ABSTRACT
This study examines the effect of compensation strategies on organizational performance in selected tertiary Institution in Akwa Ibom State. The specific objectives were to ascertain the effect of basic pay on organizational performance in selected tertiary Institutions in Akwa Ibom State; to examine the effect of leave grant payment on organizational effectiveness in selected tertiary Institutions in Akwa Ibom State, to analyse the effect of accommodation allowance and health allowance on organizational performance in selected tertiary Institutions in Akwa Ibom State and to determine the challenges of compensation strategies in selected tertiary Institutions in Akwa Ibom State. The study adopted the survey research design. A total number of (6595) six thousand five hundred and ninety five were the population of the study in which (377) three hundred and seventy-seven sample representatives were derived from the population through the Taro Yumane formula. Primary data were sourced through questionnaire administered to employees of the selected tertiary Institutions in Akwa Ibom State. simple percentages statistical analysis, mean score and standard deviation were used for data analysis, while pearson product moment correlation with the aid of statistical packages for social science (SPSS) was used for testing hypotheses one and two while hypotheses three and four were tested using kruskal wallis test. The findings of the study revealed that basic pay has a positive and significant effect on organizational performance, leave grant payment has a positive and significant effect on organizational effectiveness, health and accommodation allowance has a negative and no significant effect on organizational performance, organizational politics and capability to pay does not affect organizational performance. From the hypotheses, the study concludes that there is significant effect of basic pay on organizational performance in selected tertiary Institutions in Akwa Ibom State, there is significant effect of level grant payment on organizational effectiveness in selected tertiary Institution in Akwa Ibom State, there is no significant effect of health and accommodation allowance on organizational performance in selected tertiary Institution in Akwa Ibom State. The following recommendations were made based on findings of the research: Management of tertiary Institutions should ensure adequate and prompt payment of salaries to their employees, organizations should instill timely health and accommodation allowance payment to their employees as a culture, compensation strategies should be modified periodically to detect and eliminate all forms of organizational politics that would hinder its execution.
TABLE OF CONTENT
Cover Page - - - - - - - - - i
Titled
Page - - - - - - - - - ii
Declaration - - - - - - - - - iii
Certification - - - - - - - - - iv
Dedication - - - - - - - - - v
Acknowledgement
- - - - - - - - vi
Table
Content - - - - - - - - vii
Abstract - - - - - - - - - x
List
of Table - - - - - - - - - xi
CHAPTER 1: INTRODUCTION
1.1
Background of the Study - - - - - - 1
1.2
Statement of the Problem - - - - - - 3
1.3
Objectives of the Study - - - - - - 4
1.4
Research Questions - - - - - - - 4
1.5
Research Hypotheses - - - - - - - 4
1.6
Significance of the Study - - - - - - 5
1.7
Limitation of the Study - - - - - - 5
1.8
Scope of the Study - - - - - - - 6
1.9
Profile of the Studied
Organization - - - - - 6
1.10
Operational Definition of
Terms - - - - - 7
CHAPTER 2: REVIEW OF RELATED LITERATURE
2.1 Conceptual
Framework - - - - - - 10
2.1.1 Compensation - - - - - - - - 10
2.1.2 Determinant
of Employee’s Compensation - - - - 11
2.1.3 Categorization
of Employee’s Compensation - - - 12
2.1.4 Factors
Determining a Compensation Plan - - - - 13
2.1.5 Compensation
Plan Determination Process - - - - 14
2.1.6 Direct
Financial Payments and Employee’s Motivation - - 15
2.1.7 Benefits
and Employee’s Motivation - - - - - 19
2.1.7.1 Benefits
Classifications - - - - - - 20
2.1.7.2 Recognition
Benefits - - - - - - - 21
2.1.7.3 Other
Benefits - - - - - - - 22
2.1.8 Organizational
Performance - - - - - - 23
2.1.8.1 Performance
Measurement - - - - - - 25
2.1.8.2 Role of
Performance Measurement - - - - - 27
2.2 Theoretical
Framework - - - - - - 29
2.3 Empirical
Review - - - - - - - 33
2.4 Summary
of the Reviewed Related Literature - - - 35
2.5 Gap in
Literature - - - - - - - 36
CHAPTER 3: METHODOLOGY
3.1 Research
Design - - - - - - - 37
3.2 Sources
of Data - - - - - - - 37
3.3 Population
of the Study - - - - - - 37
3.4 Sample
Size Determination - - - - - - 38
3.4.1 Sample
Size Apportionment - - - - - - 38
3.5 Sampling
Technique - - - - - - - 39
3.6 Description
