Job Performance Of Priority Banking Business Essay

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Rewards and Motivation are important factors that influence the behavior of human capital, employees, and the most pivotal asset of an organization. Many behavioral theorists have conducted empirical research in these areas and have concluded that there is significant impact towards the level of contribution, commitment, engagement and performance of employees. Theorists such as Maslow and Herzberg explain the desire to satisfy future needs of individuals depend on their present status quo in terms of needs and satisfaction. The level of satisfaction also varies based on the type of motivation needed by each individual. Namely, there are two types of motivators intrinsic and extrinsic. Intrinsic motivators are self-inherent to the job and how one feels and perceives about it emotionally, whereas extrinsic motivators include pay and allowances which are required to satisfy psychological and safety needs (Walker et al., 1979). However, modern organizations offer a combination of both intrinsic extrinsic motivators to suit their employee's interests and to ensure they are satisfied to perform and improve bottom-line contribution.

Financial rewards such as incentive schemes are very common in sales and marketing oriented organizations. This technique is primarily utilized to induce performance of employees and achieve business objectives. Nevertheless, few businesses design their reward system for the optimization of company performance (Zingheim & Schuster, 2000). Therefore, Incentive plans are often used in employment settings to encourage superior performance. While such inducements are found to have positive effects on job performance concerns have been raised over rewards' influence on task interest and creativity (Bartol & Locke, 2000; Fay & Thompson, 2001).

It is important that organizations identify employee's behavior, attitudes towards their work place, specifically the level of motivation, interests, performance contribution and what they think about the organization and if they are satisfied with the offerings.

This study is conducted taking ABC priority banking division in to consideration and the current issues it's facing in terms of employee motivation and the existing sales incentive scheme. Therefore, the research problem is about how detrimental the effects of dissatisfaction over the incentive scheme and other factors might affect towards the organization and its performance. Hence, an appropriate solution has to be provided by its Management with the intention of maintaining a motivated group of employees and deriving positive results through them and other processes, i.e. Rewards systems.

At ABC Priority banking rewards systems have been revamped since introduction of priority banking services back in year 2000. Various campaigns are being conducted to motivate and drive the sales culture among relationship managers and business development executives. At present the Sales incentive scheme is one of the key rewards systems at ABC priority banking which has been continuously changing every year.

The changes in the rewards system has an impact towards the attitudes and perception the employees have towards their employer. This was revealed during a recent 'employee pulse survey' conducted by the bank to measure employee satisfaction (source: internal data). However, the survey result doesn't specify the exact cause for dissatisfaction, whether it's due to an intrinsic or extrinsic factor or due to the prevailing rewards system.

From the employee's point of view, the issue with the incentive scheme has been the decreasing incentive pay out amount. Each year it has been decreasing whereas the annual targets have been increasing and the effort that needs to be put in by employee increases but with no fair return on investment (source: internal data).

One of the main concerns raised is the unfair treatment for performing employees. This happens when the annual performance target is allocated for employees who are continuously performing. According to feedback from employees, the higher one achieves the previous year the higher the preceding year's target would be an how it has an impact towards the incentive scheme is when the payouts are allocated. Not all employees find this an issue but only the certain employees (relationship managers) with large customer portfolios. The core issue is that the incentive pay out amounts doesn't justify the increase of targets and doesn't reflect macroeconomic changes in the business environment for which achieving new business is tedious and cumbersome.

However, in contrast the priority banking business is in satisfactory condition. The division has performed extraordinary the past few years and recorded high profit and income levels (source: internal data). Thus, this study will explore to identify the actual reasons behind this success from employees perspective by considering rewards and motivation and how it may have contributed towards the satisfactory financial performance of the bank.

1.2 Problem Justification

The issue pertaining to the dissatisfaction towards the rewards system was triggered during an annual employee survey conducted by the bank. Formally known as GPS (Global Peoples Survey), it serves as an annual survey conducted by all group offices of ABC to ascertain employee satisfaction levels. It's an initiative to gather employee feedback and develop better HR and rewards practices (source: internal data)

Consistency and integrity of maintaining positive employee perception; motivation and performance levels are integral to the success and performance of the priority banking division. The continuous momentum will be long lived only if proper attention is given to the interest and needs of its employees. There have been no serious issues other than the negative employee survey analysis, but there is possibility of negative consequences if remedy is not provided in the short run. Perhaps this will affect the financials and bottom line of the business unit if employee's interest deteriorate and cause demotivation.

