THE IMPACT OF COMPENSATION AND REWARD SYSTEM

ON THE PERFORMANCE OF THE NIGERIAN BANKING

INDUSTRY (A CASE STYDY OF SOME SELECTED BANKS IN KEBBI STATE)

BY

AJAYI FEMI MICHAEL

MSC/BUS ADMIN/NOU159256886

A DISSERTATION SUBMITTED

TO THE DEPARTMENT OF BUSINESS ADMINISTRATION

SCHOOL OF MANAGEMENT SCIENCES

NATIONAL OPEN UNIVERSITY OF NIGERIA

IN PARTIAL FULFILMENT OF THE REQUIREMENTS FOR THE

AWARD OF

MASTER OF SCIENCE DEGREE IN BUSINESS ADMINISTRATION

NATIONAL OPEN UNIVERSITY OF NIGERIA.

OCTOBER, 2016

i

DECLARATION PAGE

I, Ajayi Femi Michael hereby declare that this masters dissertation: THE IMPACT OF

COMPENSATION AND REWARD SYSTEM ON THE PERFORMANCE OF THE

NIGERIAN BANKING INDUSTRY.(ACASE STYDY OF SOME SELECTED BANKS

IN KEBBI STATE)

Is my personal research work and findings carried out in the school of management sciences

National Open University Of Nigeria under the supervision of Dr. Aguda Niyi. I do further

reiterate that to the best of my knowledge, no part of this work had been submitted earlier for

the award of any other degree in any university or other higher institution of learning. The

text books, journals and other related literature consulted have been duly acknowledged in the

list of references provided.

……………………………………. ……………………………..

Ajayi Femi Michael Date

ii

CERTIFICATION PAGE

This is to certify that this project dissertation entitled “THE IMPACT OF

COMPENSATION AND REWARD SYSTEM ON THE PERFORMANCE OF THE

NIGERIAN BANKING INDUSTRY(A CASE STYDY OF SOME SELECTED BANKS

IN KEBBI STATE)” was carried out by Ajayi Femi Michael, in the School of Management

Sciences, National Open University Of Nigeria, Lagos for the award of Masters of Science in

Business Administration. .

_________________________ _________________________ Dr. Aguda Niyi PROJECT SUPERVISOR EXTERNAL SUPERVISOR DATE:____________________ DATE:____________________

_________________________ DEAN SCHOOL OF MANAGEMENT SCIENCES

DATE:_________________

iii

DEDICATION This project is dedicated to God Almighty for giving me the grace to successfully complete

this programme and the sense of reasoning and strength to accomplish this project.

I also wish to further dedicate it to the National Open University of Nigeria, for their

revolutionary stride to make education in Nigeria open and readily accessible irrespective of

distance and location.

iv

ACKNOWLEDGEMENT

I give my utmost thanks to God Almighty for giving me the grace to successfully complete

this programme.

I also express my sincere thanks and appreciation to my wonderful and talented Supervisor

Dr. Aguda Niyi for his understanding, support, encouragements and guidance throughout the

period of supervising this dissertation.

I do wish to also acknowledge the prestigious and dynamic National Open University of

Nigeria, for their bravery and resilience in constantly ensuring that its unique and revamped

system of education is progressively popularized. I further salute their efforts in ensuring its

competitiveness with other global educational institutions through partnership and

collaboration with global organizations. I must confess that my experience in NOUN was

quite interesting and refreshing, the quality of study material provided by the institution was

absolutely good and the learning environment was very comfortable and beautiful. Without

an institution like NOUN, it would have been more difficult and stressful for me to complete

my Msc. Programm.

I will also like to acknowledge the Kebbi State Study centre coordinator and the entire staff

of the Centre for their good work and constant provision of guidance throughout the study

period.

Finally my appreciation also goes to my lovely wife Mrs. Comfort Oluwafemi and my sons

Boluwatife Lancelot and Toluwalase Leonidas for their love, understanding and support.

Ajayi Femi Michael

October, 2016

v

ABSTRACT This research work adopts cross sectional survey method to investigate the impact of

compensation and reward system on the performance of a bank organization. Primary data

were collected through the instruments of questionnaires and interview. Structured

questionnaires were designed to collect data from randomly sampled respondents from 5

banks which form the sample for the study. The study thus adopted simple random sampling

technique to select 100 employees from 5 deposit money banks (DMBs) in Birnin Kebbi.

Bank performance was the dependent variable, while other variables like wellbeing;

compensation structure; staff promotion; incentive/ rewards were the independent variables

for this investigation. Analytical techniques like Pearson correlation and regression analysis

were applied to analyze the data collected for the study. The findings revealed that poor staff

wellbeing in the banking industry is counter-productive to the banks. The finding also

revealed that the present compensation system is detrimental to the banks‟ improved

performance. It was found however, that staff promotion has positive effect on bank

performance. The finding also revealed that incentives/reward systems in the banks promote

improved performance of banks. It was also revealed that the BSC model adopted by some of

the banks is inadequate. Based on the findings of this study, it was recommended that banks

should evolve a compensation structure that is developed from a performance management

model that is deeply dedicated to identifying and rewarding performance. The banks should

redesign the BSC model to correct the inadequacies identified. There should be regular

promotions as at when due in order to further encourage staff to put in their very bests to their

jobs. Also, Banks should emphasize rewarding and encouraging peak performance.

vi

TABLE OF CONTENTS Title page …………………………………………………..……………………….. i

Declaration Page ……. ………………………………….…………………………. ii

Certification Page ……………………………………………………………………. iii

Dedication …………………………………………………………………….……... iv

Acknowledgements ………………………………………………………………… v

Abstract ……….……………………………………………………………………. vi

Table of contents …….………………………………………………………….……. vii

List of figures……………………………………………………………………….. xi

List of tables ……………………………………………………………………. xii

Appendix ………………………………………………………………………….. xiii

CHAPTER ONE

1.0 Introduction…………………………………...………………………………………. 1

1.1 Background of Study ……………………………………………………………….. 1

1.2 Research Problem……………………………………………………………………. 3

1.3 Research Question…………………………………………………………………… 7

1.4 Objective of Study…………………………………………………………………… 7

1.5 Statement of Hypothesis…………………………………………………………….. 8

1.6 Significance of Study………………………………………………………………… 8

1.7 Scope of Study……………………………………………………………………….. 10

1.8 Limitation of Study…………………………………………………………………… 10

1.9 Definition of Terms…………………………………………………………………… 11

CHAPTER TWO

2.0 Review of related literature………………..………………………………………… 14

2.1 Introduction………………………………………………………………………… 14

2.2 Theoretical Background…………………………………………………………… . 14

2.2.1.1 The Theory of Wages………………………………………………… 15

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2.3 Compensation……………………………………………………………………. 23

2.3.1.1 Theories of Compensation………………………………………….. 29

2.3.1.2 Forms of Compensation…………………………………………… 31

2.3.1.3 Factors Considered in Deciding the Compensation………………. 36

2.3.1.4 Compensation Design…………………………………………… 42

2.4 Performance Management ……………………………………………………… 43

2.4.1 Objectives of Performance Management……………………………………. 44

2.5 Performance measurement model………………………………………………. 49

2.5.1 Balanced Score Card Model(BSC Model)………………………………… . 50

2.5.1.1 Perspectives of the BSC Model…………………………………. 50

2.5.1.2 The Key Performance Indicator………………………………… 53

2.5.2 Porters Five Forces Model…………………………………………………… 55

2.6 Rewards…………………………………………………………………………. 61

2.6.1 Intrinsic Reward……………………………………………………………. 61

2.6.2 Intrinsic Reward in the Workplace………………………………………… 62

2.6.3 Extrinsic Reward…………………………………………………………… 63

2.6.4 Extrinsic Reward In the Workplace……………………………………… 64

2.7 The Employee Reward System………………………………………………. 65

2.7.1 Effect of poor/weak Reward System………………………………………... 66

2.8 Empirical Review………………………………………………………………. 68

CHAPTER THREE

3.0 Research methodology………………………………………………………….. 71

3.1 Introduction……………………………………………………………………… 71

viii

3.2 Research design ……………………………………………………………… 71

3.3 Population of study……………………………………………………………. 71

3.4 Sampling and sample size………………………………………………………. 72

3.5 Method of data collection……………………………………………………….. 72

3.5.1 Primary source of data used………………………………………………….. 72

3.5.2 Secondary source of data used……………………………………………….. 74

3.6 Modeling……………………………………………………………………. 74

3.7 Analytical Techniques………………………………………………………. 76

3.8 Test for Reliability of Model …………………………………………………... 77

3.8.1 Test for Linear Multiple Correlation Coefficient………….……………….. 78

3.8.2 Test of Coefficient of multiple determination ……………………….……. . 78

3.8.3 Test of Adjusted Coefficient of Multiple regression…………………… 79

3.8.4 Student „t‟ Test Statistics…………………………………………………. 79

3.8.5 The F- Statistics…………………………………………………………… 80

CHAPTER FOUR

4.0 Data presentation and analysis………………………………………………… 82

4.1 Introduction…………………………………………………………………..… 82

4.2 Data analysis…………………………………………………….…………….. 82

4.3 Result of Correlation of Staff wellbeing, Compensation Structure, Staff

Promotion and Incentive/Reward system on Banks Performance…………….. 88

4.4 Regression Results of The Effect of Compensation and reward system on

bank performance……………………………………………………………… 90

4.5 Result of T- Test……………………………………………………………… 92

ix

4.6 Interview …………………………………………….........…………………... 95

4.7 Discursions and Implication of Findings…………………………………….... 99

CHAPTER FIVE

5.0 Summary, Findings, Conclusion and recommendations………………………. 104

5.1 summary of Findings………………………………………………………….. 104

5.2 Conclusion………………………………………..…………………………… 105

5.3 Recommendations…………………………….………………………………. 106

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LIST OF FIGURES

Figure: 2.1 Maslow Hierachy of Needs Pyramid……………………………….. 27

Figure: 2.2 Factors for Determining Compensation……………………………. 37

Figure: 2.3 Phases of Performance Management……………………………… 46

Figure: 2.4 Perspectives of The Balanced Score Card Model…………………. 51

Figure: 2.5 Balanced Score Card………………………………………………. 54

Figure: 2.6 Porters Five Forces Model………………………………………… 56

Figure: 4.2.1 Staff Category…………………………………………………… 83

Figure: 4.2.2 Staff Analysis Based on Unit…………………………………… 83

Figure: 4.2.3 Staff Grade Analysis……………………………………………. 84

Figure: 4.2.4 Staff Qualification Analysis…………………………………….. 85

Figure: 4.2.5 Staff Salary Value……………………………………………… 86

Figure: 4.2.6 Staff Years of Service………………………………………….. 87

xi

LISTS OF TABLES

TABLE: 3.1 ANOVA Table……………………………………………… 81

TABLE: 4.3.1 Correlation………………………………………………… 88

TABLE: 4.4.1 Model Summary………………………………………… 90

TABLE: 4.4.2 Coefficient………………………………………………. 91

TABLE: 4.4.3 The T –Test ………………..…………………………… 92

TABLE: 4.4.4 Summary of F- Test (ANOVA Table)………………….. 95

TABLE: 4.4.5 Balanced Score Card……………………………………. 98

xii

LIST OF APPENDIX

APPENDIX 1: Questionnaire and Analysis of its results……………………….. 112-141

APPENDIX 2: Regression result………………………………………………….142-146

xiii

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

1

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

2

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.

1.2 Research Problem

The banking industry has for almost a decade now witnessed constant and persistent

disengagements of staff, divestment of foreign subsidiaries, rationalization of branches due to

flagrant loss making, persistent loss of income to divisions, directorates or even the bank at

large, and several others are ominous signs connoting that the existence of banks in Nigeria

is threatened.

It is observed that many banks have remained in an ailing condition despite government

relentless efforts to make banks in Nigeria very sound and stable.

Some specific problems identified in this research work include the following.

The banks have Poor Compensation Structure. The salaries of executives and senior staff

3

members of the banks are too large for the present income generated by banks to sustain and

usually their salaries are not usually tied to direct performance target and in some banks no

targets are assigned to such outrageous salaries. The aggregate of these salaries engulf most

income made by the banks as the task of this group of staff do not add any form of financial

value that commensurate to their pay. They are rated by group performances rather than by

individual performance contribution. The present compensation model in use in banks is

toxic to the health of the bank. There is a need for senior staff pay cut or assignment of

business targets that will at least justify their monthly salaries, or even implemented the duo

to revert the present status.

Another problem is lack of effective performance Management Model. At this point in time

in the banking industry where every kobo is important, it is apparent that banks need to

operate a performance model that will energize the staff to work very hard to get businesses

for the banks. But it is observed that most banks lack effective staff performance monitoring

and measurement system-a performance measurement system which is unbiased i.e that

gives more to where income is coming from. The systems in operation in various banks

reveal that laggards take the lion share of income as salaries. This research has identified the

shortcomings of present compensation model as a model that allow laggards to grow to

sensitive positions that require prudent skills and attitude. It is also not cost effective and cost

efficient as people get paid without having to personally contribute financially to the

company income through meeting business targets. Furthermore it was observed that the

present model affect the promotion of staff. Staff are not promoted as at when due, as there

are no adequate funds to meet up with cost implications of staff promotion. Finally it is safe

to assume that the present model is bias as it gives much haven to unproductive workers.

4

Poor staff retention and succession management plan is another serious problem that was

identified. An assessment of the banks showed that they hired most of their top managers

rather than growing them from within the system over time. Any serious organization grows

its managers from within-such organization has no entry level point i.e any staff that shall

man their management level desk must have grown through the organization and can never

be hired from outside. Staff retention is achieved through effective talent management system

that identifies and sieves performers from laggards and tries to develop these star performers

to grow and occupy strategic positions within the organizations.

Unfair labour practice also constitutes part of the problems facing banks. Within the Nigerian

banking industry workers are perpetually denied their right to membership of trade unions or

workers committee as specified by the part II of the International Labour Act(2006).

Violation of workers right to association and prohibition of formation of workers union is a

deliberate attempt of banks to continuously exploit their staff. One of the fundamental goals

of workers union is to protect workers‟ rights at work and also bargain for better conditions

of service. Unfair employee compensation may also be tantamount to unfair labour practice

(ULP) which is any failure to act, or unfair act of an employer towards a worker concerning

promotion, demotion, trial periods, training or benefits; suspending a worker or disciplinary

action; refusing to re-employ a worker as agreed; and may also occur when an employer

makes circumstances difficult for a worker who was forced to make a protected disclosure,

(Rycroft, 2009). ULP has been known to be a major catalyst for the development of a

demoralized workforce who in turn directly and actively militates against achievement of

predetermined goals.

5

Denial of staff promotion was prevalent among many banks due to the present ailing

condition of the banks. Staffs have suffered a high degree of denial of earned promotions.

Unfortunately staff promotions were based on years of service rather than a combined

approach of service year and individual staff contribution in terms of financial value added,

and so, performing staff are not adequately recognized.

Stagnated wage levels for the support staff that constituted over 60% of the workforce in

banks is another monumental element affecting the performance of this group of staffs within

the banking industry. This is a regressive wage system intentionally targeted at the support

staff group within the banking industry. The stagnated wage system provides a meager

amount as a monthly salary and does not attach any value to employee number of service

years, additional qualification, and employee performance. It is a demeaning wage system

that lacks respect for workers dignity and right to good life, because it allows workers to

spend their productive and energetic period of life receiving and living on a meager salary as

their total monthly emolument. This practice has been observed to be repugnant to natural

justice, equity, good conscience and fairness. It adds to woes of the poor. The continuing

stagnation of the income levels for support staff has put the larger workforce within the

banking industry at the most disadvantaged position in terms attainment of a more humane

condition of living.

Outsourcing is a major trend in the banking industry. Outsourcing is the practice of sending

certain job functions outside a company instead of handling them in-house so as to gain a cost

advantage. But this has been abused in the Nigerian banking industry and many other

companies as a way to grow by using it to restrain staff cost by putting some of its workers

on outsourced pay roll, which offers a static wage system. Outsourcing if well practiced

6

should not ordinarily mean the flagrant and intentional violation of workers‟ rights to dignity

and good life. This research work views the current practice in the Nigerian banking industry

as tantamount to civilized slavery where the might of a productive worker is priced for a plate

of meal. Most workers within this category suffer degradation, lack of recognition, pain,

harassment, housing hardship, etc. They are exposed to varying degrees of needs problems as

enumerated in the work of Abraham Maslow „Hierachy of needs‟.

This research work shall therefore address these identified problems as related to

compensation and reward system in Nigerian banks with a view to arrest the lingering poor

performance of the Nigerian banking industry.

1.3 Research Question

Following from the above therefore, the following research questions shall guide the

investigation.

i. What is the relationship between workers wellbeing at work and employees

productivity?

ii. What is the impact of the present compensation system on the banks performance?

iii. To what extent does staff promotion affect workers productivity?

iv. What is the relationship between incentives, reward and the performance of

organization?

1.4 Objective of study

This research work aims to investigate the impact of compensation and reward system on the

performance of Nigerian banking industry. It is assumed as one of the reasons for the

persistent decline in the performance of banks and why the ailing conditions of banks have

lingered. The specific objectives of this research work include the followings:

7

i. To examine the relationship between workers‟ wellbeing at work and their

productivity.

ii. To establish the relationship between compensation structure and productivity.

iii. To investigate the relationship between promotion and productivity

iv. To investigate the relationship between incentives, reward and performance of

organization.

1.5 Statement of Hypothesis

To achieve the objective of this research work, the following hypotheses shall be tested. The

hypotheses are stated in Null form and shall be tested in order to either confirm or reject the

Null hypothesis as the case may be.

H𝑜1 -There is no significant relationship between workers wellbeing

and their productivity.

H𝑜2- There is no significant relationship between compensation

structure and productivity.

H𝑜3- There is no significant relationship between promotion and

productivity.

H𝑜4- There is no significant relationship between incentive, reward

and organizational performance.

1.6 Significance of study

This study shall demonstrate the imperative of appropriate compensation and reward system

as a panacea to the persistent decline in the performance of banks Nigeria.

8

This study shall also improve managerial understanding of the impact of performance

measurement on organizational performance and overall healthiness, dwelling richly on the

experiences within the Nigerian banking industry.

The study results will enable the management to establish the effects of human resource

management strategies on employee‟s performance, hence identify the areas where

improvements are needed. It will also help the management in planning for the development

and implementation of effective and efficient human resource strategies that will lead to

improved performance of the banks. This will in turn help in ensuring economic growth and

stability of the country. Other researchers who may need reference to information on role of

compensation strategies on employees‟ performance will also benefit by being able to assess

previous approaches used to solve similar management questions and revitalize their

compensation models. In addition they will be able to spot flaws in the logic, errors in

assumptions or even management questions that are not adequately addressed by the

objectives and designs of the current performance management technique in use in their

organizations.

