Complete chapter one
THE IMPACT OF COMPENSATION AND REWARD SYSTEM ON ORGANIZATIONAL PERFORMANCE (A CASE STUDY OF GTB PLC)
1.1 Background to the study
Compensation and reward system aimed at organizational performance through employee productivity has always been a general problem for management and administrators in most corporate organizations. The turbulent crisis between management of organizations and the labour unions all over the world over continuous agitation for increased pay for the services rendered is challenging as there is need for corporate organizations to utilize their employees more effectively to improve organizational performance. In Nigerian labour market, pay has become the motivating force driving employment seekers in the industry. It therefore however compulsory that organizations establish and adopt a compensation and reward system that can encourage and motivate employees to work thereby promoting organization performance while at the same time not eating too deep into the resources of the organization.
Employees are likely to put in little or no effort in their jobs, exit the organization if given the opportunity, avoid the workplace as much as possible and produce low quality output if they are not properly compensated and rewarded (Egwurudi, 2008). On the other hand, employees who feel encouraged, rewarded and adequately compensated to work due to a better compensation and reward system are likely to be creative and productive, persistent, turning out high quality product and service leading to the overall effectiveness and organization performance (Egwurudi, 2008).
The process of compensation and reward system are based on compensation and reward system philosophies and strategies which contain specified arrangement that shape the strategies and policies, guiding principles, procedures and structures which are devised and managed to provide and maintain appropriate types and levels of financial incentive, benefits and other forms of compensation (Bob, 2011). This includes measuring job values, designing and maintaining salary structures, paying for performance, competence and skill, and providing benefits to employee in various forms. However, compensation and reward management is not just about money. It is also concerned with non-financial incentive which provides extrinsic or intrinsic motivation (Bob, 2011).
Due to the competitive nature of the labour market today, employees are used as tools for promoting organizational effectiveness, performance and building economic progress. The welfare of the workers are taken into serious consideration because without a committed and dedicated workforce, an organization crumbles. According to Eze (2009), the process of compensation and reward system in Nigerian is probably one of the poorest in the entire globe where an average worker’s salary is barely enough to cater for the needs of the employee. Workers are used and abused in different ways; they are sometimes maltreated, harassed, offended and discarded without appreciating their contribution to the growth and development of the organization (Eze, 2009). It is however apparent that the issue of well structured reward system and compensation mechanism of employee has relevance in managerial function and activities that are aimed at directing the productive effort of the workforce toward achieving organizational performance (Adams, 2009).
Several research has been performed on the subject area of reward system, compensation, motivation by many scholars such as Assam (2002), Egwurudi (2008), but the comparative impact of compensation and reward system on organizational performance has been under-researched. This may be due to the fact that it takes different approaches to motivate employee. Therefore, employers need to understand and know their employees very well and use different tactics to compensate and reward each of them based on their personal wants and needs as observed by the management (Jones & Smith, 2005).
This research work seeks to improve on already available findings on compensation and reward system on organization performance, building on them and making necessary conclusions and recommendations for further enhancement of organization performance in corporate organizations using Guaranty Trust Bank plc as the case study. Guaranty Trust Bank plc was incorporated as a limited liability company licensed to provide commercial and other banking services to the general public of Nigeria in 1990. The Bank commenced operations in February 1991, and has since then grown to become one of the most respected and service focused banks in Nigeria (GTB, 2015). In September 1996, Guaranty Trust Bank plc became a publicly quoted company and won the Nigerian Stock Exchange President’s Merit award that same year and subsequently in the years 2000, 2003, 2005, 2006, 2007, 2008 and 2009. In February 2002, the Bank was granted a universal banking license and later appointed a settlement bank by the Central Bank of Nigeria (CBN) in 2003. GT Bank plc has 217 branches, 17 Cash Centres, 18 e-branches, 23 GT Express locations and more than 1141 ATMs in Nigeria.
