ABSTRACT
The level of employee productivity in Nigerian organizations has been on the decline over the years and this could be ascribed to poor performance management strategies put in place by these manufacturing firms. It is in light of this, that this study aims to examine the effect of performance management on employee productivity among Nigerian manufacturing firms. Descriptive survey research design was adopted for the study. The population was 6026 comprising of the entire staff of five selected manufacturing companies in Lagos State. Taro Yamane formula was used to derive the sample size of 490. A structured questionnaire was administered resulting in a response rate of 97.5%. The instrument was validated and the Cronbach’s Alpha used for the Pre-test Reliability Analysis of the major constructs ranged between 0.778 and 0.879. The data gathered was analyzed with the aid of Statistical Package for Social Sciences (SPSS) version 21.0 software involving frequency distributions, linear and multiple regressions. Findings showed that indeed the four context of performance management had a significant effect on employee productivity. Detailed simple linear regression analysis showed that performance appraisal (F = 39.60, R Square = 0.077, P < 0.05) at 7.7%; performance feedback (F = 142.726, R Square = 0.231, P < 0.05) at 23.1%; employee training (F = 7.803, R Square = 0.016, P < 0.05) at 1.6% and compensation (F = 297.643, R Square = 0.385, P < 0.05) at 38.5% had a significant effect with employee productivity, however, performance feedback and compensation had the strongest relationship on employee productivity; multiple regression analysis also showed performance management (F = 79.482, R Square = 0.402, P < 0.05) at 40.2% had significant effect on employee productivity.
The study concluded that Performance Management when well implemented improves employee productivity especially when more emphasis is placed on positive feedback and compensation which was proven to have a higher influence on productivity of employees. It was recommended, among others, that manufacturing firms should encourage their members of staff by giving them regular positive feedback and compensate them fairly to improve productivity.
Keywords: Performance management, Employee productivity, Performance appraisal, Feedback Training, Compensation, Manufacturing firms.
Word Count: 409
TABLE OF CONTENTS
Content Page
Title page i
Certification ii
Dedication iii
Acknowledgments iv
Abstract v
Table of Contents vi
List of Tables vii List of Figures viii
CHAPTER ONE: INTRODUCTION
1.1 Background to the Study 1
1.2 Statement of the Problem 3
1.3 Objective of the Study 5
1.4 Research Questions 6
1.5 Hypotheses 6
1.6 Operationalization of Variables 6
1.7 Scope of the Study 7
1.8 Significance of Study 8
1.9 Operational Definition of Terms 8
CHAPTER TWO: REVIEW OF LITERATURE
2.1 Conceptual Review 10
2.1.1 Performance Management 10
2.1.2 Performance Appraisal 12
2.1.3 Feedback 17
2.1.4 Training 20
2.1.5 Compensation 24
2.1.6 Employee Productivity 26
2.2 Theoretical Review 31
2.2.1 Vroom’s Expectancy Theory 31
2.2.2 Equity Theory 32
2.2.3 The ERG Theory of Motivation 33
2.3 Empirical Review 35
2.3.1 Performance Management and Employee Productivity 35
2.3.2 Training and Employee Productivity 36
2.3.3 Feedback and Employee Productivity 39
2.3.4 Compensation and Employee productivity 40
2.3.5 Performance Appraisal and Employee Productivity 42
2.4 Summary and Gaps in Literature 44
2.5 Conceptual Model 46
CHAPTER THREE: METHODOLOGY
3.1 Research Design 47
3.2 Population 47
3.3 Sample size and sampling Technique 48
3.4 Method of Data Collection 50
3.5 Research Instrument 51
3.6 Pilot Study 51
3.6.1 Validity of Research Instrument 52
3.6.2 Reliability of Research Instrument 53
3.7 Method of Data Analysis 53
3.7.1 Research Model 54
3.7.2 Apriori Expectation 55
3.8 Ethical Consideration 55
CHAPTER FOUR: DATA ANALYSIS, RESULTS AND DISCUSSION OF FINDINGS
4.1 Response Rate 56
4.2 Data Analysis, Results and Discussion of Findings 57
4.2.1 Restatement of Objective and Research Question one 57