A compensation model that will considerably improve the employee‟s performance in

Nigerian banking industry will also be developed. If same is employed, it will trigger a

revolution in the performance of staff and the organization as a whole.

This study re-amplifies the balanced score card model and reflects it in a way that will

address the challenges currently facing the banking industry in terms of staff cost and present

economic recession.

9

1.7 Scope of Study

This study shall investigate the compensation and reward system in some selected banks in

Birnin Kebbi, Kebbi State. Name of selected banks will not be disclosed for the purpose of

anonymity and due to the sensitivity of the subject matter of investigation, as utmost

disclosure of the findings on selected banks will be disclosed without prejudice. 5 banks in

Kebbi state were randomly selected and covered in this investigation.

It focused on compensation and reward system as one of the internal factors affecting the

performance of banks, with emphasis on the monumental erroneous use and application of

the balanced score card model (BSC Model) as one of the factors that have actively

contributed to the persistent failure of banks in Nigeria.

The researcher distributed questionnaires as well carried out a few interviews with the

respondents among the sampled banks.

1.8 Limitation of study

One of the major constraints of this research was finance. The researcher incurred a huge cost

to finance the cost of carrying out the research work all over the banks covered.

Another limitation was the oath of secrecy signed by the banks staffs, which have made it

difficult for staff to make adequate disclosures. Some of them were also reluctant to collect

the questionnaires.

The oath of secrecy almost frustrated this research work, as the employees refused to collect

the questionnaires. But after pleading with the branch management, they ended up collected

10

them and gave back their responses under the condition of anonymity as the questionnaires

were designed in a way that does not require the respondent to identify him/herself. So

responses offered were anonymous.

Despite all the seeming challenges however, the research was still able to overcome them and

meet up to the required standard. The impediments were also mitigated by conducting the

research within Kebbi State alone.

1.9 Definition of terms.

COMPENSATION -compensation is the act of compensating or the state of being

compensated with something such as money, given or received as payment or reparation for a

service or loss.

PAY STRUCTURE- It consists of the various salary grades and their different levels of

single jobs or groups of jobs.

PERFORMANCE- It is a process of collecting, analyzing and reporting information

regarding individual or group or organization. It depicts the extent to which an employee

achieves work targets assigned to him.

EMPLOYEE- An individual, who works part-time or full time under a contract of

employment, whether oral, written express or implied.

EMPLOYER- A Legal entity who controls and direct a servant or worker under an express

or implied contract of employment and pays him wages or salary as compensation.

11

MANPOWER- Power in terms of people available or required for work.

EMPLOYEE WELLBEING- This refers to the physical, moral, psychological, social,

economic, and mental health of a worker at work

INCENTIVE-This is a form of payment made in excess of the normal pay to employees so

as to stimulate, motivate or encourage performance.

WAGES- these are the payment made to manual workers

SALARY- is a fix periodical payment to a non-manual employee

KEY PERFORMANCE INDICATOR (KPI‟s) are performance measures that indicate

progress towards a desirable outcome.

STAFFCOST-are cost associated with recruitment, maintenance and retention of staff within

an organization.

OUTSOURCING-Outsourcing is the practice of sending certain job functions outside a

company instead of handling them in house, so as to gain a cost advantage.

UNFAIR LABOUR PRACTICE(ULP) Unfair labour practice means any failure to act or

unfair act of an employer towards a worker concerning, promotion, demotion, trial periods,

training or benefits; suspending a worker or disciplinary action; refusing to re-employ a

worker, as agreed; and may also occur when an employer makes circumstances difficult for a

worker who was forced to make a protected disclosure.

12

SCORE CARD- a statement showing a comparison of employee actual performance against

set assigned targets to determine the degree to which an employee have met his target.

BANKING INDUSTRY-Comprises of all the banks operating in Nigeria the Nigerian

banking industry currently consists of 19 commercial banks, regional commercial bank and

one non interest bank.

13

CHAPTER TWO

2.0 REVIEW OF RELATED LITERATURE

2.1 Introduction

This chapter presents a review of literature on compensation and reward system. It also

covers the theoretical background as well as the conceptual framework. The chapter shall as

well be rounded off with the review of empirical studies on the subject matter.

2.2 Theoretical Background

Personnel management is primarily concerned with managing the relationship between

people and work. Armstrong (1992)

Huselid as sighted in Barney' (1991) opines that human resources can be a source of

sustained competitive advantage when four basic requirements are met.

Value additive to the firm's production processes, he further insisted that the levels of

individual performance must matter but it is suggested that individual contribution

must be assumed more importance and given more attention than group

Skill required – firms are not interested in keeping large number of staff but

competent and skilled staff with rare skills.

Limited imitation-There are varying degrees of staff competence, technically

competent staff can rarely be imitated. so is it very difficult to replicate the combined

human capital investments of a firm's employees . Barney(1991) propounded that

human resources are not subject to the same degree of imitability as equipment or

facilities. This makes it difficult for competitors to replicate a value additive and

highly skilled workforce.

14

Finally, he posit‟s that a firms human resource especially the strategist‟s who

provides sustainable advantage should never be replaced with technology. If a

contrary decision is to be taken it must be weighed against prior investment in human

capital and long run impact of the technology to be adopted.

Bailey (1993) contended that human resources are frequently "underutilized" because

employees often perform below their maximum potential and that organizational efforts to

elicit discretionary effort from employees are likely to provide returns in excess of any

relevant costs.

Bailey identification of cost implication on staff retention and performance and his four

cardinal point resource based theory of firm is also addressed in this research work. His

opinion on value additive staff emphasizes cost effective retention of staff is credible

contribution that the banks in Nigeria have not adequately considered in compensation

management and administration.

2.2.1 The Theory of Wages.

Propounded by David Ricado , a classical economist born in 1772 and lived to 1823.

Graham (1988) defined wage as the payment made to manual workers while a salary is a fix

periodical payment to a non-manual employee. It is usually expressed in annual terms

implying a relatively permanent employment relationship, although normally paid at monthly

intervals. He further explains that “salaried workers are usually termed „staff‟ while, wage

earners are called „casual workers.

Wages are something received by a worker or paid by an employer for time on the job;

15

money received or paid usually for work by the hour, day, or week, or month; a calculation or

statement of money earned for a period of time from one hour (hourly wage) up to one year

(annual wages). Now let us discuss about wage level.

What is a Wage Level?

May be defined as the money an average worker makes in a geographic area or within in an

organization. It is only an average; specific markets or firms and individual wages can vary

widely from the average.

How are Wage Levels are Set?

Wage levels are calculated using position importance and skill required as criteria. While

there are minimum wage set by federal law for most jobs, But the actual wage paid is entirely

between you and your prospective employee.

What is “Stagnated” Wage Levels?

This is a regressive wage system, which does not attach any value to employee number of

service year, additional qualification, employee performance or at large may be said to lack

respect for workers dignity and right to good life. Workers spend their productive and

energetic moments of life receiving a meager salary as total monthly emolument. This

practice have been observed to be repugnant to natural justice, equity, good conscience and

fairness. It adds to woes of the poor. The continuing stagnation of the income levels for the

most disadvantaged inhibits growth of workers income and attainment of better human

conditions of living. (Michael 2015)

16

What is a Wage Rate?

A wage is an amount of money paid to a worker for some specified quantity of labor. When

expressed with respect to time, it is typically called the wage rate. The wage rate is the pre-

tax amount of payment, usually monetary, paid per unit of labor. It is the main monetary item

that the worker and the employer focus on.

Affirmatively, Wages mean any form of economic compensation paid by the employer under

some contrast to his workers for the services rendered by them. Wages, therefore, may also

include family or spouse allowance, relief pay, financial support and other benefits. But, in

the narrower Sense wages are the price paid for the services of labour in the process of

production and include only the performance wages or wages proper. Graham (1988)

proposed those wages are of two parts - the basic wage and other allowances.

The basic wage is the remuneration, by way of basic salary and allowances, which is paid or

payable to an employee in terms of his contract of employment for the work done by him.

Allowances-, are usually paid in addition to the basic wage to maintain the value of basic

wages over a period of time. Such allowances may include Spouse allowance, holiday pay,

overtime pay, bonus and social security benefits. These are usually not included in the

definition of wages.

Labor and Wages

The type of job one does and the financial compensation he or she receives are very

17

important in our society. Job type is linked to status as is wealth. While the type of job one

performs is arguably more important status wise then wealth, both are important to

Americans. In the past we used to use other descriptions to classify workers. The terms blue

collar or white collar employees were used to describe the type of vocation.

Blue Collar - Manual laborers

White Collar - Officer workers

Pink Collar - Jobs associated with women like nursing, secretarial, etc. This being a rather

sexist term is no longer used. Today we classify our work roles into three categories called

labor grades. These labor grades are described below:

Skilled Labour

These are workers who have received specialized training to do their jobs. They have

developed and honed a special skill and may or may not need to be licensed of certified by

the state. Some examples of skilled labor are: carpenters, plumbers, electricians, business

executives and managers, artisans, accountants, engineers, police, mechanics, etc. These may

be blue or white collar workers.

Unskilled Labor

These are workers who have received no special training and have few specific skills. As our

society has grown into an increasingly technological one, the members of this group have

developed more and more skills. A mechanic, for example, used to be considered unskilled

labor. Today that is no longer the case. Mechanics require a great deal of skill and training to

work with today‟s modern engines. Examples of unskilled laborers are construction workers,

sanitation and custodial workers, painters, factory assembly line workers, etc. These are blue

18

collar workers.

Professionals

Arguably the elite of the labor grades, these are those workers who need an advanced degree

to do their jobs. The three primary groups of professional are doctors, lawyers and teachers.

These are white collar workers. These labor grades are often said to be non competing labor

grades because workers rarely move from one grade to another and do not compete salary

wise with each other. There are reasons why they do not compete with each other.

The cost of education and training may be a significant obstacle. They might lack the

opportunity to make such a move and they might also have a lack of initiative.

Ricardo (1817) further opines that there are two key theories that explain why salaries are the

way they are in a particular field. These two theories are:

a. Traditional Theory of Wage Determination

In this theory the law of supply and demand dictates salary. These days programmers are in

short supply and are in great demand thus they will command a higher salary. Likewise

doctors and lawyers whose specialized skills people need command a high wage. If you

looked at the bill my electrician gave me you would know he is in demand!

b. Theory of Negotiated Wages

Those employees who work in unions where the union negotiates salary on behalf of all

workers fit into this theory. Since I am a teacher my salary is set by collective bargaining

with my union. I may be the best teacher in the world sought after by many students and

parents but it wouldn‟t matter.

However, different methods of wage payment are prevalent in different industries and in

various countries. There may be payment by time or payment by results, including payment

at piece rates. Wages are fixed mainly as a result of individual bargaining, collective

19

bargaining or by public or State regulation. How wages are determined has been the subject

of several theories of wages.

Below are various theories of Wages:

(1) Subsistence theory

(2) Wages fund theory

(3) The surplus value theory of wages

(4) Residual claimant theory

(5) Marginal productivity theory

(6) The bargaining theory of wages

(7) Behavioural theories

The theories of wages shall now be discussed in detail:

(1) Subsistence theory

This theory, also known as „Iron Law of Wages,” was propounded by David Ricardo. This

theory (1817) postulates that: “The laborers are paid to enable them to subsist and perpetuate

the race without increase or diminution.” The theory was based on the assumption that if the

workers were paid more than subsistence wage, their numbers would increase as they would

procreate more; and this would bring down the rate of wages. If the wages fall below the

subsistence level, the number of workers would decrease - as many would die of hunger,

malnutrition, disease, cold, etc. and many would not marry, when that happened the wage

rates would go up. In economics, the subsistence theory of wages states that wages in the

long run will tend to the minimum value needed to keep workers alive. The justification for

20

the theory is that when wages are higher, more workers will be produced, and when wages

are lower, some workers will die, in each case bringing supply back to subsistence-level

equilibrium. The subsistence theory of wages is generally attributed to David Ricardo, and

plays a large role in Marxist economics. Most modern economists dismiss the theory, arguing

instead that wages in a market economy are determined by marginal Productivity

2. Wages fund Theory

This theory was developed by Adam Smith (1723-1790). His basic assumption was that

wages are paid out of a predetermined fund of wealth which lay surplus with wealthy persons

- as a result of savings. This fund could be utilized for employing laborers for work. If the

fund was large, wages would be high; if it was small, wages would be reduced to the

subsistence level. The demand for labour and the wages that could be paid them were

determined by the size of the fund.

3. The Surplus value theory of Wages

This theory owes its development to Karl Marx (1818-1883). According to this theory, the

labour was an article of commerce, which could be purchased on payment of „subsistence

price.‟ The price of any product was determined by the labour time needed for producing it.

The labourer was not paid in proportion to the time spent on work, but much less, and the

surplus went over, to be utilized for paying other expenses. Marx himself considered his

theory of surplus-value his most important contribution to the progress of economic analysis

(Marx, letter to Engels of 24 August 1867).It is through this theory that the wide scope of his

sociological and historical thought enables him simultaneously to place the capitalist mode of

production in his historical context, and to find the root of its inner economic contradictions

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and its laws of motion in the specific relations of production on which it is based.

4. Residual claimant Theory

Walker (1840-1897) propounded this theory. According to him, there were four factors of

production/business activity, viz., land, labour, capital and entrepreneurship. Wages represent

the amount of value created in the production, which remains after payment has been made

for all these factors of production. In other words, labour is the residual claimant.

5. Marginal productivity Theory

This theory was developed by Phillips Henry Wicksteed (England) and John Bates Clark

(USA). According to this theory, wages are based upon an entrepreneur‟s estimate of the

value that will probably be produced by the last or marginal worker. In other words, it

assumes that wages depend upon the demand for, and supply of, labour. Consequently,

workers are paid what they are economically worth. The result is that the employer has a

larger share in profit as has not to pay to the non-marginal workers. As long as each

additional worker contributes more to the total value than the cost in wages, it pays the

employer to continue hiring; where this becomes uneconomic, the employer may resort to

superior technology.

6. The bargaining theory of wages

John Davidson propounded this theory. Under this theory, wages are determined by the

relative bargaining power of workers or trade unions and of employers. When a trade union is

involved, basic wages, fringe benefits, job differentials and individual differences tend to be

determined by the relative strength of the organization and the trade union.

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7. Behavioural theories

Many behavioral scientists - notably industrial psychologists and sociologists like Marsh and

Simon, Robert Dubin, Eliot Jacques have presented their views or wages and salaries, on the

basis of research studies and action programmes conducted by them. Briefly such theories

are:

i. The Employee‟s Acceptance of a Wage Level-This type of thinking takes into

consideration the factors, which may induce an employee to stay on with a

company. The size and prestige of the company, the power of the union, the

wages and benefits that the employee receives in proportion to the contribution

made by him - all have their impact.

ii. The Internal Wage Structure-Social norms, traditions, customs prevalent in the

organization and psychological pressures on the management, the prestige

attached to certain jobs in terms of social status, the need to maintain internal

consistency in wages at the higher levels, the ratio of the maximum and minimum

wage differentials, and the norms of span of control, and demand for specialized

labour all affect the internal wage structure of an organization.

2.3 Compensation.

Banjoko (1996) points out that the payment of wages and salaries is a reflection of a

transaction between the employees and employer involved in the employment contract.

Compensation can be defined as a managerial tool used to further the existence of a company.

It may not be crafted and limited to a particular form, but may be constantly adjusted

according to the needs, goals or objective of an enterprise and sometimes may even be

subjected to availability of resources.

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Gary Dessler (date) defines compensation in these words “Employee compensation refers to

all forms of pay going to employees and arising from their employment.” The phrase „all

forms of pay‟ in the definition does not include non-financial benefits, but all the direct and

indirect financial compensations.

According to Bergmann (1988), compensation consists of four distinct components:

Compensation = Wage or Salary + Employee benefits +Non-recurring financial rewards+

Non-pecuniary rewards.

Banjoko (1996) suggested that salary can be administered in three ways:

i. Adhoc: Here, there is no attempt to evaluate jobs before assigning payment rates to them.

Increases in pay are therefore given erratically, often, at the demand of workers through the

union.

ii. Merit review: Here, jobs are evaluated before fixing wages and salary range. Workers are

appraised normally and given personal increases which will move their pay at varying speed

through the range. In other words, individual efforts and merit are rewarded.

iii. Incremental Scale: Here, all jobs are evaluated and graded with a salary range and

standard annual increment which is, automatic.

Compensation aids in:

1. Recruitment and retention of qualified employees- Good pay attract a pool of prospective

applicants. Organizations will through it recruitment process select the right staff with

needed qualification and skill. Once this rare genius are identified, good pay ,fringe

benefits and conducive working conditions aid the workers retention.

2. Increasing or maintaining morale/satisfaction- is assumed by theorist as a motivational

factor. Wikipedia enumerated the Abraham Maslow‟s (a psychologist) hierarchy of

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needs theory as follow premises:

- That man is a wanting animal and his wants depend on what he has.

- That needs are arranged in hierarchy-once one need is satisfied it gives way for

another need to be satisfied.

He observed that these needs overlap and one of them predominates. The predominant need

is called the pre-potent need. Thus individual will tend to satisfy the pre-potent of most

powerful/pressing need at a given time. A pre-potent need must be totally or partially

satisfied before the next higher need is felt and its satisfaction desired. These needs are

satisfied by the compensation a worker earns.

The hierarchy of needs is:

- Physiological needs-Physiological needs are the basic physical requirements for

human survival. If these requirements are not met, the human body cannot function

properly and will ultimately fail. Physiological needs are thought to be the most

important; they should be met first. Air, water, and food are metabolic requirements

for survival in all animals, including humans. Clothing and shelter provide necessary

protection from the elements.

- Safety needs-Employee safety at work should be guaranteed. Safety and Security

needs include: Personal security, Financial security, Health and well-being, Safety net

against accidents/illness and their adverse impacts.

- Love and belonging-the third level of human needs is interpersonal and involves

feelings of belongingness. Friendship, Intimacy ,Family .According to Maslow,

humans need to feel a sense of belonging and acceptance among their social groups,

regardless if these groups are large or small.. Humans need to love and be loved –

both sexually and non-sexually – by others. Many people become susceptible to

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- loneliness, social anxiety, and clinical depression in the absence of this love or

belonging element. This need for belonging may overcome the physiological and

security needs, depending on the strength of the peer pressure.

