Abstract

This study titled “The Impact of Compensation on Employee’s Performance: A case study of NESTLE Cameroon” considers one of the major problems corporations do not take into consideration when evaluating employee performance.

The research is structured to tackle the research question: To what extend does salary, wages, bonus, commission, employees’ satisfaction, and promotion opportunities enhance the performance of employees? This research has as main objective to investigate the impact of compensation on employee performance.

The specific objectives include: to examine the impact of promotion on employee performance, to evaluate the impact of salary, on the employee performance, and make possible recommendations Both the primary and secondary data have been used in this work.

Primary data were obtained through administering seventeen (17) to the staff of NESTLE workers. These data were analyzed using graphs and the Likert Scale Model Using the Likert Scale model to empirically test the hypothesis, the analysis gave some prominent results that since Z = 9.46, > Z /2 = 1.96, we, therefore, reject the null hypothesis (H0) that compensation does not have a significant effect on employees’ performance.

We then retain the null hypothesis that compensation has significant effects on employees’ performance with 95% confidence.

Following these results, some policy recommendations were put forward that NESTLE Cameroon should study employees’ motivational factors so as to know where to invest their resources in compensating employees. A full view of the study can be obtained by reading through the work.

CHAPTER ONE

GENERAL INTRODUCTION

1.1 Background of the study

Job performance is influenced by many factors. According to Kritner and Kinicki (2007), performance management is a “continuous cycle of improving job performance with goal setting, feedback and coaching, and rewards and positive reinforcement”.

In this study, the focus was conducted at PT Telkom Malang Regional Office to see how such factors of compensation scheme affect the job performance of the employees.

The question that prompted the current investigation was “what degree to which the salary, incentives, benefits, promotion, self-development, and work environment collectively or individually had as an influence on employee performance?”

Compensation is one primary reason for employees to seek employment. They are rewarded for the services and efforts that they exert for their organizations. Employees can be compensated in many ways for example salaries holidays, bonuses, etc. There are two basic compensation models; performance-based pay and components-based pay.

In the former paradigm, an employee’s compensation is either tied to the way he performs; if he performs better he would be rewarded accordingly. (performance-based pay) and on the other hand, non-performance-based pay; where employees’ performance is not paid or rewarded even if its performance is not up to mark e.g. fixed pay and salaries, etc. (Taylor,1911).

Compensation is one of the physical needs that influence motivation which in turn will affect the employees’ performance.

Compensation can take the form of financial compensations include; salary, wages, bonus, and commission while non-financial compensation consists of employee’s satisfaction, such as the chance of promotion opportunities for recognition or from a psychological and physical environment in which the employee works such as a pleasant environment.

Compensation also includes the financial returns to the services rendered by employees as part of the employment relationships. It is a form of reward that flows to employees arising from employment (Dessler, 1995) compensation has a big influence on the recruitment of employees; Motivation, productivity, and employee turnover (Bernardin and Russel, 1993).

The level and magnitude of compensation should be of concern because the level of compensation will determine the lifestyle, self-esteem, and the value of the company.

Performance is defined as the achieved result of operation with the capabilities of the employee who acts in certain situations. According to Bryars(Suhartini, 1995)employee performance is a combined result of effort, ability, and perception of tasks. High performance is a step towards the achievement of organizational goals.

Although compensation is not the only factor affecting performance, it is acknowledged that compensation is a major factor for employee performance improvement.

If employees feel that their effort is appreciated and the company offers a system of compensation in association with job evaluation, the employees’ motivation and enthusiasm will improve hence their performance.

Robbins (2001) stated that when employees feel their efforts are appreciated and the company introduced a system of fair compensation and satisfaction, the company has optimized the motivation. By encouraging employees to work, there will be increased employee performance.

There has been an agreement between behavioral scientists and managers that compensation can be used to motivate employees’ performance.

This can be understood, that if compensation is intended to motivate good performance, the compensation shall be assessed by the individual and the compensation must relate to the level of performance to be motivated.

1.2 Problem Statement

A survey in 1992 conducted by Heneman (Eske and Heneman, 1996) on the compensation of senior professionals at 72 firms aimed to test the effectiveness and success rate of pay based on performance in achieving organizational goals.

The results showed that performance-based pay was less successful (only marginally successful). The results showed a decrease of the level of effectiveness of performance-based pay when compared with a similar survey 10 years before.

On the contrary, the survey results in 1996 conducted by Mclean and Tanner (Hays, 1999) showed that 70% of CEOs (Chief Executive Officer) and 58% of human resource managers said that the company can implement compensation programmes to improve performance or productivity of employees Patton (1999) say, “if you heard that money does not provide the motivation to do better, or if compensation in the form of money was ranked low, it is the result of a disability survey.”

Further, he said that it is funny if a person is not motivated to excel because of money, because money is an important element, as long as there is a correlation with another element that is expected of workers to be more appreciated.

Based on the description compensation and employee performance must have a relationship, as each reward has a valence or value to an employee. Rewards can include both financial and non-financial compensation and anything else.

However, this research is therefore structured to provide answers to the following question:

1.3 Research Questions

This research study will be aimed to provide answers to the following research questions

1. To what extent does promotion affects employee’s performance
2. To what extent does salary affect employee’s performance

1.4 Objective of the Study

The main objective of this research is to investigate the impact of compensation on employee performance.

The specific objectives are:

1. To examine the impact of promotion on employee performance
2. To evaluate the impact of salary, on the employee performance
3. To propose some recommendations.

1.5 Hypothesis

The hypothesis of this research study is that:

Ho: Compensation does not have an impact on employee performance

H1: Compensation has an impact on employee performance

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