CHAPTER ONE
INTRODUCTION
1.1.Background to the Study
It is a general understanding that job satisfaction is an attitude towards job, in other words job satisfaction is an affective or emotional response toward various facets of one’s job. A person with a high level of job satisfaction holds positive attitudes towards his or her job, while a person who is dissatisfied with his or her job holds negative attitudes about the job. Job satisfaction is a result of employees’ perception of how well their job provides those things which are viewed as important. Job satisfaction is also defined as reintegration of effects produced by individual’s perception of fulfillment of his needs in relation to his work and the surrounding. Furthermore, Job satisfaction represents a complex assemblage of cognition, emotion and tendencies. There is no definite way of measuring job satisfaction, but there are varieties of ways to identify when an employee is satisfied or dissatisfied with his or her job. Small and medium enterprises (SMEs) are globally regarded as an necessary force of ensuring the economic growth and employment creation in both developing and developed countries Ariyo, 2008; Kpleai, (2009). SMEs (firms with 200 or less employees) makes up the largest business sector in every world economy Culkin and Smith (2010), and governments around the world are constantly promoting and supporting the SME growth as part of their overall national development strategy Abdullah and bin Dakar (2010). SMEs has increasingly been an economic catalyst in industrialized states as they are in the developing world, in many developed nations, more than 95% of all enterprises are within the SME sub-sector, while 80% of the total industrial labor force in Japan, 57% Germany and 46% in USA small businesses contribute nearly 39% of the country’s national income (Wang et al, 2011).
In Africa, SMEs accounts for more than 90% of businesses and contribute about 50% and Gross National Product (GDP) Fjose (2010) Kamunge, Njeru & Tirimba, (2014). For instance, in Kenya, SMEs contribute 40% of the GDP, over 50% of new jobs and account for 80% of the workforce Kithae, (2012) Mwarari & Ngugi (2013). Similarly, while in Ghana SMEs accounts for 70% of all businesses and employed 70% of the total workforce Government of Ghana, World Bank, (2006). It is also notable that more than 50% of employment in low and lowermiddle-income countries is from businesses with less than 100 employees Ayyagari, Beck & Demirgüc-kunt, (2011).
In Nigeria, the Small and Medium Scale Enterprises (SMEs) is the driving force of the economy. In previous years, SMEs represent about 90% of the industrial sector in terms of the number of enterprises NIPC, (2002). According to Jocumsen, (2014), the sector is necessary to ensure sustainable development of the country and its importance can be put in proper perspectives in relation to the structure of the Nigerian economy with many employees performance contributions as the source of technology innovation and new products. Ezeanyim, Ufoaroh and Ajakpo (2019), stated that SMEs provides employment opportunities for about 70% of the Nigerian population. In addition, available reports suggest that the agricultural sector accounts for close to 35% to 40% of the country’s gross domestic product (GDP). Hence, in achieving optimal economic development and to reduce dependency on crude oil for redistribution of economic wealth, the government seeks rescue from the SMEs by employing economic diversification, hence this can only be achieved by these enterprises ensuring the satisfaction of its employees. Ezeanyim, Ufoaroh and Ajakpo (2019) noted that small and medium enterprises in Nigeria have been a major source of economic development through its vast creation of employment, wealth creation and innovation by introducing competitive strategies, which distinguish them from other firms. These include their ability to customize products and service delivery to meet clients’ demand by putting in place innovative techniques or development of new strategies. The performance of employees in small and medium enterprises (SMEs) is a major driver for the level of industrialization, modernization, urbanization, gainful and meaningful employment for all employees willing to work, income per capital, equitable distribution of income, and the welfare and quality of life enjoyed by the citizens Aremu and Adeyemi, (2011). Farouk and Saleh (2011) outlined that small and medium enterprises contribute to employment growth at a higher rate than larger firms do.
According to Dugguh and Dennis (2014), performance is an indicator of individual success and employee performance is a multi-dimensional structure. Employee performance is the degree of fulfillment of one’s duties of the job. Employee performance has been a major problem in organizational management and adopting effective ways to motivate employees to achieve and deliver higher job performance as well as increase the organizational competitiveness is the main objective of every business organization Lee and Wu (2011). Oluwafemi (2010) noted that organizational effectiveness and efficiency depends on how effective and efficient the employees in the organization are. Employee Performance is a reflection of the commitment and focus of employees in achieving the company's main goals. Hence, increase in employee performance contributes positively to the overall performance of the company. According Chuzaimah (2013), one of the major determinants of a successful employee performance aspect is in achieving success work is the ability to work. The ability to work both intelligence, knowledge and skills is an important component in achieving good performance in SMEs. For an organization to achieve its goal, it must be able to create conditions that encourage employees to develop and improve abilities and skill.
