason people work. Hence, rewards or otherwise should be linked directly to performance. However, this theory fails to take into consideration other human needs that could affect performance (Armstrong, 2002; 57).

This omission gave rise to the needs theory, the basis of which is the belief that an unfulfilled need creates a sense of anxiety. Therefore, in order to create a sense of fulfilment, once a need is identified, a pattern of fulfilling it must be set out. However, not all needs are important at a given time in a person’s life. Some needs are more urgent than others (Armstrong, 2002; 58). Abraham Maslow’s theory (1940) cited in Sarin (2009; 237) is said to have based his theory on Henry A. Murray’s postulation that people seek to satisfy their various needs at the same time, rather than in a specific order. Murray’s Manifest Needs however did not arrange the identified needs in any particular order of importance, unlike Maslow’s hierarchy of a set of five needs – Physiological, Security, Social, Esteem and Self actualization – each of which is related to the other and arranged in order of hierarchy. According to him, once a need is met, it does not motivate a person’s behaviour again. However, it is possible to either move up or down each of the levels depending on whether a need has been fulfilled or the realization of a need is being endangered (Sarin, 2009; 237).

McClelland (1975) identified three needs – achievement, affiliation and power – that motivates managers. However, while agreeing with Maslow that motives are part of the personality, he is of the opinion that they are caused by environmental factors. The levels of these needs are dependent on different individuals. While some may have a higher need for achievement, others may desire affiliation or power (Armstrong, 2002; 58).

Herzberg (1959) based his theory on two sets of factors – extrinsic and intrinsic – that were directly relating to job satisfaction and dissatisfaction. Extrinsic factors are referred to as ‘hygiene or maintenance’ factors and they are linked to job environment, job context e.g. quality of supervision, work conditions, company policies, relationship with co-workers and level of compensation. Job dissatisfaction may occur where there are no extrinsic factors. Intrinsic factors referred to as ‘motivators’ or ‘growth factors’, on the other hand, relate to the job itself e.g. the complexity of work, level of importance with the organization as well as promotion opportunities. The resultant effect of intrinsic factors is a high level of job satisfaction, which according to Herzberg will prevent dissatisfaction and create a positive attitude to work (Di Cesare and Sadri, 2003; 36). Essentially, businesses should study the motivator factors and hygiene factors with a view to optimize motivation and productivity among employees (Maxwell et al, 2008; 436).

Some managers hold the view that employee can be motivated to improve productivity by means of monetary incentives. The monetary scheme may be take a variety of different form example price rate, individual bonus, a team or group bonus scheme , a high pay rate system and profit sharing plan.

All these have been packaged to motivate employees so as to improve on their performance. However, the general problem of monetary incentives is that they are effective in the short run but not necessary cost effective, on the other hand, money can motivate depending on the individuals need for money. Money is not an end itself but means of satisfying needs, employee remuneration proceeds high organisational productivity his for workers to be satisfied with their job, there is need to study the various motivation theories postulated by management experts.

Motivation theories have series of theories, that is complementary to one another. The leading theory are listed below and summarised in table 19.1. the most significant ones are those concerned with expectancy, goal settings and equity, which are classified as process or cognitive theories.

2.2 Employee Compensation

Dessler (2008) define employee compensation as all forms of pay going to employee and arising from their employment. He also stated that the compensation can be in two forms and they are direct financial payment and indirect financial payment. Direct financial payment can come in form of wages, salaries, incentives, commission and bonuses. While indirect can be in form financial benefit like employer-paid insurance and vacations.

All these are strategy of remuneration, Baron A & Armstrong M, give their own contribution towards the strategy of remuneration that the implication of human capital theory is that investment in people adds to their value to the firm.

2.2.1 Why should organisations compensate Employee?

According to Stephen P. Robbins & David A. Decenzo (2005, pg211) when an organisation design its overall compensation package, it has to look further than just an hourly wages or annual salary. It has to take into account another element, benefits. They even include that employee remuneration are non financial rewards designed to enrich employees’ live. This has grown a great importance in the life of an employee and a variety over the past years. Also stated that non financial reward should also put into consideration , if an employee invest their human capital into the firm they have to obtain a return not only in form of opportunity to grow and to achieve but also in terms of being valued to their employer.