- Esteem-All humans have a need to feel respected; this includes the need to have self-

esteem and self-respect. Esteem presents the typical human desire to be accepted and

valued by others. People often engage in a profession or hobby to gain recognition.

These activities give the person a sense of contribution or value. Low self-esteem or

an inferiority complex may result from imbalances during this level in the hierarchy.

People with low self-esteem often need respect from others; they may feel the need to

seek fame or glory. However, fame or glory will not help the person to build their

self-esteem until they accept who they are internally. Psychological imbalances such

as depression can hinder the person from obtaining a higher level of self-esteem or

self-respect.

- Self-actualization- "What a man can be, he must be." This quotation forms the basis

of the perceived need for self-actualization. This level of need refers to what a

person's full potential is and the realization of that potential. Maslow describes this

level as the desire to accomplish everything that one can, to become the most that one

can be. Individuals may perceive or focus on this need very specifically. For example,

one individual may have the strong desire to become an ideal parent. In another, the

desire may be expressed athletically. For others, it may be expressed in paintings,

pictures, or inventions. As previously mentioned, Maslow believed that to understand

this level of need, the person must not only achieve the previous needs, but master

them.

Some criticisms against this theory are the assertion my Maslow that a non self actualized

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man is an incomplete man is not true. This is because some people fixate on certain needs and

can be more actualized and satisfied at that level more that the so called self actualized man.

It is also a fallacy to assume that there is self-actualized man because men usually go for

higher achievement until they are dead. The self concept will affect the need level which an

individual will operate. Based on self concept an individual might feel he is more satisfied by

associating with people than achieving his job.

Lastly there is an apparent rigidity in the theory and it‟s rare that individuals satisfy these

needs in such a way as stipulated by Maslow.

Fig 2.1-Maslow hierarchy of needs pyramid

Source: Adapted

from Cole G.A (1995) Personnel Management.

Implication.

- When employees within an organization see a clear relationship between performance

and reward, job satisfaction sets in. These employees, become highly motivated and

give their best to the organization in return.

- Maslow theory has given a ground for attainment of work objective through growing

a dedicated and unstoppable workforce that will willingly and enthusiastically strive

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Accomplishment

recognition,respect for other and by others

Self Actualization Needs

Esteem Needs

Love and Belongingness Needs

Safety Needs

Physiological Needs

friendship,family,sexual intimacy

food ,water,shelta sleep clothing

security of body,employment resources,family ,health

tirelessly.

- Rewards encourage peak performance, once employee sees a beneficial relationship

between performance and reward; he is bound to put in more efforts, so that he can

benefit more.

- Achieving internal and external equality- They include income distribution through

narrowing of inequalities, increasing the wages of the lowest paid employees,

protecting real wages (purchasing power), the concept of equal pay for work of equal

value compensation management strives for internal and external equity. Internal

equity requires that, pay be related to the relative worth of a job so that similar jobs

get similar pay. External equity means paying workers what comparable workers are

paid by other firms in the labor market. Even compensation differentials based on

differences in skills or contribution are all related to the concept of equity.

- It brings about efficiency. Efficiency objectives are reflected in attempts to link to link

a part of wages to productivity or profit, group or individual performance, acquisition

and application of skills and so on. Arrangements to achieve efficiency may be seen

also as being equitable (if they fairly reward performance) or inequitable (if the

reward is viewed as unfair).

- Macroeconomic stability - through high employment levels and low inflation, of

instance, an inordinately high minimum wage would have an adverse impact on levels

of employment, though at what level this consequence would occur is a matter of

debate. Though compensation and compensation policies are only one of the factors

which impinge on macro-economic stability, they do contribute to (or impede)

balanced and sustainable economic development.

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- Efficient allocation of labor in the labor market- This implies that employees would

move to wherever they receive a net gain, such movement may be form one

geographical location to another or form on job to another (within or outside an

enterprise). The provision or availability of financial incentives causes such

movement. For example, workers may move form a labor surplus or low wage area to

a high wage area. They may acquire new skills to benefit form the higher wages paid

for skills. When an employer‟s wages are below market rates employee turnover

increases. When it is above market rates the employer attracts job applicants. When

employees move from declining to growing industries, an efficient allocation of labor

due to structural changes takes place .

- When compensation and reward is properly administered, there are less occurrences

of confrontations between employers and workers union.

- Reward desired behavior- pay should reinforce desired behaviors and act as an

incentive for those behaviors to occur in the future. Effective compensation plans

reward performance, loyalty, experience, responsibility, and other behaviors.

2.3.1 Theories of Compensation

Several notable scholars and practicing professionals have given their various contributions

to the definition of compensation and reward.

Flippo (1980) views compensation as one of the most difficult functions of personnel

management of determining rates of monetary compensation. Not only is it one of the most

complex duties, but it is also one of the most significant to both organisation and the

employee. The management of this very important monetary aspect of employee‟s

compensation is what is referred to as Wage and Salary administration. The need to

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administer and control wages and /or salaries is to ensure equity both within and outside the

organisation itself and with respect to widening the local and national employment situation

Whitmore and Ibbeton (1977) in addition to the work of Flippo postulated that two major

considerations arise in the administration of wages and salaries:

- The need to regularly review the wages and salary situation in those areas where

similar employment conditions and types of work pertain.

- The need to hold under constant review the steadily changing factors which influence

the total field of payment within the organisation itself.

Sydney and Beatrice Webbs propounded The Webbs‟ Theory. This approached

compensation from the standpoint of unionism. The founders of the famous London School

of Economics, who happened to be a husband and his wife. The theory postulates that

workers are primarily bound together for the purpose of improving and maintaining their

working conditions. Therefore, the workers regard it as a way to economically motivate each

other. Webbs believe that workers are directly concerned with the wages and all related

allowances, compensation packages, and hours of works. The Webbs argue that workers find

themselves in a union because they realize that they are powerless fighting singly; hence the

need to present a united front through their union in fighting for their rights and privileges.

Essentially, the Webbs postulate that when workers organize themselves into trade unions,

they are interested in creating a potent means through which to pursue and achieve their

economic freedom.

Karl Marx‟s – view of compensation was from group approach. He reiterated the importance

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of group and the tremendous forces possessed by groups to take over power in a capitalist

economy. The capitalist is most time ruthless and insensitive to workers need. Max

postulated that trade union is association of workers in which the workers organize

themselves to overthrow the capitalist sector, which has been exploiting their labour and then

compete among themselves for available jobs. According to Max, the only way by which the

workers can make their lots better is by forming unions, with which they will overthrow the

capitalist, their employers who constitute themselves as the masters. Hence, the workers

would be in a good stead to control the means of production and thereby improve their

working conditions.

2.3.2 Forms of Compensation

Bergmann(1988) identifies the following forms of compensation

Basic Wages/Salaries

Basic wages / salaries refer to the cash component of the wage structure based on which other

elements of compensation may be structured. It is normally a fixed amount which is subject

to changes based on annual increments or subject to periodical pay hikes.

Wages represent hourly rates of pay, and salary refers to the monthly rate of pay, irrespective

of the number of hours put in by the employee. Wages and salaries are subject to the annual

increments. They differ from employee to employee, and depend upon the nature of job,

seniority and merit.

Dearness Allowance

The payment of dearness allowance facilitates employees and workers to face the price

increase or inflation of prices of goods and services consumed by him. The onslaught of price

31

increase has a major bearing on the living conditions of the labour. The increasing prices

reduce the compensation to nothing and the money‟s worth is coming down based on the

level of inflation. The payment of dearness allowance, which

may be a fixed percentage on the basic wage, enables the employees to face the increasing

prices.

Incentives

Incentives are paid in addition to wages and salaries and are also called „payments by results‟.

Incentives depend upon productivity, sales, profit, or cost reduction efforts.

There are:

(a) Individual incentive schemes, and

(b) Group incentive programmes. Individual incentives are applicable to specific employee

performance. Where a given task demands group efforts for completion, incentives are paid

to the group as a whole. The amount is later divided among group members on an equitable

basis.

Bonus

The bonus can be paid in different ways. It can be fixed percentage on the basic wage paid

annually or in proportion to the profitability. The Government also prescribes a minimum

statutory bonus for all employees and workers. There is also a bonus plan which compensates

the managers and employees based on the sales revenue or profit margin achieved. Bonus

plans can also be based on piece wages but depends upon the productivity of labour.

Commissions

Commission to managers and employees may be based on the sales revenue or profits of the

32

company. It is always a fixed percentage on the target achieved. For taxation purposes,

commission is again a taxable component of compensation. The payment of commission as a

component of commission is practiced heavily on target based sales. Depending upon the

targets achieved, companies may pay a commission on a monthly or periodical basis.

Mixed Plans

Companies may also pay employees and others a combination of pay as well as commissions.

This plan is called combination or mixed plan. Apart from the salaries paid, the employees

may be eligible for a fixed percentage of commission upon achievement of fixed target of

sales or profits or Performance objectives. Nowadays, most of the corporate sector is

following this practice. This is also termed as variable component of compensation.

Piece Rate Wages

Piece rate wages are prevalent in the manufacturing wages. The laborers are paid wages for

each of the Quantity produced by them. The gross earnings of the labour would be equivalent

to number of goods produced by them. Piece rate wages improves productivity and is an

absolute measurement of productivity to wage structure. The fairness of compensation is

totally based on the productivity and not by other qualitative factors.

Fringe Benefits

Fringe benefits may be defined as wide range of benefits and services that employees receive

as an integral part of their total compensation package. They are based on critical job factors

and performance. Fringe benefits constitute indirect compensation as they are

usually extended as a condition of employment and not directly related to performance of

33

concerned employee. Fringe benefits are supplements to regular wages received by the

workers at a cost of employers. They include benefits such as paid vacation, pension, health

and insurance plans, etc. Such benefits are computable in terms of money and the amount of

benefit is generally not predetermined. The purpose of fringe benefits is to retain efficient and

capable people in the organization over a long period. They foster loyalty and acts as a

security base for the employees.

Profit Sharing

Profit-sharing is regarded as a stepping stone to industrial democracy. Profit-sharing is an

agreement by which employees receive a share, fixed in advance of the profits. Profit sharing

usually involves the determination of an organization‟s profit at the end of the fiscal year and

the distribution of a percentage of the profits to the workers qualified to share in the earnings.

The percentage to be shared by the workers is often predetermined at the beginning of the

work period and is often communicated to the workers so that they have some knowledge of

their potential gains. To enable the workers to participate in profit sharing, they are required

to work for certain number of years and develop some seniority. The theory behind profit-

sharing is that management feels its workers will fulfill their

responsibilities more diligently if they realize that their efforts may result in higher profits,

which will be returned to the workers through profit-sharing.

House Rent Allowance

Organizations either provide accommodations to its employees who are from different state

or country or they provide house rent allowances to its employees. This is done to provide

them social security and motivate them to work.

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Conveyance

Organizations provide for cab facilities to their employees. Few organizations also provide

vehicles and petrol allowances to their employees to motivate them.

Leave Travel Allowance

These allowances are provided to retain the best talent in the organization. The employees are

given allowances to visit any place they wish with their families. The allowances are scaled

as per the position of employee in the organization.

Medical Reimbursement

Organizations also look after the health conditions of their employees. The employees are

provided with medi-claims for them and their family members. These medi-claims include

health-insurances and treatment bills reimbursements.

13th

month allowance

Thirteenth month bonus is paid to the employees during festive seasons to motivate them and

provide them the social security. The bonus amount usually amounts to one month‟s basic

salary of the employee.

Special Allowance

Special allowance such as overtime, mobile allowances, meals, commissions, travel

expenses, reduced interest loans; insurance, club memberships, etc are provided to employees

to provide them social security and motivate them which improve the organizational

Productivity

Non-Monetary Benefits

These benefits give psychological satisfaction to employees even when financial benefit is

not available. Such benefits are:

35

(a) Recognition of merit through certificate, etc.

(b) Offering challenging job responsibilities,

(c) Promoting growth prospects,

(d) Comfortable working conditions,

(e) Competent supervision, and

(f) Job sharing and flexi-time.

2.3.3 Factors Considered in Deciding the Compensation

Employers decide on what is the right compensation after taking into account the following

points.

The Job Description of the employee that specifies how much should be paid and the parts of

the compensation package. The Job Description is further made up of responsibilities,

functions, duties, location of the job and the other factors like environment etc. These

elements of the job description are taken individually to arrive at the basic compensation

along with the other components like benefits, variable pay and bonus. It needs to be

remembered that the HRA or the House Rental Allowance is determined by a mix of factors

that includes the location of the employee and governmental policies along with the grade of

the employee. Hence, it is common to find a minimum level of HRA that is common to all

the employees and which increases in proportion to the factors mentioned above.

The Job Evaluation that is a system for arriving at the net worth of employees based on

comparison with appropriate compensation levels for comparable jobs across the industry as

well as within the company. Factors like Experience, Qualifications, Expertise and Need of

the company determine how much the employer is willing to pay for the

employee. It is often the case that employers compare the jobs across the industry and arrive

36

at a particular compensation after taking into account the specific needs of their firm and in

this respect salary surveys and research results done by market research firms as to how much

different companies in the same industry are paying for similar roles.

Fig 2.2 Factors determining compensation

Source: Adapted from Gupta(2005)

External Factors Affecting Employees Compensation

Regulatory Compliance

To protect the working class from the exploitations of powerful employers, the government

37

External Factors

Regulatory compliance

Deman and supply of labour

cost of living

prevailing wage rate

labour and collective bargaining

Internal Factors

Financial capacity of firm

Top management philosophy

job Requirement

Organizational Politics

Empolyee related factors

Workers productivity

Job requirement

has enacted several laws. Laws on minimum wages, hours of work, equal pay for equal work,

payment of dearness and other allowances, payment of bonus, etc., have been enacted and

enforced to bring about a measure of fairness in compensating the working class. Thus, the

laws enacted and the labour policies framed by the government have an important influence

on wages and salaries paid by the employers. Wages and salaries can‟t be fixed below the

level prescribed by the government.

Demand and Supply of Labour

Wage is a price or compensation for the services rendered by a worker. The firm requires

these services, and it must pay a price that will bring forth the supply which is controlled by

the individual worker or by a group of workers acting together through their unions. The

primary result of the operation of the law of supply and demand is the creation of the going

wage rate. It is not practicable to draw demand and supply curves for each job in an

organization even though, theoretically, a separate curve exists for each job.

Cost of Living

Another important factor affecting the wage is the cost of living adjustments of wages. This

tends to vary money wage depending upon the variations in the cost of living index following

rise or fall in the general price level and consumer price index. It is an essential ingredient of

long-term labour contract unless provision is made to reopen the wage clause periodically.

Prevailing Wage Rates

Wages in a firm are influenced by the general wage level or the wages paid for similar

occupations in the industry, region and the economy as a whole. External alignment of wages

38

is essential because if wages paid by a firm are lower than those paid by other firms, the firm

will not be able to attract and retain efficient employees. For instance, there is a wide

difference between the pay packages offered by multinational and Indian companies. It is

because of this difference that the multinational corporations are able to attract the most

talented workforce.

Labour Union

Organized labor is able to ensure better wages than the unorganized one. Higher wages may

have to be paid by the firm to its workers under the pressure or trade union. If the trade union

fails in their attempt to raise the wage and other allowances through collective bargaining,

they resort to strike and other methods hereby the supply of labour is restricted. This exerts a

kind of influence on the employer to concede at least partially the demands of the labour

unions.

Internal Factors

Financial capacity of Firm

Employer‟s ability to pay is an important factor affecting wages not only for the individual

firm, but also for the entire industry. This depends upon the financial position and

profitability of the firm. However, the fundamental determinants of the wage rate for the

individual firm emanate from supply and demand of labour. If the firm is marginal and

cannot afford to pay competitive rates, its employees will generally leave it for better paying

jobs in other organizations. But, this adjustment is neither immediate nor perfect because of

problems of labour immobility and lack of perfect knowledge of alternatives. If the firm is

39

highly successful, there is little need to pay more than the competitive rates to obtain

personnel. Ability to pay is an important factor affecting wages, not only for the individual

firm but also for the entire industry.

Top Management Philosophy

Wage rates to be paid to the employees are also affected by the top management‟s

philosophy, values and attitudes. As wage and salary payments constitute a major portion of

costs and /or apportionment of profits to the employees, top management may like to keep it

to the minimum. On the other hand, top management may like to pay higher pay to attract top

talent.

Productivity of Workers

To achieve the best results from the workers and to motivate him to increase his efficiency,

wages have to be productivity based. There has been a trend towards gearing wage increase

to productivity increases. Productivity is the key factor in the operation of a company. High

wages and low costs are possible only when productivity increases appreciably.

Job Requirements

Job requirements indicating measures of job difficulty provide a basis for determining the

relative value of one job against another in an enterprise. Explicitly, job may be graded in

terms of a relative degree of skill, effort and responsibility needed and the adversity of

working conditions. The occupational wage differentials in terms of

a) Hardship,

b) Difficulty of learning the job

40

c) Stability of employment

d) Responsibility of learning the job and

f) Change for success or failure in the work.

This reforms a basis for job evaluation plans and thus, determines wage levels in an industry.

Employees Related Factors

Several employees related factors interact to determine his remuneration. These include

i) Performance: productivity is always rewarded with a pay increase.

Rewarding performance motivates the employees to do better in future.

ii) Seniority: Unions view seniority as the most objective criteria for pay

increases whereas management prefer performance to effect pay increases.

iii) Experience: Makes an employee gain valuable insights and is generally

rewarded

iv) Potential: organizations do pay some employees based on their potential.

Young managers are paid more because of their potential to perform even if

they are short of experience.

Organizational Politics

Compensation surveys, job analysis, job evaluation and employee performance are all

involved in wage and salary decisions. Political considerations may enter into the equation in

the following ways:

41

i) Determination of firms included in the compensation survey: managers could

make their firm appear to be a wage leader by including in the survey those

organizations that are pay followers.

ii) Choice of compensable factors for the job evaluation plan: Again, the job

value determined by this process could be manipulated

iii) Emphasis placed on either internal or external equity and

iv) iv) Results of employee performance appraisal may be intentionally disported

by the supervisor .Thus, a sound and objective compensation system may be

destroyed by organizational politics.

2.3.4 Compensation Design

Compensation design determines the value of specific, properly executed accomplishments

toward the achievement of desired outcomes. The value of the accomplishment, not the level

of activity, is used to establish the nature and amount of compensation. Ultimately,

compensation design should foster a productive and equitable, long-term relationship among

members, and between each member and the organization. The process begins by identifying

desired outcomes for the organization or operating unit. Importance and value are attached to

the results people achieve with reference to the need of the organization. Compensation is

based on the achievement of results that are critical to organizational success. Attracting,

retaining and motivating employees in today‟s business environment requires utilizing a host

of tools including base pay, incentives, equity, performance management, and benefits.

