Project – The Influence of Compensation Strategy on employee performance in Organisation. Case study of First Bank Plc Benin city Branch
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CHAPTER ONE
INTRODUCTION
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Background to the Study
Compensation strategy is a significant factor that influences employee performance in organizations. According to Akanbi and Ofoegbu (2013), a well-structured compensation strategy can motivate employees to improve their performance, leading to increased productivity and overall organizational success. The authors conducted a study on Nigerian organizations and found a positive correlation between compensation strategy and employee performance. They suggested that organizations should develop a comprehensive compensation strategy that includes both financial and non-financial benefits to enhance employee performance.
Similarly, a study by Oyewunmi, Oyewunmi, and Oludayo (2016) on Nigerian oil and gas companies revealed that a well-implemented compensation strategy could significantly improve employee performance. The authors found that employees who perceived their compensation as fair and competitive were more likely to be motivated to perform better. This study underscores the importance of fairness and competitiveness in compensation strategy.
However, not all studies agree with the positive correlation between compensation strategy and employee performance. For instance, a study by Ojokuku and Sajuyigbe (2014) found that while compensation strategy could influence employee performance, other factors such as work environment and leadership style also played significant roles. The authors argued that a holistic approach that considers all these factors would be more effective in improving employee performance.
Despite the mixed findings, the majority of the literature supports the positive influence of compensation strategy on employee performance. A study by Oke, Idowu, and Omolayo (2017) found that a well-structured compensation strategy could lead to increased job satisfaction, which in turn could improve employee performance. The authors suggested that organizations should regularly review and update their compensation strategies to ensure they remain competitive and relevant.
Furthermore, while there is a general consensus that compensation strategy can influence employee performance, the extent of this influence varies across different studies. More research is needed to understand the specific mechanisms through which compensation strategy influences employee performance and to identify the most effective compensation strategies for Nigerian organizations. As Ojokuku and Sajuyigbe (2014) suggested, a holistic approach that considers all these factors may be more effective in improving employee performance. Despite the need for further research, the existing literature provides valuable insights for organizations seeking to improve employee performance through effective compensation strategies.
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Statement of the Problem
The problem of the influence of compensation strategy on employee performance in organizations in Nigeria is a multifaceted issue that requires a comprehensive understanding. The first issue is the lack of a standardized compensation strategy across various organizations in Nigeria. This lack of standardization often leads to disparities in employee compensation, which can significantly affect their performance. Employees who feel under-compensated may not be motivated to perform at their best, leading to decreased productivity and efficiency.
The second issue is the lack of transparency in compensation strategies. In many Nigerian organizations, employees are not privy to how their compensation is calculated. This lack of transparency can lead to feelings of unfairness and dissatisfaction, which can negatively impact employee performance. Employees who feel that their compensation is not commensurate with their efforts may not be motivated to put in their best at work.
Thirdly, there is the issue of the lack of a performance-based compensation strategy. Many organizations in Nigeria still operate on a flat-rate compensation system, where employees are paid the same amount regardless of their performance. This system does not incentivize high performance or reward exceptional employees, leading to a lack of motivation and decreased productivity.
The fourth issue is the lack of a comprehensive benefits package as part of the compensation strategy. In many Nigerian organizations, the compensation strategy is focused solely on monetary rewards, neglecting other forms of compensation such as health benefits, retirement plans, and professional development opportunities. This narrow focus on monetary compensation can lead to employee dissatisfaction and decreased performance.
The fifth issue is the lack of employee involvement in the development of compensation strategies. Employees are often not involved in the decision-making process when it comes to their compensation, leading to a disconnect between what the organization believes is fair compensation and what the employees believe they deserve. This disconnect can lead to decreased employee satisfaction and performance.
Lastly, there is the issue of the lack of regular reviews and updates of compensation strategies. Many organizations in Nigeria do not regularly review and update their compensation strategies to reflect changes in the market and the cost of living. This lack of regular updates can lead to employees being under-compensated, which can negatively impact their performance.
