Effect Of Reward System On Employee Performance Among Selected Manufacturing Firms In The Litoral Region Of Cameroon

Academy of Strategic Management Journal Volume 18, Issue 3, 2019

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EFFECT OF REWARD SYSTEM ON EMPLOYEE

PERFORMANCE AMONG SELECTED

MANUFACTURING FIRMS IN THE LITORAL REGION

OF CAMEROON

Walters T. Ngwa, University of Nigeria

Bamidele S. Adeleke, Ladoke Akintola University of Technology

Emmanuel K. Agbaeze, University of Nigeria

Nwanneka C. Ghasi, University of Nigeria

Benedict O. Imhanrenialena, University of Nigeria

ABSTRACT

This study investigates the effect of reward system on employee performance in selected

manufacturing firms in the Littoral Region of Cameroon. Specifically, the study assesses the

degree to which profit sharing affects employee commitment in manufacturing firm; ascertains

the effect of flat-rate systems on employee work values in manufacturing firms; and appraises the

influence of collective bargaining reward systems on employee cohesiveness in manufacturing

firms. This research work is a survey which makes use of a sample of 538 employees drawn from

a population of 5146 employees of ten selected manufacturing firms within the Cameroon

Littoral Region. The sample was selected by the use of the Cochran’s formula for finite

population sample at a 95% confidence level. The major source of data used for the study was

primary data and the instrument used for data collection was questionnaire. The findings

revealed that, profit sharing had a significantly positive effect on employee commitment in

manufacturing firms; flat rate systems had a significantly negative effect on employee work

values in manufacturing firms; and collective bargaining reward systems had a significantly

positive impact on employee cohesiveness in manufacturing firms. The study concluded that

there is a positive link between reward systems and employee performance. This link creates an

opportunity for employers to use reward system as a motivating factor to fine-tune employee

behaviour towards efficiency and effectiveness. Based on the findings, it was recommended

amongst others that reward systems for manufacturing firms should be designed such that

employees are entitled to percentages of profit earned by the firm as a means of promoting

productivity and group cohesiveness amongst employees. The study further advised that

employees in manufacturing firms should not be paid fixed salaries as it could result in a high

rate of tardiness and reluctance of employees within a group to put in anything more than the

performance of an average performer in the group.

Keywords: Reward System, Work Values, Employees Commitment, Employees Cohesiveness.

INTRODUCTION

In this present world of globalization where business has gone beyond national

boundaries and employees are protected by international laws and engagement, reward systems

are fast becoming a competitive tool to many firms. The advent of globalization has brought

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about greater pressure on business management to be proactive, creative and innovative in order

to survive the turbulent business environment that now transcends national boundaries (Ezigbo,

2011). Business management has gone beyond routine processes of mass production with the

aim of benefiting from economy of scale. Consumer needs, taste and fashion not only vary from

one society to the other but constantly change with time and season. Consumers are in constant

demand for product differentiation and new product features. Different consumer groups based

on health age and need emerge on a day to day basis. This calls for a better management of

resources and a prompt response to consumer needs as a key determinant of survival (Hill,

2004). Maximizing the performance of organizations is the main issue for an organization

(Candy, 1997; Milkovich et al., 2011). Plants, machinery, and equipment cannot generate the

desired output. They have a relatively fixed production capacity. It is only the human resource

whose output is subject to a number of motivating factors. The success of every organization

depends not only on the quality of human resources available to the organization but also on the

ability to trigger the optimum output from an employee (Pratheepkanth, 2011). Ahindo (2008)

opines that success in today’s increasingly competitive environment is to a greater extent a

function of effective and efficient management of human resources available to the business

organization. This calls for the development of a work force that is motivated to yield the highest

possible performance and productivity for the firm towards achieving its organizational goals

and objectives.

Having the best strategy in place and appropriate organizational architecture is not a

guarantee that an organization will be effective. This can only be complimented when

organizational members are motivated to perform at a high level. While machines and robots can

be programmed and controlled to consistently produce the same amount of output, upgrade to

perform better or replaced if not functioning properly, humans cannot be programmed and

controlled. Their level of productivity is subject to their level of motivation (Bayon, 2013).

