CHAPTER ONE

INTRODUCTION

1.0 Background of the study

The relationship between employers and their employees, and the organization and its shareholders is expected to be mutually reciprocal. The employer expects employees to give their best in the areas of monitoring their performance, learning to develop themselves, adhere to rules and regulations in the performance of their assigned duties to increase productivity. They also expect their employees to be innovative and take initiative and address problems on their own. Employees on the other hand are also looking up to the employer or management to provide the necessary tools and equipment they need to work with and also get fair compensation for the work they do and the other services they provide. 

Many have said, that the most valuable asset of an organization is its human resource and therefore they must be managed efficiently to ensure increased productivity. It has also been said that compensation management is an area of the corporate world that has not been given much attention hence the very rampant industrial actions experienced in industry. Compensation plays an important role in organisations that want to reach their objectives and their goals. It goes without saying that organisations which do not properly manage this aspect of human resource activity very well will have a negative impact on the total performance of their employees and impact on productivity.

The kind of compensation that will motivate employee to give their best to influence performance positively will depend on how much it addresses their need for status, security, and their survival need as postulated by Maslow (1943, 1954) in his hierarchy of needs.

Beer et al. (1984) and Baron (1983) have stated that motivation is a set of processes concerned with the force that energizes behaviour and directs it towards attaining some goal. Kreitner and Kinicki (1992) also postulated that motivation represents those psychological processes that cause the arousal, direction and repeated production of voluntary actions that are goal directed.

For an organization to be able to effectively manage compensation to have a positive influence on the performance of its employees, it must understand the various aspects of compensation as the driving force that motivates the employees and direct their behaviour towards achieving the organisational objectives.

According to Maslow’s hierarchy of needs (1943, 1954) people in achieving organizational objectives are motivated to do so by trying to achieve certain individual needs. These needs are what are spelt out in the 5 level hierarchy of need he postulated in the 5 staged model which is well known in the field today. It therefore beholds on the management of an organization to take into consideration the various needs or need levels of its employees in designing compensation packages that will motivate them to influence performance positively.

Research in the past attests to the fact that compensation comprises more than just money. It is also said that since compensation is linked to the organisation’s strategy for survival and competitive advantage, constantly changing the strategy of an organisation to achieve competitive advantage and business goals will also mean a constantly keeping the compensation strategy also in view to meet the human resource at the point of their needs to better motivate them to achieve the organization’s goals and objectives. It is important that a rewards program should address the vision of both the company and the individual employee. This cannot be overstated. Personalized incentive programs and compensation packages should be continually assessed, modified, analyzed and adapted to ensure that high-performing employees have their eyes on the same price as the company owners.

Although employees might fully comprehend this vision and recognize the connection between the company’s targets and the achievement of their own goals, the bottom line for most employees is likely drawn more with salary, benefits and job security in mind. However, a thorough discovery process may unveil other areas of incentives not considered by company owners. Long-term incentive plans should consist of a number of components to provide a diversified package. A total rewards target represents the ideal blend of pay for different levels of employees. Although it may never actually reach the ideal, it serves as a guideline for management to consider when structuring pay arrangements for employees at different levels within the company.

It must also be noted that a good and successful compensation and incentive package is hinged on a number of factors which one may call indicators. The compensation package should be tied to the vision strategy, culture, business models and goals of the organization. A good communication system must exist to ensure there is a clear understanding of the organisation’s future. Employees must understand the roles they place in achieving the objectives of the company and they must feel secure in performing those roles. 

As alluded to above, compensation plans must be well defined at various levels of the organization and must be review periodically to keep the motivational levels of employees at desired heights. Also promises made concerning compensation by both employees and management must be honored to ensure a fair relationship between the two parties. It can be guaranteed that to indicators of a good compensation system as discussed above if given proper attention by the management of companies has the tendency of impacting on the attitudes and behaviours of employees positively hence sustaining their motivational levels to achieve corporate organizational goals.

1.1 Problem statement

Compensation is usually narrowed to cash and as a result, employers only have a tunneled vision when it comes to the issues of compensation for their employees. Other aspects of compensation which makes up the total compensation package for the employee are not given much attention. Employees themselves fail to recognize the fact that their compensation is a package and not only related to cash. The byproduct of the above understanding of compensation is that it is poorly managed and most of the time performance is affected adversely. Therefore the problem the researcher intends to investigate into is to understand what contributes to total compensation and how it can be better managed and linked to employee performance. 

1.2 Objectives of the study

The objectives of the study are divided into two; the general objective and specific objectives.

1.2.1 General Objective

The general objective of the study is to determine the effect of compensation management on employee performance.

1.2.2 Specific objectives

The following are the specific objectives of the research:

i.                 To determine the importance of compensation management on employee performance at the St. Michael’s Hospital Pramso.

ii.              To identify the compensation packages available at the St. Michael’s Hospital

Pramso.

iii.            To investigate the problems and challenges associated with compensation management at the St. Michael’s Hospital Pramso.

iv.             To identify other forms of compensation and recommendation ways of addressing challenges in compensation management at the St. Michael’s Hospital Pramso.

1.3 Research Question 

The following questions are what the research seeks to find answers to:

i.                   What is the importance of compensation management on employee

performance at the St. Michael’s Hospital Pramso?

ii.                 What compensation packages are available at the St. Michael’s Hospital

Pramso?

iii.               What are the problems associated with compensation management at the St.

Michael’s Hospital Pramso?

iv.               What other forms of compensation can be employed and how can

compensation be better managed to influence employee performance at the St.

Michael’s Hospital Pramso?

1.4 Justification for the study

The study primarily has the responsibility to provide insight into the impact of compensation on employees’ performance and productivity at the St. Michael’s Hospital Pramso. The outcome of the study will also serve as a knowledge base for a comprehensive look into the lapses in the management of compensation at the St.

Michael’s Hospital and by extension other similarly structured hospitals. After the study, findings will also serve as a reference source for further research into the field of compensation by future researchers.

1.5 Brief Methodology

The researcher employed the random sampling method to identify the respondents of the questionnaires. Open lines of communication were established to allow for further clarifications should there be the need for that. The respondents were mainly employees of the St. Michael’s Hospitals and the researcher employed the use of a combination of structured interviewing and the administering of questionnaires for the collection of the data for the study. The data was analyzed by the use of SPSS data analysis software. 

1.6 Scope of the study

The research study covers the entire St. Michaels Hospital Pramso located in the

Bosomtwi district of the Ashanti region on the Lake Bosomtwe road. All departments of the organization will be involved and both management and staff of the organization will be sampled in the collection of data for the study. The study will cover a fair balance of male and female employees of the hospital and cut across the entire staff of the organization, thus from junior staff to management staff.

1.7 Limitations of the study

The researcher faced challenges in the retrieval of questionnaires since it was a hospital and employees were constantly seeing clients. Also this limited the contact time the researcher had with respondent to seek clarification for some of the responses. The researcher would have also wanted to analyze the result of the studies into a greater detail with more statistical elements but the inability to understand and manipulate the data analysis software posed a challenge. 

1.8 Organisation of the study

The study comprises of five chapters. Chapter one is on the Introduction which captures sub headings from Background of the study, Problem Statement, Objectives of the study, Research Question, Significance of the study, Brief Methodology, Scope of the Study, Limitations of the study and Organisation of the study; chapter two on the Literature Review, chapter three focuses on the Methodology and Organizational Profile, chapter four Data Presentation, Analysis and Discussion of Findings and chapter five deals with the Summary of Findings, Conclusion and Recommendations.

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