Authorities in academic, reward
experts, and management gurus such as Lawler
et:al (1999), Nwachukwu (2000), Armstrong (2006), Kinicki and Williams (2003),
and Ledford Jr. (1995) have written much about reward. Some are in support that
reward affects employees performance, while others run counter of the above
view.
According to Martocchio (1998),
“when pay is based on knowledge, it provides employees with job enrichment and
job security. Job enrichment refers to a job design approach that creates more
intrinsically motivating and interesting work environment.
Besides the lofty advantages of
pay for knowledge, experts have criticized it, stating that it increases
training cost, labour cost, and overhead cost, these occur because hourly
labour often increases because greater skill is translated into higher pay
levels for a majority of workers.
Besides theoretical views on
rewards and performance, many empirical studies have been carried out on this
controversial but all-important issue.
A study by Berlet and Cravens
(1991) of the Pay-for Performance Record of 163 United States company from
1987-1989, revealed that the relationships between executive pay and company
financial performance was not related.
According to available expert
opinion and research results, pay for performance too often fall short of its
goal of improved job performance. A study of Bloom and Milkovich in 1998
revealed how incentive pay had a negative effect on the performance of 150,000
managers from 500 financially distressed companies.
According to Jenkins, Gupta,
Mitra and Shaw (1998), “a meta-analysis of 38 studies found only a modest
positive correlation between financial incentive and performance quantity and
non impact on performance quality”.
Linking teachers’ merit pay to
student performance, a study by Koretz (1995) and Bates (2002) revealed that an
exciting school reform idea, turned out to be a big disappointment: “the bottom
line is that despite high hopes, none of the 13 districts studied was to use
teacher pay incentives to achieve significant, lasting gain in student
performance”.
Performance or incentive pay
plans usually yield a positive result on the short run, but fail to achieve the
desired goals on the long-run.
A research study conducted by
Bevan and Thompson (1991), of the Institute of Manpower Studies, found no link
between improved company performance and performance related pay.
Reacting to the effect of reward
on performance, Ojo(1997) advanced that “poor wage policy and the types
of incentives schemes in the country contribute in no small way to the
relatively low level productivity of Nigerian workers. However, this may be
true to some extent, but not in all cases.
Differing from Ojo (1997) above,
researches have revealed that in Nigeria, since the introduction of Udoji award
of 1974, productivity has continually been on downward trend. This therefore
supports Herzberg’s view that financial reward is not a major source of
employee’s motivation.
An investigation has also
revealed that the more workers salary are increased, the more the number of
strikes. This is buttressed by the table below as produced by Fashoyin (2002).
|
Wage Commission and
Year of Award
|
Number of Disputes
|
Number of
Strikes
|
|
Gursuch Commission (1955/56)
Mbanefo and Morgan Commission (1956/60)
Morgan Commission (1963/64)
Elwood Commission (1966/67)
Adebo Commission (1970/81)
Cookey Commission (1980/81)
Onosode Commission (1981/82)
|
76
140
n.a
233
270
258
341
|
43
64
196
89
234
234
254
|
Table
1: A Measure of Propensity to Strike
Source: Fashoyin
(2002). Industrial Relations in Nigeria, 2nd Edition.
The above table shows that
financial reward in its own merit is not the ultimate factor in the bid to
enhance employees’ performance, rather other factors play a prominent part.
In another development, a survey
of BT of England executives carried out
by the Society of Telecom Executives (1991), revealed that only 6% of those
responding to the survey thought that performance related pay improved
performance, compared to an over-whelming 70% who thought it has not.
To some extent, financial reward
may serve as a performance enhancer, but to a greater extent, it can only serve
as a cleansing factor, which can only help to build mutual trust between the
employer and the employee, which is echoing Herzberg’s theory that classified
money under hygiene factor, which will prevent dissatisfaction, but cannot
motivate workers to greater performance.
In support of the above statement
a research by Marsden and Richards (1991), of London School of Economics, among
2500 Inland Revenue Staff produced the finding that revenue staff generally
support the principle of performance related pay (PRP), but a significant
majority feel hostile to it … the positive motivation effect of performance pay
has been at most, very modest among Inland Revenue Staff. It is hard to see
that they have been felt to any degree by more than a small majority of staff.
A study carried out in United
States by Lawler (1971), Guzzor et:al (1985, Nalbantain (1987) and Binder
(1990), all show productivity increase of between 15 and 35% when incentive
scheme has been put into place. These confirm that when reward is seen as being
fair, employees would reciprocate by putting their best effort to ensure that
the organization succeeds, since they believe that their effort is
commensurately rewarded.
In contrast to the above views,
research by Armstrong (1993) in United Kingdom proved contrary to
the above, as the study revealed an increase productivity from 67 -102 (35
points where 100 is regarded as the norms for a fully effective worker.
A study by Peterson and Luthans
(2009), revealed that both financial and non-financial incentives improved
employee and store performance. According to the study, store profits rose to
30% for those units where managers used financial rewards. Profits also rose to
35% for those stored units where managers used non-financial rewards.
Worthy of note is the fact that
no worker ever works just for the sake of love for work, rather the desire to
work arises as a result of the desire to satisfy some needs that are pressing
to
them, therefore if the worker
sees work as a means of satisfying these needs, they would be committed to it.
Employees usually see performance related pay as such that link them with the
organization’s performance.