COMPENSATION STRATEGY AND ORGANIZATIONAL PERFORMANCE

ABSTRACT

This study was on compensation strategy and organizational performance. Using  Bottling Company, ESEHI NIG. LTD and AVERY NIGERIA LTD as a case study. Three objectives were raised which included: To ascertain the effect of overtime on organizational performance in Nigerian Bottling Company, ESEHI NIG. LTD and AVERY NIGERIA LTD, to ascertain the effect of allowances on organizational performance in Nigerian Bottling Company, ESEHI NIG. LTD and AVERY NIGERIA LTD and to find out the effect of fringe benefits on organizational performance in Bottling Company, ESEHI NIG. LTD and AVERY NIGERIA LTD. The total population for the study is 75 selected staffs of Nigerian Bottling Company, ESEHI NIG. LTD and AVERY NIGERIA LTD. The researcher used questionnaires as the instrument for the data collection. Descriptive Survey research design was adopted for this study. The data collected were presented in tables and analyzed using simple percentages and frequencies

CHAPTER ONE

INTRODUCTION

1.1BACKGROUND OF THE STUDY

Employees are valuable resource of any organization. Labor productivity now a day has been main concern of organizations. It is customarily accepted that employees discover valuable source of competitive edge for firms. When a firm is implementing a value creating strategy not simultaneously being implemented by any current or potential competitors, then we can say the firm has a competitive advantage (Nebeker et al. 2014). And when a firm is implementing a value creating strategy not simultaneously being implemented by any current or potential competitors and when these other firms are unable to duplicate the benefits of this strategy, then we can say the firm has a sustained competitive advantage (Barney, 2015). In order to achieve a competitive advantage, the firm is required to make a choice about the type of competitive advantage it seeks to attain and the scope within which it will attain it. Choosing the competitive scope or the range of the firm’s activities can play a powerful role in determining competitive advantage because it aims to establish a profitable and sustainable position against the forces that determine industry competition

It has been found that there is a significant relationship between compensation strategies and employee performance (Shin-Rong and Chin-Wei, 2012). For example, Mayson and Barret (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, Inés 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 payments 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 or other work-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 benefit 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 compensation strategies.

In Africa with specific attention to Nigeria, majority of employees who change from one job to another move as a result of finding better pay (Raza and Hanif, 2013). The authors indicate that more than seven out of ten people in Nigeria that are more than 70% of employees who are interested in changing their employer normally gave the reason of low income in their present job that makes them seek for new employment environment. Several authors such as Ali and Raza (2015) are of the opinion that employees only stay in an organization to give 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 the country just to find greener pastures. Evidently, in the country, many organizations still grapple with issues relating to proper compensation of employees in order to increase their performance standards. This therefore calls for a study of this magnitude to find out whether the same is applicable in Kenya or otherwise.

 Andrews (2016), 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. However, Ongori (2015) 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. Based on this background the study wants to investigate compensation strategy and organizational performance a case study of Nigerian Bottling Company, ESEHI NIG. LTD and AVERY NIGERIA LTD

STATEMENT OF THE PROBLEM

In today’s work environment, there is more change and uncertainty, there is increased need for empowered employees, there is decline in traditional incentives, there is rise of nontraditional incentives and there is increased use of variable compensation. Many studies carried such as Kipkorir, Basweti and Nyaoga (2014) found out that there is a non-significant relationship between executive compensation and performance. Ngui, Mukulu and Gachunga (2014) study established that financial and non-financial rewards can combine to enhance firm performance. As evidenced the studies had mixed results an indication of limited information on the real effects of compensation strategies on the performance of employees in the companies specifically with a focus on Nigerian Bottling Company, ESEHI NIG. LTD and AVERY NIGERIA LTD in Edo state thus the essence of this study. Again at Nigerian Bottling Company, ESEHI NIG. LTD and AVERY NIGERIA LTD, it is clear what methods are used to determine employee compensation, what direct and indirect financial programs are offered at the company and their effects on employee performance and also the non-financial benefits offered and their effect on employee performance. At the company, compensation is usually narrowed to cash and as a result, employers only have a tunneled vision when it comes to the issues of compensation for their employees. The company has also attempted to give attention to employee compensation strategies. However, employees themselves have failed to recognize the fact that their compensation is a package and not only related to cash. The byproduct of the above understanding of compensation strategy is that it is managed to a moderate extent and most of the time employee performance could be affected and vice versa. The study therefore sought to address this gap by investigating effect of compensation strategy and organizational performance at Nigerian Bottling Company, ESEHI NIG. LTD and AVERY NIGERIA LTD

OBJECTIVE OF THE STUDY

The main objective of the study is to investigate compensation strategy and organizational performance. The specific objectives are;

1. To ascertain the effect of overtime on organizational performance in Nigerian Bottling Company, ESEHI NIG. LTD and AVERY NIGERIA LTD
2. To ascertain the effect of allowances on organizational performance in Nigerian Bottling Company, ESEHI NIG. LTD and AVERY NIGERIA LTD
3. To find out the effect of fringe benefits on organizational performance in Bottling Company, ESEHI NIG. LTD and AVERY NIGERIA LTD

RESEARCH QUESTION

The following research questions are formulated to guide the study;

1. What is the effect of overtime on organizational performance in Nigerian Bottling Company, ESEHI NIG. LTD and AVERY NIGERIA LTD?
2. What is the effect of allowances on organizational performance in Nigerian Bottling Company, ESEHI NIG. LTD and AVERY NIGERIA LTD?
3. What is the effect of fringe benefits on organizational performance in Bottling Company, ESEHI NIG. LTD and AVERY NIGERIA LTD?

