EFFECT OF REWARD MANAGEMENT ON EMPLOYEE PERFORMANCE IN SELECTED FOOD COMPANIES IN IBADAN, OYO STATE, NIGERIA.

ABSTRACT

Seeing how important and necessary rewards management strategies are in the determination of employees’ job performance through past body of research. This has encouraged companies in the food industries to improve their rewards strategies in order to get the maximum performance ability of their employees. Management teams must ensure that the right reward management strategies (financial and non-financial) such as; pay, fringe benefits, recognition, and promotion are put in place within the organizations to ensure efficiency and effectiveness is achieved using the appropriate rewards management strategies for appropriate situations.

 

The study examines the effect of rewards management on employees’ performance of selected food industries using the staff population of 3,556 of four selected food processing industries. The study adopted Taro Yamane sampling formula to arrive at the sample size from the employees total population. The data for study were collected through the use of questionnaires. The coefficient of Cronbach Alpha reliability test ranges from 0.00 to 1.00 with any value above 0.5 indicating that the research instrument is reliable. The response rate was 100%,. The data collected were analyzed using linear regression Analysis.

 

All the analyses were carried out using SPSS. The results of the analysis revealed that, pay had positive and significant effect on employees’ job performance (β = 0.764, R= 0.359, R2 = 0.129, p = 0.000<0.05), fringe benefits had positive and significant effect on employees’ job performance ( R = 0.388, R2 = 0.150 , <0.05), recognition had a positive and  significant effect on employees’ job performance ( R= 0.355, R2 = 0.126 , <0.05), promotion had a positive and significant effect on employees’ job performance ( R = 0.496, R2 = 0.246 , <0.05)

 

The study concluded that reward management has a significant effect on employees’ job performance in selected food industries. The recommendation is that Employers of labour should do a thorough review of the reward packages of their employees and ensure that it meets the current trends in terms standard of living or costs of living. Other researchers should carry out the study using larger geographical location(s).

 

Keywords: Pay, Fringe Benefits, Recognition, Promotion, Employees’ job performance, Rewards.

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Chapter One

1.1              Background to the Study

Employee performance is a crucial factor of every firm or organization, and this factor has to be deeply looked into and be given the most attention and consideration because the success of any and every organization depends on and begins with the performance of the employees. Knowing fully well by every organization that plants and machineries cannot provide maximum output on its own, employees (that is, human beings who are the main resources an organization needs) are needed to operate these plants and machineries and work together with it to provide maximum output of the products or services that is needed and this is because it is only human resource has their output depending on a number of motivating factors that can perform, provide and produce the expected outputs. Employee performance could be negative or positive and either of these have great impacts on the organization at large. Employee performance could include; job quality, job accomplishment, goal achievement, employee commitment, team work, and many more. Employee performance is also simply the way employees respond to performance drivers in the organization which includes many but a few will be mentioned like, motivation, internal communication, training and development, leadership style, etc.

In the Canadian food manufacturing industry, it was discovered that during the recession period of 2009, food manufacturers faced similar challenges to other industries but food industry performance was much different. Food manufacturing proved to be remarkably resilient in both revenue and employment compared to other manufacturing industries. The data showed that during the 2009 recession, the general manufacturing sector lost sales of about 17%, while food industry sales continued its normal course of growth (Kevin Grier, 2014)

Germany’s total food retailing revenue grew significantly, reaching EUR 243 billion in 2017. Germany’s food and beverage industry is the fourth largest industry sector in Germany, the industry is best characterized by its small and medium sized enterprise sector of more than 6,000 companies employing a workforce of almost 600,000 (Germany Trade and Invest, 2018).

Preamble Central Bureau of Statistics (BPS) Indonesia states that the production of manufacturing industry in the food industry rose 8.20% and has contributed the most in shaping the GDP Indonesia throughput 2011-2017. The success of the manufacturing industry becomes a problem for the manufacturing companies concerned with how to maintain the performance of the organization that has actually contributed to the nation and state. Another problem faced by the company’s management is preserving the competitive ability that can be demonstrated by the success of the organization to achieve high performance, because not a few large-scale manufacturing companies in the food and beverage industry in Indonesia go public and succeed, such a PT Indofood CBP Sukses Makmur Tbk, PT Mayora Indah Tbk, PT Ultrajaya Milk Industry and Trading Company Tbk, and others (Purbasari & Septian 2017).