Balancing these tools in an equitable, affordable and real manner can present difficulties for

42

even the most dedicated employers. No universal, standard programme exists that can meet

every organization‟s needs. In order for the total rewards programme to work, it must fit the

organization‟s culture and strategic initiatives and compensation objectives.

These objectives are as follows

External competitiveness to recruit and retail

- To reward performance through salary without grade promotions

- Rewards for skill acquisition

- Internal equity among employees

- Pay for the person rather than just the job

- Built-in controls and cost constraints

- An understandable and equitable system

- Parallel career paths for managers and technical employees

- Flexibility to adapt quickly to market changes

- Management flexibility to assign a range of duties

2.4 Performance Management

Fletcher(1996) Performance management is a system approach which involves developing

organization‟s mission and objectives, enhancing communication within organization,

clarifying individual responsibilities and accountabilities, then defining and measuring

individual performance and rewarding performance, and finally improving staff performance

and developing career progression in the future. There is an apparent difference of definition

43

between Schineier and Fletcher, it is the communication. Fletcher pointed that enhancing

communication within the organization so that employees are aware of the objectives and the

business plan, and employees can continue communication in the production process for

exchanging information, discussing problems and seeking feedbacks. Thus, I would combine

the definition of performance management system from Armstrong, Fletcher and Schneier.

Clear and detailed employee performance objectives play a crucial role in helping companies

to perform in accordance with their business plan and achieve their strategic goals. Then, the

managing performance activities like seeking feedback and coaching, also evaluation and

rewarding are included in the theories of both authors. In addition to Fletcher (1996) view,

there would be a need for a continuous communication activity in the managing performance

phase as well. The Communication between managers and employees and communication

within employees could make employees understand the objectives and make managers

supervise the progress of daily work.

2.4.1 Objectives of Performance Management

a). empowering, motivating and rewarding employees to do their best.

b). Focusing employees tasks on the right things and doing them right

c). Proactive managing and resourcing performance against agreed accountabilities and

objectives

d). maximizing potentials of individual and teams to focus on achievement of organizational

objectives.

There is a dichotomy between the general performance management and the HR related

44

performance management. However the similarities of general performance management and

HR related performance management are the goal setting, planning, evaluation, feedback and

rewarding activities. However, the HR related performance management focus on the

management of employee or managers, then motivating employees and managers. Moreover,

general performance management was defined more widely than HR related performance

management. It considers the definition of goals and the measurement of goal attainment not

just financially but also in terms of meeting all stakeholder aspirations.

HR-performance management aims at developing potential capabilities of human resource.

The performance management must be in line with the company's long-term policies

(Kandula, 2006). Performance management involves managing employee efforts, based on

measured performance outcomes. Therefore, determining what constitutes good performance

and how the different aspects of high performance can be measured is critical to the design of

an effective performance management process. It is important to note that performance

management effectiveness increases when there is ongoing feedback, behavior-based

measures are used and preset goals and trained raters are employed (Lawler, 2003).

According to Schneier, Beatty and Baird (1987), a performance management system is

classified into 3 phases - Development, & planning phase, managing & reviewing phase and

rewarding phase.

Figure 2.3 Below shows the contents of three phases according Schneier, Beatty and Baird

(1987).

45

Source: Drawn according to interpretation-Original source: Schneier, Beatty and Baird,

(1987:98)

From above figure and according to Schneier et all(1987), the performance management

system consists of three phases: developing and planning performance is the Phase 1 which

includes outlining development plans, setting objectives and getting commitment activities;

managing and reviewing performance is the Phase 2 which includes assessing against

objectives, seeking feedback, coaching and document reviews activities; rewarding

performance is the last phase which has personal development, results of performance and

link to pay activities.

Motivation of employees at work is one of the fundamental aim of performance management.

Since employee performances are captured, reported accurately and the subsequently

rewarded. Workers motivation is a very important for an organization because of the

following benefits it provides:

Puts human resources into action

Every concern requires physical, financial and human resources to accomplish the goals. It is

through motivation that the human resources can be utilized by making full use of it. This can

46

PHASE 1

•Developing & Planning performance

• - outlining development

• setting objective

• getting commitment

PHASE 2

•Managing and reviewing performance,

• asses against objectives

• Feedback, couching, document reviewa

PHASE 3

• PerformanceRewarding

• Personal Development-

• Link to pay

• - Results

be done by building willingness in employees to work. This will help the enterprise in

securing best possible utilization of resources.

Improves level of efficiency of employees

The level of a subordinate or a employee does not only depend upon his qualifications and

abilities. For getting best of his work performance, the gap between ability and willingness

has to be filled which helps in improving the level of performance of subordinates. This will

result into-

a. Increase in productivity,

b. Reducing cost of operations, and

c. Improving overall efficiency.

Leads to achievement of organizational goals

The goals of an enterprise can be achieved only when the following factors take place :-

d. There is best possible utilization of resources,

e. There is a co-operative work environment,

f. The employees are goal-directed and they act in a purposive manner,

g. Goals can be achieved if co-ordination and co-operation takes place

simultaneously which can be effectively done through motivation.

Builds friendly relationship

Motivation is an important factor which brings employees satisfaction. This can be done by

keeping into mind and framing an incentive plan for the benefit of the employees. This could

47

initiate the following things:

h. Monetary and non-monetary incentives,

i. Promotion opportunities for employees,

j. Disincentives for inefficient employees.

In order to build a cordial, friendly atmosphere in a concern, the above steps should be taken

by a manager. This would help in:

Leads to stability of work force

Stability of workforce is very important from the point of view of reputation and goodwill of

a concern. The employees can remain loyal to the enterprise only when they have a feeling of

participation in the management. The skills and efficiency of employees will always be of

advantage to employees as well as employees. This will lead to a good public image in the

market which will attract competent and qualified people into a concern. As it is said, “Old is

gold” which suffices with the role of motivation here, the older the people, more the

experience and their adjustment into a concern which can be of benefit to the enterprise.

From the above discussion, we can say that motivation is an internal feeling which can be

understood only by manager since he is in close contact with the employees. Needs, wants

and desires are inter-related and they are the driving force to act. These needs can be

understood by the manager and he can frame motivation plans accordingly. We can say that

motivation therefore is a continuous process since motivation process is based on needs

which are unlimited. The process has to be continued throughout.

We can summarize by saying that motivation is important both to an individual and a

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business.

Motivation is important to an individual as:

- Motivation will help him achieve his personal goals.

- If an individual is motivated, he will have job satisfaction.

- Motivation will help in self-development of individual.

- An individual would always gain by working with a dynamic team.

Similarly, motivation is important to a business as:

- The more motivated the employees are, the more empowered the team is.

- The more is the team work and individual employee contribution, more profitable and

successful is the business.

- During period of amendments, there will be more adaptability and creativity.

- Motivation will lead to an optimistic and challenging attitude at work place

The balanced score card model (BSC Model) is one of the outstanding and popular method of

tracking and measurement of performance. This is due to its flexibility. Each of its 4 category

could be defined by unlimited numbers of performance indicator which may vary from one

department/organization to another, hence making it a perfect performance measurement tool

for every organization.

2.5 Performance measurement models

A model is a theoretical construct representing economic processes by a set of variables and a

set of relationships between them. Sometime it may also connote representation of a system

49

using mathematical concepts and language. The performance measurement model are

mathematical and theoretical construct that tries to evaluate the activities of an employee by

assigning values to them and comparing actual against set benchmark.

2.5.1 Balanced Scorecard Model (Bsc Model)

Kaplan and Norton (1996) developed and defined the balanced scorecard as a strategic

planning and management system that is used extensively by organizations whether private or

government, and even non-profit organizations worldwide to align business activities to their

visions and strategy and further monitor organization performance against set benchmarks.

2.5.1.2 Perspectives of the BSC Model

The BSC performance measurement model is so unique because of its four categories,

cardinal stand points or perspectives from which it measures individual and organizational

performance.

Kaplan and Norton (1996) identified the four perspectives as:

- The learning and growth Perspective

- The business process perspective

- The customer perspective

- The Financial perspective

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Fig 2.4 Adapted from Robert S. Kaplan and David P. Norton,(1996)

The Learning & Growth Perspective

This perspective includes employee training and corporate cultural attitudes related to both

individual and corporate self-improvement. In a knowledge-worker organization, people --

the only repository of knowledge -- are the main resource. In the current climate of rapid

technological change, it is becoming necessary for knowledge workers to be in a continuous

learning mode. Metrics can be put into place to guide managers in focusing training funds

where they can help the most. In any case, learning and growth constitute the essential

foundation for success of any knowledge-worker organization.

Kaplan and Norton emphasize that 'learning' is more than 'training'; it also includes things

like mentors and tutors within the organization, as well as that ease of communication among

workers that allows them to readily get help on a problem when it is needed. It also includes

51

technological tools; what the Baldrige criteria call "high performance work systems."

The Business Process Perspective

This perspective refers to internal business processes. Metrics based on this perspective allow

the managers to know how well their business is running, and whether its products and

services conform to customer requirements (the mission). These metrics have to be carefully

designed by those who know these processes most intimately; with our unique missions these

are not something that can be developed by outside consultants. It covers Product sales

The Customer Perspective

Recent management philosophy has shown an increasing realization of the importance of

customer focus and customer satisfaction in any business. These are leading indicators: if

customers are not satisfied, they will eventually find other suppliers that will meet their

needs. Poor performance from this perspective is thus a leading indicator of future decline,

even though the current financial picture may look good.

In developing metrics for satisfaction, customers should be analyzed in terms of kinds of

customers and the kinds of processes for which we are providing a product or service to those

customer groups.

The Financial Perspective

Kaplan and Norton(1996) do not disregard the traditional need for financial data. Timely and

accurate funding data will always be a priority, and managers will do whatever necessary to

provide it. In fact, often there is more than enough handling and processing of financial data.

With the implementation of a corporate database, it is hoped that more of the processing can

52

be centralized and automated. But the point is that the current emphasis on financials leads to

the "unbalanced" situation with regard to other perspectives. There is perhaps a need to

include additional financial-related data, such as risk assessment and cost-benefit data, in this

category.

2.5.1.3 The Key Performance Indicators (KPI‟s)

The key performance indicators (KPI‟s) are performance measures that indicate progress

toward a desirable outcome. Strategic KPIs monitor the implementation and effectiveness of

an organization's strategies, determine the gap between actual and targeted performance

and furthermore also determines organization effectiveness and operational efficiency.

Performance indicators are attached to each perspective segment.- which are usually referred

to as key performance indicator (KPI).the number of indicators varies from one type of

organization to another, strategy and corporate objectives. Values are attached to each

indicator which will be use to measure against staff performance. For example in the diagram

below the indicators under the financial category are

Deposit target of staff =N40m

Loan target of staff=N0.5m

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Fig: 2.5 Balanced score card of a marketing staff of a bank, showing measuring performance

from 4 category against 7 indicators. Actual performance is measured against Target and

staff is rated.

Source : Adapted from Michael(2016)

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BALANCED SCORE CARD FOR NANA UCHE AYO FOR MONTH ENDED AUGUST 2016

BSC Model Name NANA UCHE AYO Perspective Performance(%)Target (%) Status

4 category, 7 indicatorsStaffID NU149052 Customer 20 20

August 2016 score cardGrade SA Financial 50 50

Role ACCOUNT OFFICER People 0 5

Location LAGOS Process 21 25

KEY 91 100

CATEGORY KEY SCORE RATING

PERFORMANCE INDICATOR MARKED PURPLE Good RATING CATEGOGY

Fair STAR PERFORMER

CUSTOMER Poor

Performance Measure Weight(%)Description Actual Target PerformanceStatus

DORMANT ACCOUNTS 20 DORMANT ACCOUNTS REACTIVATION 26 20 20

20 20

FINANCIAL

Performance Measure Weight(%)Description Actual(000) Target (000)PerformanceStatus

CASA-DEPOSIT 40 AVERAGE DEPOSIT POTFOLIO 317,805.25 45,000.00 40

LOANS 10 AVERAGE LOAN POTFOLIO 20179.58 500.00 10

50 50

PEOPLE

Performance Measure Weight(%)Description Actual Target PerformanceStatus

E-LEARNING 5 number of learning programNUMBER OF E LEARNING PROG 0 1 0

PROCESS 5 0

Performance Measure Weight(%)Description Actual Target PerformanceStatus

ACTIVE POS ISSUED 10 NUMBER OF POS ISSUED 3 5 6

DEBIT CARDS ISSUED 10 NUMBER OF DEBIT CARDS ISSUED 65 20 10

MOBILE BANKING 5 NUMBER OF MOBILE ACTIVATIONS 22 20 5

25 21

Good KPIs serve the following functions:

Provide an objective way to see if strategy is working

Offer a comparison that gauges the degree of performance change over time

Focus employees' attention on what matters most to success

Allow measurement of accomplishments, not just of the work that is performed

Provide a common language for communication

Help reduce intangible uncertainty

Are valid, to ensure measurement of the right things

Are verifiable, to ensure data collection accuracy

2.5.2 Porter‟s Five Forces Model

This model is an organizational related model of performance measurement. it view

performance from the view of organization as a group under a competitive environment

rather than from the standpoint of individual‟s. Porter‟s Five forces model focuses on five

key areas: the threat of entry, the power of buyers, the power of suppliers, the threat of

substitutes, and competitive rivalry.

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Fig 2.6 Porters Five Forces Model

Source: Porter (2006)

A). The threat of entry.

This defines the level of threat posed by new entrants to existing organization or threat posed

by existing organization to new entrant, which to a large extent determines the continuous

existence or subsequent failure of an organization. Often driven by the extent to which there

are barriers to entry. These barriers must be overcome by new entrants if they are to compete

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COMPETITIVE

RIVALRY

Bargaining

Powers of

Suppliers

Bargaining

Powers of

Buyers

Threat Of New Entrants

Threat Of Substitute Products

successfully. Johnson et al (2005), suggest that the existence of such barriers should be

viewed as delaying entry and not permanently stopping potential entrants. Typical barriers

are detailed below.

- Economies of scale.- For example, the benefits associated with volume manufacturing

by organizations operating in the automobile and chemical industries. Lower unit

costs result from increased output, thereby placing potential entrants at a considerable

cost disadvantage unless they can immediately establish operations on a scale that will

enable them to derive similar economies.

- The capital requirement of entry-These vary according to technology and scale.

Certain industries, especially those which are capital intensive and/or require very

large amounts of research and development expenditure, will deter all but the largest

of new companies from entering the market.

- Access to supply or distribution channels-In many industries, manufacturers enjoy

control over supply and/or distribution channels via direct ownership (vertical

integration) or, quite simply, supplier or customer loyalty. Potential market entrants

may be frustrated by not being able to get their products accepted by those individuals

who decide which products gain shelf or floor space in retailing outlets. Retail space

is always at a premium and untried products from a new supplier constitute an

additional risk for the retailer.

- Supplier and customer loyalty- A potential entrant will find it difficult to gain entry to

an industry where there are one or more established operators with a comprehensive

knowledge of the industry, and with close links with key suppliers and customers.

- Cost disadvantages independent of scale- Well-established companies may possess

cost advantages which are not available to potential entrants irrespective of their size

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and cost structure. Critical factors include proprietary product technology, personal

contacts, favorable business locations, learning curve effects, favorable access to

sources of raw materials, and government subsidies.

- Expected retaliation-In some circumstances, a potential entrant may expect a high

level of retaliation from an existing firm, designed to prevent entry – or make the

costs of entry prohibitive.

- Government regulation- This may prevent companies from entering into direct

competition with nationalized industries. In other scenarios, the existence of patents

and copyrights afford some degree of protection against new entrants.

- Differentiation- Differentiated products and services have a higher perceived value

than those offered by competitors. Products may be differentiated in terms of price,

quality, brand image, functionality, exclusivity, and so on. However, differentiation

may be eroded if competitors can imitate the product or service being offered and/or

reduce customer loyalty

B). The Power of Buyers

The power of the buyer will be high where:

- there are a few, large players in a market. For example, large supermarket chains can

apply a great deal of price pressure on their potential suppliers. This is especially the

case where there are a large number of undifferentiated, small suppliers, such as small

farming businesses supplying fresh produce to large supermarket chains.

- the cost of switching between suppliers is low, for example from one haulage

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contractor to another

- the buyer‟s product is not significantly affected by the quality of the supplier‟s

product. For example, a manufacturer of foil and cling film will not be affected too

greatly by the quality of the spiral-wound paper tubes on which their products are

wrapped.

- buyers earn low profits.

- buyers have the potential for backward integration, for example where the buyer

might purchase the supplier and/or set up in business and compete with the supplier.

This is a strategic option which might be selected by a buyer in circumstances where

favorable prices and quality levels cannot be obtained.

- buyers are well informed. For example, having full information regarding availability

of supplies.

C). The Power of Suppliers

The power of the seller will be high where (and this tends to be a reversal of the power of

buyers):

- there are a large number of customers, reducing their reliance upon any single

customer.

- the switching costs are high. For example, switching from one software supplier to

another could prove extremely costly.

- the brand is powerful (BMW, McDonalds, Microsoft). Where the supplier‟s brand is

powerful then a retailer might not be able to operate a particular brand in its range of

products.

- there is a possibility of the supplier integrating forward, such as a brewery buying

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restaurants.

- customers are fragmented so that they have little bargaining power, such as the

customers of a petrol station situated in a remote location.

D). The threat of Substitutes

The threat of substitutes is higher where:

- There is product-for-product substitution, eg for fax and postal services

- here is substitution of need. For example, better quality domestic appliances reduce

the need for maintenance and repair services. The information technology revolution

has made a significant impact in this particular area as it has greatly diminished the

need for providers of printing and secretarial services

- there is generic substitution competing for disposable income, such as the competition

between carpet and flooring manufacturers.

Competitive Rivalry

Competitive rivalry is likely to be high where:

There are a number of equally balanced competitors of a similar size. Competition is likely to

intensify as one competitor strives to attain dominance over another.

- the rate of market growth is slow. The concept of the life cycle suggests that in mature

markets, market share has to be achieved at the expense of competitors

- there is a lack of differentiation between competitor offerings because, in such

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situations, there is little disincentive to switch from one supplier to another

- the industry has high fixed costs, perhaps as a result of capital intensity, which may

precipitate price wars and hence low margins. Where capacity can only be increased

in large increments, requiring substantial investment, then the competitor who takes

up this option is likely to create short-term excess capacity and increased competition

- there are high exit barriers. This can lead to excess capacity and, consequently,

increased competition from those firms effectively „locked in‟ to a particular

marketplace.