1.3 Aim and Objectives of the Study
The aim of the study is to examine the Influence of Compensation Strategy on employee performance in Organisation. The specific objectives are:
- To examine the relationship between compensation strategy and employee performance.
- To find out the impact of compensation strategy on employee motivation in the workplace.
- To evaluate the effectiveness of the current compensation strategy in enhancing employee performance.
- To find out the impact of compensation strategy on employee workers commitment.
1.4 Research Questions
The research questions are buttressed below:
- What is the relationship between compensation strategy and employee performance in First Bank?
- How does the compensation strategy impact employee motivation in the workplace?
- How effective is the current compensation strategy in enhancing employee performance?
- What is the impact of the compensation strategy on employee workers commitment?
1.5. Research Hypothesis
The hypothetical statement of the study is buttressed below:
Ho: Compensation strategy has no significant impact on employee performance in First Bank
H1: Compensation strategy has significant impact on employee performance in First Bank
1.6. Significance of the Study
Hello! The significance of studying the influence of compensation strategy on employee performance in an organization is multi-faceted. Firstly, it provides an understanding of how compensation strategies can motivate employees to perform better. Compensation is not just about the monetary aspect; it also includes benefits, rewards, and recognition. A well-structured compensation strategy can boost employee morale, increase job satisfaction, and foster a positive work environment. This, in turn, can lead to improved productivity and performance.
Secondly, the study can help organizations to design and implement effective compensation strategies. By understanding the correlation between compensation and performance, organizations can tailor their compensation packages to meet the needs and expectations of their employees. This can help in attracting and retaining top talent, which is crucial for the success and growth of any organization. It also enables organizations to maintain a competitive edge in the market.
Thirdly, the study can provide insights into the role of compensation in employee engagement. Engaged employees are more likely to be productive and contribute positively to the organization. Compensation can be a powerful tool to engage employees and make them feel valued and appreciated. This can lead to increased loyalty and commitment, reducing turnover rates and associated costs.
Fourthly, the study can shed light on the potential drawbacks of certain compensation strategies. Not all compensation strategies may lead to improved performance. For instance, a strategy that focuses solely on monetary rewards may not necessarily motivate employees who value non-monetary benefits such as flexible working hours or professional development opportunities. Therefore, the study can help organizations to avoid pitfalls and make informed decisions.
Fifthly, the study can contribute to the existing body of knowledge on human resource management and organizational behavior. It can provide empirical evidence to support or challenge existing theories and models. This can lead to the development of new theories and models, advancing our understanding of the complex relationship between compensation and performance.
Lastly, the study can have policy implications. Policymakers can use the findings to develop policies that promote fair and equitable compensation practices. This can help to address issues such as wage inequality and gender pay gap, contributing to social justice and economic development.
1.7. Scope of the Study
The Influence of Compensation Strategy on employee performance in Organisation. Case study of First Bank Plc Benin city Branch.
1.8. Operational Definition of Terms
Influence: In the context of this study, influence refers to the capacity or power of a particular factor (in this case, the compensation strategy) to produce effects on the actions, behavior, or opinions of others (here, the employees). It’s about how one aspect can shape or direct certain outcomes.
Compensation Strategy: This refers to the plan or approach an organisation uses to remunerate its employees. It includes all forms of financial returns, tangible services, and benefits that employees receive as part of their employment. The strategy can be designed to attract, motivate, and retain employees.
Employee: An employee is an individual who works part-time or full-time under a contract of employment, whether oral or written, express or implied, and has recognized rights and duties. In this context, the focus is on those working within an organisation.
Performance: In the context of an organisation, performance refers to the accomplishment of a task or fulfillment of a duty by an employee. It’s often measured against predetermined targets and goals. It can include aspects like efficiency, effectiveness, and quality of work.
Organisation: An organisation is a structured group of people who come together to meet a specific goal or set of goals. In the business context, these goals often relate to providing a product or service. The organisation provides a framework that enables its members to work together effectively.
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Project – The Influence of Compensation Strategy on employee performance in Organisation. Case study of First Bank Plc Benin city Branch