Relationship Between Rewards and Employee's Performance in The Cement Industry in Pakistan
Relationship Between Rewards and Employee's Performance in The Cement Industry in Pakistan
Relationship Between Rewards and Employee's Performance in The Cement Industry in Pakistan
31 August 2010
Abstract
This study empirically examines the relationship between rewards and employees
performance in cement industry in the Khyber Pakhtoonkhawa Province (KPK) of
Pakistan. The study is based on primary data collected from one hundred and forty
employees of various cement industry in Pakistan. A self designed questionnaire was
used for data collection. The data was analysed using the techniques of rank correlation
coefficient and multiple regression analysis. All the findings were tested at 0.01 and 0.05
level of significance. The result concludes that there is a direct relationship between
extrinsic rewards, intrinsic rewards and the employees performance. It is also find out that
recognition techniques used in cement factories are good for the maximum performance
of employees.
Key Words
Rewards, Employees Performance, Cement Industry, Pakistan.
1. Introduction
How to improve the employees performance is the main concern of all organisations
and focus point for research in many studies. Many approaches have been developed and
adopted worldwide to improve the employees performance including goal setting
approach, measurement and feedback approach, involvement of employees in decision
approach, organisations culture approach, organisations expectation approach, job
design approach, rewards and recognition approach (Howes, 2010). The aim of all
approaches is how to effectively motivate employees to maximise their performance. One
common method of motivation is to tie rewards to employee performance which has been
focused in this study.
The impact of rewards on employees performance is well known phenomenon in the
available literature of human resources. A large number of studies have verified that
reward is a powerful tool to enhance employee behaviours leading to performance
improvement. However, some other studies also observed the negative consequences of
rewards such as an environment of favouritism, sexism and racism.
According to Luthans (2000), there are two basic types of rewards, financial and non
financial and both can be utilised positively to enhance performance behaviours of
employees. Financial rewards means pay-for-performance such as performance bonus,
job promotion, commission, tips, gratuities and gifts etc. Non financial rewards are non
monetary/non cash and it is a social recognition such as acknowledgment, certificate, and
genuine appreciation etc. The non financial rewards is also called non material award
(Neckermann and Kosfeld, 2008).
There is mix finding in the literature to determine which type of reward is more effective to
increase employees performance. According to Perry et al (2006) financial rewards is not
Relationship between Rewards and Employees Performance in the Cement Industry
in Pakistan
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31 August 2010
the most motivating factor (Perry et al, 2006) and financial results have a de-motivating
effect among employees (Srivastava, 2001). Several studies have found that among
employees surveyed, money was not the most important motivator, and in some instances
managers have found money to have a demotivating or negative effect on employees
(University of Texas, undated). On the other hand, Ryan (undated) indicated that non
monetary types of rewards can be very meaningful to employees and very motivating for
performance improvement. According to him, creative use of personalised non-monetary
rewards reinforces positive behaviours and improves employee retention and
performance. These types of recognition can be inexpensive to give, but priceless to
receive.
Rewards can be either intrinsic or extrinsic. Intrinsic rewards that are inherent in the job
itself along with the individual enjoys as a result of successfully completing the task or
attaining his goals. While extrinsic rewards are those that are external to the task of the
job, such as pay, work condition, fringe benefits, security, promotion, contract of service,
the work environment and conditions of work. Such tangible rewards are often determined
at the organisational level, and may be largely outside the control of individual managers
(McCormick and Tifflin, 1979).
The objective of this study is to find out the relationship between rewards and employees
performance in cement industry in Pakistan. More specific objectives are to find out:
Based on the above objectives, the present study seeks to test the following hypothesis:
H1:
H2:
H3:
H4:
2. Literature Review
Rewards and compensation systems motivate employees to give their maximum efforts
towards assigned work. Compensation systems deliver other objectives such as legal
compliance, labour cost control, perceived fairness towards employees and enhancement
Relationship between Rewards and Employees Performance in the Cement Industry
in Pakistan
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Intrinsic Rewards
Extrinsic Rewards
Financial Rewards
Employees Performance
Recognition Rewards
Job Description
Work Environment
Gender Discrimination
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3.1 Data Collection: Questionnaire was used for data collection. Prior to the distribution
of the actual survey, a pilot study involving a sample of 47 employees were conducted to
validate the content of the questionnaire in terms of relevance, accuracy, and wording.
Appropriate changes were made in the final questionnaire.
Five point Likert Scale ranging from 1 (strongly disagree) to 5 (strongly agree) was used
to measure responses. The respondents scores for each construct were obtained by
summing across all the item scores of the individual variables. The hypothesised
relationships among the study variables depicted in the model were tested using multiple
regressions.
3.2 Sampling: Total two hundred questionnaires were randomly distributed among the
employees of cement industry in Khyber Pakhtoonkhawa Province of Pakistan, namely,
Best Way Cement, Cherate Cement, Fauji Cement, Mustehkum Cement and Saadi
Cement. One hundred and forty four questionnaires were returned. Thus, the response
rate was 74%.