This author’s opinion is different from other people’s opinion they include that organisation should have array of benefit such as paid time off from work, life and disability insurance, retirement programs and health insurance. While some of this benefit are been paid by both employee and employer, such benefits are retirement and health insurance.

2.3 Employee Remuneration

The word “Employee Remuneration ” to most people refer s to money and usually money is addition to wages and salaries. In fact employee in any organisation set up as an embodiment of many factors. Employee remuneration has caused effective phenomenon, one area that brings about employee remuneration is motivation of the workers

In fact employee remuneration in any organisation set up embodiment of many factors. employee remuneration has caused effect phenomenon, one area that brings about employee remuneration is motivation of the workers. The organisations identified to be responsible for employee remuneration of workers are as follows:

  • Job Enrichment
  • Job Rotation
  • Job Content
  • Conducive Job Environment
  • Equity Share in the organisation
  • Participation in all level of decision process
  • Positive criticism
  • Recognition for contribution made in the organisation.

Since evaluation of management professional managers and writers on management have made variety of assumption-about what would make the individual employees (workers) to be satisfied for example.

The traditional (theory of organisation that a system reward and punishment should be used to elicit the desire behaviour, this is implemented through a compensation packages, based on productivity of employee example of Taylor differentiates payee system of based on the assumption that employee work out of necessity not out of love of money.

Therefore this naturally led to the conclusion that money was an important factor that satisfied the workers on the job. In the late eighty’s (80) and ninety’s (90) managers started to witness frequent encounter with workers who appeared to be suspicious of management in view of the fact that a simple solution to the problem of did not exist, in addition it may be noted that when considering some traits of workers.

The understanding will provide the basic ingredient for designing and incorporating employee remunerations and strategies into the policy and objective of the organisation as it is total neglect is capable of having a great advance effect on the organisation objective especially in the long run. Reilly P.& Williams T. (2006) Support that for employee remunerations to be effective HR needs the support of the top team. An unsympathetic CEO can be the a major block on getting people management issue properly on the agenda. Even when the HR director is low in the pecking order, well behind the chief financial officer information officer, the same result will occur. So HR director as a person needs to be respected by the board, executive etc. need to support and understand what HR is doing. This simply means another way for HR to motivate staff is to have a good relationship with senior management and with employees.

2.3.1 When should an employee is well remunerated?

The characteristics of the job need of the individual, it is clear that there are numerous variable between people and their jobs that helps to determine their relationship. It must be noted that the concept of employee remuneration is psychological, it relates to these forces operating within individual employees.

The underlying problem is therefore, that management should attempt to strike a balance so as to satisfy the interest of both the organisation and the workers. The reality of management observed that emphasis of high employee remuneration shifted away from the job itself to labour.

In simplistic term, an employee organisation productivity can be define as being determined by the level and interaction between ability and motivation thus:

Organisation productivity is contingent on a number of factors such as skill (liability appropriate for assigned job)motivation and role clarify (a clear understanding of assigned role).

Another way that Reilly & Williams T add their support to how HR activity can influence the way to manage their staff, it will be encouraging line managers to allow scope for employee involvement and space for employees to act in practical terms, that this might be supporting the consultation of staff if changes are afoot.

Also it is the duty of HR to determine whether the employee is due to be reward, before the department can come to conclusion, such employee have to go through the performance appraisal process which contains three steps

  1. Define the job:- the means that the employee understand the nature of the job that he/ she has to do in the organisation and to do it to the organisation standards
  2. Appraising performance:- Dessler G defines this as comparing your subordinate’s actual performance as to the standard that have been set ; this usually involves some types of rating form.
  3. Feedback session:- here is the situation where two of you debate on employee’s performance and progress, an d make plan for any development.

There various methods of appraisal methods such as graphic rating scale, Alternation ranking method, paired comparison method, forced distribution method etc. I will try and expansiate on two of this methods

PAIRED COMPARISON METHOD:- this is a method whereby the two employee together in terms of quantity of work, quality of work , behaviour, how they react to work whenever they have been called, team work and so on.

GRAPHIC RATING SCALE METHOD:- this method can be refer to as the simplest and what most organisation prefer to use for appraising staff performance.

THEORETICAL FRAMEWORK

To provide the required theoretical background for the study attempt will made to review literature of motivation as a means of achieving employee remunerations.

