Abstract

This research work focuses on the effect of reward systems on employee performance in the modern work environment and how satisfaction with rewards can lead to higher performance and better job satisfaction. Based on a critical review of published literature, it is clear how important the right combination of rewards is to the performance of an organisation.

Employees should always be aware of the relationship between their level of performance and how they are rewarded for that performance. This project will examine how different types of reward systems affect that performance and attempt to establish which type of reward systems are more beneficial to the company in question and in the current business climate it operates in.

How can performance be enhanced and the required business outcomes accomplished? How can reward systems contribute to this performance and outcomes? These issues will be addressed in the context of best international practices regarding reward structures and from primary data collection.

This research was conducted at the operational managerial level. Considering how many employees report into this level, this is where I believe both employee and employer interact the most regarding rewards, motivation, and how that affects performance.

CHAPTER ONE

INTRODUCTION

1.1 Background of the Study

Today’s organisations are operating in a very dynamic and highly competitive environment. To remain relevant in the market, they have to be able to respond quickly to ever-changing customers’ demands.

Reward management is one of the ways used by organisations for attracting and retaining suitable employees as well as facilitating them to improve their performance. The management has established rewards in their organisations in pursuit of increasing performance so as to ensure quality service. Employees’ rewards refer to “all forms of pay and rewards received by employees for their performance. This study, therefore, is aimed at determining the effect of rewards on employee performance.

Reward management is one of the strategies used by human resource managers to attract and retain suitable employees as well as facilitate them to improve their performance through motivation and to comply with employment legislation and regulations.

As a result of these pressures, to design reward structures that facilitate the organisation’s strategic goals and the goals of individual employees. Reward systems are very crucial for an organsation (Maund, 2001).

Rewards include systems, programs, and practices that influence the actions of people. The purpose of reward systems is to provide a systematic way to deliver positive consequences. The fundamental purpose is to provide positive consequences for contributions to desired performance (Wilson, 2003).

Establishing this balance is one of the main reasons for rewarding employees. Organisations that follow this approach to create this balance focus on the two main components of a reward system which are Intrinsic and Extrinsic rewards. That is compensations, benefits, appreciation, and recognition.

Studies that have been conducted on the topic indicate that the most common problem in organisations today is that they miss the important component of reward, which is the low-cost, high-return ingredient to a well-balanced reward system (Pratheepkanth, 2011).

A key focus on recognition is to make employees feel appreciated and valued. Research has proven that employees who get recognized tend to have higher self-esteem, more confidence, more willingness to take on new challenges, and more eagerness to be innovative (Pratheepkanth, 2011).

A Reward system is an important tool that management can use to channel employee’s motivation in desired ways. In other words, reward systems seek to attract people to join the organization, to keep coming to work, and motivate them to perform to high levels.

The reward system consists of all organisational components including people, processes, rules, and decision-making activities involved in the allocation of compensations and benefits to employees in exchange for their contribution to the organisation. In order for an organisation to meet its obligations to shareholders, employees, and society, its top management must develop a relationship between the organisation and the employees that will fulfill the continually changing needs of both parties.

At a minimum, the organisation expects employees to perform reliably the tasks assigned to them and at the standards set for them and to follow the rules that have been established to govern the workplace. Management often expects more: that employees take initiative, supervise themselves, continue to learn new skills, and be responsive to business needs.

At a minimum, the employees expect the organisations to provide fair pay, safe working conditions and fair treatment. Like management, employees often expect more depending on the strength of their needs for security, status, involvement, challenges, power, and responsibility.

For organisations to address these expectations, an understanding of employees’ reward systems (motivation) is required. Mills and al. (1984), define motivations as “a set of processes concerned with the force that energizes behaviour and direct it towards attaining some goals”. Kreither and Kinicki (1992) postulate that motivation represents “those psychological processes that cause the arousal, direction, and persistence of voluntary actions that are goal-directed”.

If it is the goal of the managers to successfully guide employees towards accomplishing their goals, that is organisational objectives, it is imperative that they understand these psychological processes.

Schermerhorn and al. (1991) conceptualised motivation as based on content and process approaches. The content theories of motivation emphasize the reasons for motivated behaviour and what causes it. These theories specify that the correlates of motivated behavior that is, states, feelings or attitudes associated with motivated behaviour helps to represent psychological deficiencies that an individual feels some compulsion to eliminate.

Establishing this balance and meeting these needs is one of the first reasons according to Deeprose (1994) to reward and recognise employees. Formal reward programs which denote financial rewards such as salaries, cash bonuses, fringe benefits, bonuses, promotions, or share options play a significant role but employees accept these as intrinsic factors for the job.

Every company needs a strategic reward system for employees that address these four areas: compensation, benefits, recognition, and appreciation. The problem with reward systems is that many businesses today are missing one or more of these elements (usually recognition or appreciation) and the elements that are addressed are not properly aligned with the company’s corporate strategies.

From the above views, it can be thought that rewarding employees (motivation) is of a greater value to the employee’s behaviour toward performance (work). It is, therefore, necessary that the management of organisations have this at the back of their mind during planning.

1.2 Statement of the Problem

Reward management is one of the strategies used in organisations to improve employee performance. It is therefore important to find out what motivates its employees so that it can plan a suitable reward system and gain better results.

In viewing the increase in productivity in the work today, which has resulted in economic growth, most African countries like Cameroon for instance have witnessed a consistent drop in their productivity. This is due to the lack of some of the reward systems by some of the organisations to reward their employees. This study is therefore intended to analyse the effect of intrinsic and extrinsic rewards on employees performance. (CFC BUEA) which will later lead to efficiency and effectiveness.

More specifically, this study also aims at finding out which element of the reward systems functions well and which element could be further developed and improved in order to increase employees satisfaction.

The driving force behind these studies is to enable employees of CFC BUEA to give feedback on their work motivation and their attributes towards the reward systems and perhaps increase the commitment to the organisation. Based on this information, this research is therefore structured to provide answers to the following questions.

The main research question is;

1. To what extent do reward systems affect employee performance at CFC?
2. The specific research questions are:
3. Which are the most important rewards that motivate employees at CFC?
4. How can the reward system be improved to enhance performance at CFC?

1.3 Objective of the Study

The main objective of this study is to investigate the effects of reward systems on employee performance.

More specifically, the research sets out;

1. To examine the effects of promotion on the performance of employees in CFC.
2. To examine the effects of compensation on the performance of the employees in CFC.
3. To identify the most important rewards that motivate employees at CFC