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Consequent to the ending of civil war in Sri Lanka, Sri Lankan economy has shown a significant growth in terms of increase in foreign investments, new business activities, infrastructure development and accessibility to North and East house hold consumer markets. This new economic turn in terms of foreign investments and opening up new markets created opportunities for insurance industry to grow by 22% in 2011 (Central Bank of Sri Lank annual Report 2011).
With the insurance industry growth new insurance companies opened up creating more competition within the industry. According to Insurance Board of Sri Lanka (IBSL) annual report there are 22 insurance companies registered as at 2011 where as in 2009 there were only 18 insurance companies. As shown in the Figure 1 out of 22 companies 12 are carrying out both life insurance and general insurance business, 3 companies are only carrying out life insurance and balance 7 companies deal with general insurance business.
Figure - 1
In this competitive market Sri Lanka insurance Co. Limited (SLIC) competes as the most experienced insurer in the industry. Annex 1 demonstrates the 22 insurance company's position in the market.
Further with globalization, countries opened up their economy to foreign markets enabling organizations to widen their horizons across international borders. With the intervene of global economic giants such as US, Euro Zone and BRICS trade barriers have disintegrated and state interference have reduced. As a result and as mention above with the growth in insurance industry in Sri Lanka has ever faced with unequal number of competitors which gives the customers a wide range of preference. Such exposure to better products and services will increase the demand for high expectation in quality, faster deliver and low price. Therefore higher expectations have to be met by improved performance to obtain customer satisfaction. (Bredrup 1995a: 61)
1.2. Organization Background
Sri Lanka Insurance Corporation Limited (SLIC) established in 1962 as a state owned institute was converted to a private limited liability company in 2004 and reinstated as a fully owned government entity in 2009. As at today Sri Lanka Insurance Co is the largest state owned insurer in Sri Lanka with a Rs. 107 billion asset base and a massive gross written premium of Rs. 18.5 billion for 2011 financial year (Source: SLIC Annual Report 2011)
SLIC vision is "To be the most preferred provider of insurance services to the nation, as the national insurer" and SLIC mission is "To be a customer focused company that is trusted, which constantly innovates in providing insurance services that are of the best value to our customers, whilst rewarding our employees and adding value to our shareholders" (Source: Sri Lanka Insurance official Web Site).
In order to achieve the organization objectives as stated in the above, SLIC has to identify the main contributors to organization performance. The main contributors towards achieving organization goals are its employees and it is important to give more emphasis on rewarding the employees in order to enhance performance. Managing employee reward appropriately is an important factor as a return for their contributions or performance to the organization (Michael Armstrong-Employee Rewards 1999). As refer to Adam Equity Theory (1963), less reward may result to decreasing of employee performance such as high number of absenteeism, as well as lack of interest in doing a task that assigned to them, not focus on their job which is also the decreasing resulted in job quality. The theory, also propagate that the reduction in employees' performance could happen whenever they felt that their contributions were not fairly rewarded. In other words, rewards can influences employees' performance.
Rewarding motivates an individual to outperform, achieve goals beyond his/her expectations or to explore new dimensions of his/her capabilities. As we can see rewarding is an important factor to improve the quality of work environment which motivate employees towards achieving goals or objectives to give an organization a competitive advantage.
The Main purpose of this study is to analyze the relationship between reward system and the performance of the employees in Corporate Business Division of Sri Lanka Insurance Corporation Limited (SLIC). Corporate Business Division (CBD) of SLIC is a division formed in 2004 when the company converted to a private institute to proved insurance services to the corporate customer base. CBD contributes 25% towards the total revenue of SLIC. SLIC total operational turnover in 2011 is Rs. 18.5 billion and CBD contribution is Rs. 4.6 Billion which approximately 25% of the total revenue. The CBD performance has a significant impact on the total revenue on the Organization therefore is it important to look at the performance of Corporate Business Division and its employees.
1.3. Problem Identification
Even though there is a substantial contribution from CBD towards SLIC total turnover, in 2012 the CBD performance has decreased significantly compared to 2010 and 2011. In 2012 Corporate Business Division employees were unable to achieve the set goals of the organization which negatively affects the SLIC total target and the Growth management expected. There can be numerous reasons such as Leadership issues, Lack of Knowledge Management, require Training and Skills development and Workplace Bullying for the negative performance. In view of the fact that CBD is a sales division and been in the insurance industry incentive schemes and reward systems are vital and inevitable factors to achieve target and enhance performances. The enthusiasm and drive required in most types of sales work demands that sales employees be highly motivated (Snell, 2007). There are many studies and theories exemplify employee performance associates to the reward system. Therefore the problem being the employees' performance, the research is based on identify the relationship between Reward System and employees' performance among the SLIC CBD staff.
