CHAPTERONE

INTRODUCTION

1.1  Background to the Study

It is the concern of organizations all over the world on effectivehuman capital strategies to enhance their productivity. It is clear thatemployee’s productivity in the expanding organization is a key factor inorganization performance. Employees, technically known as human resources inmodern organizations, are rightly considered as the most important assets (Ong& Teh, 2012). In developed countries such as USA, JAPAN, UK and Germanyorganizations recognize employees as the important asset that needs highconsideration in promotion (Lawler & Worley, 2006). The rationale behindthe use of rewards to employees is that motivated employees become satisfied interms of fulfilling their wants, both financial and non financial. Failure todo so, employees will be tempted to leave the organization. (Azasu, 2009). Onone hand, employees prefer receiving intrinsic rewards in terms of praise andrecognition for certain work accomplishments, while other employees are happywith extrinsic reward in terms of salaries, bonus and incentive offered toemployees (Lawler, 2008, Sajuyigbe, Bosede & Adeyemi, 2013).

In developing countries such as China, India and Thailand alsoemployees reward is one of highly demanded factors in  influencing organization performance. One ofthe most important factors in rewarding employees for organization performanceis through recognition and appreciation (Ajila & Abiloa, 2004).

In Tanzania like any other country employees are motivated byrewards. There is a

need for organization to reward its employees for creating asuccessful competitive

Environment. This is one of the essential for the organizations toachieve high work performance. Some employees are highly motivated by extrinsicrewards such as increase in pay, promotions and bonus, others employees aremotivated with intrinsic rewards such as appreciation, praise and recognitionon (Bana & Kessy, 2007).

Paying employees for productivity has been the cornerstone ofindustrial and business development for centuries. Financial reward has alwaysbeen important in managing employee’s performance, but over the last 25 yearsother elements of compensation have been developed to provide employers withmore scope to reward, and thus, motivate employees. Performance managementinfluences performance by helping people to understand what good performancemeans and by providing the information needed to improve it. While rewardmanagement influences performance by recognizing along with rewarding goodperformance as well as providing incentives to improve it. The rewards that anenterprise apply to both individual and team performance are critical indetermining how affective the reward strategy will be. Also performancemanagement involves the value an enterprise workforce couldmake to the overall business goals and how it could be groomed and cultivatedto add most value to competitive advantage. This necessitates theneed to identify how these rewards impact employee performance and howwell the current reward system does this, within the chosen manufacturingcompanies forming the basis for this research.

Theproductivity and success of every organization is highly dependent on its staff(Ali, 2013; Gabcanova, 2011; Markova & Ford, 2011; Vlachos,2009). Thusmaximizing the overall organisation performance requires an understanding ofthose factors that encourages the employees to put in extra effort at work andalso in enhancing their performances (Hafiza,Shah,Jamseheed&Zaman, 2011).Reward system and management is one important Human Resource Managementstrategy for attracting and retaining high quality employee as well as facilitatingthem to improve performance (Dewhurst, Gutridge& Mohr, 2010; Ibrar&Khan, 2015).

Accordingto Anku-Tsede&Kutin(2013) reward system can be seen as a means of activelyengaging and the renewing the employee’s sense of community and mission of anorganisation. In this view, an effectively administered system of rewards canprovide incentive for quality workmanship and performance. Likewise, a poorlyadministered reward system can lead to low morale, unproductive performance andin the extreme cases a high percentage of employee turnovers. Organizationsprovide rewards to members in the form of wages and salaries, promotions, longservice awards and certificates, end of the year bonus and other fringebenefits. These rewards are to motivate behaviour that will contribute to theachievement of the goals of organizations.The questions that readily come tomind are, what sort of behaviour does an organization want? How can rewardprocess promote that behaviour? What motivates an organization to design rewardpackages for the employees? Nearly all organizations invest in the provision ofrewards to motivate their employees in order to get the desired results.According to equity theory, the adequacy of such rewards will to a large extentdepend on the value the employees place on the inputs they bring to the job inthe form of education, experience, training, time, effort etc, with theoutcomes (rewards) such as pay, promotions, praises and recognitions theyreceive as a result of performing the job (Fajana, 2002).