In summary, the application of Porter‟s five forces model will increase management

understanding of an industrial environment which they may want to enter.

2.6 REWARDS

Rewards are positive outcomes that are earned as a result of an employee's performance.

Reward may not be possible without a performance measurement system that tries to monitor

and score employee against assigned targets. These rewards are aligned with organizational

goals. When an employee helps an organization in the achievement of one of its goals, a

reward often follows. According to Deci and Ryan there are two general types of rewards that

motivate people: intrinsic and extrinsic.

2.6.1 Intrinsic Rewards

Intrinsic motivation- refers to behaviour that is driven by internal rewards. In other words,

the motivation to engage in a behaviour arises from within the individual because it is

intrinsically rewarding. In that it is something that you have to offer yourself and its driven

61

by personal interest or enjoyment in the work itself. Because intrinsic motivation exists

within the individual, achieving it does not depend on others. Some people believe that the

most powerful rewards come from inside a person. (Coon & Mitterer, 2010)

Think of that sense of accomplishment you feel once you have overcome a significant

challenge or completed an assignment or work project that required a good deal of effort.

Intrinsic motivation provides that personal pat on the back or natural high that reflects a

person's ability, competency, growth, knowledge and self-control over their endeavors.

(Brown, 2007) Employees who are intrinsically motivated tend to work at higher levels of

productivity and strive to develop professionally. Intrinsic rewards include things such as:

personal achievement, professional growth, sense of pleasure and accomplishment.

2.6.2 Intrinsic Rewards in the Workplace

In a knowledge economy where the greatest asset an employee can offer an organization is

their intelligence, experience, problem solving ability and change-savvy person. intrinsic

rewards are especially important to workers. In fact, Frederick Herzberg, who is one of the

leading theorists of workplace motivation, found intrinsic rewards to be much stronger than

financial rewards in increasing employee motivation. This is not to say that employees will

not seek financial rewards in addition to intrinsic rewards, rather it just means that money is

not enough to maximize motivation in most employees. People want to feel like their

contributions matter.

For example, an employee might want to reach a sales quota set by his manager to earn the

bonus that is attached to it, but unless the employee feels a sense of accomplishment as part

of making those sales, the motivation to achieve the quota is less powerful. To help

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employees with their intrinsic motivation, managers should:

- provide meaningful work

- allow workers to make choices through a high level of autonomy

- provide opportunities for employees to show their competence in areas of expertise

- facilitate professional development so that employees can expand on their level of

knowledge

- offer frequent opportunities for employees to reward themselves

- allow employees the opportunity to connect with those with whom they serve to

obtain valuable feedback

- give them a path to monitor their progress with milestones along the way

2.6.3 Extrinsic Rewards

Extrinsic motivation is based on tangible rewards. Unlike intrinsic motivation that is self-

administered, extrinsic motivation is external to the individual and is typically offered by a

supervisor or manager who holds all the power in relation to when extrinsic rewards are

offered and in what amount. Extrinsic rewards are usually financial in nature, such as a raise

in salary, a bonus for reaching some quota or paid time off. However, extrinsic rewards can

also be as simple as getting the better office, verbal praise, public recognition or awards,

promotions and additional responsibility.

These material rewards can be motivating to employees because pay, time off, advancement

and recognition are important to most workers. Just imagine how de-motivating it would be

to be underpaid, overworked and unappreciated, and you can quickly see how important

extrinsic rewards are to organizational success. An extrinsically motivated person will work

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on a task that they do not particularly care for simply because of the anticipated satisfaction

that will come from some extrinsic reward. For example, the employee may not be interested

in the product he is selling, but reaching the quota means the bonus, therefore he is motivated

to put forth the effort he needs to meet the sales quota.

2.6.4 Extrinsic Rewards in the Workplace

Providing employees with extrinsic rewards is relatively straightforward and usually built

into performance reviews or individual projects. They are particularly useful in the short-term

for motivating employees to work towards one specific organizational goal. Meeting the sales

quota for a bonus is an example of offering an extrinsic reward for a short-term goal.

2. 7 The Employee Rewards System

Reward should be viewed by managers as a tool to attract, motivate and retain exceptional

employees. A reward system must reflect fairness and goodwill to the employee. It should

give much to where much is coming from , it should be non-discrimination in application and

should embrace the equity, diversity and inclusion in approach (Michael, 2015)

Exceptional employees most time are interpreneurs, who Posses diverse skill that an

enterprise are in need of, they work with minimal or no supervision, and most time work to

achieve and score above their assigned target no matter how difficult or unachievable the

measurement parameters have been set by seldom employers with exploitative tendencies. A

good organization ordinarily should identify these categories of employees, reward and

promote them to strategic positions within organizations. These category of employees

should be the ones heading the division, directorates, and even technical assistance to the

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managing directors and executive directors and with time assume these positions. There will

be a synergetic effects within the organization if strategic position are manned by competent

individual and leaders who have been grown within an organization over time. The benefit

accrued from such synergy may include-

- Increased productivity

- Sustained productivity

- Sustained and even increased profit

- Minimal employee turnover

- Wilful Sharing of knowledge by employees

- Motivated workforce

- Perpetual succession

- Innovations and rapid tactical response to both internal and external threat

- Gaining a competitive advantage

The right people must be originally selected into the organization, motivated to works; and

sound personnel promotion and training decisions must be made in filling no entry level. An

effective personnel performance evaluation system is a crucial cornerstone in this process, as

it provides the data needed for most of the required administrative decisions. This system

plays a key role in motivating people to utilize their abilities in pursuing the organization's

goals(Musgrove & Creighton, 1973).

Serious organizations grow their managers from within (Michael, 2015). Rewards represent

important mechanisms by which employee behaviors can be aligned with the interests of the

organization (Eisenhardt, 1989). Particularly, pay-for-performance is a reward practice that

65

links one's pay increase to one's performance, and could be used to direct, sustain, and

motivate desirable behaviors, such as knowledge sharing (Bartol and Srivastava, 2002),

creativity (Eisenhardt et al., 1998), quality (Cowherd and Levine, 1992) and customer

satisfaction (Delaney and Huselid, 1996). Pay-for-performance establishes the behavioral

criteria by which rewards are allocated and in doing so underpins the alignment of employee

behavior with organizational values and objectives. Therefore, if an employee achieves his or

her performance objectives then the employee receives a pay increase. This simple and

visible link between pay and performance recognizes an employee for a specific level of

accomplishment, therefore nurturing favorable work attitudes, such as satisfaction and

commitment (Heneman et al., 1988). Thus, the effectiveness of pay-for-performance has a

direct influence on high levels of service quality and desirable work attitudes.

2.7.1 Effect of Poor or Weak reward system on organizations

According to Michael(2015) Weak reward system connotes weak relationship with

employees. He identified the following as effects of poor compensation system.

1. Employee turnover- When employees do not see a clear relationship between work

and pay they become demoralized due to the poor compensation system and

inequality within an enterprise. Performing employees feel cheated and tends to fall

out to look for greener pastures. Some of these exits become entrepreneurs who

directly compete with the business or end up becoming machineries of competitors

who hire them to crush out their former employers.

2. Brain drain- Due to the grievance, rift and mistrust between the employee and

employer, a demotivated employee will deliberately refuse to share any knowledge he

66

has to other employees or may even withhold sensitive information that will amount

to financial or reputational loss on the path of the employer.

3. De-motivated work force- when worker morale is low, it affects productivity of

individual, groups and even the organization at large.

4. Increase in wastages- employee reaction to unfair labour practice may be passive.

Passive reactions of employee are much more dangerous and have a disastrous effect

on organizations at the long run. As reacting employees do not air out their grievances

in voices or in writing nor through groups(formal or informal) that exist within an

organization but reacts internally by exhibiting attitudes that runs contrary to

organization objective. For example an employee technically alters a process or

deliberately refuse to correct a process that leads to a chance of loss.

5. Increase in time offs- A demoralize sales personnel officer may decide to spend more

time at home under the guise that he is in the field.

6. Negative attitude to work- poor attitude to work are synonymous with a demoralized

worker. Lateness to work, carefree attitudes, frustration, anger, hatred form part of

employee attitude at work. Non of these attitude are positive reinforcement to and at

work.

7. Dwindling profits- the overall impact of having unproductive or demoralized workers

must always reflect on profit. Once productivity is altered it directly impact on profits.

8. Increased competitors activity- as they buy your turned over employees so they

possess your business secret. In extreme conditions, an aggrieved employee can do

everything possible to bring an enterprise to its knees. An aggrieved soldier who was

denied his right to fight for Sparta brought down ancient Sparta by leading the

67

enemies through a mountain path that were never known to the enemies. Soon did a

historic city in ancient Greece that have never been conquered in battle for many

years brought to her knees within hours. it was an epic fall. The fall was the end of

Sparta.

9. Eventual liquidation of organization- Prolonged and persistent decline in profit

implies looming bankrupsy. Once an enterprise is bankrupt, it means it has ceased to

exist.

2.8 Empirical review.

Quite a number of empirical studies have been conducted on the impacts of compensation and

reward system on employees‟ performance in an organization. For instance, Riaz (2014) studied

the impact of compensation of employee performance on organization commitment on the

performance of employee, by using SPSS as a statically tool and concluded that Compensation in

the form of incentives, salaries will perform an important part to enhance motivation of employee

in Local Revenue Management.

In the research work of Ramzan, Hafiz, Zubair, Ali and Arslan (2014) on the Impact of

Compensation on Employee Performance (Empirical Evidence from Banking Sector of

Pakistan) –they submitted that compensation and employee performance should share a

relationship. SPSS and ANNOVA were used to analyze the significance effects compensation

and rewards on employee Performance

Mukulu et all(2014) studied the effect of reward and compensation strategies on the

performance of commercial banks in Kenya. They submitted that Human resources are one of

the most critical components of strategic success across all organizations.

In the empirical work of Staphen (date) on Performance appraisal, he tried to study to

68

understand job satisfaction and motivation of personnel. Trust in the Performance Appraisal

system is likely to affect motivation.

In the empirical work of Yasmeen et al(2013) on impact of rewards on organizational

performance (a case study of Pakistan Telecom Sector) shows that appreciation and

recognition are two main factors which affect an organization performance in Pakistan

Telecom sector. Therefore results indicate that there exists insignificant and weak

relationship between salary, bonus and organization performance. This shows that intrinsic

rewards play an important role to increase the organization performance. So if organization

provides intrinsic rewards to its employees, the employees are more motivated as compared

to extrinsic rewards.

Nazir and Khan (2013) examined the degree of organizational engagement and job comfort in the

UK Higher Education sectors and universities and conclude that UK Higher Education system

give rewards(cash and non-cash) to members of organization and makes them competent because

it recognized that the members of organization are social agents. Nguithomaskatuaat (2014) study

that reward and compensation have major influence on the function of banks In Kenya by using

SPSS and MS Excel and conclude that rewards and compensation system have an important

effect on the performance of banks employee.

Adewale et al (2014) analyze the impact of compensation system on the job performance of

employees and work on only preferred private institutes in Ogun State, South-West Nigeria by

using questionnaire. He fined that institutes which have more appropriate compensation packages

embed an affirmative effect on employee‟s performance therefore the turnover of employee

become less and they sincere with their job and stay in organization.

Ellis (2011), studied the extent to which compensation management can be used as a tool for

improving organizational performance in a typical public sector organization like the Anambra

69

State of Nigeria Civil Service by using questionnaire and concluded that The outcome of

hypothesis reveals that the reform programs of the Anambra State Government have not had a

significant effect on financial compensation policies and practices of the civil service.

Nazi et al (2013), checked that what is the degree of organizational dedication and job

satisfaction presently in the United kingdom Higher Education sector and universities by using

correlation technique and

concluded that United kingdom Higher Education sector propose both cash and non-cash basis

rewards to members of organization and makes them capable as it count that the member of

organization are social agents.

The research Christen and Lyer (2005) focuses on the relationship of effort job performance and

job satisfaction. The need of the link between the three “effort” as opposed to “job performance”

and then resulted in “job satisfaction” is highlighted. In output of the research is that the positive

and negative elements neglect each other. After working on first element, the effect of job

performance can be achieved and so the job satisfaction but still less than the expected level.

70

CHAPTER THREE

3.0. METHODOLOGY

3.1 Introduction:

This section provides the methods and procedures employed to carry out the research study.

It therefore describes the types and how data were collected and analyzed so that valued

conclusion could be drawn on the relationship between the compensation and reward system

and performance of banks in Nigeria.

The chapter contains model specification, population and sampling techniques, sources of

data, estimation techniques, model testing, among others.

3.2 Research design

This research work adopts cross sectional survey method to investigate the impact of

compensation and reward system on the performance of a bank organization. The survey

instruments were in two Sections: Section 1 elicits demographic information about the

respondents while section 2 consists of five parts to collect information on the variables of

the study. Structured questionnaires were designed to collect data from randomly sampled

respondents from 5 banks which form the sample for the study. The study thus adopted

simple random sampling technique to select 100 employees from 5 deposit money banks

(DMBs) in Birnin Kebbi.

Analytical techniques like Pearson correlation and regression analysis were applied to

analyze the data collected for the study.

3.3 Population of Study

The population of this study consists of the selected five money deposit banks in Birnin

71

Kebbi. The banks include Keystone Bank, Union Bank, GTB, UBA and First Bank Plc.

3.4 Sampling and sample size

This study adopted simple random sampling technique to select 100 employees from 5

deposit money banks (DMBs) in Birnin Kebbi. A number of 20 respondents were drawn from

each bank. Simple random sampling technique was adopted because it gives every member of

staff equal chances of being considered/selected and thus would enhance objectivity of

findings from the study (Ismail & majid 2015)

These staffs shall be duly administered with questionnaires as respondents and their

responses will be used for data analysis and testing of hypotheses.

3.5 Method of Data Collection

Data were collected from both primary and secondary sources. The primary data were

collected using structured questionnaires and in depth interview. Likewise, secondary data

were used through the review of related literatures on the subject. Periodicals, daily

newspapers, CBN published reports and also the worldwide web were used to source for

reasonable data covering the subject matter.

3.5.1 Primary Source of Data

The primary data were collected through the instruments of questionnaires and interview.

They were used to gather information from the respondents. However, when designing the

questionnaire, the researcher was mindful of the different background of the staff

72

(respondents) and the need for coherent responses. The interview carried out by the

researcher, so as to get clearer picture and detailed interpretation some of the responses

emanating from the respondents.

Questionnaires

Primary data were collected from the sampled banks with the use of structured questionnaire

administered on the bank staff and management. Five commercial banks in Birnin Kebbi

were sampled for the purpose of this study. A number of 20 staff from each bank were

served with the questionnaires. Hence a total number of 100 questionnaires were

administered on the participants from all the banks.

The questionnaires were made up of 5 sections, with each section addressing questions

pertaining to each of the 5 variables in the model of this study. The variables include

wellbeing; compensation structure; staff promotion; incentive/ rewards and finally

organizational performance.

Each section contains 20 questions. All the questions were designed using 5 point Likert

scale as follows: Strongly agree=5, Agree =4, Undecided =3, Disagree =2, Strongly Disagree

=1.

All questions were distributed personally and hence the response rate was 100%.

Interviews

The researcher used this data collection instrument as a support to the questionnaires to seek

the opinions of staff from 5 different banks on some of the responses obtained from the

respondents. This was done to further acquire a deeper understanding of inherent staff

conditions at work, feelings and experiences of staff, staff compensation and reward system

73

and performance.

3.5.2 Secondary Source of Data

The researcher also consulted published and unpublished books written by different authors

relating to the research topic, seminars and conferences papers, journals, dailies, magazines

among others. Secondary data from the web were also browsed . The Wikipedia,

Investopedia were also firm sources of secondary data for this study.

However, primary data were used majorly in the analysis because most of the variables

involved in this study are personal issues and require the respondents to give clear and direct

information about the issues. Hence, the data that shall be analyzed in this study shall be

based on the data collected from primary sources.

3.6 Modeling

This section shall present specification of model which permits the qualification of economic

relationship between economic variables. The model for this research work shall be in line

with what is rooted in the extant theoretical framework on the impact of compensation and

reward system on the performance of a bank organization. While bank performance is the

dependent variable, other variables like wellbeing; compensation structure; staff promotion;

incentive/ rewards will be the independent variables.

Functional econometric models for this study shall therefore be specified in line with

Yasmeen et al (2013); Mukulu et al (2014) as follows:

74

Performance = f (wellbeing , compesation, promotion,

incentives/rewards) ……………… (3.1)

Following from the theoretical perspective, the models were specified such that the economic

relationships as stated in the objectives of the study can be tested.

The model in equation 3.1 can be functionally specified in a linear form as follows:

PERFORM = b0 + b1 WELL + b2COMPES + b3 PROMO +

b4I&R + e …………… (3.2)

Where

b0 = Constant

b1 - b4 = Coefficient or parameters which show the extent to

which each of the independent variables affects the

dependent variable.

PERFORM = Bank Performance

WELL = Staff Wellbeing

COMPES = Compensation Structure

PROMO = Staff Promotion

I&R = Incentive/ Rewards

e = Error term which represent other omitted variables.

75

3.7 Analytical Technique

The analytical technique for this study include Pearson correlation and regression analysis

which shall be applied to measure the impacts and relationships among variables. The process

of analysis was carried out in SPSS 17.0 version for windows.

According to Alan, (n.d), multiple regression is a technique that allows additional factors to

enter the analysis separately so that the effect of each can be estimated. It is valuable for

quantifying the impact of various factors simultaneously on a single dependent variable.

Further, it also remedies the problem biasness caused by the omitted variables in simple

regression model.

For example when a variable Y depends on other variables X1, X2….. Xn.

A multiple regression model can be specified as:

Y = b0 + b1X1 + b2X2 + …… + bnXn + e …………………… (3.5)

Where

Y = Dependent variable

X1, X2…Xn = Independent variables

b0 = Constant

b1, b2…. Bn = Coefficient or parameters which show the extent to which each of the

independent variables affects variable Y.

e = Error term which represent other omitted variables.

The OLS regression method is being used in this study because of its simplicity, non-

76

excessive data requirement and the fact that this method has been used in estimating linear

relationship in Econometrics models with fairly satisfactory results obtained. Of course, it is a

good estimation technique in the sense that it has a sampling distribution that is closely

concentrated around the true value of the parameters being estimated.

Fundamental Assumptions of OLS.