When investigated for the reasons of the incentive changes and reduced payout thresholds it was observed that the bank has adopted cost savings initiatives. According to the management high operating and financial costs has had an impact towards budget allocation for designing and implementation of reward schemes in the bank. Priority banking being the apex of personal banking business at ABC has been negatively affected as a result, due to the fact priority banking staff being paid sales incentives instead of fixed/variable annual bonus payments.

However, in contrary, ABC Priority banking has recorded satisfactory sales performance by its sales and frontline staff. The question remains if extrinsic rewards were overruled by intrinsic motivation of employees in concern. According to Maslow's theory of hierarchy of needs, individuals move on from one level to another with the attainment of firstly basic needs and esteem needs and finally self-actualization needs. Therefore, the underlying fact is which level does staff of ABC fall in to with respect to them outperforming during turbid situations in the rewards scheme i.e. incentives.

Also it should be noted that the changes in the incentive scheme has contributed adverse thinking among the employees whether the bottom line of the bank's rewards system is in employee's interests or whether it's merely a tool to attain business objectives whilst trying to maintain the crème of performing employees merely to ensure satisfactory business performance.

2.0 Research Objectives

2.1 Objectives of study

The objectives of the research have been formulated based on the research variables identified. The conduct of the research will evolve within these areas and will contribute towards formulating hypotheses required to justify the study.

To explore the relationship between intrinsic rewards and job motivation

To explore the relationship between extrinsic rewards and job motivation

To explore the relationship between job motivation and job performance

To ascertain the importance of a revised rewards strategy to enhance employee engagement and performance

2.2 Hypothesis for research

The hypotheses identified are as follows;

Hypothesis 1

H1: Intrinsic rewards positively relates to Job motivation

Job motivation

Intrinsic rewardsH0: Intrinsic rewards negatively relates to Job motivation

Independent variable Dependent variable

Hypothesis 2

H2: Extrinsic rewards positively relates to Job motivation

H0: Extrinsic rewards negatively relates to Job motivation

Job motivation

Extrinsic rewards

Independent variable Dependent variable

Hypothesis 3

H3: Job motivation positively relates to Job performance

H0: Job motivation negatively relates to Job performance

Job performance

Job motivation

Independent variable Dependent variable

3.0 Research Methodology

3.1 Conceptual Framework

Intrinsic rewards Self-esteem Achievement Recognition

H1 1111 1

Job Motivation Engagement Commitment

Job performance Target achievement Performance reviews

H331111 1

H2 1111 1

Extrinsic rewards Salary Incentives

Illustration 1.0

As depicted in the above conceptual framework each research variable will be subject to analysis based on the indicators listed. Each indicator will be highlighted during the data collection stage to identify its significance for the research variable.

3.2 Data sources

Both primary and secondary data sources will be used for the research study. Primary data will be are collected through a structured questionnaire and face-to-face interviews. Secondary data will be collected from journals, internet, books and etc.

3.3 Research approach

The research study will adopt a purely quantitative research approach, which is aligned with the objectives that it aims to attain. The quantitative approach has been selected since it's highly structured, which allows cost efficient and less tedious data analysis (Schutt 2006).

3.4 Population

Sekaran (2001, p. 225) defines a population as "the entire group of people, events or things of interest that the researcher wishes to investigate". The population for the research includes all frontline employees attached to ABC Priority banking division eligible and remunerated under the Sales incentive scheme. This group will consist of employees from different capacities such as Business Development officers and Relationship Managers. Following is the breakdown of employees.

Job Title

No. of employees

Relationship Managers

30

Business Development Officers

15

Population

45

Figure 1 -Data population

3.5 Sample selection

The sample selected for research will comprise the Relationship Managers. Sample size will therefore be only 30. Data required for the analysis of research will be derived from this sample during data collection stage.

