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COMPENSATION MANAGEMENT AS A TOOL FOR IMPROVING ORGANISATIONAL PERFORMANCE IN THE PUBLIC SECTOR

ABSTRACT

The growing emphasis on employee engagement as critical to organizational performance means that the concept of total reward is exerting more and influence on reward strategy. Reward management however, is concerned with the formulation and implementation of strategies and policies that aim to reward people fairly, equitably and consistently in accordance with their value to the organization. This study attempted to examine compensation management as a tool for improving organizational performance in public sector. Relevant literatures were reviewed to highlight the subject matter. State Internal Revenue Service [LIRS] was chosen as the case study. Selected representative comprising of staff and management of LIRS formed the sample size examined. A sample of one hundred (100) was drawn from the population. Simple Random Sampling technique was used in selecting the sample. A structured questionnaire was used to collect data. Respondents responses were presented in frequency tables and simple percentages was used for demographic data, while correlation method of data analysis was employed for hypotheses testing. Two hypotheses were formulated and tested accordingly. The test resulted to rejecting the two null hypotheses and concluding that poor compensation packages affects workers morale and productivity in public sector. And effective remuneration structure aids organization in achieving high level of performance. Consequently, it was proffered that compensation should be goal driven for instance, State Internal Revenue Service [LIRS]  should place more emphasis on financial reward, this will aid workers to evaluate his performance towards the organization, thereby promoting organizational performance and profitability.

CHAPTER ONE

INTRODUCTION

1.1      BACKGROUND TO THE STUDY

The compensation of employees at all level has become one of the major functions of human resource management. It is one of the most important, complex and problematic issues in managing human resources in any organization. Every business enterprise that wants to gain competitive advantage over its competitors must attract the services of high quality employees. According to Faraland (2001) ‘Man is a rational animal covered with maximizing his economic gains’. He continuously put forth effort to satisfy his personal needs ranging from physiological needs to self actualization. Maslow (1970) states that it is the way to desire to satisfy the needs that motivate workers into higher performances and productivity, they strive to increase their output and efficiency in order to acquire the means for satisfying these needs.

Mutter & Donald (2003) describes remuneration as payment system based on effort, performance and productivity in essence; remuneration refers to salary or wages and the allowance and financial benefits payable to employee, either in cash or kind in return for his service. In a nutshell remuneration is the price of labour. Essentially, employees work to produce reward for their performances. Thus, the exchange of labour for financial reward is the heart of the compensation process. However, formal compensation can be offered using three types of reward namely; Pay, Incentives and Benefits. Compensation management is an integral part of management. Compensation management is a systematic approach to providing monetary values to employees in exchange for work performed. It may achieve several purchases assisting in recruitment, job performance and job satisfaction. It is an organized practice that involves balancing the work employee relation by providing monetary and non monetary benefits to employees. It is a tool used by management for a variety of purpose to further the existence and growth of the company. It may be attuned according to economic scenario, the business needs goals and available resources.

Compensation management contributes to the overall success of the organizations in several ways. To be effective, the managers must appreciate the value of competitive pay, to maintain and retain quality employees while recognizing the need to manage pay roll costs. An effective compensation package has a combination of direct and indirect compensation. Compensation management programs often include salary range for each position, with incremental increases and annual reviews. During these review sessions, both type of compensation management are addressed and presented to the employee as part of the total package. The field of compensation management provides management with the ideal combination of different remuneration types. The purpose of these types of program is to retain and motivate good employees

1.2.   STATEMENT OF PROBLEM

Non availability of staff buses to conveniently covey workers from their various areas to make sure the meet the resumption time. Apart from this, cafeteria is a place where food is served, bought and eating during the break time, but this facility is lacking in organizations. Irregular promotion or advancement for workers upgrade has become a threat worrying the workers. Workers complain have taken over the organization, some of the workers complain to have been in one position over 4 – 5 years, while some of their colleagues get rapid and regular promotion. This act is the outcome of God’s fatherism and man know man. The less privilege seldom gets their promotion. The term work environment encompasses different aspects such as physical work environment, management attitude towards employees, relationship with colleagues and working condition. Recent research has highlighted the hypothesis that an employee’s work environment can have a dramatic effect on his or her performance and attitude to work. In addition to physical attributes of a work, place, hostile work environment are like cancer that can eat through the core.