of Research Instrument - - - - - 39
3.7 Validity
of the Instrument - - - - - - 39
3.8 Reliability
of Research Instrument - - - - - 39
3.9 Methods
of Data Analyses - - - - - - 39
CHAPTER 4: DATA PRESENTATION AND ANALYSIS
4.1 Questionnaire
Distribution and Returns - - - - 40
4.2 Data
Presentation - - - - - - - 40
4.3 Test of
Hypotheses - - - - - - - 47
4.4 Discussion
of Results - - - - - - - 52
CHAPTER 5: SUMMARY OF FINDINGS, CONCLUSION AND
RECOMMENDATIONS
5.1 Summary
of Findings - - - - - - - 54
5.2 Conclusion - - - - - - - - 54
5.3 Recommendations - - - - - - - 55
References - - - - - - - - - 56
Appendices
LISTS
OF TABLES
Distribution of returned and unreturned questionnaire - - - - 40
Distribution of the respondents by gender - - - - - - 41
Distribution of the respondents according to marital
status - - - - 41
Distribution of respondents based on qualification - - - - - 41
Distribution of academic staff and non-academic staff
in the
Selected
tertiary Institution in Akwa Ibom State - - - - - 42
Distribution of length of service of the respondents
in the selected
Tertiary
Institutions in Akwa Ibom State. - - - - - - 43
Respondents responses on the effect of basic pay on
organizational
performance - - - - - - - - - - 44
Respondents responses on the effect of leave grant
payment on
organizational performance - - - - - - - - 45
Respondents responses on the effect of health
allowance and
Accommodation allowance on organizational performance - - - - 46
Respondents responses on the challenges of
compensation strategies
Faced by the selected organization - - - - - - - 47
Pearson product moment correlation analysis result
showing the significant
Effect of basic pay on organizational performance in
selected tertiary
Institutions in Akwa Ibom State, Nigeria - - - - - - 48
Pearson product moment correlation analysis result
showing the significant
effect of leave grant payment on orgnizational
effectiveness in selected
tertiary Institutions in Akwa Ibom State, Nigeria - - - - - 48
Krukal wallis analysis
result showing the significant effect
of health
allowance and accommodation allowance on
organizational performance in selected tertiary
Institutions in
Akwa Ibom State, Nigeria - - - - - - - - 49
Kruskal wallis
result showing organisational politics and capability to pay
as significant challenges of compensations strategies
in selected tertiary Institutions
in Akwa Ibom State, Nigeria - - - - - - - - 51
CHAPTER 1
INTRODUCTION
1.1
BACKGROUND
OF THE STUDY
Compensation is
one of the major issues involved in personnel administration. Some of us who
are professional managers have identified personnel administration as one of
the major task facing the management of any organization. This is because human
resource management takes a different dimension and approach from the
management of material resources. Employees can think, move and respond to
stimuli while material resources cannot. This makes it imperative for
management of most successful organizations to incorporate in their policies
adequate compensation and motivation for their employees in order to achieve
their organizational objectives. If employees are not well compensated and
motivated they will not contribute effectively towards the achievement of organizational
goal.
Chabra (2001) referred
to Compensation as a wide range of financial and non-financial reward provided
to employees in exchange for their services rendered to the organization.
According to him, it is paid in the form of wages, salaries and employee
benefits such as paid vacations, insurance, maturity leave, free travelling
facility, retirement benefits, etc. He indicated that the term wage is used to
denote remuneration to worker doing manual or physical work. Thus, wages are
given to compensate the unskilled workers for their services rendered to the
organization wages may be based on hourly, daily, weekly or even monthly basis.
Denise and Griffin
(2001) stated that compensation is a reward system that a company provide to
individuals in return for their willingness to perform various jobs and tasks
within organizations. They further stated that relevant and commensurate
rewards need to be provided to the employees so that they feel valued and their
expectations on exchanging their skills abilities and contribution to the
organization are met.
Mayson and Banet
(2016) found that a firm’s ability to attract, motivate and retain employees by
offering competitive salaries and appropriate rewards is linked to firm
performance and growth. On the other hand, Ines and Pedro (2015) found that the
compensation system used for the sales people has significant effects on
individual salesperson performance and sales organization effectiveness.