3.6 Data collection

Data will be collected using both primary and secondary data collection methods. The data collection techniques can be elaborated as follows;

3.6.1 Primary data collection

A Structured Questionnaire will be distributed to the sample selected. The questionnaire will be complied mainly focusing on the areas relevant with the research objectives and hypotheses identified. The questions could be broadly categorized as follows;

Personal and career related information i.e. age, gender, job title, experience etc

Perception over factors relating to intrinsic rewards

Perception over factors relating to extrinsic rewards

How job satisfaction is perceived and correlation with the existing rewards system

Feedback to management on areas of development where rewards management is concerned

Face-to-face interviews will be conducted with Team managers and Relationship managers. A simple random sampling technique will be used when determining the participant for the interview. Only 5 employees will be selected to be interviewed based on an unbiased selection process. A selective range of structured questions will be prepared relating to intrinsic, extrinsic rewards and job motivation.

3.6.2 Secondary data collection

Data with respect to the research variables identified can be collated using the following secondary data sources;

Publications

Annual Reports

3.7 Data Analysis and Methodology

Primary data collected will be analyzed using Statistical Package for the Social Sciences (SPSS) version 17.0 and the use of following tools will analyze the hypotheses and ascertain the type of relationship between each research variable.

Correlation analysis

Regression analysis

Graphical techniques

Chi-squared test

Confidence level testing

Significance level testing

Further it has to be noted that the confidence level will depend on the confidence placed on the selected sample size. For example if the sample size constitutes the population the expected confidence level should be between 90%-100%.

The secondary data collected can be used to analyze data by establishing correlation between each research variable and relate findings to support overall analysis of data. The application of graphs, charts and scatter plot diagrams will enable the researcher to arrange data in a methodical manner and present in a manner which is clear and understandable. It is appropriate to gather data applicable within the recent past, for example last 5 years, since up-to-date data will represent the current position of the company and relate to the prevailing issues.

4.0 Literature Review

4.1 Intrinsic and Extrinsic rewards defined

Rewards can be treated as some offerings in addition to pay. Traditional reward systems were based on positions and longevities. But now a day's profit sharing, gain sharing and stock option plans are being practiced as a reward. Modern reward systems include stock grants, certificate of appreciation, even personal thank you notes (Nelson, 1994).

According to Walker et al (1979), rewards are classified into extrinsic and intrinsic rewards. Extrinsic rewards include basic salary and allowances which is needed to fulfill psychological and safety needs. Intrinsic rewards help individuals' feelings and perceptions about the job situation which is needed to fulfill self-esteem, competence, self-actualization etc. There are several financial rewards commonly found in sales organizations are salary and commission, bonus, fringe benefits, stock options, retirement plan which fulfills both extrinsic and intrinsic needs of employees.

Coli (1997), describes classification of reward and recognition under three types of rewards. They are monetary, awards and developmental rewards. Monetary rewards includes individual bonus for project completion, stock grants, skill-based pay, gain sharing, targeted total cash, special individual increase, non-discretionary incentives for the beginning of the project etc. According to Lyons & Ora (2002), financial performance includes basic salary, variable pay, other compensations, perquisites and benefits.

Different individuals have different perceptions of rewards. For instance, some individuals may consider cash as a sufficient and adequate reward for their efforts at work, while others may consider holidays and material incentives (such as a car) as more rewarding in exchange for their work. Others still, may consider a shift in the treatment that they get from their leaders to be a more rewarding experience. For instance, some employees consider being recognized by their leader as more rewarding than financial incentives (La Belle, 2005).

4.1.1 What are Financial Rewards?

Zammit (2004), best described financial rewards. A reward strategy is an integrated approach to reward employees according to their contribution, skill and competence and their market worth.

The author classified four types of financial reward.

Basic salary

Performance related pay

Allowances

Other financial rewards

The basic salary is determined according to management position, standard of living, job market, qualification of the receivers. The dimensions of performance consist of bonuses, commissions and special skills. Allowances are most commonly provided for substitution, workstation transfer and transportation, free or discounted benefits, cultural or religious holidays, telecommunications. Other financial rewards are mostly practiced by offering stock options, pension schemes.

4.2 What is Motivation?

Many contemporary authors have defined the concept of motivation as; the psychological process that gives behavior purpose and direction (Kreitner, 1995); a tendency to behave in a purposive method to achieve specific, unmet desires (Buford, Bedeian, & Lindner, 1995); an inner force to gratify an unsatisfied need (Higgins, 1994); and the will to accomplish (Bedeian, 1993).

