IMPACT OF INCENTIVES ON PRODUCTIVITY OF EMPLOYEES IN ORGANISATION

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IMPACT OF INCENTIVES ON PRODUCTIVITY OF EMPLOYEES IN ORGANISATION

 

CHAPTER ONE

INTRODUCTION

1.1       Background to the Study

The progress and continuous existence of any organization are determined by the manner the employees are given their emoluments and rewards. As stated by Dixit and Bhati (2012), poor incentive packages have been the major factor affecting employees’ commitment and productivity. The attitude of workers to their jobs and the level of their dedication are determined by the reward system and the motivating inducements.

According to Ogundele (2010), motivation is as an action which an individual takes in order to correct an imbalance work.  Nevertheless, for any organization to achieve its goals and objectives in any competitive business environment, employers of labour must have an in-depth knowledge and understanding of what galvanizes its workforce to perform effectively and efficiently and reward them in the same way. Moreover, employees must be motivated via sufficient incentives plans and reward system and that will always stimulate them to take the initiative, do things on their own without necessarily having to ask bosses for direction or go-ahead because they are proactive and have the interest of the organization at heart and have a good attitude to work, hence foster organizational productivity. Nonetheless, in a fast-changing organization, inducement strategies are used by employers of labour to make sure that the competent and hard-working employees are kept happy, invigorated, energized, and retained for the continuous improvement of the organization.

Bola, Kuye, Sulaimon, Peter, Olayiwola, Glorious, Adekoya (2012) posited that Motivation is the driving force within individuals that propel them to action. As a result, improvement in productivity can only be possible and attainable if the employees are properly motivated through sufficient incentive packages that are commensurate with their performances.

According to Alaneme, Ayinla, Kuye,  Adebakin, Adeleke (2012),  motivation can be defined as the willingness to exert greater effort to achieve organizational goals, and any influence that directs individual’s goal directed behavior.

Incentives impel and drive employee attitude in the place of work and also foster understanding between the employer and the employee which will as a result, give rise to the fantastic performance of the employees in particular and the organization as a whole. Chidi, Joy, Badejo, Ogunyomi, Onabote (2012), added that motivation is the process of stimulating people to action in order to accomplish desired goals. It is a predisposition to act in a specific goal directed way. Charles (2000) viewed motivation as psychological forces that determine the direction of a person’s behavior, a person’s level of effort, and a person’s level of persistence in the face of obstacles.

To forestall or prevent a lack of understanding and conflict with the members of staff, the reward system must be lucidly communicated to the workforce; with appropriate measuring of job which will drive the much desired motivational impetus in the employees. Incentives packages and reward system instituted by an organization go a long way in influencing job satisfaction and performance.

Job satisfaction has to do with a personal evaluation of the extent to which people like their job. That is, whether or not the condition in the work itself and the environment, as well as policies and management strategies are beneficial. In a situation where they are favourable, then, employees are satisfied, if the conditions remain the same. This leads them to form positive attitudes that are useful to customers and management. Schermerhorn (2000), opines that job satisfaction is an emotional response towards various aspects of an employee’s work. He emphasizes that likely causes of job satisfaction include – status, supervision, co-workers’ relationship, job content, remuneration, and organizational structure.

Hersey and Blanchard (1988), state that motivation is influenced by forward-looking perception concerning the relationship between performance and reward, while satisfaction refers to people’s feelings about the rewards they have received. A number of research findings have suggested a positive relationship between motivation and job satisfaction to the extent that Kreitner and Kinicki (2001), suggest that managers can potentially enhance employee motivation through employees’ job satisfaction.

A number of other research findings have had support for the uplifting effects of money in employee motivation, especially in developing nations with poor employee remuneration, but with high family, societal, political, and so forth financial demands and expectations.

1.2       Statement of the Problem

In the past, employers of labour have been complaining that employees perform their work efficiently when they are newly employed, but with time, their efficiency and productivity dwindle. The employees have attributed decrease in efficiency and productivity to the fact that employers do not provide adequate financial incentives and motivation to enable them to put in their best. According to Ubeku (1975) productivity suffers a lag if incentives are poorly or inappropriately used. The use of various incentives to motivate staff must be adequate and appropriate. The human in the economic sense, has generally been regarded as an economic man, this means that means that man or worker, as the case may be, only responds to financial incentives as a form of motivation. This assumption is popular among the classical economic schools of thought. They equate satisfaction only to economic values, such as a monetary inducement as the only benefit that workers respond to. In other words, the only condition that may get a worker motivated or satisfied can only be measured in financial or monetary terms.