Therefore, in an ever competitive business environment, many companies
globally, in Africa, regionally and locally are today attempting to identify
innovative compensation strategies that are directly linked to improving
employee performance (Denis and Michel, 2011).
In Canada,
according to Long (2017), companies tend to initiate compensation strategies in
the aspects of direct and indirect financial compensation as well as benefits
that motivates and ultimately improves performance. The financial compensation
such as wages, salaries or performance related payment is evidently adhered to
in many organizations in order to retain employees and outwit their rivals. The
employee benefits in the country are designed to protect employees and their
families from loss of income due to health problems on other related financial
disruptions and can improve the employees general quality of life through
special programs and services in the workplace (Ali and Raza, 2015). They
include additional health coverage that is not included in the provincial plan
such as medical prescription, vision and dental plans, group disability,
employee assistance plans, retirement benefits plans and so on. The provision
of various compensation mechanisms has in the short or long run enhanced
employee performance which has in turn created a competitive environment over
the companies that lags behind with respect to offering better compensations
strategies.
Ali and Raza
(2015) are of the opinion that employee only stay in an organization to give
out their best when they believe the remuneration process is commensurate to
their input. This has constituted a high rate of employees leaving their
employers, moving sometimes away from their city or country just to find
greener pasture. Evidently, in the country, many organizations still grapple
with issues relating to proper compensation of employees in order to increase
their performance standards.
Andrew (2016), posits
while it may be considered that salary attached to a post represents
appropriate remuneration of its holder for proper and efficient performance of
day-to-day duties; there are circumstances in which benefits are warranted. The
objective of these benefits is to attract and retain qualified and competent
employees. He also asserts that many companies in the recent have witnessed
exodus of employees to other rivals, this has been attributed to poor
compensation strategies which has prompted the shifting of employees in search
of firms that could consider compensating them better and thereby reciprocate
through good performance. It is therefore an undeniable fact that human
resources of every organization remains the most important resource therefore
every effort should be made to ensure their effectiveness since without them
the organization cannot function properly.
1.2
STATEMENT
OF THE PROBLEM
Some organizations over the years see employees as
additional cost as well as liability to their operations. Hence do not
remunerate them appropriately, instead of paying attention on how employees
will be compensated appropriately; some organizations concentrate more on how
to improve their productivity with little or no consideration for human
efforts. This therefore make most of the
organizations not to have good compensation policies or welfare packages for
their employees thereby causing a devastating effect on employees of such organization.
When employees believe their efforts and skills are not commensurate with the
amount earned, they begin to exhibit signs of overall dissatisfaction. As a
result, problems begin to arise in the workplace such as higher absenteeism,
fighting or making violent threats in the workplace, stealing and vandalizing
of organization’s properties, repeated tardiness or absences, creating a
hostile workplace for other workers and lower corporate citizenship. Employees
dissatisfied with their compensation tend to lose interest in their
organization and start absenting frequently from their workplace. This
negatively affects the functioning and performance of such organization there
by resulting in loss of man hours, dislocation of work and productivity. Employees
unhappy with their compensation indulge in stealing organizations property,
using official time and resources for personal gains. They deliberately damage
equipments and properties of the organization and also exhibit militant and
uncooperative behaviors towards other employees of the organization.
More so, some organizations do politicize with employee’s
compensation. This is done when management of organization have good
compensation package to attract qualified employees to the organization but do
not have the capability to implement them. Also in such organization employees
are exploited mentally and physically or which may lead to injuries during the
cause of carrying out their services. This leads to lower corporate citizenship
where employees of such organization are more prone to argumentation,
disobeying orders of the superiors, low quality work and inciting fellow
employees or bad mouthing the management. These would also affect employee’s
turnover in that particular organization thereby affecting performance in such organization.
It is in view of this that the study sought to know the effect of compensation
strategies on organizational performance in selected tertiary Institutions in
Akwa Ibom State.
1.3 OBJECTIVES OF THE
STUDY
The broad objective is to investigate the effect of compensation
strategies on organizational performance in selected tertiary Institutions in
Akwa Ibom State, Nigeria. While the specific objectives include to:
i.
Ascertain the effect of
basic pay on organizational performance in selected tertiary Institutions in
Akwa Ibom State, Nigeria.
ii.