In this study, motivation is operationally defined as the inner force that drives individuals to achieve personal and organizational goals. Understanding what motivates employees is one of the key challenges for managers. Although it is not possible directly to motivate others, it is nonetheless important to know how to influence what others are motivated to do, with the overall aim of having employees identify their own welfare with that of the organization (Bruce and Pepitone, 1999).

While motivation is determined by both monetary & non-monetary factors, money has come to play an overly important role in our thinking about the causes of behavior. In most companies, very limited time & effort are spent on considering non-monetary sources of motivation (Gratton, 2004). For organizations to address these expectations an understanding of employee motivation is required (Beer et al., 1984). Carnegie (1975) emphasizes the human aspects of management. They postulate that as it is people who make a business succeed - or fail - it is the organization's chief responsibility to motivate their people so that they will assure success. The author believes that each human being has the potential for creativity, contribution and achievement of business goals.

Therefore, the infinite question is how organizations reach this potential and how they stimulate creativity and foster in their people the desire to succeed and to achieve self-fulfillment through their work. The common theme of all the above authors is the belief that people need to be respected and treated as precious human capital, more essential to an organization's effectiveness than its financial capital.

Organizations are under constant pressure to enhance and improve their performance and are realizing that an interdependent relationship exists between organizational performance and employee performance. In the following section the focus will be on the motivational theories and the impact that these theories have on enhancing employee performance.

4.3 Theories on motivation

The process of motivation as described below is broadly based on a number of motivation theories that attempt to explain in more detail what it means. Some of the distinctive theories will be discussed below.

4.3.1. Needs (content) theory

The basis of this theory is the belief that an unsatisfied need creates tension and disequilibrium. To restore the balance a goal is identified that will satisfy the need and a behavior pathway is selected that will lead to the achievement of the goal. All behavior is therefore motivated by unsatisfied needs.

The best-known contributor to needs theory is Maslow, A (1954). He formulated the concept of a hierarchy of needs, which start from the fundamental physiological needs and lead through safety, social and esteem needs to the need for self-fulfillment, the highest need of all. He said that 'man is a wanting animal'; only an unsatisfied need can motivate behavior, and the dominant need is the prime motivator of behavior. This is the best-known theory of needs, but it has never been verified by empirical research.

4.3.2 Herzberg's two-factor theory

Herzberg's two-factor model theory states that the factors giving rise to job satisfaction (and motivation) are distinct from the factors that lead to job dissatisfaction. It is sometimes called the 'motivation-hygiene theory'.

There are two groups of factors. The first consists of the satisfiers or motivators, which are intrinsic to the job. These include achievement, recognition, the work itself, responsibility and growth. The second group comprises what Herzberg calls the 'dissatisfaction avoidance' or 'hygiene' factors, which are extrinsic to the job and include pay, company policy and administration, personal relations, status and security. These cannot create satisfaction but, unless preventive action is taken, they can cause dissatisfaction. He also noted that any feeling of satisfaction resulting from pay increases was likely to be short-lived compared with the long-lasting satisfaction from the work itself. One of the key conclusions derived from the research is therefore that pay is not a motivator, except in the short term, although unfair payment systems can lead to demotivation.

Herzberg's two-factor model draws attention to the distinction between intrinsic and extrinsic motivators, and his contention that the satisfaction resulting from pay increases does not persist has some face validity. But his research and the conclusions he reached have been attacked - first because, it is asserted, the original research is flawed and fails to support the contention that pay is not a motivator, and secondly because no attempt was made to measure the relationship between satisfaction and performance.

As Guest, D (1992) has written: 'Many managers' knowledge of motivation has not advanced beyond Herzberg and his generation. This is unfortunate. Their theories are now over thirty years old. Extensive research has shown that as general theories of motivation the theories of Herzberg and Maslow are wrong. They have been replaced by more relevant approaches'.

4.3.3. Equity theory

To explain how employees judge the fairness of rewards received in proportion to resources invested for completing a task by assessing one's on investment-reward ratio "Equity theory" (John Stacey Adams) is used, This theory is compared against the ratio of another colleague holding a similar position (McShane et al.2000 pg 79).