The problem is lack of job satisfaction among staff. Locke and Lathan (1976) gave a comprehensive definition of a job satisfaction as pleasurable or positive emotional state resulting from the appraisal of one’s job or job experience. Job satisfaction is a result of an employee’s perception of how well their job provides those things that are viewed as important. According to Mitchell and Lasan (1987), it is generally recognized in the organizational behavior field that job satisfaction is the most important and frequently studied attitude. While Luthan (1998) posited that there are three important dimensions to job satisfaction: Job satisfaction is an emotional response to a job situation. As such, it cannot be seen, it can only be inferred.

Organizational productivity is only determined by how well outcome meet or exceed expectations. For instance, if organization employees feel that they are working much harder than others in the department, but are receiving fewer rewards they will probably have negative attitudes towards the work, the boss and or coworkers. On the other hand, if they feel they are being treated very well and are being paid equitably, they are likely to have positive attitudes towards the job.

Organizational productivity represents several related attitudes which are the most important characteristics of a job about which people have an effective response. These, to Luthans, are: the work itself, pay, promotion opportunities, supervision and coworkers.

Employee satisfaction is closely related to productivity, which is then related to firm profitability. Employee satisfaction has a positive impact on organizational performance. Beside this, firm profitability has a reasonable non-recursive effect on employee satisfaction. Employee satisfaction plays a considerable role in enhancing the firm profitability and improving operational performance of organizations and quality of goods and services. There is no doubt in it that employee satisfaction is critical to attain quality and profitability at organization, employee satisfaction attain quality and profitability of the organization. Employee satisfaction impacts quality at industry, to achieve quality and profitability at organization, employee satisfaction is fundamental and without it, an organization cannot think of being successful.

To tackle this problem, the researcher has decided to use financial incentive. This will boost staff morale and galvanize them towards greater productivity and more dedication to their jobs. This problem, if left unsolved, will lead to disenchantment of the staff with their jobs, low morale among staff, poor quality of work done and by extension, lack of satisfaction of customers. Therefore, the importance of solving this problem cannot be over-emphasized.

1.3      Aim and Objectives of the Study

The purpose of this study is to examine the effect of financial incentives on organizational productivity. Other objectives include:

  1. Examine the impact of financial incentive used on the organizational productivity.
  2. Examine the relationship between the measures of financial incentives and dimensions of organizational productivity.
  3. To examine the impact of benefits of financial incentive on the organizational productivity.
  4. To examine factors militating against effective financial incentive on organizational output

1.4    Research Purpose

  1. What is the impact of financial incentive used on the organizational productivity?
  2. What is the relationship between the measures of financial incentives and dimensions of organizational productivity?
  3. What is the impact of benefits of financial incentive on the organizational productivity?
  4. What are the factors militating against effective financial incentive on organizational productivity?

1.5    Research Hypothesis

  1. There is no significant impact of financial incentive used on the organizational productivity.
  2. There is no significant of the relationship between the measures of financial incentives and dimensions of organizational productivity.
  3. There is no significant impact of benefits of financial incentive on the organizational productivity.
  4. There is no significant impact of the factors militating against effective financial incentive on organizational output

1.6       Significance of the Study

This study shows clearly the impact organizational financial incentives have on employee job satisfaction in an organization. The study will therefore be useful to:

This will help the organization in no small way in the area of policy formulation with respect to employee incentive plans and emolument.

The study will add immensely to knowledge that is already in existence on the impact of organizational financial incentives on job satisfaction.

This study will equip and adequately furnish management with useful information as to how to motivate its employees so as to get the best out of them and keep them happy in their jobs. In other words, the high rate of employee turnover will be drastically reduced to the barest minimum.

This study will energize and stimulate workers to do their jobs with more vigor and enthusiasm. They will also be able to meet their basic needs easily and their quality of work life will improve tremendously.

The study will enrich the knowledge of the researcher as well as  broaden or widen his horizon as far as the impact of organizational financial incentives on employee job satisfaction is concerned in particular and motivation is concerned in general. The researcher, having delved into several sources to gather relevant information, is therefore armed with sufficient information and ready to impart a great deal of knowledge to people.

1.7       Scope of the Study

The study centred on financial incentives and organizational productivity using United Bank for Africa staff as case study.

1.8       Definition of Terms

Financial incentives: monetary reward or compensation used to motivate workers.

Employee commitment: This refers to the level of employees’ dedication with the organization, their preparedness to exert a high level of effort, goal congruence and values and a strong wish or hunger to be an integral part of the organization.

Job satisfaction: Job satisfaction is the extent to which an employee is satisfied and happy with his/her job which propels the employee to give his/her all to the organization.

Emolument: This is the cash paid to employees for the work they have done

Low morale: This refers to when employees do not show zeal and enthusiasm in the performance of their jobs

Productivity: This refers to the degree of how efficient a machine, a person, a system, or factory is in transforming raw materials into finished goods.

 

IMPACT OF INCENTIVES ON PRODUCTIVITY OF EMPLOYEES IN ORGANISATION

 

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