Local biscuits manufacturers have consistently struggled to fight over increasing competition in the market place. Kenyan supermarkets are filled with 40% imported products mainly from Comesa and other developed countries despite the Kenya policy “buy Kenya, build Kenya” (KAM, 2016). Efficiency in performance and quality of products is challenged with such practices. This has led to the stagnation of the food industry in terms of product and service quality, innovation, utilization of resources amd employee resourcefulness. Companies have adopted compensation practices to motivate employees to perform in order to improve management.

It is of important notice that in Ghana, managers tend to focus more on monetary incentives and perks as motivation tools (which is basically the extrinsic reward factors) for their employees. The way managers motivate their workers to help achieve not only the organization but also that of their own personal interest stems from both the complex nature of work environment as well as the wide array of people employed within them (Eshun & Duah, 2011)

Employees are the backbone of any organizations. They are the most precious and important asset among all the assets of any organization (Ganesh, 2015). Organizations are aware of the fact that employee performance is the key factor behind their success, which is why the organization management is usually finding ways to increase the level of employee performance through various methods. It is the mission of organizations to get people together to accomplish tasks and objectives of the organization by utilizing the available resources effectively and efficiently. However, if there is no strong human resources, organizations will not be able to achieve their set goals and objectives as expected. Based on this, Mayson and Barret (2016) admit that organizations can achieve greater performance and growth only when they are able to attract, motivate and retain qualified employees by offering competitive salaries and rewards. Mabaso and Dlamini (2017) stress that employees who are well paid will in turn display favourable attitude towards their job and this will lead to better job performance.

It is generally believed that employee performance is multidimensional and essential for organizational success. Job performance is as a result of three factors. These are skills, effort and the nature of work conditions. The skills include knowledge, abilities and competencies the employee brings to the job. While effort is the degree of motivation the employee puts in toward getting the job done and the nature of work conditions is the degree of accommodation of these conditions in facilitating the employee’s productivity. (Kazmi, Amjad and Khan, 2008).

Employee performance could include job quality, employee commitment, goal achievement and job accomplishment. Employee performance is also simply, the way employees respond to performance drivers in the organization which includes many but a few will be mentioned like, motivation, internal communication, training and development, leadership style, etc.

The job performance of workers depends upon the different factors contributing to the achievement of organizational goals and objectives. The organization is the combination of employees, policies and procedures. It could be managed effectively with the help of proper reward management policies and positively motivated employees. There has to be an effective and efficient reward management system in organizations. It has been reported that providing the application of reward (in terms of a combination of financial and non-financial rewards) would impact on the performance of employees (Esione, Osita and Ngige, 2020) and quality of work as well (Allan, 2019). Thus, it could be argued that in order to get the best results, organization should consider a variety of ways to reward employees for their employees.

However, it should be noted that success in the management of employees’ reward may not essentially bring about improved job performance. This is because some other factors also influence an employee’s job performance. Such factors are not limited to the nature of labor/ management relationship, work environment, the level of learning and development, availability of appropriate working tools and job security. Muogbo and Chikenze (2018) however observed that of all these factors, motivation coming from reward is seen as the most important.

There have been studies on reward management and employees’ job performance with contradictory findings. For example, studies by (Ideh and Ekwoaba, 2020; Balogun and Omotoye, 2020; Esione, et al 2020; Salah, 2016; Mbah et al., 2015) showed that a positive connection exists between pay reward and workers’ performance. Despite the fact that fast-food businesses are among the specific businesses that employ a large number of workers and hence contribute positively to Nigeria’s economic development, yet there is a shortage of literature and studies on reward management and employees’ performance in the fast-food industry. Based on the above-identified research gaps, this study seeks to determine the effect of reward management on the performance of workers in the fast-food enterprises in Ibadan, Oyo State, Nigeria.