1.4. Problem Statement
There is no denying that in this modern business environment, organizations have become more and more competitive to be the best in their respective fields. The process of international integration of political, economical, social, technological and environmental activities describe as globalization has challenged the way that organizations traditionally compete. New information and communication technologies are changing the very nature of business itself (Peppard and Preece 1995: 157). This creates tremendous pressure on managers today in improving competitive position of their organization in order to keep up with the ever accelerating pace of competition. There for many organizations are trying to identify innovative strategies that could improve organization performance as well as to become more dynamic and flexible so they can take advantage of the constantly changing business environment. It has been identify that the ingenious systems, innovative technologies and new resources can increase performance of an organization yet it can be simply imitate or copied by competitors. However an individual ability to perform and contribute towards achieving an organizational goals cannot be copied or imitate. Templer & Cawsey states that an organization is only as good as its people therefore employees are the most valuable asset to an organization who thrive and perceive an organization towards its Goals. Employees' positive performance contributes to enhance and improve organization performance. Therefore it is important to study and analyze the methods used to enhance performance. As mentions above there are many means of improving employees' performance, yet previous studies and theories have shown reward is a basic method of all factors concern. Reward methods can be performed in many ways such as monetary rewards and Non-Monetary rewards which provides opportunity to study a vast area of theories and practices that have demonstrated to improve employees' performance and thereby increase organization performance.
These research findings provide SLIC to identify the different reward systems and methods practiced by other organizations, thereby design a better reward mechanism to suit the organization to improve CBD performance which leads SLIC to better financial performance.
1.5. Research question
Are reward methods practiced in Sri Lanka Insurance Co. Corporate Business Division effective in improving employees' performance?
1.6. Research Objectives
To identify the impact of monetary reward and employees' performance of SLIC.
To identify the impact of non-monetary reward and employees' performance of SLIC.
To identify the effectiveness and impact of reward methods practiced on employees' performance of SLIC Staff.
To identify what criteria needs to taken into consideration when implementing rewards system to improve employees' performance.
1.7 Significance of the Research
The aim of this research is to gain an understanding of the Employee's point of view on how they expect the organization of this study to recognize and reward them for their effort in achieving the organizational goals. At the same time to gain understanding of the organization's current Reward and Recognition system and to what extent it meets the employee's expectation.
There by measures the effectiveness of Rewards Methods practiced and its impact on Employee Job Performance. It is anticipated to benefits the researcher as well as the management of the organization the importance of evaluating the reward practices in broader manner.
In the literature review researcher found that the employees are one of the biggest assets an organization has and Harvard Business review describes it as the Human Capital. As the same time organizations sends enormous amount of time and money on rewards and employee recognition therefore it is important to assess the return on their investment.
The significant of this study is to provide management of the organization of this study with a reward evaluation method and criteria needs to taken into consideration when implementing rewards system. There by creating a good work environment and high performance culture in order to achieve the company objectives.
Further it is identified that there has been previous studies on this subject in global and local context, yet there was no research been done for insurance industry in Sri Lanka more focused on a State owned institute as Sri Lanka Insurance. Consequently it is expected that this study will fill a research gap and benefit the researcher himself in understanding the subject by developing his career academically and practically of his work environment.
I. Executive summary Introduction
Background, previous studies Area of study, purpose, justification significance of the study research questions and objectives.
The background and the area of study backs and adds value to the problem statement. There are many anticipated obstacles limiting the research to secondary data but the researcher hopes to justify objectives and research question.
II. literature review
literature review, critical evaluation and synthesis
The literature has been collected from journals, text books, websites and conceptual and emphatically work papers. The literature has been summarized to capture has much details as possible, giving a taste/ an over view of the literature researched to the reader. Also identifying the current knowledge, arguments and arriving at the gap that needs to be researched.
Methodology and data collection
Conceptual model is developed. Here independent and dependant variables are identified and the methodology explained accordingly. Hypothesis in constructed. Operationalise is done. The sample size stated against population. Data collected with the use of the questionnaire which is mainly qualitative. The data consists of Primary and Secondary forms.
IV. Data collection Summary
Style and presentation, including the use of graphic materials
Once the data is collected, it is summarized and graphically illustrated in a logical flow. There will be bar charts, histograms and even pie charts depicting the analysis of the data collected using the questionnaire
V. Data Analysis and Presentation
The data analysis, Conclusions of the study, assumptions of the research and how limitations were dealt with.
The information that is collected is tested against the hypothesis and conclusions will be given. Drawing from the analysis while minimizing the impact by the limitations and recommendation will be given after the identification of gaps and possibility for further research.