ABSTRACT
This study sets out to examine the impact of contingent pay on employee
performance in the banking industry. Probabilistic sampling technique has been
used for the study. Four research questions and three hypotheses were
formulated to guide the study. To achieve this, data were collected through a
well-structured questionnaire from five banks in Onitsha Metropolis. The data
were presented in frequency tables and analyzed using chi-square test
statistics. The result of the analysis showed that, there is a significant
relationship between contingent pay and employee performance, that contingent
pay has impact on the employee performance. Employee performance has greatly
improved since the introduction of performance-based pay. The main
recommendation of the study is that organizations should introduce
performance-based pay in order to reduce their staff cost instead of mass
retrenchment. They should also seek the input of the employee in setting
performance standards.
CHAPTER ONE
INTRODUCTION
1.1. BACKGROUND OF THE STUDY
In the 80s, there were
great similarities between banking job and civil service. Bankers were not
given targets and can stay in the office, drink coffee and attain to their
customers. Staff rarely go out prospecting except few occasions they are
mandated to recover bad loan. Customer on their own accord went to bank to open
accounts. Grades were determined by the year of experience and qualifications.
Salary was based on grade and everybody in the same grade received the same
salary irrespective of one’s competence, skill, knowledge, and contribution.
Nepotism was the order of the day. The banking environment was not really
challenging. Once the people have confidence in the bank, the bank would have
all business. Competition was not fierce as it is now and the cost of doing
business was not so high. There was no need to invest huge funds in software
and other security gadgets. The sophisticated crimes and fraud witnessed today
in banking industry were not so then. The challenging investment opportunities
were not there. But a lot have change in 21st century. The business
environment has become turbulent and complex. For managing in turbulent
environment, there is a requisite variety imperative, which states that the
complexity and subtlety of the firm’s response must match the complexity and
subtlety of the environment (Roy Ashby, 1956). The requisite variety
theory can be seen as a contingent theory (Onwuchekwa, 2000)
In order to survive in
such unpredictable, turbulent and complex business environment, banks have
adopted measure for survival. Hence the introduction of contingent pay
packages. Every business organization is in business to either maximize profit
or minimize cost. It is a fact that all employees do not have the same
education, experience, strength, skills, competence, motivation, passion or
attitude. Some organization could no longer bear the wage bill but still
understand the importance of having a satisfied /motivated workforce.
Banks and some other
organizations in a strategic move for survival, have embarked on a search for
motivational tools that have the capacity to sustain high performance, reward
performers, punish non-performers and reduce staff cost. Hence this has
informed the choice of the title of this study.
The equity theory of motivation forms the
theoretical framework for this study. This theory was propounded by Adam
Stacy J 1963 It states that a major input into job performances and
satisfaction is the degree of equity (or inequity) that people perceive in
their work situation. It is based on the assumption that a major factor in job
motivation is the individual’s evaluation of the equity or fairness of the
reward received. Equity can be defined as a ratio between the individual’s job
inputs such as effort or skill and job reward such as pay or promotion (Stoner,
Freeman and Gilbert, 2005). Most discussions and research on equity theory
focus on money as the most significant reward in the work place. People
compare what they are being paid for their efforts with what others in similar
situations receive for theirs. When they feel inequity exist, a state of
tension develops within them which they try to resolve by appropriately
adjusting their behaviour (Robins, 2000).
This research is based
on this theory since every staff in the bank is rewarded based on their skill,
knowledge, effort, education, experience competence and performance.
Banks are not charitable organizations and
every staff must add value and must earn his/her pay. They must justify their
continuous stay with the bank. Employees’ experience, education, skill and
competence are not the same and they should not be rewarded equally. The cost
of doing banking business in Nigeria is so high and banks have observed that
greater percentage of their cost is staff cost. The bank cannot afford to spend
their hard earned profits on who are contributing little or nothing to their
profit. In recent times, a bank in Nigeria announced that most of its business
offices are making loss and can no longer bear their current wage bill. As a
result, a lot of staff were retrenched. Right sizing could demoralize other
staff; expose bank’s technology and security software to competition and
fraudsters. It could affect the bank’s image. Most banks have resorted to
a system of contingent pay. A payment structure that is based on performance,
contribution and competence. Work is not inherently distasteful. People who
contribute meaningfully to the accomplishment of the bank objectives should be
fairly rewarded.
Staff who are lazy, who avoid
responsibilities and lack passion, ambition or creativity should be made to
rewrite their scripts.
The major objective of
this study is to find out what an organization stands to gain or lose when the
issue of contingent pay is not properly addressed. To do this, we hope to
address the following:
a.
To identify various performances based rewards
used in banks
b.
To investigate the impact of contingent pay on
employee performance
c.
To find out how contingent pay acts as
motivational tool
1.5. RESEARCH QUESTIONS
The following research questions are formulated for this study:
1.
Is your annual pay package tied to your
performance on the job?
2.
Do you have an opportunity to buy the bank’s
share with a low-interest loan for staff?
3.
Is the bank’s pay scheme fair and devoid of
bias?
4.
Has performance improved since the introduction
of performance-based pay?
H0: Employee’s
performance is not directly proportional to
employees’
reward.
H1: Employees
performance is directly proportional to employee
reward
H0: Contingent pay does not motivate staff to greater
performance
H1: Contingent
pay motivates staff to greater performance
H0: Contingent
pay does not improve employee’s performance
H1: Contingent
pay improves employee’s performance
1.7.
SIGNIFICANCE OF THE STUDY
The significance of this study is to reveal
the relationship between contingent pay and performance and to expose the
managers to most effective contingent pay that can be used in their
organizations. The findings of this research will be useful to managers in
various organizations, students of tertiary institutions, lecturers in tertiary
institutions, practitioners of other fields requiring good working knowledge of
the topic.
To treat this problem
as a whole will be too much for the requirement of this work. Therefore, we
will study United Bank for Africa (UBA) Plc, First Bank of Nigeria Plc, Zenith
Bank Plc and Union Bank of Nigeria considering the time available and cost
implication for this research. This work will be restricted to performance
related pay contribution related pay profit sharing recognition schemes and
Employee and executive share schemes. We will also limit the scope to the
period between 2000 to 2009.
In a research work of
this sort, there are many constraints; the bank are staff a re reluctant to air
their views pointing out that they are constrained by the oath of secrecy which
they took before their appointment. A lot of funds are needed for typing,
transportation, and meeting other demands of this work. Also the time available
for this work is short and it is not easy combining the research and the
demanding task of being a banker.
1.9.
DEFINITION OF TERMS AND CONCEPTS
i.
Contingent pay is the payment of cash to
individuals in the form of performance pay or bonus on the basis of their own
performance or that of their team or organization.
ii.
Performance Related Pay (PRP) schemes relate to
a proportion of pay to indicators of performance such as quality, flexibility,
contribution to team work and ability to achieve target.
iii.
Contribution related pay is a process for
making pay decisions that are based on assessments of both the outcomes of the
work carried out by individuals and the level of competence and competency that
has influenced these outcomes.
iv.
Bonus is a cash reward for past performance
v.
Team is defined as two or more people who
interact and influence each other towards a common purpose.
vi.
Motivation is the factor that causes, channels,
and sustains an individual’s behaviour.
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Item Type: Project Material | Size: 98 pages | Chapters: 1-5
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