Examine the effect of
leave grant payment on organizational effectiveness in selected tertiary Institutions
in Akwa Ibom State, Nigeria.
iii.
Analyze the effect of
accommodation allowance and health allowance on organizational performance in
selected tertiary Institutions in Akwa Ibom State, Nigeria.
iv.
Determine how the challenges
of compensation strategies affect performance of tertiary Institutions in Akwa
Ibom State, Nigeria.
1.4 RESEARCH QUESTIONS
To guide this study, the following research questions
were stated:
i.
What is the effect of
basic pay on organizational performance in selected tertiary Institutions in
Akwa Ibom State, Nigeria?
ii.
What is the effect of
leave grant payment on organizational effectiveness in selected tertiary Institutions
in Akwa Ibom State, Nigeria?
iii.
What is the effect of
health allowance and accommodation allowance on organizational performance in
selected tertiary Institutions in Akwa Ibom State, Nigeria?
iv.
What are the challenges
of compensation strategies in selected tertiary Institutions in Akwa Ibom
State, Nigeria?
1.5 RESEARCH HYPOTHESES
To guide the study in providing answer to the research
questions, the following hypotheses were formulated,
Ho1: There is no significant effect of basic pay
on organizational performance in selected tertiary Institutions in Akwa Ibom
State, Nigeria.
Ho2: There is no
significant effect of leave grant payment on organizational effectiveness in
selected tertiary Institutions in Akwa Ibom State, Nigeria.
Ho3: There is no
significant effect of health allowance and accommodation allowance on
organizational performance in selected tertiary Institutions in Akwa Ibom
State, Nigeria.
Ho4: Organizational
Politics and capability to pay are no significant challenges of compensation
strategies in selected tertiary Institutions in Akwa Ibom State, Nigeria.
1.6 SIGNIFICANCE OF THE STUDY
The study is important to a number of stakeholders in
the tertiary institutions as follows:
Government:
The study will be beneficial to both the federal government of Nigeria and Akwa
Ibom State government, in order to understand what motivates the staff of
tertiary Institutions and hence contributes/improves the performance of these Institutions.
It would be important for the government policy makers to know of areas in
which the can provide tertiary Institutions with further incentives, for such a
worthy course of improving the organizational performance.
Researchers:
Currently, tertiary Institutions in Akwa Ibom State is operating under a very
highly dynamic environment, characterized by high competition and fast
technological changes. The study will be of importance to other researchers in
future who may be interested in studying motivation under these very high
dynamic conditions.
Tertiary Institutions:
The Intensive research study will be much beneficial to the management of
tertiary Institutions as it will unveil the needed knowledge on what motivates
their staff to achieve the set objectives effectively and efficiently.
Specifically to the human resource manager, the study will help highlight any
areas of concern and strength. This will help in attract and retaining the
staff.
1.7 SCOPE OF THE STUDY
The Scope of this study is premised on effect of
compensation strategies on organizational performance with particular interest
on selected tertiary institutions in Akwa Ibom State. For purposes of research
convenience and generalization, the study used some selected tertiary
Institutions which were University of Uyo, Akwa Ibom State University, and Akwa
Ibom State Polytechnic all in Akwa Ibom State as the geographical scope. For
the contextual scope, the study covered compensation, methods used to determine
employees compensation, Direct Financial Payments and employee’s motivation,
Benefits and employee’s motivation, Recognition benefits organizational
performance, performance measurement, Role of performance measurement and
organizational effectiveness. Again the study uses organizational level
analyses. The essence is to have reliable information because it is assume that
those in the management level have deep knowledge regarding the issue.
1.8 LIMITATIONS OF THE STUDY
On
the course of carrying out this research work, the researcher was faced with
many problems and obstacles, affecting the successful coverage of the study.
Financial constraints:
For proper collection of data and information on this research work,
sustainable sum of money are required. The prevailing cost of materials in
economy resulting on high cost of printing information from journals, typing of
stationary and transportation cost are not let out.
Poor cooperation
from some respondents: The accessibility to
some relevant data which the respondent saw as being confidential created a big
obstacle to the generation of valuable information and also late return of
questionnaire which also affected the whole information required to carry out
the research work.
Methodological
constraint: This study is limited to the
research techniques and statistical tools adopted in the course of these
research.
1.9 OPERATIONAL DEFINITION OF TERMS
Compensation:
Is the total amount of the monetary and non-monetary pay provided to an
employee by an employer in return for work performed as required. (https://www.
the balancecareers.com/Accessed, 2018).