RESEARCH HYPOTHESES

The following research hypotheses are formulated to guide the study;

H1: There is no effect of overtime on organizational performance in Nigerian Bottling Company, ESEHI NIG. LTD and AVERY NIGERIA LTD

H2: There is no effect of allowances on organizational performance in Nigerian Bottling Company, ESEHI NIG. LTD and AVERY NIGERIA LTD

H3: there is no effect of fringe benefits on organizational performance in Bottling Company, ESEHI NIG. LTD and AVERY NIGERIA LTD

1.6.         SIGNIFICANCE OF THE STUDY

The findings of this research are partial and theoretical significance not only with the reference to the members of the work organization studied, but also with regard to the available knowledge about problems of compensation strategy.

The research also enhances and broadens the knowledge of the strategy that attained of organization goals is aimed at involving all parties in the organization, the management, the employees and the customers/suppliers. The significant derived from this study will enable the management to realize that poor working condition, lack of promotion, inadequate salary structure e.t.c. will immensely reduce the output of employees. This study is a contribution to the body of knowledge existing. In the field of human resources management especially in wages and salaries, administration because of the approach brought to bear upon the research which may see compensating strategy in different light from much of the existing literature on compensation of workers in Nigeria. The importance of this study is to see the relationship (if any) between overtime, allowances, and fringe benefits and organizational performances.

1.7.         SCOPE OF THE STUDY

The study tries to examine compensation strategies and organizational performance and how employees reward could be linked to efficiency and higher productivity with a particular reference to Bottling Company, ESEHI NIG. LTD and AVERY NIGERIA LTD. The scope of the research is limited in both depth and coverage, the study concerning the examination of independent variable affecting compensation of employees and organizational performances in Bottling Company, ESEHI NIG. LTD and AVERY NIGERIA LTD. The study will not cover all the variety of products producing in the company because of the problem that may be encountered when administering questionnaires on employees in all the industries all over Nigeria. As such, this study will adhere strictly to Bottling Company, ESEHI NIG. LTD and AVERY NIGERIA LTD in Edo state.

1.8.         LIMITATION OF THE STUDY

This research is affected by non availability of fund. This however, is caused by the poor standard of living in the country which emanated from economic situation of the country and high rate of inflation which has caused prices in commodities and other materials needed by the researcher to increase.

   The time fame scheduled for the completion of the research is too limited.

  It is difficult to retrieve information from the populace because people prefer to keep their privacy.  In a situation where data over the year are needed, such data are not often possible to collect.

1. OPERATIONAL DEFINITION OF TERMS

Compensation: compensation refers to monetary payment given to an individual in exchange for their services. In the workplace, compensation is what is earned by employees. It includes salary or wages in addition to commission and any incentives or perks that come with the given employee’s position

Compensation strategies are plans that describe how a company determines employee benefits and pay. These plans include information on the company’s goals for providing compensation and remuneration ranges for roles within the company. It also outlines how the company evaluates employees when determining compensation.

 Pay: This is a generally rewards as the most important form of compensation because of the role it plays in employees motivation of putting all his effort towards organization productivity. Pay is the basic compensation employee receives usually inform of wages or salary.

 Incentives: These are rewards designed to encourage and reimburse employees for effort beyond normal performance expectations. It includes bonus, commission, profit sharing, plans, piece work, stock option, cost reduction, suggestion plan, production bonus plan e.t.c. incentive pay has the following benefit:

 Motivation: linking pay to performance increase employees motivation to perform i.e superior performance is encouraged and inferior. Performance is discouraged

 Retention: high performance is more motivated to stay with an organization.

Productivity: because incentive pays encourage superior performances, an organization’s productivity can be highly improved

Organizational goals: it helps to designing individual goals with organizational goals.

Benefits:  These are rewards available to employees as part of organizational membership. These includes free medical treatment, vocational or leave pay, call back pay, lay off pay, rest period pay, lunch subsidy, accident insurance, disability insurance, scholarship for staff’s children.

According to flippo (2002), increasing management is accepting the idea that group as well as individual can be motivated to work more effectively. Thus most of them embark on employee compensation program which are designed to attract capable employees to the organization, motivates them into superior performances and retain. This service over an extended period of time. Services increase inefficiency and higher productivity is one of the goals of an organization effective, compensation management is a step towards achieving the goals

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