According to Awe (2006), the fundamental assumptions of the OLS include the following:

i. The expected mean value of the error term is equal to zero i.e. E (U) = O. The

positive error cancels out the negative ones.

ii. The explanatory variable is exogenous i.e. cov ( X,U) = O Before a variable (X)

can be used as explanatory variable it must be independent of the value of the

error term or any other explanatory variable.

iii. No autocorrelation cov (ut, ut-1) = 0 that is, error in time one does not affect error

in time 2; also Cov (ui, uj) = 0

3.8 Tests for Reliability of the Model

The analytical models of this study were subjected to certain tests do as to determine

the reliability of the results obtained. According to Surwillo (1980) the power of statistical

test lies in its ability to reject the null hypothesis when it is really false.

The test here basically included the following;

i. Test of linear multiple correlation co-efficient

ii. Test of coefficient of multiple determination.

iii. Test of Adjusted co-efficient of multiple determination

iv. Student “t” test statistics.

77

3. 8. 1 Test of Linear Multiple Correlation Coefficient

The linear multiple correlation co-efficient (R) is used to measure the extent of linear

relationship existing among more than two variables „R‟ lies between 0 and 1. The closer it is

to one the better the linear relationship while R = O indicates absence of any linear

relationship „R‟ is given as

R = 1 - Se2

…………………… (3.6)

Sy

2

Where; Se2 = expected variation

Sy

2 = total variation

3. 8. 2 Test of Co-Efficient of Multiple Determination

The determination (R2) refers to the square of the correlation coefficient. It is used to

measure the proportion of the variance in the dependent variable that is explained by the

independent variables

The value of R2 is between zero and one O < R

2 < 1.

The closer the value of R2 is to one the stronger the explanatory power of the estimated

regression plane and hence the greater the estimated relationship.

R2

is given as R2 = 1 - Se

2 …………………… (3.7)

Sy2

Where; Se2 = S(e - e)

2 = unexplained variation

Sy

2 = S (y -y)

2 = Total variation

78

3. 8. 3 Test of Adjusted Co-efficient of Multiple Determination

This is denoted by R2

it is calculated to find out the reliability of R2

Generally, when sample are relatively low compared to the population under study, the co-

efficient of multiple determination R2

usually over-state the true proportion of the variability

of dependant variable explained by the regression. It is necessary to correct this bias by

adjusting the R2

i.e by dividing the numerators and the denominator in the formula for R2 by

the appropriate degree of freedom R2 is given as

R2 = 1- Se

2 / n-k …………………… (3.8)

Sy2 / n-1

Where;

n =sample size

k = number of model variables

Se2 = Unexplained variation

Sy2 = Total variation

3.8.4 Student „t‟ test statistics

This is a statistical tool employed to test for the statistical significance of the model‟s

estimators thereby making for better decision. This empirical study seeks to test the

significance of the impact of compensation and reward system on the performance of a bank

organization. The value of „t‟ is estimated as:

tc = âi …………………… (3.9)

SE âi

tc = bi

SE bi

79

Where

tc = t calculated

âi = estimators / parameters (i.e Estimated a‟s)

SEâi = Standard error of each estimated a‟s

bi = estimators / parameters (i.e. estimated b‟s)

SEbi = Standard error of each estimated b‟s

The value of tc must be compared with the value of tabulated t (t*), given the degree of

freedom of (n - k) and level of significance at 95% or 99%.

The null hypothesis (Ho) that a‟s and b‟s = 0 i.e. all the estimated parameters are not

significantly different from zero is accepted if tc is less than t*. The converse is the decision

rule when tc is greater than t* i.e. if

tc < t*, accept Ho, reject Hi

tc > t* accept Hi, reject Ho

3. 8. 5 The F - Statistics

It usually aims at finding out whether the explanatory variable X1, actually have any

significant influence on the dependent variable Y. The test of the overall significant may be

carried out with the table of the analysis of variance (ANOVA table) as constructed below.

80

Table 3.1: ANOVA TABLE

Source of

Variation

Sum of Square Degree of Freedom Mean of

Square

X1,(Capital base) Sy2 V1 = k – 1 Sy

2/k – 1

Residual Se2 V2 = n – k e

2/n – 1

Total Sy2 n – 1 F

C

FC

= Sŷ2/K-1 …………………… (3.10)

Se2/n-1

Where;

n = sample size

k = Number of variables in the model

Sy2 = Sum of the explained part of the total variation in dependent variable.

Se2 = Sum of the error term of the variable.

The fc value is then compared with F* at 95% and 99% confidence levels with V1 = k - 1 and

V2 = (n - k) degree of freedom.

The decision rule here is the same as that of the „t‟ test above.

81

CHAPTER FOUR

4.0 DATA PRESENTATION AND ANALYSIS

4.1 Introduction:

This chapter attempts to analyze the responses collected from the respondents. Thus, the

responses were gathered by the researcher through the administration of questionnaires to the

one hundred (100) staff who served as the sample size. This sample size represents staffs

from 5 commercial banks in Kebbi State with each having an average of 20 staff. Hence all

the questionnaires were answered and returned which form the basis for analysis of data in

this study.

4.2 DATA ANALYSIS

Data shall be analyzed in two parts. Part one presents the demographic analysis of the staffs

from all the 5 banks investigated. While the second part shall center on the analysis of data

collected with questionnaires based on the compensation and reward system as they affect the

performance of the banks.

The data collected from the respondents were analyzed for easy understanding with the use of

graphs and tables. Some tables present data from more than one dimension, this is to ensure

that the responses from the questionnaires were properly coded for effective understanding.

Thus, the responses collected from the respondents are as follows:

82

PART A:

Fig 4.2.1:Staff Category

Source: Questionnaire Administered

From the graph above it is vivid that Outsourced staff in the banking industry out-numbered

other staff categories. Outsourced staff account for 70 staff, direct staff numbered 25 and

management staff were 5 in number

Fig 4.2.2 staff analysis based on unit

Source: Questionnaire Administered

83

0

10

20

30

40

50

60

70

80

Management Direct Outsourced

Nu

mb

er

of

staf

f

Staff Category

Management

010203040506070

Marketing

Operations

Audit Remedial

Others

Outsourced 15 55 0 0 0

Direct 8 10 5 1 1

Management 5 0 0 0 0

Nu

mb

er

Of

Staf

f

Chart Title

From table above, operations department in all the banks has the highest number of staff (55

outsourced and 10 direct staff- totaling 65staff) followed by marketing which had 28 staff (15

outsources 8 direct staff and 5 management staff), Audit had 5 staff, only 1 bank had a

remedial staff attached to its branch. 1staff also belong to trade department which is herein

referred to as others.

Fig 4.2.3 Staff Grade Analysis.

Source: Questionnaire Administered

The TO/SA are staff grade for outsourced staff it is perpetually static grade. ET-ABO and

B0-DM are direct staff cadre grade, MANAGERS AND ABOVE are staff grade for

management staff.

The outsource staff grade has the highest number.

84

0

20

40

60

80

TO/SA ET-ABO BO-DM MANAGER & ABOVE

Staff Population By Grade

Fig 4.2.4 Staff Qualification Analysis

Source: Questionnaire Administered

Table above shows a critical analysis of staff qualification. 2 of the staff are PhD holders, 5

had masters degree, 68 possess HND/BSC degrees , while 25 staff had Diploma qualification.

85

0

10

20

30

40

50

60

70

Management Direct Staff Outsourced

Phd 2

Masters 2 1 2

HND/BSC 0 25 43

Diploma 0 0 25

Nu

mb

er

Of

Staf

f

Qualification

Fig 4.2.5 Staff Salary Value (N„000).

Source: Questionnaire Administered

From response above, the pay of each staff category was clearly indicated. Outsourced staff

were paid less than #100,000 other cadre of staff earned far above the outsourced staff salary

benchmark. But in one of the banks some out-sourced staff earned above #100,000. That is an

indication that, one of the banks had a more fair compensation system. Other direct staff and

management staff take a lion share of the total pay in the banks.

86

0

10

20

30

40

50

60

70

10-100 100-250 250-500 500 & aboveOutsourced (TO/SA) 62 2 0 0

Direct (ET-DM) 0 18 10 3

Management (MGR & above)

0 0 0 5

Nu

mb

er

of

staf

f

Staff Salary

Fig 4.2.6 Staff service years in the bank

Source: Questionnaire Administered

The table above shows staff category and number of active years in service. It is important to

note that 40 outsourced staff have spent above 5 years without any promotion. Outsourcing in

the Nigerian banking industry from our literature reviews was fingered to have been subject

to abuse, hence staff in this category are not eligible for promotion. While the direct and

management staffs, though few in number, have spent long number of years in the service of

the banks.

87

0

10

20

30

40

50

60

10yrs & Above

5 - 10 Yrs 2 - 5 Yrs Below 2 yrs

Outsourced 0 40 13 17

Direct 5 18 2 0

Manegerial 5 0 0 0

Nu

mb

er

of

staf

f

Staff years of active service

PART B:

In this section, the results of the empirical analyses are presented, analyzed and interpreted so

as to either confirm or reject the hypotheses earlier stated. It therefore, focuses on the

presentation of results obtained from the correlation and regression of staff wellbeing,

compensation structure, staff promotion and incentive/ rewards on bank performance.

4.3 Result of correlation of staff wellbeing, compensation structure staff promotion and

incentive/ rewards with bank performance.

Table 4.3.1Correlations

performanc

e

wellbein

g

compensatio

n

promotio

n

incentiv

e

Pearson

Correlation

Performance 1.000 -.042 .032 .018 .268

Wellbeing -.042 1.000 -.082 .025 -.059

Compensatio

n

.032 -.082 1.000 .271 .242

Promotion .018 .025 .271 1.000 -.174

Incentive .268 -.059 .242 -.174 1.000

Sig. (1-tailed)

Performance . .431 .447 .470 .126

Wellbeing .431 . .366 .458 .403

Compensatio

n

.447 .366 . .124 .152

Promotion .470 .458 .124 . .231

Incentive .126 .403 .152 .231 .

N

Performance 20 20 20 20 20

Wellbeing 20 20 20 20 20

Compensatio

n

20 20 20 20 20

Promotion 20 20 20 20 20

Incentive 20 20 20 20 20

The result from the Pearson Correlation above shows a negative and weak relationship

between staff wellbeing and banks performance (r= -0.042). Poor staff wellbeing can easily

de-motivate work force and low workers‟ morale will simply be counter-productive to the

organization at large.

There was a weak positive relationship between compensation and banks performance

(r=0.032). Although the correlation was weak in strength, the positive relationship implies

that high levels of banks performance in Nigeria were associated with effective compensation

structure of the banks.

The result also revealed a positive relationship between promotion and banks performance

(r=0.018). The positive relationship implies that observed increased level of banks

performance in Nigeria were associated with promotions of staff of the banks who in turn, put

in their bests to the service of the bank towards achieving the organizational goals.

Incentives and rewards system also turned out to be positively related with banks

performance to the tune of r=0.268. Effective and appropriate incentives and rewards system

89

is a major driver of high performance in any organization.

4.4 Regression result on the effect of compensation and reward

system on banks performance

Tables 4.4.1 and 4.4.2 below show the summary of the relationship between compensation

and reward system of banks and performance.

Table 4.4.1 Model Summary

Mode

l

R R

Squ

are

Adjust

ed R

Square

Std.

Error of

the

Estimate

Change Statistics

R

Square

Chang

e

F

Change

df1 df2 Sig. F

Change

1

.284

a

.081 -.164 .65808 .081 .330 4 15 .854

a. Predictors: (Constant), incentive, wellbeing, promotion, compensation

90

The result from table 4.4.2 above shows a negative relationship between staff wellbeing and

bank performance. In the same vein, compensation structure of the bank also bears a negative

relationship with bank performance. Staff promotion and incentives/reward system

however, have positive effects on bank performance. This implies that regular promotions as

at when due as well as appropriate incentives and good reward system will encourage staff to

put in their very bests to their jobs with the overall effect of improved performance of the

banks.

The model shows a correlation of 28.4% between the independent variables and bank

performance. This is a rather very low relationship indicating that compensation and reward

91

Tables 4.4.2 Coefficientsa

Model Unstandardized

Coefficients

Standardize

d

Coefficients

t Sig. Correlations

B Std. Error Beta Zero-order Partial Part

(Constant) 2.405 .650 3.699 .002

wellbeing -.018 .141 -.032 -.128 .900 -.042 -.033 -.032

Compensatio

n

-.028 .113 -.067 -.246 .809 .032 -.063 -.061

promotion .038 .114 .089 .333 .744 .018 .086 .082

incentive .143 .127 .298 1.129 .277 .268 .280 .280

a. Dependent Variable: performance

system of banks have low correlation with bank performance.

The coefficient of multiple determinations (R2) shows that the independent variables (staff

wellbeing, compensation structure, staff promotion and incentive/ rewards) only explain 8%

variation in the behaviour of bank performance while as high as 92% is accounted for by

variables outside this model.

4.5 Result of T - Test

The Null hypotheses earlier stated were subjected to student-t test to either confirm or reject

the hypotheses as the case may be. Table 4.4.3 below shows the summary of t-test calculated:

Table 4.4.3

The table 4.4.3 above shows that the estimator ao is significant at 95% but not significant at

92

Regression

Coefficient

Cal.(tc) T-

Table

value

(t*) at

95%

T-

Table

value

(t*)at

99%

Ho:

a=0

95%

Hi a

≠0

99%

Ho: a=0

99%

Hi a ≠0

99%

ao 3.699 2.776 4.604 Reject Accept Accept Reject

a1 -0.128 2.776 4.604 Accept Reject Accept Reject

a2 -0.246 2.776 4.604 Accept Reject Accept Reject

a3 0.333 2.776 4.604 Accept Reject Accept Reject

a4 1.129 2.776 4.604 Accept Reject Accept Reject

99% confidence levels at 4 degree of freedom (d.f). The calculated “t” value of 3.699 is

greater than the “t” table value of 2.776 at 95% confidence level but less than 4.604 at 99%

confidence level.

This implies that the Null hypothesis (H0) is rejected at 95% confidence level that is, the

estimated ao is not significantly different from zero hence the alternative hypothesis is

accepted. However, the null hypothesis (HO) is accepted at 99%confidence level while

rejecting the alternative hypothesis.

Hypothesis One:

H𝒐𝟏 -There is no significant relationship between workers

wellbeing and their productivity.

Also the table shows that the estimator aI is not significant since the calculated “t” value of -

0.128 is far less than the “t” table values at both 95% and 99% confidence levels with 4

degree of freedom (d.f). This shows that the estimated aI is not significantly different from

zero. Hence the Null hypothesis (HO) that there is no statistically significant relationship

between workers wellbeing and their productivity is accepted while rejecting the alternative

hypothesis.

Hypothesis Two:

H𝒐𝟐- There is no significant relationship between compensation

structure and productivity.

The table also shows that the estimator a2 is not significant since the calculated “t” value of -

0.246 is also much less than the “t” table values at both 95% and 99% confidence levels at 4

degree of freedom (d.f). This shows that the estimated a2 is not significantly different from

93

zero. Hence the Null hypothesis (HO) that there is no significant relationship between

compensation structure and productivity is accepted while rejecting the alternative hypothesis

that there is significant relationship between compensation structure and productivity.

Hypothesis Three:

H𝒐𝟑- There is no significant relationship between promotion and

productivity.

Also, the table also reveals that the estimator a3 is not significant or not significantly different

from zero since the calculated “t” value of 0.333 is less than the “t” table values of 2.776 at

95% confidence level and 4.604 at 99% confidence level with 4 degree of freedom (d.f).

Hence the Null hypothesis (HO) that there is no significant relationship between promotion

and productivity is accepted while the alternative hypothesis is rejected.

Hypothesis Four:

H𝒐𝟒- There is no significant relationship between incentive/

reward and organizational performance.

The table also shows that the estimator a4 is not significant since the calculated “t” value of

1.129 is also much less than the “t” table values at both 95% and 99% confidence levels at 4

degree of freedom (d.f). This shows that the estimated a4 is not significantly different from

zero. Hence the Null hypothesis (HO) that there is no significant relationship between

incentive/ reward system and organizational performance is accepted while rejecting the

alternative hypothesis that there is significant relationship between incentive/ reward system

and organizational performance.

94

TABLE 4.4.4 SUMMARY OF F-TEST (ANOVA Table)

Calculated

F-Ratio

F- table

value at

95%

F- table

value at

99%

H0 : R2

=0 95%

Hi: R2

≠0 95%

HO:R2 =

0 99%

Hi: R2 ≠0

99%

0.33 3.06 4.89 Accept Reject Accept Reject

The table 4.2.4 above shows that the entire model is not statistically significant. The „F”

calculated value (FC) of 0.33 is much less than the „F‟ table value of 3.06 and 4.89 at 95%

and 99% confidence levels respectively with 4 degree of freedom. Thus, the Null hypothesis

(HO) that compensation and reward system of banks have no statistically significant impact

on bank performance is accepted while rejecting the alternative hypothesis (Hi) that

compensation and reward system of banks have statistically significant impact on bank

performance.

4.6 INTERVIEW

Few marketing staff were briefly interviewed under the condition of anonymity to air their

views about the current performance measurement model employed by the banks. Below are

the summary of their submissions.

Interviewer: what performance measurement model has your bank adopted to rate you?

Interviewee: The balanced score card model with 4 categories and 7 indicators.

Interviewer: is this model applicable to all staff irrespective of department.

Interviewee: No its only applicable to marketers . the operations and other group uses VALA

95

Interviewer: From the questionnaire earlier submitted by you and your colleagues. It was

visible that not all staff have assigned target. Why is this so knowing fully well that each staff

constitutes a cost to each branch?

Interviewee: That’s how management wants it. Some staff have group target(which is

primarily not derived from the effort of the individual, but the effort of others given to

another as a glory to them) and some have none at all. In my own openion,the way the

management have designed the operation of the with only few staff having targets is quite

worrisome and quite inadequate. As i speak to you,i am aware that most of the branches are

not able to survive their staff and operations expenses cost. If most staff are contributors, it

will give a better chance of profitability.

Interviewer: what can you tell us about the Balanced score card model?

Interviewee: The balanced score card performance model(BSC). The BSC model was

designed to improve productivity and motivate staff to work more diligently. But rather than

it creating and fulfilling the desired effect, due to the pay cut that followed the introduction of

the model, and the (80%) benchmark score that qualified any one for the incentive pay. It was

seemingly difficult for anyone to achieve the 80% bench mark, It created a more damaging

and devastating effect as it led to massive resignation of performing/talented DSA’s

nationwide. It is safe to assume that the DSA model in consonance to the BSC model was an

error. The support staff(staff with targets) of the marketing department were the only staff

whose salaries were cut down. Staffs without targets whose salaries were larger were not cut

down. This was a monumental error.

