Unlock document.
This document is partially blurred.
Unlock all pages and 1 million more documents.
Get Access
Academy of Strategic Management Journal Volume 18, Issue 3, 2019
1 1939-6104-18-3-382
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
Academy of Strategic Management Journal Volume 18, Issue 3, 2019
2 1939-6104-18-3-382
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
Academy of Strategic Management Journal Volume 18, Issue 3, 2019
3 1939-6104-18-3-382
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.
Academy of Strategic Management Journal Volume 18, Issue 3, 2019
4 1939-6104-18-3-382
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
Academy of Strategic Management Journal Volume 18, Issue 3, 2019
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.