4.3.2 Restatement of Objective and Research Question two 62
4.3.3 Restatement of Objective and Research Question three 66
4.3.4 Restatement of Objective and Research Question four 70
4.4 Summary Table of findings 76
CHAPTER FIVE: SUMMARY, CONCLUSION AND RECOMMENDATIONS
5.1 Summary 78
5.1.1 Implication of Findings 79
5.1.2 Policy makers 79
5.1.3 Manufacturing company 80
5.1.4 Society 80
5.2 Conclusion 80
5.3 Recommendations 81
5.4 Contribution to Knowledge 81
5.4.1 Concepts 81
5.4.2 Theories 81
5.4.3 Empirics 82
5.5 Limitation of the Study 82
5.6 Suggestion for Further Studies 82
References 83
Appendices 100
LIST OF TABLES
Table Page
3.1 Population of staff of selected companies 48
3.2 Research Sampling 50
3.3 Sources of adapted questionnaires 51
3.4 Confirmatory Factor Analysis 52
3.5 Cronbach’s Test of Reliability 53
4.1 Questionnaire response rate 56
4.3 Descriptive Analysis of Performance Appraisal 57
4.4 Descriptive Analysis of Employee Productivity 58
4.5 Linear Regression Results of the Effect of Performance Appraisal on Employee Productivity 60
4.6 Descriptive Analysis of Performance Feedback 63
4.7 Linear Regression Results of the Effects of Performance Feedback on Employee Productivity
4.8 Descriptive Analysis of Employee Training 66
4.9 Linear Regression Result on the Effects of Employee Training on Employee Productivity
4.10 Descriptive Analysis of Compensation 71
4.11 Linear Regression Results of the Effects of Compensation on Employee Productivity
4.12 Multiple Regression Results of the Effects of Performance Management on Employee Productivity
4.13 Summary Table of Findings 76
LIST OF FIGURES
Figures Page
1 Conceptual Model indicating gaps in literature 46
2 Researchers Conceptual Model 54
APPENDICES
Informed Consent Form
Questionnaire
Demographic Data of Respondent
Coefficient Tables
Turnitin Originality Report
BURHEC
ABBREVIATIONS
PM Performance Management
USA United States of America
PA Performance Appraisal
T Training
C Compensation
F Feedback
PLC Public Limited Company
PZ Paterson Zochonis
BARS Behavioral Anchored Rating Scale
HRD Human Resource Department
MBO Management by Objectives
SAMBO System Approach to Management by Objectives
RDP Reconstruction and Development Program
ERG Existence Relatedness Growth
TET Tertiary Education Trust
AVE Average Variance Extracted
SSFL Sum of Squared Factors Loading
NOI Number of Variables Indicators
SPSS Statistical Package Social Science
BUHREC Babcock University Health Research Ethics Committee
SD Standard Deviation
EP Employee Productivity
ET Employee Training
DF Degree of Freedom
CHAPTER ONE
INTRODUCTION
1.1
Background to the Study
In the turbulent business
environment, with changes in customer demands the main aim of every
manufacturing organization is to improve its productivity but this can never be
possible without the efficient performance of employees and one of the major
challenges facing many countries has been the need to improve the performance
of employees. Therefore, Performance Management (PM) came into effect as a
human resource management reform to address and redress concerns organisations
had about performance (Amir, 2012; Sharif, 2002). Performance management has
been seen as a tool which focuses on managing the individual and work
environment in such a manner that an individual or team can achieve set
organizational goals (Esu & Inyang, 2009; Fletcher, 2001). However,
performance management has come to signify more than a list of singular
practices aimed at measuring and adapting employee performance. Rather, it is
seen as an integrated process in which managers’ work with their employees to
set expectations, measure and review results and reward performance, in order
to improve employee performance, with the ultimate aim of positively affecting
organisational success (Mondy & Noe, 2008; Mondy, Noe & Premeaux,
2002).
Performance Management has been
used as a tool to enhance employees productivity by managing their performance
(Poister, 2003) specifically, PM intends to improve accountability,
performance, communication, efficiency and productivity among employees.