Rewardsystems is a broad construct that generally represents anything that employeesmay value and are willing to acquire in exchange for his or her contribution towork.Chiang & Birtch (2008).Pratheepkanth (2011) describe reward system toinclude all organisation components which may include people, processes, rulesand decision making activities involved in the allocation of compensation andbenefits to employees in exchange for their contribution to the organisation.From both definitions, rewards can be described as tangible benefits one canreceive from engaging in a specific task. This opinion is reiterated byTorrington, Hall, Taylor and Atkinson (2011) who argue that although there arefew people who claim to enjoy work for the sake of it, most people work inlarge part because it provides a means sustaining livelihood. This implies thatpeople generally are concerned with the amount of benefits (whether financialor non-financial) attached to their work. The positive relationship betweenreward systems (especially financial rewards) on employee performance has beenestablished in past studies (Lazear,2000;Osa,2014;Prendergast,1999;Metha ,2014;Saleem, 2011.).

Othercommentators have put forward the notion that non-financial rewards are alsoimportant facilitators of organisational performance with the argument thatfinancial performance on its own is incapable of effectively motivatingemployees towards optimum performance (Babakus, Yavas, Karatape&Avci, 2003;Bason, 2003; Dewhurst et al.(2009); Perry,Mesch&Paarlberg, 2006;Neckermann&Kosfeld, 2008; Dewhurst et al. (2009) for instanceadvanced the notion that non-financial rewards have a more significantinfluence on employee performance than financial rewards with the argument thatfinancial rewards are mostly effective in boosting employees’ energy in theshort-term and in most cases can have damaging unintended consequence. Threemajor non-monetary rewards reported to have significant effect on employeemorale are: (i) praise from immediate managers, (ii) leadership attention (i.e.one on one conversation) and (iii) the opportunity to lead projects or taskforces. In addition, Neckermann and Kosfeld, (2008) identify significantnon-financial rewards to include  socialrecognition from managers and colleagues alike in the form of appreciation forjob completed, acknowledgement and certificates of recognition, were reportedto be better drive improved performance than financial/monetary rewards .

The debate on whether to usemonetary or non-monetary rewards has led to the development of the concept,Total Reward System. WorldatWork(2011) defines total rewards as holistic approach that strategicallyincorporates several employment factors (such as compensation, benefits andwork-life amenities) in unison, to deliver desired employee attraction,motivation and retention. Thompson (2002) also defines total reward totypically encompass not only traditional, quantifiable elements like pay andbenefits, but also more intangible elements such as scope to achieve andexercise responsibility, career opportunities, learning and development, theintrinsic motivation provided by the work itself and the quality of workinglife provided by the organisation. Kaplan (2007), also sharing this view, define total rewards as aholistic approach aligning business strategy and people strategy, aimed atbringing about maximum return and builds up employment brand, all of whichcreate sustainable competitive advantage for organisations. According toArmstrong (2007) the conceptual basis of total reward is the bringing togetherof the different reward processes (that are interrelated, complementary andmutually reinforcing) with the focus of stimulating a deeper and long-lastingimpact on the motivation and commitment of employees.

Similarly,Nazir, Shah and Zaman (2012) describe total rewards as an enclosing of aspectsof work benefits that employees attach value to; whether it concerns provisionof healthy work environment, better opportunities of learning and developmentor the benefits package linked to the pay. Hence, an effective reward systemincorporates both the financial incentives (such as pay, fringe benefits andother money-related plans) and non-financial incentives (such asvacations/holidays, recognition and appreciations) in driving employeemotivation for improved performances. Given that employees’ morale and improvedproductivity go hand in hand, it is therefore imperative  for organisations to foster a properlyadministered reward system which not only has the capacity to improve thequality work efforts and employee but also act as a strategic tool forattracting skilled employees to the organisation (Armstrong & Brown, 2005;Herman, 2009).  Notwithstanding, most organizations are stillfinding it difficult to establish an effective reward system that fairly suitsthe organizational demands in relation to employee performance and overorganizational profitability (Osa, 2014; Roberts, 2005; WorldatWork, 2011.).Dewhurst et al. (2009) argue that thepresent economic situation has pushed successful companies around the world toadjust their reward systems – moving from financial to non-financial sensitivesystems; whereas some organizations (to their detriment) are still sticking tothe traditional method of rewards that emphasis bonuses and paymentcompensation.  Additionally, the findingsthat the workers’ needs and desire from work differs from one individual toanother require organization management to develop reward systems that istailored towards the individual needs of their staffs (Dewhurst et al.2009).  Nevertheless, as emphasized byBrian (2006), rewarding and recognizing employee can be a tricky task as thereis no generalized model towards its implementation; arguing that a successfulsystem in one organization can be a failure in another.