Strategy:
Is a plan of action designed to achieve a specific goal or series of goals
within an organizational framework. It entails specifying the organizations
mission, vision and objectives, developing policies and plans to execute the
vision and allocating resources to implement those policies and plans. (http://www.businessdictionary.com./Accessed,
2018).
Accommodation Allowance:
An employer might choose to provide accommodation or pay an accommodation
allowance when an employee needs to continuously work at a distant work
location that is not within reasonable daily travelling distance of their home.
(https://www.
Ird.govt.nz/Accessed, 2018).
Health Allowance:
Is simply an allowance a company or organisation provides to employees for
healthcare expenses. (www.peoplekeep.com/Accessed,
2018).
Leave Grant:
Is paid time off work granted by employers to employees to be used for whatever
the employees wishes. (https://en.M.
Wikepedia.org/Accessed, 2018).
Organization:
A Social Unit of people that is structured
and managed to meet a need or to pursue collective goals. (www.businessdictionary.com/Accessed,
2018).
Performance: The accomplishment of a given task measured against
preset known standards of accuracy, completeness, cost and speed. (www.businessdictionary.com/Accessed,
2018).
1.10 PROFILE OF THE STUDIED ORGANIZATION
Profile of some selected tertiary
institutions used in the study:
University of Uyo
University of Uyo is in heart of Uyo, capital of Akwa
Ibom State, Nigeria second largest oil producing state. It operates from four
campuses.
Which as: The permanent site/main campus which
accommodates parts of central administration/faculties of Engineering and
Natural and Applied Sciences, International Central for Energy and
Environmental Sustainability Research (ICEESR) and the post graduate school. The
town campus which accommodates faculities of Arts, Education, Social Science,
Pharmacy. The Annex Campus, home for the faculties of Agriculture, Business
Administration, Law, Environmental Studies and General Studies. The Ime Umana
Campus, Ediene Abak, which accommodates the pre degree JUPEB and other special
courses. The permanent site/main campus of the university along Nwaniba Road,
Uyo is about 4.5km from the city center and covers an area of about 1443
hectares. The University of Uyo has 12 faculty plus the school of continuing
education. (https://en.m.wikipedia.
Org/Accessed, 2018).
Akwa Ibom State
University
Akwa Ibom State University was conceived and funded by
Akwa Ibom State government. Unity of people with a passion to constantly seek
knowledge that addresses practical issues of development in Nigeria. The
University opened its doors to its pioneer students in the 2010/2011 academic
year.
At conception, the university was to be located within
Akwa Ibom State’s Technology triangle at the university town. However, the
administration of the Akwa Ibom State Government have changed the enabling law
of the university into a multi-campus institution with the main campus at Ikot
Akpaden, Mkat Enin L.G.A. and a second campus situated at Obio Akpa, Oruk Anam
L.G.A. the goals of the university have been modified by the administration of
the state government in order to transform the university into a conventional
university where focus is not just Technology and Applied Science but also
Arts. In line with the transformation, the name of the institution has been
changed from Akwa Ibom State university of Technology to Akwa Ibom State
University. (https://en.m.wikipedia.org./Accessed,
2018)
Akwa Ibom State
Polytechnic
Akwa Ibom State Polytechnic was established by Akwa
Ibom State Government Edict No. 11 of 1991. The decision to establish the
institution was taken after the creation of Akwa Ibom State from Cross River
State in 1987.
The Official Commissioning of the Institution took
place of Friday, 24th January, 1992. A total of 961 students were
admitted and registered in 15 (fifteen) academic programmes established by the
ministry of Education. The Programmes were in the Science, Environmental
Studies, Communication arts and engineering. The corresponding staff strength
stood at 3 (three) principal officer and 492 (academic and non-academic) staff
mostly transferred from polytechnic calabar.
The number of academic programmes however dropped to 8
(eight) between 1996 and 2000 as a result of non-accreditation of programmes by
(NBTE). Presently, 15 (Fifteen) programmes have been fully accredited by NBTE
at the National Diploma (ND) and 7 (seven) Higher National Diploma (HND)
levels. With effect from the (2006/2007) session, the polytechnic governing
council gave approval to establish part-time/evening programme in all the NBTE
accredited programmes. (https://akwa
ibom poly.edu.ng./Accessed, 2018).
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