Teamwork is often viewed as a collaboration condensing individual contributions into cohesive outcome. The term ‘Self directed work teams have been used since the 1950s to describe teams of employees working together toward one common goal. In the typical work environment like Lagos State Internal Revenue Service [LIRS], a self directed work should be encouraged in employee’s work life for a greater performance. Also, workers complained there is inadequate remuneration and incentives to commensurate with the nature and importance of the job they perform. Employees look forward or anticipate certain rewards from management which are not forth coming. There should be differentiation in pay due to our region, skills, talent and capacities as well as a business overtime payment and retirement e.t.c.

1.3.  OBJECTIVES OF THE STUDY

The study can be viewed as a contribution to greater understanding of compensation as an instrument that can be employed to increase efficiency and productivity and the value to secure and retain labour service. Other objectives include: -

1. To examine the relationship between compensation packages and workers morale and productivity.

2. To identify if effective remuneration structure will aid organization in achieving high level of performance

3. To investigate if relationship exists between workers reward and their level of performance

4. To identify the particular compensation package that motivates employee to higher productivity

1.4.  RESEARCH QUESTIONS

This study attempt to provide answers to the following questions.

· Is there any relationship between compensation packages and workers morale and productivity?

· Does effective remuneration structure aid organization in achieving high level of performance?

· Does relationship exists between workers reward and their level of performance?

·  Which compensation package motivates employees to higher productivity?

1.5. RESEARCH HYPOTHESES

1. H0: Poor compensation packages will not affect workers morale and  

productivity in the public sector.

H1: Poor compensation packages will affect workers morale and productivity in public sector.

2.  H0:  Effective remuneration structure will not aid organization in  

achieving high level of performance.

H1: Effective remuneration structure will aid organization in achieving

high level of performance.

1.6      SIGNIFICANCE OF THE STUDY

The findings of this research are partial and theoretical significance not only with the reference to the members of the work organization studied, but also with regard to the available knowledge about problems of compensation management. The research also enhances and broadens the knowledge of the management  in attaining organization goals. This study will enable the management of public organisations to realize that poor working condition, lack of promotion, inadequate salary structure e.t.c. will immensely reduce the output of employees. This study is a contribution to the body of existing knowledge in the field of human resources management especially in wages and salaries, administration because of the approach brought to bear upon the research which may see compensating management in different light from much of the existing literature on compensation of workers in Nigeria. The importance of this study is to see the relationship (if any) between salaries, wages, and other staff motivations and organizational performances. Finally, the outcome of this study will pose a challenge for future researchers or students who may be interested in carrying out more research in this area and it will also serve as reference materials for students.

1.7  SCOPE AND LIMITATIONS OF THE STUDY

The study tries to examine compensation management and organizational performance and how employees reward could be linked to efficiency and higher productivity with a particular reference to Lagos State Internal Revenue Service [LIRS]. The scope of the research is limited in both depth and coverage, the study concerning the examination of independent variable affecting compensation of employees and organizational performances in Lagos State Internal Revenue Service [LIRS]. The study will not cover all the variety of products producing in the company because of the problem that may be encountered when administering questionnaires on employees in all the industries all over Nigeria. This research is affected by non availability of fund. This however, is caused by the poor standard of living in the country which emanated from economic situation of the country and high rate of inflation which has caused prices in commodities and other materials needed by the researcher to increase.

§   The time fame scheduled for the completion of the research is too limited.

§   It is difficult to retrieve information from the populace because people prefer to keep their privacy.  In a situation where data over the year are needed, such data are not often possible to collect.

1.8      OPERATIONAL DEFINITION OF TERMS

Pay: This is a generally rewards as the most important form of compensation because of the role it plays in employees motivation of putting all his effort towards organization productivity. Pay is the basic compensation employee receives usually inform of wages or salary.

Incentives: These are rewards designed to encourage and reimburse employees for effort beyond normal performance expectations. It includes bonus, commission, profit sharing, plans, piece work, stock option, cost reduction, suggestion plan, production bonus plan e.t.c. incentive pay has the following benefit:

Motivation: linking pay to performance increase employees motivation to perform i.e superior performance is encouraged and inferior. Performance is discouraged

Retention: high performance is more motivated to stay with an organization.

Productivity: because incentive pays encourage superior performances, an organization’s productivity can be highly improved

Organizational goals: it helps to designing individual goals with organizational goals.

Benefits:  These are rewards available to employees as part of organizational membership. These includes free medical treatment, vocational or leave pay, call back pay, lay off pay, rest period pay, lunch subsidy, accident insurance, disability insurance, scholarship for staff’s children.

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