Sheriff, Alibaba, and Aliyu (2012) gave an understanding to the concept of
employee productivity that implies the level or degree of output achieved from
a defined input, it is rather more serious as it has been found that it forms
the core of achievement of corporate goals and objectives, production, market, and
sustainability of organizations in the manufacturing industry. Effective
utilization of performance management is critical to enhance organizational
performance, so as to achieve a competitive position in global marketplace
(Kovacic, 2007; Neely, 2005; Neill & Rose, 2006; Franceschini., Galetto
& Turina, 2009)
In the last 30 years, Performance
Management has remained a static process that consisted primarily of an annual
appraisal. Today, Performance Management is one of the principle tools
executives, line managers, and employees are able to use to achieve their
collective goals (Potgieter, 2004).The 1990’s saw widespread and rapid adoption
of performance management requirements in U.S. states. The adoption of these
reforms continued through the 2000’s, albeit at a slower rate. By 2004, 33
states had performance management statutes on the books, and the remaining
17states had administrative requirements (Melkers & Willoughby 2005). By
2008, a survey of the states found that 39 states had performance budgeting
laws, and 6 other states had some sort of management requirement (Lu,
Willoughby, & Arnett 2011). The majority of such laws were adopted in the
1990s and 2000s. Many countries have experimented with performance management
initiatives but most of these were limited to the introduction of
performance-oriented staff appraisal systems. These have not been very
successful because in these systems promotions are linked to performance, while
in many developing countries promotion is still linked to seniority or to
relations (Waal, 2007).
Although performance management is
relatively unknown in many African countries, the interest in such an
improvement tool is growing among African organisations and in specific African
countries. Despite this growing awareness, performance management is not
widespread yet in Egypt (Abdel Aziz et al., 2005), in South Africa, the term
‘performance management’ is relatively new in the field of management
(Motswiane, 2004), in Kenya, performance management was traditionally defined
as the process of financial control, in which the mission and strategy are
translated into budgets, and subsequently results are compared with budgets
(Malinga, 2004), in Ethiopia, there are some developments for the benefit of
performance management (Tessema, 2005) and in Uganda, there were inadequacies
in setting performance targets and performance management planning were hardly
done (Lutwama, Roos & Dolamo, 2013). However, the overall lack of
management skills and expertise often makes it not viable for developing
countries to develop complex structures such as sophisticated performance
management systems (Waal, 2007). And the lack of precise definition and no
consensus on an appropriate strategy for initiating and sustaining PM is a
factor that sometimes militates against the unity of purpose required to make
performance management initiatives work in the public service in Africa
(Balogun, 2002).
Although there
is a plethora of studies on the reasons why businesses failed, it was argued
that most public sector businesses and industries have failed because of
ineffective and inefficient implementation of performance management (Esu,
2003).The performance of these businesses is predicated on several factors.
Many businesses have failed to meet the objective or purpose of its formation.
This has been the experience in all economies. It is more worrisome in the
developing economics of the world where managers lack the requisite managerial
skills in management. It is one thing to formulate individual and
organizational objectives, and another thing is to achieve the set targets,
sustain task-level and later improve on performance. The fact that most of the
businesses (both large and small scale business) that we saw in our
communities, states and country are no more in existence, means that something
is wrong somewhere especially in the absence of performance management which
was determined to contribute to the high rate of business failures in
Nigeria(Ellis & Chinedu, 2011; Esu & Inyang, 2009). Hence, the
foregoing sets the pace for an understanding of the effect of performance
management on productivity.
1.2 Statement
of the Problem
The issue of
employee productivity has suffered from high level of neglect as indicated by
Gerhart and Milkovich (2010) that the level of employee productivity in
Nigerian organizations has been on the decline over the years and this could be
ascribed to poor performance management strategies put in place by these
manufacturing firms. Watkins (2007) elucidates that some public sector business
organizations like those in Delta State of Nigeria have not given adequate
attention to performance management review as a tool for improving performance
even when recent studies suggest that performance reviews benefit
organizational performance in both private and public sectors.
Aidah, (2013) opines that an
employee may have the ability and determination, with the appropriate equipment
and managerial support yet such employee may be underproductive. According to
Adeniji (2013) the missing factor in most cases is the lack of adequate skills
and knowledge, which are acquired through training and manpower development
that brings about increase in absenteeism rate, low output, poor quality and
results. Bartel (2004) asserts that majority of governmental, private
organization and international organizations have failed to recognize the
importance of training, as when not done appropriately it tends to decrease the
employee's productivity, those that attempt to conduct trainings for their
employees do so in an ad- hoc and haphazard manner, and as such, training in
those organizations is more or less unplanned and unsystematic (Nwachukwu,
2007). The absence of these major variables of PM which have been proven to
improve employee productivity (Armstrong & Baron, 2005; Caruth & Humphreys,
2008; Edward, 2012; Greve, 2003; Moynihan &Landuyt, 2009; Thompson
&McGraw, 2010) may have resulted in low productivity in Nigerian companies
as established by Esu (2009) who attributed failure of businesses to
ineffective and inefficient performance management.