Company Profile

Unilever Nigeria Plc

Unilever Nigeria Plc. was establishedin 1923 as a soap manufacturing company – Lever Brothers West Africa by LordLeverhulme. Today, it is the oldest surviving manufacturing organization inNigeria (Unilever Nigeria Plc. 2016).After a series of mergers/acquisitions,the Company diversified into manufacturing and marketing of foods and personalcare products. These mergers/acquisitions brought in Lipton Nigeria Ltd. in1985, Cheesebrough Industries Ltd. in 1988 and Unilever Nigeria Ltd. in 1996.The Company changed its name to Unilever Nigeria Plc. in 2001 in line with theglobal strategic direction of the business. The Company was quoted on theNigerian Stock Exchange in 1973 and with equity holdings of 58.53% Unilever,and 41.47% Nigerian investors, the company is a true Multi-local Multinationalorganization with very outstanding international and local brands in herportfolio. The international brands include Close-Up toothpaste, Pepsodenttoothpaste, LUX beauty soap, Lifebuoy soap, Rexona, Vaseline lotion andVaseline Petroleum Jelly in the Personal Care Unit of the business; Blue BandMargarine, Lipton Yellow Label Tea and Knorr bouillon cubes in the Foods Unit;and OMO Multi-Active Detergent ,Sunlight washing powder and Sunlight Dishwashing liquid in the Home Care Unit. Other Regional and local products includethe Pears Baby Products range and Royco bouillon cubes. As at 2015, theorganisation currently has over 1,200full time employees across three coredepartments: administration, technical/production and sales and marketing.

Cadbury Nigeria Plc

CadburyNigeria Plc was incorporated in Nigeria on 9th January 1965 as acompany limited by shares. It became a publicly listed company with its sharestraded locally on the Nigerian Stock Exchange in 1976 (Cadbury Nigeria Plc.2016). The company is principally engaged in the manufacture and sales ofbranded fast moving consumer goods mostly to the Nigeria market, but alsoexports to other West African countries. The company’s brands fall into threeprincipal categories, namely: Refreshment Beverages, Confectionery andIntermediate Cocoa Products. Cadbury Bournvita, Cadbury 3-in-1 Hot Chocolateare the main brands in the refreshment beverage category. In the Confectionerycategory, the main products are TOMTOM Classic, TOMTOM Honey Lemon, TOMTOMstrawberry and BUTTERMINT. Lastly, the main brands within the intermediatecocoa products include; Cocoa Powder, Cocoa Cake and Cocoa Butter.

Nestle Nigeria Plc

NestleNigeria Plc is a Nigeria-based food manufacturing and marketing company foundedin 1961 (Nestle Nigeria, 2016). The Company operates through two segments: Foodand Beverages. The Food segment includes the production and sale of Maggi,Cerelac, Nutrend, Nan, Lactogen and Golden Morn. The Beverages segment includesthe production and sale of Milo, Chocomilo, Nido, Nescafe and Nestle Pure Life.The Company manufactures and markets a range of brands, which include InfantFormula-Nestle NAN, Nestle LACTOGEN, Infant cereals-Nestle NUTREND, NestleCERELAC, Family cereals-Nestle GOLDEN MORN, Confectionery-Nestle CHOCOMILO,Nestle KITKAT, Bouillon-MAGGI Cube, MAGGI Mix’py and Table Water-Nestle PURELIFE. Its products include MAGGI Star Cube, MAGGI Crayfish, MAGGI Chicken,Ginger & Garlic, Golden Beef and Classic. It promotes food cultures throughMAGGI Star Cook participatory cookery program in neighborhoods, and MAGGI WomenForum, a home management program targeted at semi urban and rural women.