THE IMPACT OF ADEQUATE COMPENSATION ON JOB PERFORMANCE 

(A CASE STUDY OF GUINNESS NIGERIA PLC, BENIN CITY)

CHAPTER ONE

INTRODUCTION

1.1 BACKGROUND OF THE STUDY

In corporate organizations and companies nowadays, working conditions and compensations have been large, especially since World War II. The statement that working conditions and employee’s compensation is the live wire of an organization is not an overstatement.

Frederick Herzberg (1987), classified working conditions and compensation under “hygiene” factors. He further stressed that when these factors exist in the environment of work, both in quantity and quality, the workers will experience no dissatisfaction. He went further to stress that the lack of existence of these factors will cause a feeling of dissatisfaction.

In Compensation, it is “all forms of financial returns and tangible services and benefits employees receive as part of an employment relationship” The phrase “financial returns’ refers to an individual’s base salary, as well as short- and long-term incentives. “Tangible services and benefits” are such things as insurance, paid vacation and sick days, pension plans, and employee discounts. Milkovitch and Newman (2010).

An organization’s compensation practices can have far-reaching effects on its competitive advantage. As compensation expert Richard Henderson notes, “To develop a competitive advantage in a global economy, the compensation program of the organization must support totally the strategic plans and actions of the organization.” Labour costs greatly affect competitive advantage because they represent a large portion of a company’s operating budget. By effectively controlling these costs, a firm can achieve cost leadership. The impact of labor costs on competitive advantage is particularly strong in service and other labour-intensive organizations such as Guinness Nigeria.

A firm achieves external competitiveness when employees perceive that their pay is fair in relation to what their counterparts in other organizations earn. To become externally competitive, organizations must first learn what other employers are paying and then make a decision regarding just how competitive they want to be.  

1.2 STATEMENT OF THE PROBLEM

Human beings have needs which they expect to satisfy from such as safety or security needs, social need the needs for advancement in life. These needs inferences their work performance or role, social relation with their formal and informal, groups, their attitudes towards the management and their efforts to meet the organization objectives. One of the function of the organization is to motivate workers motivating them entails, meeting them to perform their duties by dial of controversy over the issue of what motivates a worker, some people has around that workers can be motivated through the use of money, these people are of the view that people work primarily for money. However an opposition view advanced by the human relation movement does not regard `money as the primary thing that motivates workers, they lay great emphasis on “man as the producer.”

In other words the advocates of the movement are of the view that a good working environment and the provision of compensation for workers will be valued highly by the workers.

Most remarkably, there is a serious problem and argument about the issue of compensation. Some scholars who believe that compensation motivates worker to perform more includes Nwachukwu (1955), Ejiofor (1956), fried Lander (1964).   

However scholars like Herzberg (1959) believes that welfare schemes, compensation are hygiene factors and as a result does not motivate the workers to perform. This study will therefore, set out to resolve and look into the compensation on employees’ performance.

1.3 OBJECTIVES OF THE STUDY

1.       The main objective of the study is to explore and determine the process of modern compensation strategy in relation to organizations productivity.

2.       To examine whether compensation brings about increase in workers performance

3.       To examine whether compensation lead to increase in organizations productivity

4.       To investigate which effects compensation has on organization’s total profit?

5.       To examine how compensation can enhance quality, enhance group dynamism and motivate workers to be more effective leading to increased organizational productivity.

1.4 RESEARCH QUESTIONS

The study aims at the impact of compensation on organizations productivity.

Some of the research questions are as follows:

1.       Does compensation have direct relationship with organization’s productivity?

2.       Does compensation brings about increase in workers performance?

3.       Does compensation lead to increase in organizations performance?

4.       Does compensation have negative effects on organization’s total profit?

5.       Does compensation motivate workers to be more effective?

1.5 RESEARCH HYPOTHESIS

The following research hypotheses formulated will be empirically tested and result gotten will serve as a spring board for recommendations. The following are the hypothesis for the study:

Ho:    Good compensation does not lead to increased workers performance

Hi:     Good compensation leads to increase workers performance

Ho:    Compensations have no positive impact on organizational productivity

Hi:     Compensations have positive impact on organizational productivity

1.6 SIGNIFICANCE OF THE STUDY

At the end of this study, most organizations will understand that basic principles and process of compensating workers to work effectively by highlighting the problem facing compensation before and at present.

