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1.1 Background to the Study
It is the concern of organizations all over the world on effective human capital strategies to enhance their productivity. It is clear that employee’s productivity in the expanding organization is a key factor in organization performance. Employees, technically known as human resources in modern organizations, are rightly considered as the most important assets (Ong & Teh, 2012). In developed countries such as USA, JAPAN, UK and Germany organizations recognize employees as the important asset that needs high consideration in promotion (Lawler & Worley, 2006). The rationale behind the use of rewards to employees is that motivated employees become satisfied in terms of fulfilling their wants, both financial and non financial. Failure to do so, employees will be tempted to leave the organization. (Azasu, 2009). On one hand, employees prefer receiving intrinsic rewards in terms of praise and recognition for certain work accomplishments, while other employees are happy with extrinsic reward in terms of salaries, bonus and incentive offered to employees (Lawler, 2008, Sajuyigbe, Bosede & Adeyemi, 2013).
In developing countries such as China, India and Thailand also employees reward is one of highly demanded factors in influencing organization performance. One of the most important factors in rewarding employees for organization performance is through recognition and appreciation (Ajila & Abiloa, 2004).
In Tanzania like any other country employees are motivated by rewards. There is a
need for organization to reward its employees for creating a successful competitive
Environment. This is one of the essential for the organizations to achieve high work performance. Some employees are highly motivated by extrinsic rewards such as increase in pay, promotions and bonus, others employees are motivated with intrinsic rewards such as appreciation, praise and recognition on (Bana & Kessy, 2007).
Paying employees for productivity has been the cornerstone of industrial and business development for centuries. Financial reward has always been important in managing employee’s performance, but over the last 25 years other elements of compensation have been developed to provide employers with more scope to reward, and thus, motivate employees. Performance management influences performance by helping people to understand what good performance means and by providing the information needed to improve it. While reward management influences performance by recognizing along with rewarding good performance as well as providing incentives to improve it. The rewards that an enterprise apply to both individual and team performance are critical in determining how affective the reward strategy will be. Also performance management involves the value an enterprise workforce could make to the overall business goals and how it could be groomed and cultivated to add most value to competitive advantage. This necessitates the need to identify how these rewards impact employee performance and how well the current reward system does this, within the chosen manufacturing companies forming the basis for this research.
The productivity and success of every organization is highly dependent on its staff (Ali, 2013; Gabcanova, 2011; Markova & Ford, 2011; Vlachos,2009). Thus maximizing the overall organisation performance requires an understanding of those factors that encourages the employees to put in extra effort at work and also in enhancing their performances (Hafiza,Shah,Jamseheed&Zaman, 2011). Reward system and management is one important Human Resource Management strategy for attracting and retaining high quality employee as well as facilitating them to improve performance (Dewhurst, Gutridge& Mohr, 2010; Ibrar& Khan, 2015).
According to Anku-Tsede&Kutin(2013) reward system can be seen as a means of actively engaging and the renewing the employee’s sense of community and mission of an organisation. In this view, an effectively administered system of rewards can provide incentive for quality workmanship and performance. Likewise, a poorly administered reward system can lead to low morale, unproductive performance and in the extreme cases a high percentage of employee turnovers. Organizations provide rewards to members in the form of wages and salaries, promotions, long service awards and certificates, end of the year bonus and other fringe benefits. These rewards are to motivate behaviour that will contribute to the achievement of the goals of organizations.The questions that readily come to mind are, what sort of behaviour does an organization want? How can reward process promote that behaviour? What motivates an organization to design reward packages for the employees? Nearly all organizations invest in the provision of rewards to motivate their employees in order to get the desired results. According to equity theory, the adequacy of such rewards will to a large extent depend on the value the employees place on the inputs they bring to the job in the form of education, experience, training, time, effort etc, with the outcomes (rewards) such as pay, promotions, praises and recognitions they receive as a result of performing the job (Fajana, 2002).