Theresa and Henry (2016) stated that job satisfaction is an affective or emotional response toward various aspects of one’s job. A person with a high level of job satisfaction holds positive attitudes towards his or her job, while a person who is dissatisfied with his or her job holds negative attitudes about the job. Job satisfaction is a result of employees’ perception of how well their job provides those things, which are viewed as necessary. Job satisfaction has been connected with how people think, feel and observe their jobs Spector (2007). According to Lai Wan (2007), employee job satisfaction is an important target either for any organization to achieve in short run or in long run. Low level of employee satisfaction would result in high employee turnover and the turnover intention is the desire to leave an organization (Saghir, Asad and Ishtiaq, (2015). This study, which is based on the determinants of job satisfaction on employee performance in small and medium scale enterprises in Abuja, Nigeria, will provide evidence perceived to be vital tools for management decisions and controlling the day-to-day operations of the SMEs sector in Nigeria.
1.2.Statement of the Problem
Small and Medium enterprises are faced with challenges in employees performance which is affecting on the organization’s productivity, quality of work, duration of projects and profitability. Due to the global competition, these firms tend to retain hardworking or good personnel. Job security and loyalty to the organization is challenged by external market pressure and changing social norms.
According to Singh and Jain (2013), there are factors, which influence an employee’s level of job satisfaction. Some of these factors include the level of pay and benefits, the perceived fairness of the promotion system within a company, the quality of the working conditions, leadership and social relationships. The happier people are within their job, the more satisfied they are said to be. Hence, with poor employee compensation and benefit package, poor working conditions, inadequate job security, the satisfaction of employees will be affected which will lead to poor organizational performance.
Different researchers have examined the relationship between job satisfaction and employee performance but majority of studies were performed in other countries Nanjundeswaraswamy, Kavya, Sanjana (2020) other than the current study which is Nigeria, although in the last few years, there has been more research performed on the relationship between corporate social responsibility and profitability of banks in Nigeria. Although, previous studies such as, Adigun, Oyekunle and Onifade, (2017) Abiodun, 2014 examined the effect of job satisfaction on employee performance in firms, the proxy variables used to measure job satisfaction and employee performance are different from the variables which will be used in the current study. Indrayani, Landra and Suardika (2018) examined the determinants of job satisfaction on employee performance. Job satisfaction was measured using salary and promotional opportunities, while employee performance was measured using quantity of work, quality of work and timeliness of work. The findings revealed that job satisfaction has a significant positive effect on employee performance. Hence, this study intends to measure job satisfaction using salary system, benefits package, job security and manager to employee relationship while employee performance will be measured using staff commitment, customer satisfaction, productivity and goodwill, which has been very rare in research. Hence, there is a gap in the academic literature that needed to be filled. It is within this context that this study examines the determinants of job satisfaction on employee satisfaction in SMEs in Abuja, Nigeria. It is hoped that the study will shed more light on how ensuring job satisfaction affects employee satisfaction in SMEs and provide solutions to other issues faced in the SMEs sector of Nigeria.
1.3 Objective of the Study
The objective of the study was to examine the determinants of job satisfaction on Employee Performance in Small and Medium Scale Enterprises (SMEs) in Abuja, Nigeria. Specifically, the study seeks to:
- determine the effect of salary system on employee performance in Small and Medium Scale Enterprises (SMEs) in Abuja, Nigeria.
- examine the impact of benefits package on employee performance in Small and Medium Scale Enterprises (SMEs) in Abuja, Nigeria.
- evaluate the relationship between job security and employee performance in Small and Medium Scale Enterprises (SMEs) in Abuja, Nigeria.
- assess the effect of manager to employee relationship on employee performance in Small and Medium Scale Enterprises (SMEs) in Abuja, Nigeria.
1.4 Research Questions
The research questions were as follows:
- What is the significant effect of salary system on employee performance in Small and Medium Scale Enterprises (SMEs) in Abuja, Nigeria?
- How does benefits package affect employee performance in Small and Medium Scale Enterprises (SMEs) in Abuja, Nigeria?
- To what extent does job security affect employee performance in Small and Medium Scale Enterprises (SMEs) in Abuja, Nigeria?
- What is the significant effect of manager to employee relationship on employee performance in Small and Medium Scale Enterprises (SMEs) in Abuja, Nigeria?
