REWARD SYSTEM AND ITS IMPACTS ON THE PRODUCTIVITY OF STAFF

CHAPTER ONE

INTRODUCTION

1.1       BACKGROUND OF THE STUDY

Organizations are established with the aim of effectively utilizing various available human and non-human resources to achieve certain objective. Reward system is the instrument used to increase employees’ productivity. It seeks to attract and retain suitable employees, encourage good management – employee relationship and commitment and minimizes tension and conflict as it deals with all forms of final returns, tangible service and mechanism for good relationship.

These reward or incentives vary from one organization to another and they include the following: advancement opportunity in the company, job security, good salary/wages, adequate medical facilities, canteen services, pension scheme, credit for the job one do (recognition) vacation and holiday practice, housing, transport, company attitude towards employees, physical working condition such as office accommodation etc. Milkovich and Newman (2002). "Employees may see reward systems as a return in exchange between their employer and themselves, as an entitlement for being an employee of the company, or as a reward for a job well done." The way the employee views this exchange determines their levels of organizational commitment.

Petroleum sector plays a great or leading role in building Nigeria economy since petrol (Crude oil) serves as the major source of income in Nigeria and is the strength of Nigeria economy. The role petroleum industry plays cannot be overemphasized, among which are structuring the capital market, refining of crude oil for local consumption, provision of employment for both indigenes and foreigners and the marketing of crude oil and petroleum product.

However, the success of the industry rests so much on its human resources capability, which is the most valuable asset of any sources capability, which is the most valuable asset of any organization. The challenging tasks of every manager at all level are how to build a befitting reward and compensation system to incorporate both organizational goals and individual needs, thus, have a motivated workforce and improve productivity.

Incentives and reward may be financial and non-financial.

It has to be mentioned here that incentive and reward are used for the following:

a)       To persuade people to come to work.

b)       To encourage people to work harder while they are at work.

c)       To help people to identify themselves with the objectives of the organization.

d)      To show management appreciation of the employee’s contribution to the survival of the organization.

Consequently, the problem of how to make employees work harder for the interest of the organization and for their own interest becomes a fundamental one. In fact, the issue of low productivity and mobilization of employees is one of the major problems that occupied the attention of the management and administrator in industrial organization.  Management are always concerned with finding effective ways of ensuring that employees produce their best of the cheapest rate in a short time, while employees according to Scott (1966:12) are most concerned with income and security before other things.

In this study, the research would be looking at organizational reward system and its impact on the productivity of staff, referring to Nigerian National Petroleum Corporation (NNPC). This research will also focus on ways organization-reward/incentives can be administered so as to reduce job dissatisfaction and improve productivity of staff.

1.2       STATEMENT OF THE PROBLEMS.

several organizations over the years see employee as extra cost as well as liability to their operations, hence do not remunerate them fittingly, and where it is more appropriate, the compensation is not commensurate with the efforts and skills that workers put into the organization’s activities, instead of paying attention on how employees will be compensated appropriately, some organizations concentrate more on other resource, such as materials, machines and money. The effort is more on how to improve the production process with little or no consideration for human efforts.

This had led to the inability of such organizations to attain their set objective, organization success relies heavy on how much attention pay to its employees’ reward policies. It is in view of this that the study seeks to know how reward and compensation system in organization affect the performance of employees as well as that of the organization in general.

In fact, those organizing work have over the years struggled with the problem of how to obtain more efforts from those performing work. The employees have tended to avoid giving their best unless adequately compensated by way of appropriate reward/incentive to retain them and get the best out of them. Early ideas of employees remuneration were based on the principle of penalty and reward, the underlying assumption being that people at work minimize their own interest and act accordingly. It should be noted that people are unpredictable and hence there is no right way to deal with employee’s productivity.

Therefore, the researcher in this study attempts to investigate the correlation between reward and productivity in the organization.         Based on the above, the researcher wants to investigate:

                                            i.            Why employees have tended to avoid giving their best unless adequately rewarded.

                                          ii.            Why are some employees not motivated by some rewards or incentives for increase in productivity?

                                        iii.            How to make the employees to work hard for the interest of the organization.

1.3       PURPOSE/OBJECTIVES OF THE STUDY

The purpose of this study is to determine reward system and its impacts on employee motivation. In detail, it aims to identify which aspect of the reward system functions better, and which aspects can be developed and improved to increase employee motivation. Employees are usually regarded as the most effective machinery through which the organizational goals and objectives can be easily achieved. The following are the major objectives of this research:

                                            i.            To identify reward system in service company;

                                          ii.            To evaluate the relationship between reward system (wages / salary, bonus, promotion, responsibility, meaningful work, achievement) and employee motivation;

                                        iii.            To identify the most influential factors of reward system towards employee motivation.