1.2 Statement of problem
This study is premised on the findings from existing literatures that compensation and reward system influences organizational performance. This relationship between reward system and organizational performance will be examined considering various methods of compensation and reward system. According to Armstrong (2005) who sees compensation and reward system as an integral part of human resources management methods used by corporate business managers to boost profitability and productivity in an attempt at achieving improvement in the organization performance. It encompasses the design, implementation and maintenance of compensation and reward system that are geared towards an improvement of organization performance, team and individual performance.
Compensation and reward system are concerned with the planning and implementation of better incentive policies that is targeted at compensating people fairly, equitably and consistently in accordance with their value and contribution to the organization (Armstrong, 2005). The task in management of employee’s compensation and reward system is to develop policies and reward packages that will attain maximum return on money spent on the employee in terms of satisfying, attracting, retaining and perhaps motivating them (Anyebe, 2003).
However, no research work has targeted to investigate the impact of compensation and reward system and organizational performance in Guaranty Trust Bank plc. Previous studies in Nigeria aimed at the effect of motivation and hygiene on job performance by Jibowo (2007). Other studies on this subject area include a study on monetary incentives and its removal on performance (Bergum and Lehr’s, 2004). Of all these studies conducted in Nigeria, very few assessed the impact of compensation and reward system on organizational performance and effectiveness in the banking sub-sector. To this effect, this study attempts to empirically analyze the impact of compensation and reward system on the organizational performance in Guaranty Trust Bank plc with a view to uncover how to effectively derive plans for growth and development in the banking sector through adequate compensation and reward system.
Objectives of study
This study seeks to find out the impact of compensation and reward system on organizational performance in Guaranty Trust Bank plc. The following are the specific objectives:
To determine the impact of compensation and reward system on organizational performance, effectiveness and productivity.
To determine various types of compensation and reward system that will contribute to organizational performance
To examine the relationship between compensation and organizational performance.
What is the impact of compensation and reward system on organizational performance, effectiveness and productivity?
What are the various types of compensation and reward system that will contribute to organizational performance?
What is the relationship between compensation and organizational performance?
1. Ho: Compensation and reward system does not have any impact on organizational performance
Hi: Compensation and reward system does have any impact on organizational performance
2. Ho: There is no significant relationship between compensation and
H1: There is significant relationship between compensation and organizational performance
Significance of study
Basically, the significance of this study cuts across the work environment and the business society at large makes the knowledge and findings of this study useful and applicable to every human task.
This research is coming at the right time to improve organizational performance at the workplace, to retain employees and to help organizations plan how to adequately motivate the employees through compensation and reward system. It would help managers and administrators of corporate business especially GTB Plc to identify the areas that they need to take seriously in order to successfully compensate and reward their employees to perform at their best. As a manager this knowledge will therefore be of help for better understanding and various modern strategies that could be implemented in order to compensate employees to achieve optimal business output.
It will also assist students, management, teachers, human resource managers, government and others who in one way or the other an employer of labour will find the work useful. Furthermore this study will be of great benefit to policy makers, labour union officials and representative, corporate organization, government officials and establishments responsible for reviewing and updating policies and legislation on workers compensation.
In the aspect of knowledge and contribution to the body of existing literatures, it will help to create an understanding of the relationship between compensation, reward system and organizational performance. Similarly, in the aspect of practice, it will provide solutions to problems relating to compensation and motivation of employees in the organization.
Scope and limitations of study
The focus of this study is on employees in the organization who (in one way or the other) contribute to the organizational performance of the organization. This study is centered on compensation and reward system as a means of increasing organizational performance of workers in the organizations.
Limitations experienced in the course of this study are basically centered on problems relating to:
Financial constraint- Insufficient fund tends to impede the efficiency of the researcher in sourcing for the relevant materials, literature or information and in the process of data collection (internet, questionnaire and interview).
Time constraint- The researcher will simultaneously engage in this study with other academic work. This consequently will cut down on the time devoted for the research work.
Busy schedule of the respondents- The workers of Guaranty Trust Bank plc who will be the respondents of the questionnaires may have busy work schedule thereby making them to provide answers to the questions hurriedly, which can affect their answers negatively.
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