COMPENSATION STRATEGY AND ORGANIZATIONAL PERFORMANCE
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COMPENSATION STRATEGY AND ORGANIZATIONAL PERFORMANCE
Chapter one
INTRODUCTION
1.1 Background of the Study
Employees are a significant resource for any organisation. Today, labour productivity is the primary concern of organisations. It is well acknowledged that employees identify key sources of competitive advantage for businesses.
When a corporation implements a value-creating strategy that no existing or potential competitors are pursuing at the same time, the firm enjoys a competitive advantage (Nebeker et al. 2014).
And when a firm implements a value-creating strategy that no present or potential competitors are using at the same time, and these other firms are unable to replicate the benefits of this approach, we can say the firm has a persistent competitive advantage (Barney, 2015).
To gain a competitive advantage, the organisation must first decide what type of competitive advantage it seeks and how it will accomplish it.
Choosing the competitive scope or the range of the firm’s activities can play a major role in determining competitive advantage since it tries to develop a lucrative and sustainable position against the factors that define industry rivalry.
According to Shin-Rong and Chin-Wei (2012), there is a substantial association between compensation schemes and employee performance. For example, Mayson and Barret (2016) discovered that a company’s capacity to recruit, inspire, and retain employees by providing competitive compensation and appropriate awards is related to its success and growth.
On the other hand, Inés and Pedro (2015) discovered that the remuneration structure utilised for salespeople has a considerable impact on individual salesperson performance and sales organisation effectiveness.
As a result, in an increasingly competitive business climate, many organisations worldwide, in Africa, regionally, and locally are seeking to develop novel compensation techniques that are directly related to boosting employee performance (Denis and Michel, 2011).
According to Long (2017), organisations in Canada typically launch compensation systems that include direct and indirect financial pay, as well as benefits that encourage and eventually increase performance.
Financial compensation, such as wages, salaries, or performance-based incentives, is clearly followed by many organisations in order to retain personnel and beat their competitors.
Employee benefits in the country aim to protect employees and their families from financial disruptions due to health issues, as well as improve their overall quality of life through workplace programmes (Ali and Raza, 2015).
They include extra health coverage that is not covered by the provincial plan, such as medical, prescription, vision, and dental plans, group disability, employee assistance programmes, retirement benefit plans, and so on.
The implementation of various compensation systems has, in the short or long run, improved employee performance, resulting in a competitive advantage over organisations that lag behind in terms of giving better pay plans.
In Africa, particularly in Nigeria, the vast majority of people who change jobs do so in search of higher compensation. According to the authors, more than seven out of ten Nigerians, or more than 70% of employees, are interested in shifting jobs due to inadequate pay in their current job, which drives them to seek other employment opportunities.
Several scholars, including Ali and Raza (2015), argue that employees only stay in an organisation to give their all when they consider the remuneration process is fair to their contributions.
This has resulted in a high proportion of employees leaving their jobs, often migrating away from their city or nation to seek greener pastures. Evidently, many organisations in the country are still grappling with challenges related to proper employee compensation in order to raise performance standards.
As a result, a large-scale study is required to determine whether the same applies in Kenya.According to Andrews (2016), while a post’s salary may be regarded fair remuneration for the competent and effective performance of day-to-day activities, there are occasions in which benefits are needed.
These perks aim to recruit and retain qualified and competent personnel. However, according to Ongori (2015), many companies have recently seen an exodus of employees to other rivals.
This has been attributed to poor compensation strategies, which has prompted employees to seek out firms that will consider compensating them better and thus reciprocate through good performance.
Based on this backdrop, the study aims to explore compensation method and organisational performance through a case study of Nigerian Bottling Company, ESEHI NIG. LTD and AVERY NIGERIA LTD.
Statement of the Problem
In today’s work environment, there is more change and unpredictability, there is a greater demand for empowered individuals, traditional incentives are declining, nontraditional incentives are increasing, and variable remuneration is being used more frequently.
Many research, such as Kipkorir, Basweti, and Nyaoga (2014), discovered that there is no substantial association between executive pay and performance. Ngui, Mukulu, and Gachunga (2014) discovered that financial and non-financial awards can be combined to improve corporate performance.
As evidenced, the studies had mixed results, an indication of limited information on the real effects of compensation strategies on the performance of employees in the companies, specifically with a focus on Nigerian Bottling Company, ESEHI NIG. LTD and AVERY NIGERIA LTD in Edo state, thus the essence of this study.
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