EFFECT OF COMPENSATION STRATEGIES ON ORGANISATIONAL PERFORMANCE (A STUDY OF SELECTED TERTIARY INSTITUTIONS IN AKWA IBOM STATE)

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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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