THE IMPACT OF EFFECTIVE ORGANIZATIONAL REWARD SYSTEM ON CORPORATE PERFORMANCE(A CASE STUDY OF NNPC PORT HARCOURT)

ABSTRACT

The purpose of this research is to ascertain the Impact of Effective Organizational Reward System on employees job performance in Nigeria with specific emphasis in NNPC Port Harcourt. The research questions and hypotheses addressed the extent to which improved employees job performance/reduced rate of industrial action is influenced by the implementation of effective organizational reward system. The core aspect of the study is the issue of cross-sectional survey research design in generating the required primary data. The Taro Yemen’s formula was used for the population using stratified random sampling method. The results indicated that implementation of effective organizational reward system in organizations to a large extent influenced improved employees’ job performance. This study was guided by incentive theory which emphasized that behaviour of an employee is a product of his work environment. There was also conceptual framework that established a relationship between independable variables and dependable variables.  It therefore recommends that; there should be regular review of organizational reward system to ensure fairness, maintenance of competitive rates of pay, flexibility in reward administration and rewarding people for the value they create.

CHAPTER ONE

INTRODUCTION

1.1 BACKGROUND OF THE STUDY

Reward is the benefits that from performing a task, rendering a service or discharging a responsibility. The principal reward for performing work is play, many employers also offer reward packages of which wages and salaries are only a part. The packages typically include: bonuses, pension schemes, health insurance, allocated cars, beneficial loans, subsidized meals, profit sharing, share options and much more (Ajila, C., and Abiola ,A. 2004).

Reward system is an important tool that management uses to channel employees motivation in desired ways. In other words, rewards systems seek attract people to join the organization, keep them coming to work and motivate them to perform to high levels (Ajila, C., and Abiola ,A. 2004).

According to Ferrin, and Kurt (2003) the utility enticement entrenched in an organization’s reward system is revealed in a variety of theoretical perspectives. The dichotomy between intrinsic and extrinsic rewards as initiated by Herzberg et al, labeled achievement, recognition and advancement as intrinsic rewards that motivate employees more than extrinsic rewards (salary, job security or working environment etc). Zhou et al (2009)stated that the philosophy of extrinsic rewards originated from the term “utilitarianism” which suggests that people’s behaviours is modifiable. Thus, by providing extrinsic rewards their performance could be enhanced as opposed to the term “Romanticism” which refers to intrinsic motivation that boosts the innovative and creative abilities of the employees (Ferrin, and Kurt 2003).

Vroom in his expectancy theory state that certain behaviour will be exhibited only when the expectations and consequences are related. Porter and Lawler followed vroom’s ideas and further contended that people often determine efforts at work by judging the value of their efforts and the relationship between their efforts end expected rewards. Maslow stated that only unsatisfied needs could motivate further action since it creates disequilibrium (Vroom HM 1994). Latham and Locke speculated in their goal setting theory that performance can be enhanced only when the objectives and goals of an organization are difficult and feedback is associated with the elevate performance for the attainment of higher goals (Vroom HM 1994).

Babakus et al totally negates this notion and conceived the idea of equitable reward. According to him people can only be motivated when they are treated in an equitable manner (Babakus, Yavas, Karatepe, Avci, 2000). If employees feel that their inputs are fairly rewarded they would be happier or not dissatisfied (Babakus, Yavas, Karatepe, Avci, 2000).  If they feel unfairly rewarded, they would become dissatisfied with their job and employer. It is important to note that the degree of dissatisfaction depends on the degree of perceived disparity in the reward-to-effort ratio. For some people, any smallest indication of negative disparity is enough to cause massive disappointment and a feeling of considerable injustice, others may reduce effort and become inwardly disgruntled or outwardly difficult recalcitrant or even disruptive, yet other may seek to improve their outputs by making claims or demands for more reward or seeking alternative job. It is against this background that it becomes pertinent to discuss the impact for fair reward system on corporate performance in NNPC Port Harcourt.

1.2 STATEMENT OF THE PROBLEM

Effective, fair, timely, and market-driven rewards can be motivational for managers and employees alike. Experience and research in the science of success reinforces the concept that effective and fair rewards can motivate and enhance employee’s productivity. For the past 10 years, NNPC Port Harcourt has been “experiencing problems in implementing it corporate reward system due to the non-residence of its expatriate personnel manager owing to the incidence of expatriates kidnapping in the Niger Delta.

This situation has resulted in the casualisation of most workers whose rewards are now based on a daily paid system culminating in fluctuations in organizational output. The corporate reward system of the company is usually determined by top management in the foreign headquarters of the company in Italy, while the expatriate personnel manager implements this reward system locally.

However, the non-residence of the expatriate personnel manager in Port Harcourt creates a managerial gap in the implementation of the corporate reward systems thus creating room for the development and contractors resulting in industrial actions (strikes/lockout) and unpredictable output levels. The local management of the reward system by the labour contractors also results in delays in the formulation of staff development plans. This situation demotivates employees and encourages industrial disputes and fluctuations in output levels.

It is this unfair reward system (daily paid system) and its associated industrial disharmony in NNPC Port Harcourt that informed this research.

1.3 OBJECTIVES OF THE STUDY

The main objective of the study is to examine the relationship between organizational reward system and corporate performance. The specific objectives are as follows:

1. To examine the relationship between variable pay and corporate performance.
2. To examine the relationship between bonuses and corporate performance.

iii.    To examine the relationship between profit sharing and corporate performance.

1. To examine the relationship between organizational culture and corporate performance.

1.4 RESEARCH QUESTIONS

1. To what extent does Variable pay associate with corporate performance?
2. To what extent does bonuses associate with corporate performance?

iii.    To what extent does profit sharing associate with corporate performance?

1. What is the extent to which organizational culture influence corporate performance?

1.5 RESEARCH HYPOTHESIS

In view of the above research questions, the following null hypotheses were formulated:

H01:There is no significant relationship between organizational reward system and corporate performance.

H02:There is no significant relationshipbetween bonuses and corporate performance.

1.6 SCOPE AND LIMITATION OF THE STUDY

The scope of the study is limited to Port Harcourt. Port Harcourt was chosen for the study because of its cosmopolitan nature and therefore. The find out of this study will at worst five the reader an ideal of how to improve employee’s performance through proper reward system.

In the course of carrying out this study, the researcher met certain problems and difficulties that constitute the limitations in one form or the other. The researcher being a student was pace with financial constraints time factor, and bureaucratic redtapism in the organization investigated which affected the pace of the work.

1.7 DEFINITIONS OF TERMS

Corporate Performance: It is a composite assessment of how well an organization executes on its most important parameters, typically financial, market and shareholder performance.

Organization: Organized group for people and system.

Objective:Mission, parameter,compass or targets is for organizations form or direction for the evaluation of the process in individual and work units to integrates them.

Performance:An act of presenting a play, concert, or other form of entertainment.

Reward System:      Itis a group of neural structures responsible for incentive salience (i.e., motivation and “wanting”, desire, or craving for a reward), associative learning (primarily positive reinforcement and classical conditioning), and positive emotions, particularly ones which involve pleasure as a core component.

Worker’s Productivity: The efficiency of the individual person whoworks in an industrial production.