Reward System is one of the significant methods to boost workers morale to contribute to increased job performance. Reward system is a method of recognition of workers contribution to organizational growth. However, in the context of this study, indicators of reward system (financial rewards – pay, bonuses, etc. and non – financial rewards – fringe benefits, recognition and promotion) will be put in to consideration with regards to the workers job performance in Food industries in Ibadan Metropolis.

Financial or monetary reward is one of the components of reward management system. Pay is a major component of the compensation process, which is aimed at reimbursing employees for their work and motivating them to perform to the best of their abilities. Hence, pay signifies payment received by employees from their employers in exchange for their contributions to the organization. Pay (wages and salaries) is an important factor of human resource management practice that makes employees to be satisfied with their jobs (Fapohunda, 2012b). However, poor wages or salary has been identified to be a major cause of low employee job performance in various organizations. Mwangi et al. (2017) reported that salary and compensation were the key institutional factors affecting job satisfaction of employees since they fortified a pleasure or positive emotional state. From the employees view point, financial reward systems should meet their expectations in terms of equity and fairness. The reward policies should be well-communicated to the employees understanding, and the rewards should match market rate, qualification and skills. Managers must therefore put in place proper procedure to manage this financial reward system so that the organization can achieve its goals and objectives.

Another components of reward management system is the non – financial reward system. This consists of fringe benefits, recognition at work and promotion. Fringe benefits are regarded as those types of rewards other than salary that constitute an important part of the remuneration package of most employees. It is an addition to other forms of cash payment like wages and salaries that are intended to improve the quality of work life for employees and increase their cooperation and job performance. Yousaf, Latif, Aslam, and Saddiqui (2014) see fringe benefit as that incentive that is given to employee in addition to pay, and has the ability to motivate employees and enhances their job satisfaction and performance. Employees perceive the fringe benefits given them as being a part of the total reward package which is capable of influencing their behaviors at work.

Recognition is regarded as the appreciation and status that an employee receives from his organization. It is a process of giving an employee a certain status within an organization and it is a very crucial factor towards an employee’s motivation. Alam, Saheed and Akter (2013) posited that recognition is the identification and acknowledgement given to employees for something. This suggests that recognition is an appreciation of employees’ contribution to their organization. In addition to money, non-monetary rewards such as recognition has been used to attract, retain and motivate employees towards achieving organizational goals around the world. The basic purpose of recognition program is to define a system of pay and communicate it to the employees so that they can link their reward to their performance which will ultimately lead to employees’ job satisfaction. Recognition may consist of social reinforcers such as writing somebody’s name in the company newsletter; plaques or letters of commendation; or even verbal appreciation privately or publicly. Studies have shown that employees who are not recognized in their work place tend to exhibit low job performance such as lateness to work, high employee turnover and absenteeism.

Promotion is the acknowledgement of employee’s efforts and their commitment to work. It is an incentive tool that influences employees in the work place. It is an occasion given to employees by their employers to elevate or change employees from their present positions to higher positions of service within an organization. Njoroge, (2011), refers to promotion as the advancement of a worker to a better job in terms of more skills, responsibilities, status and remuneration. When an employee is promoted to more challenging and more demanding job, they feel trusted and their contributions valued in the organization. Such an employee is more likely to give his/her all to the organization.

Studies have considered promotion as one of the most important factors for increasing employees’ job performance. Muhamad and Akhter (2014) postulates that organizations that have sufficient opportunity for promotion do foster job satisfaction among employees especially, when it is based on seniority, stipulated period, and performance as specified in the employment contract. Furthermore, employees who perceive their promotion and promotion decision to be fair tend to be more committed to their organizations and experience career satisfaction which subsequently lead to higher job satisfaction than those who do not have such opportunities in their organizations.

The implication of promotion is that it gives employees the opportunity for advancement and growth in their current work place which consequently increase employees’ job satisfaction. Hence, raise in salary, opportunities for personal growth, and increase social status as a result of promotion in the work situation tend to be valued by the employees thereby improving their job performance. This suggests that promotion is not just about raise in salary alone but, includes other work related benefits such as change in rank, status and responsibility which make employees happy.