Feedback is sometimes viewed as
not accurate or useful by employees, potentially leading to feelings of
discouragement and anger (Brett & Atwater, 2001). Feedback that directs the
recipient’s attention to the task is more effective than feedback that directs
the recipient’s attention to the self and away from the task. Negative feedback
is often given to harass or punish the employees; it is typically misperceived
or rejected. Caruth and Humphreys (2008) states that when performance feedback
is not fair, timely and specific in highlighting the employees’ progress or, if
participants in appraisal perceive the system to be unfair, the feedback to be
inaccurate or the sources to be incredible, they are likely to ignore the
feedback they receive which will however lead to the reduction in the levels of
productivity. Feedback then becomes least useful when it is inaccurate or
untrue, biased due to favoritism or politics (Levy & William, 2004).
Wright (2007) states that
compensation, such as pay and promotion is not coupled to performance levels.
This has however led to the failure of manufacturing companies to reach their
set objective as it is understood that an organization’s success relies heavy
on how much attention is paid to its employee compensation policies (Wright,
2007). Barton (2000) states that
manufacturing industry over the years regard employees as additional cost,
hence do not remunerate them appropriately; most times, employee’s compensation
does not commensurate with the efforts and skills that workers put into the
activities. However Broady-Preston and Steel (2012), establish it that
compensation plans are not usually linked with performance of the employee; and
when this is happens productivity in the organisation is threatened and as a result
might have effect on the overall productivity. In some organizations, their
employees are been under-remunerated
whereas some organizations do not have good compensation administration
programs which can be in form that the employee promotion does not come in
time, or pay packages are not commensurate to the work they have done for the
organization (Fein, 2010).
When performance appraisal is
conducted, employees are always discontent with the report (Sudarsan 2009).
Studies have observed that the reasons for this displeasure is that they see
performance appraisal as a waste of time and believe it is filled with favoritism and inaccuracy,
resulting in compromised assessment of employees’ accomplishments and capabilities
(Cleveland & Williams, 1989; Cook & Crossman, 2004; Jawahar, 2007).
Mone and London (2010) states that there is usually unfair evaluation of
employee performance which makes them feel insecure or discouraged leading to
the development of poor relationship between the employer and employee and
thereby affects employee’s productivity. Line managers have frequently rejected
performance appraisal as being time consuming and irrelevant. Employees have
disliked the shallow nature with which appraisals have been conducted by
managers who lack the skills required. According to Armstrong and Murlis (2005)
also assert that performance appraisal too often degenerates into ‘a dishonest
annual ritual, which nonetheless is inevitable and when tend to be biased will
have a negative effect on employees and their level of productivity.
Therefore, in
the light of these issues, could it then be said that the adoption of
performance management can actually improve employee productivity of
manufacturing industries in Nigeria?
1.3 Objective
of the Study
The main objective of the study is
to examine the effects of performance management on employee productivity of
selected manufacturing firms in Lagos State Nigeria. Other specific objectives
are to:
1. determine
the effect of performance appraisal on employee productivity of selected
manufacturing firms in Lagos State;
2. evaluate
the effect of feedback on employee productivity of selected manufacturing firms
in Lagos State;
3. investigate
the effect of training on employee productivity of selected manufacturing firms
in Lagos State and
4. ascertain
the effect of compensation on employee productivity of selected manufacturing
firms in Lagos State.
1.4 Research Questions
The proposed study would answer the following
research questions:
1. To
what extent does performance appraisal affect employee productivity of selected
manufacturing firms in Lagos State?
2. What
way does feedback affects employee productivity of selected manufacturing firms
in Lagos State?
3. How
does training affect employee productivity of selected manufacturing firms in
Lagos State?
4. What
is the effect of compensation on employee productivity of selected
manufacturing firms in Lagos State?