96

The DSA model and the BSC Model may be assumed inadequate due to the following

observations

i. It does not recognize excess performance over assigned target on deposit and risk

asset or any other assigned variable. For example, if your deposit target is N40m and

you have achieved N240m the extra N200m you have achieved over your target is

meaningless in the BSC model, the present model does not recognize or reward

performance

ii. The model lacks respect for profitability-It does not recognize income contribution of

marketer at large. –if your deposit and risk asset , other liabilities or risk products

generates an income contribution of N3m for the bank on monthly basis, it is useless

to this present model. Income/profit should be the most important thing that any

performance measuring model should recognize. Profit is a kind of guarantee for the

continuous existence of any business. the Performance induced pay score bench mark is too high and unrealistic.

The Performance induced pay score bench mark is too high and unrealistic. You have to

score 80% to qualify for an inducement pay

TABLE 4.5

The table below shows the inadequacies in the present score card model in use in the banks.

The information provided was a print out of an automated score card of one of the banks

staff.

It was observed that despite meeting deposit target in excess of 500% no additional score

was added to staff score.

Same was observed on his risk asset(loans) performance ,he exceeded target by 2000% but

no score was given to the excess achieved over target

97

Table 4.5

Noticeable Implication of Model on Branch /Staff/Organization at Large.

i. The Model have led to massive exodus of talented market facing support staff thereby

leading to brain drain in branches. As the new staff that may have replaced the exited staff

may not have the needed technical expertise.

ii. It has created a massive demotivated and demoralized workforce who may not be ready to

embrace anything that will add value to the organization.

98

BALANCED SCORE CARD FOR NANA UCHE AYO FOR MONTH ENDED AUGUST 2016

BSC Model Name NANA UCHE AYO Perspective Performance(%)Target (%) Status

4 category, 7 indicatorsStaffID NU149052 Customer 20 20

August 2016 score cardGrade SA Financial 50 50

Role ACCOUNT OFFICER People 0 5

Location LAGOS Process 21 25

KEY 91 100

CATEGORY KEY SCORE RATING

PERFORMANCE INDICATOR MARKED PURPLE Good RATING CATEGOGY

Fair STAR PERFORMER

CUSTOMER Poor

Performance Measure Weight(%)Description Actual Target PerformanceStatus

DORMANT ACCOUNTS 20 DORMANT ACCOUNTS REACTIVATION 26 20 20

20 20

FINANCIAL

Performance Measure Weight(%)Description Actual(000) Target (000)PerformanceStatus

CASA-DEPOSIT 40 AVERAGE DEPOSIT POTFOLIO 317,805.25 45,000.00 40

LOANS 10 AVERAGE LOAN POTFOLIO 20179.58 500.00 10

50 50

PEOPLE

Performance Measure Weight(%)Description Actual Target PerformanceStatus

E-LEARNING 5 number of learning programNUMBER OF E LEARNING PROG 0 1 0

PROCESS 5 0

Performance Measure Weight(%)Description Actual Target PerformanceStatus

ACTIVE POS ISSUED 10 NUMBER OF POS ISSUED 3 5 6

DEBIT CARDS ISSUED 10 NUMBER OF DEBIT CARDS ISSUED 65 20 10

MOBILE BANKING 5 NUMBER OF MOBILE ACTIVATIONS 22 20 5

25 21

iii. The model has exposed our DSA to undue hardship. And may have successfully triggered

an increased fraudulent tendencies on affected staff. In the nearest future it may give birth to

dangerous tendencies such as systematic armed robbery, cyber terrorism, terrorism and

other extreme retaliatory acts. The effect of this model on staff should not be underestimated

as staffs may decide to unleash terror against the bank as a result of their grievance from

perceived social injustice(a major causative agent of terrorism).

iv. The model has amounted to Frustration. Grievance level of both exited staff and existing

staff need to be checked as it poses a significant threat to the organization future.

Interviewer: with this excellent figure on your score card, have you ever been issued a

commendation letter by your bank?

Interviewee: No Sir. Instead my salary was cut down despite having this level of exceptional

performance.

4.7 Discussion and Implication of Findings

Findings from the analyses show mixed relationships between the explanatory variables and

banks performance. For instance, a negative relationship was reported between staff

wellbeing and bank performance. Unfair labour practice constitutes part of the problems

99

facing banks. Within the Nigerian banking industry workers are perpetually denied their

rights to membership of trade unions or workers committee as specified by the part II of the

International Labour Act (2006). Violation of workers right to association and prohibition of

formation of workers union is a deliberate attempt of banks to continuously exploit their staff.

One of the fundamental goals of workers union is to protect workers rights at work and also

bargain for better conditions of service. Unfair employee compensation may also be

tantamount to unfair labour practice (ULP) which is any failure to act, or unfair act of an

employer towards a worker concerning promotion, demotion, trial periods, training or

benefits; suspending a worker or disciplinary action; refusing to re-employ a worker as

agreed; and may also occur when an employer makes circumstances difficult for a worker

who was forced to make a protected disclosure, (Rycroft, 2009). ULP has been known to be a

major catalyst for the development of a demoralized workforce who in turn directly and

actively militate against achievement of predetermined goals. According to Michael, (2015),

poor staff wellbeing can easily de-motivate work force. When worker morale is low, it affects

productivity of individual, groups and even the organization at large. Employee reaction to

unfair labour practice may be passive. Passive reactions of employee are much more

dangerous and have a disastrous effect on organizations at the long run. As reacting

employees do not air out their grievances in voices or in writing nor through groups (formal

or informal) that exist within an organization but reacts internally by exhibiting attitudes that

runs contrary to organization objective. For example an employee technically alters a process

or deliberately refuses to correct a process that leads to a chance of loss.

The overall impact of having unproductive or demoralized workers always reflect on

dwindling performance. Once productivity is altered it directly impacts on profits.

100

In the same vein, compensation structure of the bank also bears a negative relationship with

bank performance. The banks have Poor Compensation Structure. The salaries of executives

and senior staff members of the banks are too large for the present income generated by

banks to sustain and usually their salaries are not usually tied to direct performance target and

in some banks no targets are assigned to such outrageous salaries. The aggregate of these

salaries engulf most income made by the banks as the task of this group of staff do not add

any form of financial value that commensurate to their pay. They are rated by group

performances rather than by individual performance contribution. The present compensation

model in use in banks is toxic to the health of the bank. There is a need for senior staff pay

cut or assignment of business targets that will at least justify their monthly salaries, or even

implemented the duo to revert the present status.

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.

Stagnated wage levels for the support staff who constituted over 60% of the workforce in

banks is another monumental element affecting the performance of these group of staff

within the banking industry. This is a regressive wage system intentionally targeted at the

support staff group within the banking industry. The stagnated wage system provides a

meager amount as a monthly salary and does not attach any value to employee number of

service years, additional qualification, employee performance. It is a demeaning wage system

that lacks respect for workers dignity and right to good life, because it allows workers to

101

spend their productive and energetic period of life receiving and living on a meager salary as

their total monthly emolument. This practice has been observed to be repugnant to natural

justice, equity, good conscience and fairness. It adds to woes of the poor. The continuing

stagnation of the income levels for support staff has put the larger workforce within the

banking industry at the most disadvantaged position in terms attainment of a more humane

condition of living.

Staff promotion and incentives/reward system however, have positive effects on bank

performance. This implies that regular promotions as at when due as well as appropriate

incentives and good reward system will encourage staff to put in their very bests to their jobs

with the overall effect of improved performance of the banks.

Rewards represent important mechanisms by which employee behaviors can be aligned with

the interests of the organization (Eisenhardt, 1989). Particularly, pay-for-performance is a

reward practice that links one's pay increase to one's performance, and could be used to

direct, sustain, and motivate desirable behaviors, such as knowledge sharing (Bartol and

Srivastava, 2002), creativity (Eisenhardt et al., 1998), quality (Cowherd and Levine, 1992)

and customer satisfaction (Delaney and Huselid, 1996). Pay-for-performance establishes the

behavioral criteria by which rewards are allocated and in doing so underpins the alignment of

employee behavior with organizational values and objectives. Therefore, if an employee

achieves his or her performance objectives then the employee receives a pay increase. This

simple and visible link between pay and performance recognizes an employee for a specific

level of accomplishment, therefore nurturing favorable work attitudes, such as satisfaction

and commitment (Heneman et al., 1988). Thus, the effectiveness of pay-for-performance has

a direct influence on high levels of service quality and desirable work attitudes and ultimately

improved performance of the organisation.

102

The finding also revealed that the Balance Score Card model adopted in the banks has created

a massive demotivated and demoralized workforce who may not be ready to embrace

anything that will add value to the organization. The model has exposed our DSA to undue

hardship. And may have successfully triggered increased fraudulent tendencies on affected

staff. In the nearest future it may give birth to dangerous tendencies such as systematic armed

robbery, cyber terrorism, terrorism and other extreme retaliatory acts.

103

CHAPTER FIVE

5.0 SUMMARY OF FINDINGS, CONCLUSION AND RECOMMENDATIONS.

5.1 Summary of Findings.

From the analysis of data from questionnaires administered as well as the responses gathered

from the interview conducted, below are some of our findings.

The finding revealed a negative relationship between staff wellbeing and bank performance.

Unfair labour practice constitutes part of the problems facing banks. Workers are perpetually

denied their rights to membership of trade unions within the Nigerian banking industry.

The finding also revealed that the present compensation system is detrimental to the bank

improved performance. Most staff are paid salaries without contributing any meaningful

income to the branch.

The payment for performance was bias. Its implementation was only targeted at the support

marketing staff alone throughout the bank. Staff who constituted larger cost to the bank were

just paid by the bank with no recourse to whether they had target and met their targets nor

even had no target.

It was also found that staff promotion has positive effect on bank performance. This implies

that regular promotions as at when due will encourage staff to put in their very bests to their

jobs with the overall effect of improved performance of the banks.

104

The finding also revealed a positive relationship between incentives/reward systems in the

banks. An appropriate incentives and good reward system improves efficient service delivery

of staff which in turn culminate in improved performance of banks.

It was also revealed that not all staff had targets. The few numbers of staff that had targets

were only some marketing staff who had lower rank and support marketing staff.

The BSC model as adopted by some of the banks is inadequate. It gave no credence to

income generated by each staff, and neither recognized any performance in excess of

assigned target.

5.2 Conclusion

Effective and appropriate compensation and reward system is essential for attracting,

retaining and motivating employees in today‟s business environment towards achievement of

improved performance by banks. This requires utilizing a host of tools including base pay,

reward/incentives, equity, promotion, performance management, and benefits.

Foregoing from the findings from this study, the researcher made the following conclusions:

i) Poor staff wellbeing in the banking industry is counter-productive to the banks.

Unfair labour practice (ULP) which involves unfair treatment of staff concerning

promotion, demotion, trial periods, training or benefits, suspending a worker or

disciplinary action, refusing to re-employ a worker as agreed, etc are all demoralizing

to workers and these hinder their effective contribution towards achieving the

organisational goals.

ii) The banks have poor compensation structure which adversely affects their

105

performance. The salaries of executives and senior staff members of the banks are

too large for the present income generated by banks to sustain and usually their

salaries are not usually tied to direct performance target and in some banks no targets

are assigned to such outrageous salaries. Whereas, stagnated wage levels are meant

for the support staff who constituted over 60% of the workforce in banks. This is

another monumental factor affecting the performance of these group of staff within

the banking industry. The present compensation structure in banks is counter-

productive.

iii) Staff promotion improves banks performance. This implies that regular promotions

as at when due as will encourage staff to put in their very bests to their jobs with the

overall effect of improved performance of the banks.

iv) Incentives/reward systems in the banks motivate staff to put their bests towards

achievement of their organisations goals. The link between incentives and

performance recognizes an employee for a specific level of accomplishment,

therefore nurturing favorable work attitudes such as satisfaction and commitment

which will ultimately improve the performance of the organisation.

v) The BSC model as adopted by some of the banks is inadequate as it gives no

credence to profit/income generated by each staff, and neither recognized any

performance in excess of assigned target.

5.3 Recommendations

As it has been observed that the present compensation model in use in banks is toxic to the

health of the bank. The assumption that higher salaries improve workers performance may be

untrue. Rather our findings revealed that a reasonable performance inducement pay will serve

106

as the major catalyst that will improved overall performance. hence, there is need for senior

staff pay cut or assignment of business targets that will at least justify their monthly salaries.

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. Other should also borrow a leaf from this. According to

Michael, (2015), a compensation structure that is developed from a performance management

model that is deeply dedicated to identifying and rewarding performance and subsequently at

a minimal and 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.

There should be regular promotions as at when due in order to further encourage staff to put

in their very bests to their jobs which will in turn have a positive effect on performance of the

banks.

Banks should emphasize rewarding and encouraging peak performance. When employees

within an organization see a clear relationship between performance and reward, job

satisfaction sets in, and employees become highly motivated and give their best to the

organization in return. Effective compensation plans should reward performance, loyalty,

experience, responsibility, and other behaviours. Apart from the salaries paid, the employees

should be eligible for a fixed percentage of commission upon achievement of fixed target of

income or performance objectives. Special allowance such as overtime, mobile allowances,

meals, commissions, travel expenses, reduced interest loans; insurance, club memberships,

etc should be provided to employees to provide them social security and motivate them which

improve the organizational Productivity.

107

Banks should develop and implement an effective reward system that gives more to where

much is gotten from rather than robbing peter to pay Paul, which is rather unfair. Also

material rewards can be motivating to employees because pay, time off, advancement and

recognition are important to most workers as they drive the organizational success.

There should be a change in management philosophy on how viewed a staff. A staff is seen

as a cost in many organization. This is because they have underutilized the potency of human

resource. Staff should rather be viewed as a value creator by ensuring that the bank only

retains staff in which it has the absolute cost advantage

The banks should redesign the BSC model to correct inadequacies identified. The current

model in use have earlier been criticised by this research work as bias and lacking credibility.

It is rigid and not applicable to all staff. Some banks have more than a model for rating staff

performance rather than a general model that will appear fair to all staff. It gave no credence

to income generated by each staff, and neither recognized any performance in excess of

assigned target. This should be corrected.

Banks should develop and implement an effective performance management system that will

measure all staff based on income generation, and ensure that each staff on a minimum basis

generates the income that pays their salary rather than the present practice which pays staff

according to grade.

It is safe to assume that when Banks in Nigeria implement the recommendations of this

research work, it will improve or rather put to an end, the lingering ailing conditions and sign

of distress synonymous with the Nigerian banking industry.

108

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Torrington D., Hall L. and Taylor S. (2005) Human Resource Management (6th edition).

Harlow: FT/Prentice Hall.

Vroom V. H. (1964) Work and Motivation. New York: John Wiley & Sons

Whitener, E. M., (2001). A Cross Level Analysis Using Hierarchical Linear Modeling.

Journal of Management. 27(5), 515 – 35.

112

APPENDIX 1

NATIONAL OPEN UNIVERSITY NIGERIA

Master of Science Business Administration (Msc.)

QUESTIONNAIRE FOR STAFF

This research is for academic purpose only. It is to establish the impact of

compensation and reward system on corporate performance. Respondents are

assured that any information given will be accorded the necessary

confidentiality. Thank you.

SECTION A

Demographics

1. Staff Category: management [ ] direct [ ] outsourced [ ]

2. Department: Marketing[ ] Operations [ ] Audit [ ]

Remedial [ ] Others [ ]

3. Staff grade: TO/SA[ ] ET-ABO [ ] BO –DM [ ]

MGR AND ABOVE[ ]

4. Qualification: Diploma[ ] HND/BSC[ ] Masters[ ] Phd[ ]

113

5. Professional Qualifications: 0 [ ] 1-2 [ ] 3[ ] 4and above [ ]

6. Salary Value(#,000): 10-100[ ] 100-250[ ] 250-500[ ]

500 and above [ ]

7. How long have you worked in this organization?

Below 2 yrs [ ] 2 – 5 yrs [ ] 5 – 10 yrs [ ]

10 yrs and above [ ]

SECTION B

PART I- WELLBEING AND PRODUCTIVITY

1. You are satisfied with your present reward package.

a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree

2. Staff will do better if they are paid more (or given more incentives).

a) Strongly Agree b)Agree c) Disagree d) Strongly Disagree e) Undecided

3. Staff unhappiness at work affects his morale and efficiency.

a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree

4. You are happy with your current status at work(as an outsourced ,direct or management

staff).