Thus, it is obvious that financial and non- financial rewards such as pay, fringe benefits, recognition and promotion have been used by organizations as useful instruments to enhance the job performance of employees and therefore their retention. Hence, this study intends to examine how rewards (financial rewards – pay, bonuses, etc. and non – financial rewards – fringe benefits, recognition and promotion) could improve employees’ job performance in food industries in Ibadan metropolis.

1.2              Statement of the Problem

Food industries are among the specific manufacturing companies that employ a large number of workers and hence contribute positively to Nigeria’s economic development, yet there is a shortage of literature and studies on reward management and employees’ performance in the food industry. Consequently, a lot of studies have been carried out to advance the understanding of reward system and the extent to which it influences the level of employees’ job performance. For example, the study by Mbah et al., (2015) showed that a positive connection exists between pay reward and workers’ performance.

In spite of the increasing interest of organizations to provide effective reward system that can motivate employees to work harder and increase their job performance, most employees in Nigeria appear not to put in their best with their rewards. Thus, the intention of any reward system in any organization is to attract, retain and maintain a satisfied workers that will always stay focused on producing quality products.

Rewards and employees’ job performance currently remain a problem of most organizations. Nevertheless, employees’ job performance is critical for the success of any organization as well as quality of products provided by the organization to their customers. However, researches have revealed that low employees’ job performance in the food industries are attributed to low pay, lack of promotion or opportunities to move to position of higher authorities, inadequate fringe benefits. Also, poor or inadequate pay (salaries and wages) has been found to be responsible for the strained employer employee relationship, threatened industrial peace in the food industries in Nigeria.

Therefore, this study proposes to examine how rewards (financial rewards – pay, bonuses, etc. and non – financial rewards – fringe benefits, recognition and promotion) could improve employees’ job performance in food industries in Ibadan metropolis. This study seeks to solve the identified problems in various research, which are the problems of employee absenteeism, to look into the problem of the rate of employee turnover, as well as the issue of reduced organizational productivity.

1.3       Objectives of the Study

The main aim of the study is to examine the effect of reward management on employees’ performance in Food Industries in Ibadan. The specific objectives of the study are as follows:

  1. to find out the level of job performance of employees in food industries in Ibadan
  2. to find out the effect of pay on employees’ job performance in food industries in Ibadan
  3. to ascertain the effect of fringe benefits on employees’ job performance in food industries in Ibadan metropolis
  4. to establish the effect of recognition on employees’ job performance in food industries in Ibadan Metropolis
  5. to investigate the effect of promotion on employees’ job performance in food industries in Ibadan Metropolis
  6. to examine the relative contribution of pay, fringe benefits, promotion and recognition on employees’ job performance.
  7.  to ascertain the joint contribution of pay, fringe benefits, promotion and recognition on employees’ job performance.                                              

1.4       Research Questions

The following research questions are raised to guide the study:

  1. What is the level of employees’ job performance in selected food industries in Ibadan metropolis?
  2. What is the effect of pay on employees’ job performance in selected food industries in Ibadan metropolis? 
  3. What is the effect of fringe benefits on employees’ job performance in selected food industries in Ibadan metropolis?
  4. What is the effect of recognition on employees’ job performance in selected food industries in Ibadan metropolis? 
  5. To what extent does promotion affects employees’ job performance in selected food industries in Ibadan metropolis?

1.5       Research Hypotheses

The following research hypotheses are formulated to pilot the study and they will be tested at 0.05 level of significance:

  1. There is no significant effect of pay on employees’ job performance in selected food industries in Ibadan metropolis.
  2. There is no significant effect of fringe benefits on employees’ job performance in selected food industries in Ibadan metropolis
  3. Recognition has no significant effect on employees’ job performance in selected food industries in Ibadan metropolis.
  4. Promotion has no significant effect on employees’ job performance in selected food industries in Ibadan metropolis
  5. There is no significant relative contributions of pay, fringe benefits, promotion and recognition on employees’ job performance.
  6. There is no joint contribution of pay, fringe benefits, promotion and recognition on employees’ job performance.