A comparison can be made using the formula below:

Outcomes (Individual) = Outcomes (Other)

Inputs (Individual) Inputs (Other)

Above formula can be explained, that employees seek to maintain equity between the inputs that they put in to a job and the outcomes they receive from it against the perceived inputs and outcomes of others. The belief in equity theory is that people value fair treatment which causes them to be motivated to keep the fairness maintained within the relationships of their co-workers and the organization.

The main concern however is "payment"; this therefore is the cause of equality or inequality in most cases. In any position within the organization, an employee wants to feel that their contributions and work performance are being rewarded with their pay. According to equity theory, if an employee feels under-paid then it will result in the employee feeling hostile towards the organization and perhaps their co-workers, which may result the employee not performing well at work anymore.

But Adams' Equity Theory is very much more complex & sophisticated motivational model, in this model more than merely assessing effort put in (inputs) and rewards (outputs). Equity Theory gives prominence to an additional perspective of comparison, were employees compare themselves with others (people who consider in a similar position). 'Referent' others are used to describe the reference points or people with whom we compare our own situation, which is the Highlight part of the theory.

4.4 Reward strategy

An effective and feasible rewards system has to be in place in an organization seeking bottom line performance. Absence of such system will result demotivation of employees and inhibit the business performance. Organizations attempt to motivate employees but disregard the essential nature of human motivation. Businesses implement motivation programmes that are not only ineffective but end up sabotaging the very goals they are trying to achieve.'(Hansen et al., 2002)

Reward strategies provide answers to two basic questions for an organization 'Where do we want our reward practices to be in a few years' time?' and 'How do we intend to get there?'. Therefore, they deal with both ends and means. 'Ends' they describe a vision of what reward processes will look like in a few years' time and 'means' on the expectation of how the vision will be realized.

4.4.1 Reward strategy defined

Reward strategy is ultimately a way of thinking that you can apply to any reward issue arising in your organization, to see how you can create value from it (Brown, 2001). Reward strategy is a declaration of intent which defines what the organization wants to do in the longer term to develop and implement reward policies, practices and processes which will further the achievement of its business goals and meet the needs of its stakeholders. It provides a sense of purpose and direction and a framework for developing reward policies, practices and process. It is based on an understanding of the needs of the organization and its employees and how they can best be satisfied. It is also concerned with developing the values of the organization on how people should be rewarded and formulating guiding principles which will ensure that these values are enacted.

Reward strategy is underpinned by a reward philosophy which expresses what the organization believes should be the basis upon which people are valued and rewarded. Reward philosophies are often articulated as guiding principles.

4.4.2 The content of reward strategy

Reward strategy may be a broad-brush affair simply indicating the general direction in which it is thought reward management should go. Additionally or alternatively, reward strategy may set out a list of specific intentions dealing with particular aspects of reward management.

4.4.3 Broad-brush reward strategy (Armstrong (2007), pg. 635)

A broad-brush reward strategy may commit the organization to the pursuit of a total rewards policy. The basic aim might be to achieve an appropriate balance between financial and non-financial rewards. A further aim could be to use other approaches to the development of the employment relationship and the work environment which will enhance commitment and engagement and provide more opportunities for the contribution of people to be valued and recognized.

Examples of other broad strategic aims include:

1. Introducing a more integrated approach to reward management - encouraging continuous personal development and spelling out career opportunities;

2. Developing a more flexible approach to reward which includes the reduction of artificial barriers as a result of over-emphasis on grading and promotion;

3. Generally rewarding people according to their contribution;

4. Supporting the development of a performance culture and building levels of competence

5. Clarifying what behaviors will be rewarded and why.

4.4.4 Specific reward initiatives

As Cox and Purcell (1998) write: 'The real benefit in reward strategies lies in complex linkages with other human resource management policies and practices'. The selection of reward initiatives and the priorities attached to them will be based on an analysis of the present circumstances of the organization and an assessment of the needs of the business and its employees. The following are examples of possible specific reward initiatives, one or more of which might feature in a reward strategy:

• The replacement of present methods of contingent pay with a pay for contribution scheme;

• The introduction of a new grade and pay structure, e.g. a broad-graded or career family structure;

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