114

a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree

5. All staff have targets.

a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree

6. All marketers have personal targets assigned to them individually.

a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree

7. In the face of dwindling revenue. all staff should be given business targets.

a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree

8. Your employer is fair to you with your current pay

a)Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly

Agree

9. You have a business target assigned to you in person.

a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly

Agree

10. You always meet up with your assigned targets.

a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree

11. You are always rewarded for meeting up with your assigned targets.

a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree

115

12. The business target assigned by your bank is applicable to all category of

staff irrespective of unit.

a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree

13. Along with the marketing staff group/unit, every other unit is assigned with

business targets.

a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree

14. All marketers have incentive attached to their business targets.

a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree

15. All available incentives apply to all staff.

a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree

16. You feel very secured about you job

a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree

17. The sale force have a special compensation.

a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree

18. The sales team enjoy other forms of incentive apart from their salary.

a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree

116

19. Employee willing to retire are provided with some form of benefit.

a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree

20. The banking industry is a safe haven for employees.

a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree

PART II- COMPENSATION STRUCTURE

1. Your employer compensation structure is grade based rather than performance

based.

a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree

2. Your compensation is influenced by your years of service within the

organization.

a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree

3. Pay increment and promotion are applicable to all staff.

a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree

4. Your pay is defined by your contribution to the organization in terms income

generated by your efforts.

a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree

117

5. Your reward is increased/reviewed after every financial year.

a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree

6. Upward review of staff salaries periodically based on your performance will

always continue to enhance your productivity.

a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree

7. You have a say in what comprises your salary package.

a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree

8. You would like other form of performance related benefits to be added to

your benefits.

a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree

9. The reward package for every level of staff is fair.

a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree

10. You are paid overtime for closing late at work

a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree

11. Bank staff have access to loans

a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree

118

12. There are active workers union within the bank, that helps in negotiating

conditions of work with your employers.

a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree

13. Spouse allowance are paid to some selected group of staff

a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree

14. Child allowance is paid to some selected group of staff

a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree

15. All staff are covered under the group life assurance policy.

a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree

16. All staff are covered under the HMO plan.

a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree

17. All staff spouses are covered under the group life insurance policy.

a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree

18. All staff spouses are covered under the HMO plan.

a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree

119

19. All staff child are covered under the group life assurance Plan.

a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree

20. All staff children are covered under the HMO plan.

a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree

PART III- STAFF PROMOTION AND PRODUCTIVITY

1. Staff promotion is something that should be constantly done.

a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree

2. Staff promotion translate to a better life and status for employees.

a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree

3. You have been consistently promoted in the last five years

a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree

4. You feel satisfied about staff promotion in your organization.

a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree

5. Staff promotion is based on achievement of assigned business targets.

a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree

120

6. Staff Promotion is based on years of service as stated in the banks policy.

a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree

7. Staff are always happy when they are not promoted.

a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree

8. Lack of staff promotion improves workers participation and productivity at work

a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree

9. The higher the promotion the higher the pay and related benefits

a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree

10. The higher the rank the higher the risk of being exited

a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree

11. Since promotion are not tied to income contribution of staff, employers view staff with

higher grade as a burden.

a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree

12. There has been more retrenchment than promotion in recent times

a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree

121

13. Staff promotion in recent times has been very minimal.

a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree

14. Scanty staff promotions and persistent promotion denials are signs that banks are in

recession.

a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree

15. Staff promotion will impact on productivity

a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree

16. Arbitrary staff promotion can put laggards at strategic roles

a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree

17. When laggards man strategic desk, it improves productivity

a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree

18. Laggards should always be promoted along side performers

a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree

19. When performers and laggards earn same income it improves productivity

a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree

20. A performance and wage system that keeps laggards on job is more desirable

a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree

122

PART IV- INCENTIVE ,REWARDS AND PERFORMANCE

1. Your bank grows its managers rather than hire.

a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree

2. Your bank have always retained most of its talents.

a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree

3. There is low rate of employee turnover in your bank.

a) Strongly Disagree b) Disagree c) undecided d) Agree e) Strongly Agree

4. staff whose activities mobilize more deposit to the bank are rewarded

accordingly.

a) Strongly Disagree b) Disagree c) undecided d) Agree e) Strongly Agree

5. You affirm that your bank has a well motivated work force

a) Strongly Disagree b) Disagree c) undecided d) Agree e) Strongly Agree

6. You are adequately motivated to work.

a) Strongly Disagree b) Disagree c) undecided d) Agree e) Strongly Agree

7. The present compensation system is adequate.

a) Strongly Disagree b) Disagree c) undecided d) Agree e) Strongly Agree

123

8. If the reward system is revamped it will improve performance.

a) Strongly Disagree b) Disagree c) undecided d) Agree e) Strongly Agree

9. Most of your branches are making profit.

a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly

Agree

10. Staff are constantly promoted when due.

a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree

11. There is a need for upward review of your pay.

a) Strongly Disagree b) Disagree c) undecided d) Agree e) Strongly Agree

12. There is a need for downward review of pay considering the current situation

in the Nigerian banking industry.

a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree

13. Your bank adequately manage employee succession

a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree

14. Adequate workers motivation can improve your branch profitability.

a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree

124

15. Do you agree that target can improve individual productivity

a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree

16. All Staff have adequate social security(Pension) as their pay package

a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree

17. Good incentive helps to attract workers

a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree

18. Incentive helps to retain workers at work

a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree

19. Good incentive helps grows a loyal and dedicated work force

a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree

20. Having an experienced loyal and dedicated workforce translate to improved

productivity and improved profits

a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree

125

PART V- ORGANIZATION PERFORMANCE

1. Your branch made a good profit in the 2015 Financial year end.

a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree

2. Your bank declared profit in 2015 financial year end.

a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree

3. Your branch made an impressive profit in the monthly performance report

published last month

a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree

4. The federal government TSA policy affected your performance as a bank.

a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree

5. The impact of the zero C.O.T policy was felt by your bank.

a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree

6. Your bank compensation policy is fair to every staff category.

a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree

7. Your growth in sales of new account was very significant

a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree

126

8. Deposit mobilization by marketing staff has always been very high

a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree

9. Risk asset mobilization efforts by marketing staff is quite impressive.

a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree

10. There is significant increase in the deposit level in your branch this year.

a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree

11. There is significant increase in the risk asset level in your branch this year.

a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree

12. The non performing loans of your branch have exceeded the acceptable 3%

benchmark.

a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree

13. Your branch maximizes share holders wealth.

a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree

14. Allocated expenses constitute about 30% of operational expenses.

a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree

127

15. Staff costs constitute about 40% of your operating expenses.

a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree

16. Administrative expenses also constitute about 30% of your operating

expenses.

a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree

17. Your bank paid dividend in 2015 financial year

a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree

18. There was increase in the earning per share of your bank in 2015 when

compared to 2014

a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree

19. There is a growth in your performance indices when compared to 3rd

quarter 2015

a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree

20. There is strong indication that your branch will have a positive PBT by 2016

financial year end.

a) Strongly Disagree b) Disagree c) Undecided d) Agree e) Strongly Agree

128

Administered Questionnaire

PART 1 WELLBEING AND

PRODUCTIVITY

1 2 3 4 5

S/N QUESTION SD D U A SA Mean

1 You are satisfied with your

present reward package.

48 10 12 22 8 2.32

2 Staff will do better if they are

paid more (or given more

incentives).

0 5 0 11 84 4.74

3 Staff unhappiness at work

affects his morale and

efficiency.

0 0 0 12 88 4.88

4 You are happy with your

current status at work(as an

outsourced ,direct or

management staff).

62 3 5 8 22 2.25

5 All staff have targets. 92 8 0 0 0 1.08

6 All marketers have personal

targets assigned to them

individually.

0 87 0 13 0 2.26

7 In the face of dwindling

revenue. all staff should be

given business targets.

2 30 10 46 12 3.36

8 Your employer is fair to you 52 8 10 25 5 2.23

with your current pay

9 You have a business target

assigned to you in person.

72 5 0 4 19 1.93

10 You always meet up with your

assigned targets.

71 13 0 1 15 1.76

11 You are always rewarded for

meeting up with your assigned

targets.

52 28 20 0 0 1.68

12 The business target assigned

by your bank is applicable to

all category of staff

irrespective of unit.

68 32 0 0 0 1.32

13 Along with the marketing

staff group/unit, every other

unit is assigned with business

targets.

68 32 0 0 0 1.32

14 All marketers have incentive

attached to their business

targets.

58 37 0 5 0 1.52

15 All available incentives apply

to all staff.

58 42 0 0 0 1.42

16 You feel very secured about

you job

7 23 10 52 8 3.31

17 The sale force have a special

compensation.

42 38 0 12 8 2.06

18 The sales team enjoy other

forms of incentive apart from

their salary.

41 53 0 6 1.71

19 Employee willing to retire are

provided with some form of

benefit.

82 13 5 0 0 1.23

20 The banking industry is a safe

haven for employees.

18 47 2 30 3 2.53

PART II COMPENSATION

STRUCTURE

1 2 3 4 5

S/N QUESTION SD D U A SA Mean

1 Your employer compensation

structure is grade based rather

than performance based.

0 0 0 38 62 4.62

2 Your compensation is

influenced by your years of

service within the organization.

30 40 0 20 10 2.4

3 Pay increment and promotion

are applicable to all staff.

22 78 0 0 0 1.78

4 Your pay is defined by your

contribution to the organization

in terms income generated by

your efforts.

7 78 0 15 0 2.23

5 Your reward is 14 86 0 0 0 1.86

increased/reviewed after every

financial year.

6 Upward review of staff salaries

periodically based on your

performance will always

continue to enhance your

productivity.

3 6 0 43 48 4.27

7 You have a say in what

comprises your salary package.

79 21 0 0 0 1.21

8 You would like other form of

performance related benefits to

be added to your benefits.

0 0 0 21 79 4.79

9 The reward package for every

level of staff is fair.

10 81 0 9 0 2.08

10 You are paid overtime for

closing late at work

0 100 0 0 0 2

11 Bank staff have access to loans 20 40 0 40 0 2.6

12 There are active workers union

within the bank, that helps in

negotiating conditions of work

with your employers.

82 13 0 5 0 1.28

13 Spouse allowance are paid to

some selected group of staff

0 0 0 30 70 4.7

14 Child allowance is paid to

some selected group of staff

0 0 0 30 70 4.7

15 All staff are covered under the

group life assurance policy.

0 0 0 2 98 4.98

16 All staff are covered under the

HMO plan.

0 0 0 2 98 4.98

17 All staff spouses are covered

under the group life insurance

policy.

57 43 0 0 0 1.43

18 All staff spouses are covered

under the HMO plan.

57 43 0 0 0 1.43

19 All staff child are covered

under the group life assurance

Plan.

57 43 0 0 0 1.43

20 All staff children are covered

under the HMO plan.

30 40 0 13 17 2.47

PART III STAFF PROMOTION

AND PRODUCTIVITY

1 2 3 4 5

S/N QUESTION SD D U A SA Mean

1 Staff promotion is something

that should be constantly done.

0 0 0 21 79 4.79

2 Staff promotion translate to a

better life and status for

employees.

0 0 0 4 96 4.96

3 You have been consistently

promoted in the last five years

70 8 0 17 5 1.79

4 You feel satisfied about staff

promotion in your organization.

70 8 0 17 5 1.79

5 Staff promotion is based on

achievement of assigned

business targets.

13 80 0 7 0 2.01

6 Staff Promotion is based on

years of service as stated in the

banks policy.

50 20 0 17 13 2.23

7 Staff are always happy when

they are not promoted.

92 8 0 0 0 1.08

8 Lack of staff promotion

improves workers participation

and productivity at work

98 2 0 0 0 1.02

9 The higher the promotion the

higher the pay and related

benefits

0 0 0 22 78 4.78

10 The higher the rank the higher

the risk of being exited

4 20 10 52 14 3.52

11 Since promotion are not tied to

income contribution of staff,

employers view staff with

higher grade as a burden.

20 15 15 48 2 2.97

12 There has been more

retrenchment than promotion in

recent times

0 9 10 64 17 3.89

13 Staff promotion in recent times

has been very minimal.

2 2 7 72 17 4

14 Scanty staff promotions and

persistent promotion denials are

signs that banks are in

recession.

86 14 0 0 0 1.14

15 Staff promotion will impact on

productivity

0 0 0 4 96 4.96

16 Arbitrary staff promotion can

put laggards at strategic roles

10 9 0 64 17 3.69

17 When laggards man strategic

desk, it improves productivity

86 14 0 0 0 1.14

18 Laggards should always be

promoted along side performers

20 60 5 15 0 2.15

19 When performers and laggards

earn same income it improves

productivity

40 60 0 0 0 1.6

20 A performance and wage

system that keeps laggards on

job is more desirable

13 78 4 5 0 2.01

PART IV -INCENTIVE

,REWARD AND

PERFORMANCE

1 2 3 4 5

S/N QUESTION SD D U A SA Mean

1 Your bank grow its managers

rather than hire.

3 64 0 33 0 2.63

2 Your bank have always

retained most of its talents.

24 32 4 23 17 2.77

3 There is low rate of employee

turnover in your bank.

24 32 4 23 17 2.77

4 staff whose activities

mobilize more deposit to the

bank are rewarded

accordingly.

74 16 7 3 0 1.39

5 You affirm that your bank has

a well motivated work force

72 6 2 13 7 1.77

6 You are adequately motivated

to work.

72 6 2 13 7 1.77

7 The present compensation

system is adequate.

72 6 2 13 7 1.77

8 If the reward system is

revamped it will improve

performance.

4 6 0 14 76 4.52

9 Most of your branches are

making profit.

23 68 0 7 2 1.97

10 Staff are constantly promoted

when due.

13 77 0 8 2 2.09

11 There is a need for upward 0 4 0 5 91 4.83

review of your pay.

12 There is a need for downward

review of pay considering the

current situation in the

Nigerian banking industry.

0 100 0 0 0 2

13 Your bank adequately

manage employee succession

47 28 3 18 4 2.04

14 Adequate workers motivation

can improve your branch

profitability.

0 6 0 82 12 4

15 Do you agree that target can

improve individual

productivity

0 4 0 54 42 4.34

16 All Staff have adequate

social security(Pension) as

their pay package

0 0 0 2 98 4.98

17 Good incentive helps to

attract workers

0 5 0 27 68 4.58

18 Incentive helps to retain

workers at work

0 5 0 78 17 4.07

19 Good incentive helps grows a

loyal and dedicated work

force

0 5 0 27 68 4.58

20 Having an experienced loyal

and dedicated workforce

translate to improved

productivity and improved

profits

0 0 0 86 14 4.14

PART V- ORGANIZATIONAL

PERFORMANCE

1 2 3 4 5

S/N QUESTION SD D U A SA Mean

1 Your branch made a good profit

in the 2015 Financial year end.

0 80 0 20 0 2.4

2 Your bank declared profit in

2015 financial year end.

0 80 0 20 0 2.4

3 Your branch made an

impressive profit in the monthly

performance report published

last month

18 62 0 10 10 2.32

4 The federal government TSA

policy affected your

performance as a bank.

0 20 0 54 26 3.86

5 The impact of the zero C.O.T

policy was felt by your bank.

0 0 0 38 62 4.62

6 Your bank compensation

policy is fair to every staff

category.

40 38 0 12 10 2.14

7 Your growth in sales of new

account was very significant

0 4 0 33 63 4.55

8 Deposit mobilization by

marketing staff has always been

very high

44 51 0 5 0 1.66

9 Risk asset mobilization efforts

by marketing staff is quite

impressive.

20 13 0 34 33 3.47

10 There is significant increase in

the deposit level in your branch

this year.

46 34 0 20 0 1.94

11 There is significant increase in

the risk asset level in your

branch this year.

4 46 0 24 26 3.22

12 The non performing loans of

your branch have exceeded the

acceptable 3% benchmark.

6 4 0 76 14 3.88

13 Your branch maximizes share

holders wealth.

34 46 0 16 4 2.1

14 Allocated expenses constitute

about 30% of operational

expenses.

0 0 0 76 24 4.24

15 Staff costs constitute about 40%

of your operating expenses.

0 0 0 24 76 4.76

16 Administrative expenses also

constitute about 30% of your

operating expenses.

0 0 64 36 4.36

17 Your bank paid dividend in

2015 financial year

17 43 0 17 23 2.86

18 There was increase in the

earning per share of your bank

in 2015 when compared to 2014

17 43 0 17 23 2.86

19 There is a growth in your

performance indices when

compared to 3rd quarter 2015

17 43 0 12 28 2.91

20 There is strong indication that

your branch will have a positive

PBT by 2016 financial year

end.

18 62 0 12 8 2.3

140

Mean values

Variable Y 𝑿𝟏 𝑿𝟐 𝑿𝟑 𝑿𝟒

1 2.4 2.32 4.62 4.79 2.63

2 2.4 4.74 2.4 4.96 2.77

3 2.32 4.88 1.78 1.79 2.77

4 3.86 2.25 2.23 1.79 1.39

5 4.62 1.08 1.86 2.01 1.77

6 2.14 2.26 4.27 2.23 1.77

7 4.55 3.36 1.21 1.08 1.77

8 1.66 2.23 4.79 1.02 4.52

9 3.47 1.93 2.08 4.78 1.97

10 1.94 1.76 2 3.52 2.09

11 3.22 1.68 2.6 2.97 4.83

12 3.88 1.32 1.28 3.89 2

13 2.1 1.32 4.7 4 2.04

14 4.24 1.52 4.7 1.14 4

15 4.76 1.42 4.98 4.96 4.34

16 4.36 3.31 4.98 3.69 4.98

17 2.86 2.06 1.43 1.14 4.58

18 2.86 1.71 1.43 2.15 4.07

19 2.91 1.23 1.43 1.6 4.58

20 2.3 2.53 2.47 2.01 4.14

141

APPENDIX 2

REGRESSION RESULT

/DESCRIPTIVES MEAN STDDEV CORR SIG N

/MISSING LISTWISE

/STATISTICS COEFF OUTS R ANOVA CHANGE ZPP

/CRITERIA=PIN(.05) POUT(.10)

/NOORIGIN

/DEPENDENT performance

/METHOD=ENTER wellbeing compensation promotion incentive.

Descriptive Statistics

Mean Std. Deviation N

Performance 2.8425 .60989 20

Wellbeing 2.2455 1.07390 20

Compensation 2.8620 1.45578 20

Promotion 2.7760 1.41944 20

Incentive 3.1505 1.26790 20

142

Correlations

perform

ance

wellbe

ing

compensa

tion

promot

ion

incent

ive

Pearson

Correlation

performa

nce

1.000 -.042 .032 .018 .268

wellbeing -.042 1.000 -.082 .025 -.059

compensa

tion

.032 -.082 1.000 .271 .242

promotio

n

.018 .025 .271 1.000 -.174

incentive .268 -.059 .242 -.174 1.000

Sig. (1-tailed)

performa

nce

. .431 .447 .470 .126

wellbeing .431 . .366 .458 .403

compensa

tion

.447 .366 . .124 .152

promotio

n

.470 .458 .124 . .231

incentive .126 .403 .152 .231 .

N

performa

nce

20 20 20 20 20

wellbeing 20 20 20 20 20

compensa

tion

20 20 20 20 20

Variables Entered/Removeda

Mode

l

Variables Entered Variables

Removed

Method

1

incentive,

wellbeing,

promotion,

compensationb

. Enter

a. Dependent Variable: performance

b. All requested variables entered.

144

promotio

n

20 20 20 20 20

incentive 20 20 20 20 20

Model Summary

Mode

l

R R

Squar

e

Adjusted

R Square

Std.

Error of

the

Estimate

Change Statistics

R Square

Change

F

Chang

e

df1 df2 Sig. F

Change

1 .284a .081 -.164 .65808 .081 .330 4 15 .854

a. Predictors: (Constant), incentive, wellbeing, promotion, compensation

ANOVAa

Model Sum of

Squares

df Mean

Square

F Sig.

1

Regression .571 4 .143 .330 .854b

Residual 6.496 15 .433

Total 7.067 19

a. Dependent Variable: performance

b. Predictors: (Constant), incentive, wellbeing, promotion, compensation

145

Coefficientsa

Model Unstandardized

Coefficients

Standar

dized

Coeffici

ents

t Sig. Correlations

B Std.

Error

Beta Zero-

order

Parti

al

Part

1

(Consta

nt)

2.405 .650

3.69

9

.002

wellbei

ng

-.018 .141 -.032 -.128 .900 -.042 -.033 -.032

compen

sation

-.028 .113 -.067 -.246 .809 .032 -.063 -.061

promoti

on

.038 .114 .089 .333 .744 .018 .086 .082

incentiv

e

.143 .127 .298

1.12

9

.277 .268 .280 .280

a. Dependent Variable: performance

146