1.4       SIGNIFICANCE OF THE STUDY

This study is significant in much respect. First, the findings of this study will help organizations to know how best to reward their hardworking employees.

Secondly, it will assist organization, to relate reward system on the productivity of staff; employers would be assisted to adopt the most appropriate reward scheme that would engender better performance of staff in this era of democracy. It is also expected that by this effort every individual performance will be rewarded accordingly to his environment. In other words, reward should be glanced toward achieving productivity, if the objectives of the organization are to be achieved.

A situation whereby employees are given reward irrespective of the performance breeds frustration and lack of commitment on the part of employees. This study shall endeavour to establish fully that reward should be based on individual performance and achievements rather than any other factions.

1.5       RESEARCH QUESTIONS

The relevant questions for the purpose of this study are:

RQ1:   What is reward system?

RQ2:   What is the relationship between reward system and employee motivation?

RQ3:   What are the factors of reward system that contribute to employee motivation most?

                                             

1.6      RESEARCH HYPOTHESES

In order to answer the research questions and achieve the objectives of the study, the following hypotheses are advanced and will be tested in the course of the study.

HYPOTHESES ONE

H0:      There is no positive relationship between reward system and employees

            Productivity in Nigerian Na5tional Petroleum Corporation (NNPC)

H1:      There is a positive relationship between reward system and organizational   productivity in Nigerian National Petroleum Corporation (NNPC)

           

HYPOTHESES TWO

HO:     Lower rewards system does not lead to lower organizational Productivity in           Nigerian National Petroleum Corporation (NNPC)

H1:      Lower rewards system lead to lower Productivity in Nigerian National Petroleum Corporation (NNPC)

1.7      SCOPE AND DELIMITATION OF THE STUDY

Organizational reward and its impacts on the productivity of the staff is an extensive topic whose study is all embracing and might require an extensive research. Therefore, the researcher has decided to restrict the study to Nigerian National Petroleum Corporation (NNPC) Headquarter in Abuja.

1.8      LIMITATION OF THE STUDY

Despite the limited scope of this research. It was affected with certain constraints, which are as follows:

(i)                             TIME: in research of this type, a lot of time is required but given the short time allowed for this study, it was not possible to do all that was required and necessary.

(ii)                           FINANCE: due to the harsh economic conditions or economic crunch, enough finance was not readily available to do all was required and necessary.

(iii)                         INFORMATION CONSTRAINT: getting the needed information was not easy. This is probably because of the stingy manner managers handle information especially those bordering the life of the organization.

1.9      DEFINITION OF TERMS

COMMERCIALIZATION: this means the selling of the service of government owned corporation at a competitive or commercial prices

CORPORATION: this is a group of people having authority to operate as a single unit with a separate existence, example for business purposes.

EMPLOYEE: a person who works for somebody or a company in return for wages or salary.

EMPLOYER: a person or company that employs people. He engages the services of others and agrees to pay the person in return for the services rendered.

FINANCIAL INCENTIVES: this is an incentive given to somebody to encourage him/her but in the form of cash/money.

Management: this is the process by which a corporative group direct actions of others towards common goals.

NON FINANCIAL INCENTIVE: this is form of incentives that is not in cash or money but other material items and or moral kind.

ORGANIZATION HIERARCHY: this simply means the authority flow in the organization. It is the level of authority that exists in an organization.

Output: this is the amount of something that a person or employee, a machine or an organization produces usually products

PHYSIOLOGICAL NEEDS: this refers to primary and unlearned needs. They include need for good, drinks, shelter, rest, exercise and relief from pain.

MOTIVATION: An inner state that propels an individual to move and direct his/her behaviour towards the attainment of specific goals.

PRODUCTIVITY: this is the efficiency; especially in industry measured comparing the amount of goods or services produced within the time taken or the resources used to produce (input).

REWARD: a thing that is given or received in turn for doing something good and acceptable, hardworking etc.

PROMOTION: Promotion is the action of raising someone to a higher position or rank or fact of being so raised.

INTRINSIC REWARD:An intrinsic reward is an intangible award such as recognizing, a sense of achievement or conscious of satisfaction.

EXTRINSIC REWARD:Is a reward that is tangible or physical given to you for accomplishing something.

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