Reward systems is a broad construct that generally represents anything that employees may value and are willing to acquire in exchange for his or her contribution to work.Chiang & Birtch (2008).Pratheepkanth (2011) describe reward system to include all organisation components which may include people, processes, rules and decision making activities involved in the allocation of compensation and benefits to employees in exchange for their contribution to the organisation. From both definitions, rewards can be described as tangible benefits one can receive from engaging in a specific task. This opinion is reiterated by Torrington, Hall, Taylor and Atkinson (2011) who argue that although there are few people who claim to enjoy work for the sake of it, most people work in large part because it provides a means sustaining livelihood. This implies that people generally are concerned with the amount of benefits (whether financial or non-financial) attached to their work. The positive relationship between reward systems (especially financial rewards) on employee performance has been established in past studies (Lazear,2000;Osa,2014;Prendergast,1999;Metha ,2014; Saleem, 2011.).
Other commentators have put forward the notion that non-financial rewards are also important facilitators of organisational performance with the argument that financial performance on its own is incapable of effectively motivating employees towards optimum performance (Babakus, Yavas, Karatape&Avci, 2003; Bason, 2003; Dewhurst et al.(2009); Perry,Mesch&Paarlberg, 2006; Neckermann&Kosfeld, 2008; Dewhurst et al. (2009) for instance advanced the notion that non-financial rewards have a more significant influence on employee performance than financial rewards with the argument that financial rewards are mostly effective in boosting employees’ energy in the short-term and in most cases can have damaging unintended consequence. Three major non-monetary rewards reported to have significant effect on employee morale are: (i) praise from immediate managers, (ii) leadership attention (i.e. one on one conversation) and (iii) the opportunity to lead projects or task forces. In addition, Neckermann and Kosfeld, (2008) identify significant non-financial rewards to include social recognition from managers and colleagues alike in the form of appreciation for job completed, acknowledgement and certificates of recognition, were reported to be better drive improved performance than financial/monetary rewards .
The debate on whether to use monetary or non-monetary rewards has led to the development of the concept, Total Reward System. WorldatWork (2011) defines total rewards as holistic approach that strategically incorporates several employment factors (such as compensation, benefits and work-life amenities) in unison, to deliver desired employee attraction, motivation and retention. Thompson (2002) also defines total reward to typically encompass not only traditional, quantifiable elements like pay and benefits, but also more intangible elements such as scope to achieve and exercise responsibility, career opportunities, learning and development, the intrinsic motivation provided by the work itself and the quality of working life provided by the organisation. Kaplan (2007), also sharing this view, define total rewards as a holistic approach aligning business strategy and people strategy, aimed at bringing about maximum return and builds up employment brand, all of which create sustainable competitive advantage for organisations. According to Armstrong (2007) the conceptual basis of total reward is the bringing together of the different reward processes (that are interrelated, complementary and mutually reinforcing) with the focus of stimulating a deeper and long-lasting impact on the motivation and commitment of employees.
Similarly, Nazir, Shah and Zaman (2012) describe total rewards as an enclosing of aspects of work benefits that employees attach value to; whether it concerns provision of healthy work environment, better opportunities of learning and development or the benefits package linked to the pay. Hence, an effective reward system incorporates both the financial incentives (such as pay, fringe benefits and other money-related plans) and non-financial incentives (such as vacations/holidays, recognition and appreciations) in driving employee motivation for improved performances. Given that employees’ morale and improved productivity go hand in hand, it is therefore imperative for organisations to foster a properly administered reward system which not only has the capacity to improve the quality work efforts and employee but also act as a strategic tool for attracting skilled employees to the organisation (Armstrong & Brown, 2005; Herman, 2009). Notwithstanding, most organizations are still finding it difficult to establish an effective reward system that fairly suits the organizational demands in relation to employee performance and over organizational profitability (Osa, 2014; Roberts, 2005; WorldatWork, 2011.). Dewhurst et al. (2009) argue that the present economic situation has pushed successful companies around the world to adjust their reward systems – moving from financial to non-financial sensitive systems; whereas some organizations (to their detriment) are still sticking to the traditional method of rewards that emphasis bonuses and payment compensation. Additionally, the findings that the workers’ needs and desire from work differs from one individual to another require organization management to develop reward systems that is tailored towards the individual needs of their staffs (Dewhurst et al. 2009). Nevertheless, as emphasized by Brian (2006), rewarding and recognizing employee can be a tricky task as there is no generalized model towards its implementation; arguing that a successful system in one organization can be a failure in another.