The Cronbachs Alpha reliability coefficients for the sample are given in table 1 below:
Table 1: Cronbachs Alpha Reliability Coefficients
Items
Cronbach's Alfa (r)
Extrinsic Rewards
0.83
Intrinsic Rewards
0.90
Recognition Techniques (Social Rewards)
0.74
Performance Bonus (Financial Rewards)
0.91
Job Description
0.87
Gender Discrimination
0.84
Work Environment
0.71
In the regression table 2, p-values of job description, extrinsic rewards and intrinsic
rewards shows the significance contribution in employees performance. R square is
0.822 which depicts that independent variables can cause 82.2% impact on employees
performance while adjusted R square is 0.796 which shows the fitness of the model. The
F-statistics also explains the significance of the model.
Relationship between Rewards and Employees Performance in the Cement Industry
in Pakistan
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To find out the exact relationship between employees performance and independent
variables, the respondents were divided into two salary groups. Low Salary Group contain
employees having pay between Rs. 20,000 to Rs. 40,000 while High Salary Group
consist of employees having salary more than Rs. 40,000. The correlation analysis of two
salary groups is carried out below.
4.1 Correlation Analysis of Low Salary Group Correlation table 3, of the Low Salary
Group showed the strong relationship between performance and job description. The
value of correlation is 0.756 which shows a strong positive correlation. The correlation
between extrinsic rewards and performance is 0.838 while intrinsic rewards and
performance correlate with a value of 0.700. Gender discrimination has a low but negative
impact on performance (correlation = -0.036). In the Low Salary Group there is very low
correlation (0.058) between performance and employees recognition which indicates the
minimum attraction of the intangible rewards at this level. Similarly, correlation between
employees performance and performance bonus is also low (0.150)
Table 3: Correlation Matrix of Low Salary Group
Variables
1
2
3
Employees
Performance
1
Job Description
0.756 1
Extrinsic Reward
0.838 0.692 1
Intrinsic Reward
0.700 0.489 0.652
Gender Discrimination -0.036 -0.155 -0.118
Environment
0.161 0.010 0.095
Recondition
Techniques
0.058 0.000 0.008
Performance Bonus
0.150 0.056 -0.163
1
-0.272
0.122
1
0.203
-0.064
-0.204
0.127
-0.010
-0.059
-0.003
1
0.005
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1
-0.306
0.100
1
0.203
0.117
-0.018
-0.077
-0.011
0.135
0.174
1
0.526
Results
Supported
Supported
Supported
Supported
Partially
Supported
Supported
The result showed that as the intrinsic and extrinsic rewards increase the employees
performance go beyond the minimum acceptability level which show significant
relationship between organisations reward system and employees performance. There is
a moderating effect of employee recognition techniques on performance. At a certain level
it is more attractive then the intrinsic and extrinsic rewards. Job description has a positive
effect on employee performance while increasing gender discrimination has a negative
impact on employee performance.
Relationship between Rewards and Employees Performance in the Cement Industry
in Pakistan
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5. Conclusion
The importance of reward in the day-to-day performance of employees duties cannot be
over emphasized, especially when it comes to being rewarded for a job done. It is a wellknown fact that human performance of any sort is improved by increasing motivation.
From this study it can be easily inferred that workers reward package matters a lot and
should be a concern of both the employers and employees. The results obtained from the
hypotheses showed that workers place great value on the different rewards given to them
by their employers. Hence, when these rewards are not given, workers tend to express
their displeasure through poor performance and non-commitment to their job. It is
therefore imperative for the organisation to consider the needs and feelings of its
employees and not just over look them in order to safe guard industrial harmony, because
a happy worker they say is a productive worker. Having stressed, the importance of a
good remuneration policy on the performance of workers and the different kinds of reward
that can influence workers to perform better on job, this study can therefore be seen as a
call for employers sense of commitment to put in place appropriate incentive plan that will
encourage workers to be more purposeful and improve their performance.
Many organisations are transforming themselves, flattening hierarchies, empowering
workers and basing processes on teams rather than individual performance. Reward and
recognition systems are an important part of the change that is necessary for such
transformation to be effective. A thorough rethinking and restructuring of reward and
recognition practices which are aligned with new organisational goals and culture will give
companies the focused energy they will need to succeed in challenging times. Those
companies that use relevant compensation and rewards as strategic resource tools will be
able to realise the tremendous potential of their employees, working together. This
requires the reorganisation of incentive programs to encourage new employee behaviours
aimed at achieving team and organisational goals. The types of teams operating and the
stage of teamwork will dictate the incentives to be used to achieve worthwhile team and
organisational goals. These rewards and recognition programs must also fit in with the
culture and values that the organisation wishes to develop.
The study concludes that there is a direct relationship between employees performance
and organisations reward system. In case of low salary group, it is more important to
develop such a reward system which has more emphasis on extrinsic reward. Similarly,
high income group could be more motivated through intrinsic reward. Well defined job
description leads to high performance rating in the organisation. Where as, gender
discrimination has a negative impact on employee performance. Employees recognition
techniques are good way to motivate employees.
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