Employees are bound to the organization by terms of a contract, labour union laws, state and

human right regulations. As such employees cannot be replaced like machined or compelled to

deliver under adverse conditions. However, when an organization undertakes to satisfy the needs

of employees, it triggers a desire in the employee to return this favour with hard work and

commitment. Thus, identifying the needs of the employees and answering it is the most basic

approach of every organization to earn their commitment to organizational goals and objectives

(Chughtai, 2008).

Generally, individuals are motivated to work by the needs they have which require

satisfaction. Such individuals are committed to jobs they perceive to have a possibility of

satisfying their needs through the reward they will receive for the work done. The type of

motivation depends greatly on the nature of the reward. Remuneration is, therefore, one of the

factors that have the ability to improve the performance of individuals and organizations by

increasing productivity, quality of performance and encouraging positive work attitudes from

workers to be in line with organization’s objectives (Bayon, 2013).Intrinsically motivated

individuals will be committed to their work only when they find out that their job contains task

that is intrinsically rewarding (Ajila, 1997). In the same light, extrinsically motivated persons

will be committed to the extent that they can gain or receive external rewards for their job. In a

nut shell, you can only get what you reward. Good remuneration, therefore, is expected to

contain elements that reward both intrinsically and extrinsically to trigger both extrinsic and

intrinsic motivation from the employee. With a well-motivated workforce, employee

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performance can be manifested on organizational effectiveness, which allows individuals to

focus on the development of their work, in terms of behaviour, knowledge, ethics, skills, and

effectiveness (Pratheepkanth, 2011).

The performance of every employee is a major concern to the human resource

department. In spite of the qualification and longevity of service of an employee, workers are

sometimes reluctant to put in their best at their job site. Some who show a high level of

performance at the start of their career start diminishing at the time they are expected to use their

experience and perform even at a higher level. Many work only within the confines of their job

specification and are not interested in putting in any additional effort in driving the

organizational goals. This takes away creativity from the work place, limits invention and

improvement and places such a firm at a competitive disadvantage in the adverse business world

that is constantly shifting to meet consumer needs and expectations. It takes only motivation to

transform these employees into a self-driven and work oriented labour force (Grant, 2008). As

pointed by Pierce et al. (2003), an effective reward system is not static but constantly fine-tuned

and its effectiveness often evaluated to ensure it constantly captures employee motivation. It

must constantly increase the desire to attain high standards, increase employee satisfaction and

give a feeling of competence and freedom (Danish & Usman, 2010). Employers get more of the

behaviour that they reward, not actually what they assume they will naturally get from

employees. Thus when employees surpass their target or exceed their standard they expect to be

rewarded immediately as a way of motivating them. By doing this, employees directly connect

reward with work behaviour and the higher performance they have attained (Torrington & Hall,

2006). To this note, reward systems are very critical for an organization (Maund, 2001). Though

reward systems have the ability to attract the right employee, keep them and constantly motivate

them to deliver desirable performance (Otieno, 2006), a poorly structured reward system can

result in high labour turnover, low level of productivity and a general laissez faire attitude at the

workplace. It is therefore important for management to develop a reward system that will

provide positive consequences for contributions to desired performance by employee. This will

create an ever burning desire in employee to be creative, innovative and performance oriented,

resulting in high-level productivity thereby placing the organization at a competitive advantage

amidst global competition.

In many manufacturing settings, instead of the reward systems to harmonize the interest

of employee and employer by fine-tuning employee interest towards performance, the systems

have progressively made parallel the interest of employee and employers. If research is not done

to correct this situation, many firms will continue to experience low levels of employee

performance, high production cost, and low-profit margins. There will be conflicting interest

between employee and employer resulting in high labour turnover with its associated cost effect.

It is on this premise that this research work is designed to investigate the effect of reward system

on employee performance using selected firms in Cameroon littoral region. The study

specifically (i) assesses the degree to which profit sharing affects employee commitment in

manufacturing firms; (ii) ascertains the effect of flat-rate systems on employee work values in

manufacturing firms; and (iii) appraises the influence of collective bargaining reward systems on

employee cohesiveness in manufacturing firms.