1.5 Hypotheses
The hypotheses for the proposed study tested at
0.05 level of significance are as follows:
H01:
Performance Appraisal has no significant effect on employee productivity of
selected manufacturing firms in Lagos State.
H02: Feedback
has no significant effect on employee productivity of selected manufacturing
firms in Lagos State.
H03: Training has no significant effect on and
employee productivity of selected manufacturing firms in Lagos State.
H04: Compensation has no significant effect on employee
productivity of selected manufacturing firms in Lagos State.
1.6 Operationalization of Variables
The variables of this study are
operationalized in order to show the functional relationships between them as
follows: X= Independent Variable
Y= Dependent Variable
Where X =
Performance management
Y=
Employee productivity
X = (x1,
x2, x3, x4)
Where: x₁
= Training (T)
x₂
= Feedback (F) x₃ = Compensation (C)
x₄ = Performance
Appraisal (PA)
Y= f(x1, x2, x3, x4)
Y = α0 + β1x1 + μ
………………………………………….. Equation 1
Y = α0 + β₂x₂ + μ ………………………………………….. Equation 2
Y = α0 + β₃x₃
+ μ ………………………………………….. Equation 3 Y = α0 + β₄x₄ + μ ………………………………………….. Equation 4
Y= α0+ β1x1+ β₂x₂+ β₃x₃+ β₄x₄+ μ
1.7 Scope of the Study
This study focused on the effects
of performance management on employee productivity of selected manufacturing
firms in Lagos State. Identified variables of performance management was
examined hence, because of the wide scope of manufacturing industry in Lagos
State; the researcher therefore limited the research to the following sector
group of manufacturing companies listed in the Nigeria Stock Exchange, namely
Cadbury Nigeria Plc, Dangote Sugar Refinery Plc, PZ Cuzzons Nigeria Plc,
Unilever Nigeria Plc, Honeywell Flour Mills Plc. The reason for this choice is
due to the fact that they have large number of employees; they have survived
the so called harsh operating environment in Nigeria and have continued to
dominate the Nigerian manufacturing industry.
The target respondent consists of
the total number of staff operating within the firm. The total estimated figure
for the population is given at (6,026) personnel as at September 2015 by the
Nigeria Stock Exchange List (2016). Information regards this population number
was sourced from the human resource department (HRD) of the firms. Using Yamane
(1967) formula for the sample size determination, the study is able to arrive
at a sample size of 490 respondents including a provision of 30% non response
rate. Sampling method to be used in this study is the stratified sampling
technique simply because of the stratification variables included in the scope
of the study. The study is based on manufacturing corporations that are listed
and operating on the Nigerian Stock Exchange as at June 2016. Lastly the study
would be carried out using descriptive survey design.
1.8 Significance of the Study
The general understanding of this
study would serve as a useful guide to management, human resource
practitioners, executive corporate managers and administrators most especially
in the manufacturing industries to understand how performance management can
enable organization in sensing any possible changes in the level of
productivity; thereby figure out strategies for identifying, encouraging,
measuring, evaluating, improving and rewarding employees ‘performance at
work.
The findings of this study would
also be helpful to the manufacturing industries when setting policies on their
specific performance management system in order to adopt PM practices that are
consistent with the requirements of these policies and that best fit the nature
of the work performed and the mission of the organization.
This study would also enable the
government create better policies and regulations with regard to the research
variables in a way that can create an enabling environment for companies to
survive.
Finally, the study would be of
immense benefits to the society by contributing to the body of knowledge and
stimulate more researchers’ interest in this field of study.
1.9 Operational Definition of Terms
The proposed operational definitions of terms for
this study are:
Performance appraisal: This is the process of assessment carried
out by a superior employer or supervisor to evaluate and judge the work
performance of an employee.
Feedback: This is a helpful information or criticism that is given
to an employee in respect to work done (input) to improve performance (output).
Training: This is identified
as the organized activity aimed at imparting information and instruction to
improve the employee’s performance based on feedback report given as at the
time.
Compensation: It is the monetary or non-monetary rewards given to
employee based on result of training activities and respective improvement in
performance of said employee.
Performance
Management: This is the performance appraisal, feedback, training and
compensation process and techniques used by an organization to achieve work
objectives or goals.
Employee
Productivity: It is the degree at which work done brings about increase in
performance of employee to achieve set goals.
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