Unilever Nigeria Plc
Unilever Nigeria Plc. was established in 1923 as a soap manufacturing company – Lever Brothers West Africa by Lord Leverhulme. Today, it is the oldest surviving manufacturing organization in Nigeria (Unilever Nigeria Plc. 2016).After a series of mergers/acquisitions, the Company diversified into manufacturing and marketing of foods and personal care products. These mergers/acquisitions brought in Lipton Nigeria Ltd. in 1985, Cheesebrough Industries Ltd. in 1988 and Unilever Nigeria Ltd. in 1996. The Company changed its name to Unilever Nigeria Plc. in 2001 in line with the global strategic direction of the business. The Company was quoted on the Nigerian Stock Exchange in 1973 and with equity holdings of 58.53% Unilever, and 41.47% Nigerian investors, the company is a true Multi-local Multinational organization with very outstanding international and local brands in her portfolio. The international brands include Close-Up toothpaste, Pepsodent toothpaste, LUX beauty soap, Lifebuoy soap, Rexona, Vaseline lotion and Vaseline Petroleum Jelly in the Personal Care Unit of the business; Blue Band Margarine, Lipton Yellow Label Tea and Knorr bouillon cubes in the Foods Unit; and OMO Multi-Active Detergent ,Sunlight washing powder and Sunlight Dish washing liquid in the Home Care Unit. Other Regional and local products include the Pears Baby Products range and Royco bouillon cubes. As at 2015, the organisation currently has over 1,200full time employees across three core departments: administration, technical/production and sales and marketing.
Cadbury Nigeria Plc
Cadbury Nigeria Plc was incorporated in Nigeria on 9th January 1965 as a company limited by shares. It became a publicly listed company with its shares traded locally on the Nigerian Stock Exchange in 1976 (Cadbury Nigeria Plc. 2016). The company is principally engaged in the manufacture and sales of branded fast moving consumer goods mostly to the Nigeria market, but also exports to other West African countries. The company’s brands fall into three principal categories, namely: Refreshment Beverages, Confectionery and Intermediate Cocoa Products. Cadbury Bournvita, Cadbury 3-in-1 Hot Chocolate are the main brands in the refreshment beverage category. In the Confectionery category, the main products are TOMTOM Classic, TOMTOM Honey Lemon, TOMTOM strawberry and BUTTERMINT. Lastly, the main brands within the intermediate cocoa products include; Cocoa Powder, Cocoa Cake and Cocoa Butter.
Nestle Nigeria Plc
Nestle Nigeria Plc is a Nigeria-based food manufacturing and marketing company founded in 1961 (Nestle Nigeria, 2016). The Company operates through two segments: Food and Beverages. The Food segment includes the production and sale of Maggi, Cerelac, Nutrend, Nan, Lactogen and Golden Morn. The Beverages segment includes the production and sale of Milo, Chocomilo, Nido, Nescafe and Nestle Pure Life. The Company manufactures and markets a range of brands, which include Infant Formula-Nestle NAN, Nestle LACTOGEN, Infant cereals-Nestle NUTREND, Nestle CERELAC, Family cereals-Nestle GOLDEN MORN, Confectionery-Nestle CHOCOMILO, Nestle KITKAT, Bouillon-MAGGI Cube, MAGGI Mix'py and Table Water-Nestle PURE LIFE. Its products include MAGGI Star Cube, MAGGI Crayfish, MAGGI Chicken, Ginger & Garlic, Golden Beef and Classic. It promotes food cultures through MAGGI Star Cook participatory cookery program in neighborhoods, and MAGGI Women Forum, a home management program targeted at semi urban and rural women.
1.2 Statement of the Problem
Osa (2014) reveals that several organisations are still finding it difficult to establish an effective reward system that fairly suits the organisational demands in relation to employee performance and over organisational profitability and this position is also shared by Dewhurst et al(2009) and Roberts (2004).There is a natural disparity between what people think they should be paid and what organizations spend in compensation thus affecting employees sense of accomplishment and this is a challenge employees in organizations face (
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