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REVIEW OF LITERATURE

Concept of Reward Systems

Reward systems can be traced back to the scientific management era where management

principles and philosophies were developed some of which are still existing today. Reward

systems played an important role in this era in the success and implementation of this philosophy

of scientific management. It all started with the American Society of Mechanical Engineers who

was the first promoter of management. The most challenging problem they had was what they

termed “wage problem” (Drury, 1915). It was in 1895 that Taylor made the first formal

presentation in a paper titled

“A piece-rate system: A step toward partial solution of the labour problem”.

One of the major issues addressed in this paper is the “wage problem”. Though Peach &

Wren (1992) traced the evolution of pay for performance to the 1950s, many management

programs had existed in the 1915s many of which were identified with the names of the

management engineers themselves like: the Taylor system, the Gantt system, Emerson system

and so on (Nadworny, 1957).

Although scientific management is not a reward system as stated by Taylor in his

testimony before the special committee when he defined what scientific management is not, it is

the major concern of scientific management. Scientific management is not a pay scheme for

employee neither is it a piece works system. It is not a bonus or premium system neither is it a

scheme for paying men but under scientific management, the pay system is simply one of the

subordinate elements. However, task and bonuses constituted the most important elements in

scientific management. In this era, Taylor pressed on the need for management to develop plans

that offer high wages to workers and a relatively low labour cost to employers while fostering

individual pay for performance. This was illustrated in a proposed pay system: the piece-rate

plan (Taylor, 1947).

Frank and Lillian Gilbreth developed a reward system whose ideas are still being used

today (Spriegal & Myers, 1953). They identified two kinds of incentives: direct incentives which

include ambition and pride of the worker, and indirect incentives which include rewards and

punishment. The characteristics of reward are:

1. Positive in terms of their perceived gain to the worker.

2. Predetermined, meaning that they should be decided upon prior to the start of a job.

3. Personal or individual design i.e. for that particular man for that particular work.

4. Fixed/unchanged so that once the rate is established it must not be cut.

5. Assured by the organization so that employees trust that: rewards have always been paid in the past,

therefore probably will be in the future.

6. Prompt so that the reward is announced and received as soon as the work has been completed.

In a world of global competition, employers are looking for better ways of motivating the

employee to perform at optimum. One of such strategies is by the use of an appropriate reward

system. Reward systems that not only attract and retain top performing employee but constantly

motivates them towards achievement (Downes & Choi, 2014). Reward systems had existed in

the past and have served as a premise for the development of recent ones that better align the

interest of both employee and employer. According to Babakus et al. (2003), the perceptions that

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employees have with regards to their reward climate influences their attitude towards their

employees. In addition, the commitment of managers towards their organization is also shown by

how the manager rewards his/her employees. Hafiza et al. (2011) mentions the norm of

reciprocity, which focuses on the ability of organization to accommodate the needs of their

employees, and reward them for their effort. In exchange for the rewards provided to them,

employees should reciprocate by increasing their commitment towards their organization and

their work. Many studies in the creativity literature have shown that the firm’s perform creatively

(Eisenberger et al., 1998; Eisenberger & Rhoades, 2001).

Reward systems have different parts and structures depending on the need of the

organization exploiting the reward system. What every organization regards as its goals for

profitability and growth are the parameters that are expected to be included in the reward system

to ensure that desired behaviours are rewarded while undesired actions are not. This requires a

breakdown and restructuring of organizational goals into understandable and measurable

behaviours and performances. The outcome is some forms of a management control tool that

measures and rewards performance. These systems sometimes have minimum and maximum

reward that can be paid out depending on what it is designed to achieve (Jaghult, 2005).

There are different parts of a reward system. The first include the monetary part which is

the most common part of every reward system. It is not necessarily the most important part of the

system but has a high motivating impact on employee performance. It is the financial part of

reward (Merchant, 2007). There are three main categories of the monetary part of a reward

system:

1. Performance base salary-increase: Organizations pay salaries to their employees after every fixed period of

time. It is expected that employee competencies increase over time as a result of experience in longevity.