Reward

Reward can be described as a way which one is been compensate what been done either good or bad, it can also be called benefit that is given to an employee or group of people in an organisation. This can be done directly or indirectly. It usually use to encourage people at work to be able to put more effort in work that need to be done. This usually done when an employee want to sign a contract with an organisation or company such employer needs to allow the employee to be fully aware what the package of the income will be per annum or hourly paid if such an employee is interest he or she is going to sign the contact form. There are two types of rewards, they are financial and non financial rewards. Financial Reward also can be refer to as an incentive which can be in form of financial reward given to an employees whose production exceed predetermined standard that is the production is beyond what the organisation expectation.

This can also be in form of pay structure, incentives and benefits this three usually has it important role to play in implementing strategies in an organisation. firstly, For a high level of pay or benefits relative to that of competitors can ensure that the company attracts and retains high quality employees, but this might have a negative impact on the company’s overall labour cost. Secondly, by tying pay to performance, the company can elicit specific activities and level of performance from employee. In a study of how compensation practices are tied to strategies, researchers examined 33high- tech and 72 traditional companies. They classified them by whether they were in growth stage. They found that high-tech companies in growth stage (greater than 20percent inflation- adjusted increases in annual sales) or a maturity stage. They found that high-tech companies in the growth stage used compensation systems that were highly geared towards incentive pay, with a lower percentage of total pay devoted to salary and benefits. On the other hand, compensation systems among mature companies (both high-tech and traditional)devoted a lower percentage of total pay to incentive and a high percentage to benefits. (Noe.et.al 2003; pg 69).

Organisation believe that given an employee incentives after profit is another way of motivating an employee to put more effort to his /her work this reward can be inform of profit sharing, salary increase,

Non- Financial reward

2.5 Job satisfaction

????? you need to talk on job satisfaction

Employee performance pg66 amstrong hand bk

2.6 What is Motivation

Behind every behaviour there is motive, that is all behaviour is motivated, behaviour psychologist agree that what motivate individual is the satisfaction of their needs but do not develop generally acceptable clarification of needs, several theories of motivation of worker. These theories can be grouped into two major categories.

  1. The satisfaction or content theories
  2. The instrumentally theories

The satisfaction or content theories assume that human beings have needs and it’s their desire to satisfy these needs that limitation to specific behaviours. The instrumentality or process theories are based on the assumptions of that the part which leads to a goal is influenced by the reception and values of members of the organisation.

The theory of Maslow, Adeifer, Herzberg are example of theory of needs satisfaction theories. Vroom porter, Lawal and Jacque are example of instrumentality of theories.

Lawal (1993), says “Motivation is a persuasive function that come across all aspect of employees development, the need for motivation can be viewed from following perspectives.

  1. Qualified manpower must be attracted and maintain in organisation ton exercise
  2. Once employed workers must be motivated to exercise their time and energy in achieving the predetermined goals of the organisation.
  3. Human resources are most important factor of production in an organisation and must be maintained and developed.

The reasons highlighted above suggest that the creation of conducive working environment employee remuneration are the requirement for achievement of organisation success.

Hence it is necessary for manager to understand what motivate workers and how motivation influence organisation productivity. In brief, motivation is an inner state that energize activates or more directs or channel behaviour towards goals/objectives.

Motivation therefore is a general term used to denotes relationship between needs and the fulfilment of needs. It is dynamic process that this five (5) parts.

  1. Deprivation, presence of need (NEEDS)
  2. Need crystal led as want (WANTS)
  3. Action, goal oriented behaviour (ACTIONS)
  4. Tension or drives to fulfil the need (DRIVES)
  5. Satisfaction of need that reduce the drive and thus create the need for re-evaluation.

The above description of motivation process may not be enough to explain employees behaviour, some theories of some reckoned management writers may be needed for further clarification and explanation. Also there is two types of motivation Intrinsic and Extrinsic motivation.

Intrinsic motivation can be define as

2.8. MASLOW ‘S HIERARCHY OF NEEDS

According to Robert (1971), the best known theory of motivation was proposed by “MASLOW”, who hypothesized that work of every human being there exist an hierarchy of five (5) needs. According to Maslow, human beings have needs that can be arranged in hierarchy of needs, if these needs are satisfied human being will be motivated to perform however a satisfie


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