1.6       Scope of the Study

The study will focus on the effect of reward management on employee performance and how it will be affected by some other variables that will be used as moderators. The geographical scope of this study is Ibadan Metropolis, Oyo State, Nigeria. This was chosen on the premise that it has quite a number of food processing industries. The employees in industries are chosen because they play an important role in the production processes of the company. The content scope of this study focuses on issues relating to job performance, financial rewards, non – financial rewards, etc.

1.7       Significance of the Study

Employees in different organizations have different needs and place different values to the rewards they may expect to receive and consequently they work towards better job performance and productivity.

The findings of the study will enable management to plan, set and implement effective and efficient rewards strategies that may lead to improved performance of the organization which in turn will lead to economic growth and stability of food industry and hence growth and stability of the country.

In addition, the findings of this study will assist the stakeholders in Food industries especially employers of labor to make policies that will encourage the engagement of the employees in terms of reward system (financial and non – financial) so as to increase the level of their job performance.

Furthermore, the study will serve as guide to the researchers on how reward management systems can be sustained and factors that could be used to improve employees’ job performance. This study would also provide useful guide for researchers to further investigate in this area of study, and it would be vital for future reference and contribute to the available body of knowledge. It will also enable them to empirically ascertain their level of job performance thereby increasing their level of commitment to the job.

1.8       Operationalization of Variables

Y = f (X)

Y = Dependent Variable

X = Independent Variable

Where:

Y = Employee Job Performance

X = Rewards System (Financial and Non – Financial)

Y = (y)

X= (x, x2, x3, x4)

Where:

Y = Employee Job Performance (JP)

x1 = Pay (P)

x2 = Fringe Benefits (Fb)

x3 = Recognition (R)

x4 = Promotion (Pr)

Y = f(y1, y2, y3)

y1 = Job Accomplishment

y2 = Goal Achievement

y3 = Job Quality

Y= α0 + β1x1 + µ---------------------------------------- Equation 1

Y= α0 + β2 x2 + µ----------------------------------------Equation 2

Y= α0 + β3x3 + µ----------------------------------------Equation 3

Y= α0 + β4x4 + µ----------------------------------------Equation 4

β= regression parameter, which measures the coefficient of the independent variable, each of these indicators measures the effect of a given change in the independent variable on the dependent variable.

α0= constant or intercept of the independent variable, this is the average value of the dependent variable when the independent variable is equal to zero.

µ= error term or stochastic variable, this is included in the model to accommodate the influence of other variables that affect the dependent variable but which are not included in the model.

 

1.9       Definition of Operational Terms.

Job Performance: Job performance is a work related activities expected of an employee and how well those activities were executed. In this study, this is the efforts of employees towards achieving job accomplishment, goal achievement and job quality.

Job accomplishment: This is the success or achievement attained after a lot of work or effort.

Goal Achievement: This is the result gained by the effort directed towards a task.

Job Quality: This is the degree of excellence of a specific work or task.

Reward: This consists of financial rewards and employee benefits. In this study, reward will be regarded as both financial and non – financial rewards. These includes remuneration, benefits, bonuses and incentives.

Reward system: This refers to the different types of rewards available and provided to employees by their organizations.

Compensation: In this study, this includes pay provided by an employer to its employees for services rendered (such as time, effort, skill). This includes both fixed and variable pay tied to performance levels.

Benefits: These are programmes an employer uses to supplement the cash compensation employees receive. These are health, income protection, savings and retirement programmes provide security for employees and their families.

Fringe benefits: These are those rewards that an employee receives from the organization other than wages and salaries.

Pay: Pay is the financial reward that an employee receives from his employer in an employment relationship.

Promotion: Promotion is a shift in upward direction in organizational hierarchy with more responsibility and pay raise.

Recognition: Recognition refers to the praise and appreciation that an employee receives from his organization for performing a task.