It will educate those who are studying Business Administration and management as a course in tertiary institution and organization and it will serve as reference for researchers.

1.7 SCOPE OF THE STUDY

The research is limited to the impact of compensation on organizations productivity; this is carried out within the context of large organization such as Guinness Nigeria Plc Benin City.

1.8 LIMITATIONS OF THE STUDY

One of the major problems encountered by the researcher is the monetary problem. There was no sufficient money to make the purchasing of all necessary materials for the research work. There was also the problem of meeting some personalities in Nigeria Bottling Company Plc to get information from them. Because of that, the researcher found it difficult to collect all the necessary information. However, the researcher made do with the resources available for her research work.

1.9 DEFINITION OF TERMS

Compensation: Compensation of all form of financial return, tangible services and benefit an employee receives as part of an employment relationship.

Industry: This is the group of firm that engage in the production of similar product (i.e. goods / services)

Productivity: Productivity is the output unit/per labour input into the production process given the level of existing technology.

Management: This is the process of planning, organizing, staffing, leading, directing, coordinating and controlling available resources toward s achieving a target objective.

Reward: Reward system consists of an organization’s integrated policies process and practices for rewarding its employees in accordance with their contribution skills competence and their market worth.

Remuneration: This is the financial reward accruing to employee for his or her performance in the organization.

Motivation: It is the inner drives that arouse direct and maintain an individual behavior toward accomplishing organization goals.

Research: Is a way of arriving at a dependable solution to business and management problem through a systematic way of data collection, data analysis and data interpretation.

Pay Structure: Is a framework for managing base pay progression over time for employee benefit.

Policy: Is organizational guiding principles that regulate its operation and activities.

Job Analysis: According to Raymond, et al (2004) it is the process of getting detailed information about jobs.

Job Description: Is the setting out of the purpose of job, where it is fit in the organization structure the content within which the job holder function and the principal accountability of job older. Main task the employee has to carry out.

Job Enlargement: Is the act of combining previously fragment task into one job to add greater autonomy and responsibility to a job and is based on the job characteristic approach and maximizing the interest and challenges of work.

Job Evaluation: Is a systematic process for establishing the relative work of job within an organization.

1.10 HISTORICAL BACKGROUND OF THE ORGANIZATION UNDER          STUDY 

The firm Guinness Nigeria Plc came into existence in year 1950 with the sole aim of importing and distributing Guinness stout from Dublin for eventual sales in Nigeria. Due to the success of the product in the country it gave rise to a decision to establish a small brewery in the year 1962. The foundation stone of Guinness was laid at Ikeja on the 31st January 1962, by Arthur Benjamin Francis Guinness now the Earl of Irish to which titles he succeeded on his grandfather’s death until 1967 in active services during the 2nd world war.

Guinness Nigeria is a subsidiary of the prestigious Diageo Plc of the United Kingdom. The brewery was the first outside of Ireland and Great Britain. Other breweries have been opened over time – Benin City brewery in 1974 and Ogba brewery in 1982.

Guinness Nigeria produces the following brands – Foreign Extra Stout (1962), Guinness Extra Smooth (2005) Malta Guinness (1990), Harp Lager Beer (1974), Gordon’s Spark (2001), Smirnoff Ice (2006), Satzenbrau (1995).

Guinness Nigeria Plc is a company that believes in enriching its communities. This it has achieved by embarking on laudable Corporate Social Responsibility projects in several communities in Nigeria. These projects are Water of Life initiative, which currently provides potable water to over 500,000 Nigerians spread across several rural communities, from Northern to Southern Nigeria; scholarship and Guinness Eye Hospitals in three cities in Nigeria.