1.5 Research Hypothesis
H01: There is no significant effect of salary system on employee performance in Small and Medium Scale Enterprises (SMEs) in Abuja, Nigeria.
H02: Benefit package do not have an impact on employee performance in Small and Medium Scale Enterprises (SMEs) in Abuja, Nigeria
H03: There is no significant impact of job security on employee performance in Small and Medium Scale Enterprises (SMEs) in Abuja, Nigeria.
H04: There is no significant relationship between manager to employee relationship on employee performance in Small and Medium Scale Enterprises (SMEs) in Abuja, Nigeria.
1.6 Operationalization of Variables
Y=f(x)
Y= Employee performance (EP)
X= Job satisfaction (JO)
Where Y = Dependent variable
X = Independent variable
X = f(x1, x2, x3, x4)
x1 = Salary system (SS)
x2 = Benefits package (BP)
x3 = Job security (JS)
x4 = Manager to employee relationship (ME)
Y = f(y1, y2, y3, y4)
y1 = Staff Commitment (SC)
y2 = Customer Satisfaction (CS)
y3 = Productivity (PR)
y4 = Goodwill (GO)
y1 = f(x1) -------------------------------------------------------- (1)
y2 = f(x2) -------------------------------------------------------- (2)
y3 = f(x3) -------------------------------------------------------- (3)
y4 = f(x4) -------------------------------------------------------- (4)
y1 = α0 + β1x1 + µ -------------------------------------------- (1)
y2 = α0 + β2x2 + µ -------------------------------------------- (2)
y3 = α0 + β3x3 + µ -------------------------------------------- (3)
y4 = α0 + β4x4 + µ -------------------------------------------- (4)
1.7 Scope of the Study
This research work is on the determinants of Job satisfaction (Salary system, Benefits package, Job security, Manager to employee relationship) on employee performance (Staff commitment, Customer satisfaction, Productivity, Goodwill) in SMEs in Abuja, Nigeria. The method of data collection was through survey with the aid of questionnaires. The population of the study was on three (3) Small and Medium scale Enterprises (SMEs) in Abuja. The sample representatives was 100 employees in total of three (3) Small and Medium Scale Enterprises (SMEs) in Abuja namely: First place supermarket, MK Barbers and Faxx supermarket. The researcher selected the following SMEs: First place supermarket, MK Barbers and Faxx supermarket because of data availability and ease of access in that location. Questionnaire, which is a primary source of data, was administered to respondents, a figure was derived from the sample of employees selected and response gotten was converted into data using simple percentage and frequency tables and regression analysis with the aid of Statistical Package for Social Science (SPSS) was used for the test of hypothesis.
1.8 Significance of the study
This research work focused on determinants of job satisfaction on employee performance in SMEs in Abuja, Nigeria. This study should provide understanding and more information to SMEs on how employee performance can be improved through job satisfaction. This research work should be of great benefit to this area because it gave a better understanding on exactly how job satisfaction affects employee performance in SMEs in Abuja, Nigeria or a related topic. It would also serve as reference for other students/researchers who want to carry out their research work in this area or do further research where recommendations are made.
1.9 Definition of Operational Terms
Job Satisfaction: the relative feelings, objective thoughts, and behavioral intentions of employees in an organization that help predict employee behavior Brown (2013).
Benefits package: the indirect, non-cash, or cash compensation paid to an employee beyond regular salary or wages Amburgey,( 2005).
Job security: the feeling of having a proper job and the assurance of its continuance in future as well as the absence of threatening factors Arabi, (2010).
Manager to employee relationship: the relationship between employer or the representative manager and employees, aimed towards maintaining commitment morale and trust to create productivse and secure workplace environment Bajaj (2013).
Staff commitment: the affective response to the whole organization and the degree of attachment or loyalty employees feel towards the organization Ongori, (2007)
Customer satisfaction: the responsibility and ability to meet customers’ needs, managing and forecasting their expectations, and highlights the importance of creating value for them (Lager, 2008).
Productivity: the ratio between the output volume and the volume of inputs. In other words, it measures how efficiently production inputs, such as labour and capital, are being used in an economy to produce a given level of output Terver, Terfa and Asibi, (2015)
Goodwill: an intangible asset that is associated with the purchase of one company by another. Specifically, goodwill is the portion of the purchase price that is higher than the sum of the net fair value of all of the assets purchased in the acquisition and the liabilities assumed in the process Okrepilov, Gravit, Nedviga and Oleg,( 2016)
