THE IMPACT OF FINANCIAL INCENTIVES IN NIGERIA’S GOVERNMENT-OWNED ORGANIZATIONS
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CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
Those who advocate scientific management Taylor (1911) and his followers argued that man’s primary motivation for working was economic. Money was viewed as the primary motivating factor. Although the influence of money and material rewards could not be disregarded, the focus switched from economic man to social man over time. (Ezeani. 2005:135). This was the consequence of Elton Mayo’s Hawthorne experiment at the Western Electric Company. The experiment highlighted the impact of group membership and interaction on output, attitude, and job satisfaction. Other personal and interpersonal aspects, including as personal worth, recognition, friendship, social pressures from group members, and status are influential in influencing production and level of job satisfaction, according to the human relations movement spawned by the study. (Osuji,1985:91). In other words, it is becoming increasingly apparent that, in addition to economic demands, people also have social-psychological needs that must be fulfilled in order to elicit behavior conducive to higher production.
While traditional theories of management, as illustrated by the Scientific Management Movement, emphasize the motivational force of money and material incentives, classical theories place greater focus on addressing the psychological needs of employees. Motivational variables include pay incentives and fringe perks. According to Croft (1996:46), motivation can be described as “inner urges that inspire a person to act in ways that satisfy those impulses.” In other words, the concept of motivation suggests that individuals are driven to seek to attain a goal or purpose in order to satisfy their need(s). (Croft, 1996:46). Therefore, to say that managers motivate their employees is to imply that they do the things that they believe would fulfill those drives and desires and influence the subordinates to behave as desired. (Koontz et al, 1983:632). Alugbuo (1981:13) states that people work in order to receive compensation for their efforts.
The exchange of labor for monetary compensation is the core of the pay process. People do not put up their greatest efforts until they receive compensation commensurate with the prevailing social and economic conditions.
Ubeku (1975:301) noted that the payment of remunerative salaries and wages is vital to the enhancement of the performance prerequisites. In order to motivate employees to exert maximum effort, it is vital that their diverse requirements, notably in terms of compensation and other perks, be met to the greatest extent possible. In Nigeria, the compensation structure falls below the amount required to maintain worker productivity. The compensation system does not reflect the economic realities. According to Papola (1970:79), “a just minimum wage to sustain not only the life, but also the health and vigor of the working people is a requirement and knows no other law.”
Wage payment is the single most significant obligation due by an employer to an employee. Wages, salaries, and related costs (pension contributions, etc.) account for around 60 percent of the overall operating expenses of a large corporation. Therefore, employers have a keen interest in this area of their business. Other significant impacts on this activity include trade unions negotiating a higher wage for labor, competitors vying for the best employees, and the state attempting to set minimum standards for all employees’ working conditions (Cole, 2005:30).
A benefit is additional money offered to employees as a reward for their membership in an organization. Due to the expense of fringe benefits to employers, it is essential to specify the extent and total cost of giving such benefits to employees. According to Zolthistsch et al. (1970:136), it refers to any financial and non-financial payments to employees that exceed the agreed-upon basic salary rate owed to the employee for the bare minimum job performance required. Armstrong et al. (1970:36) also stated that “fringe benefits when combined with the basic pay of an individual forms that total remuneration which is the entire package of pay and benefits received by each employee, their value to an individual is a more accurate basis for comparison with outside market rates than salary alone.”
Motivation and productivity are twin notions in organizational growth, according to Sunken (2008:20). First, motivation serves as a means for achieving productivity as an end; second, it is the best cause for achieving productivity’s positive consequences; and third, it is the stimulus for triggering productivity as a response. People require motivation just as machines require fuel and operators. This is required to guarantee that they are constantly in optimal functioning condition. This will inevitably result in maximum productivity. (Sunken, 2008:20).
It cannot be overstated how important it is for managers and administrators to motivate their personnel. There is little doubt that the ability of any organization or group to accomplish its objectives is heavily dependent on the motivation of its employees. Indeed, no manager or administrator can achieve ideal productivity for their organization without understanding what motivates the employees. (Ezeani 2005:136). According to Koontz et al. (1983:631), individuals in charge of the administration of an organization must incorporate into the overall system characteristics that encourage employees to participate as effectively and efficiently as feasible. A manager accomplishes this by including into every conceivable facet of the organizational climate those factors that will motivate employees to behave as desired. According to Onah (2008:279), employee motivation is one of the largest competitive reserves and a crucial factor in enhancing a company’s competitive edge. Motivation is a vital force and significant factor in the equation for employee success. It is a collection of forces that motivate individuals to act in particular ways. Motivation refers to the internal forces that influence the direction, intensity, and persistence of a person’s voluntary behavior. (1995:78, Moon and Griffin). According to Pinder (1984), direction alludes to the objective nature of motivation. People are motivated to appear on time to work, complete a project a few hours early, and strive for several other goals. Intensity is the amount of effort devoted to a specific objective. Two employees may be motivated to complete their work a few hours early (direction), but only one will exert sufficient effort (intensity) to reach this objective. Motivation also entails varied degrees of tenacity, which entails the continuation of efforts over a period of time. The need, according to Moorhead and Griffin (1995), is the starting point of the motivating process. Typically, a person’s behavior is prompted by a lack in one or more of their essential needs.
When a worker perceives that equity is lacking, he is obligated to withhold a portion of his production in an effort to restore equity. To encourage greater productivity, it is vital to construct a reward system that aims to establish a connection between effort and compensation.
1.2 STATEMENT OF THE PROBLEM.
Government officials, corporate organizations, and the general public are currently concerned about and debating the poor performance, lack of dedication, and lack of commitment of workers. How to increase staff productivity has been the subject of several seminars, symposia, and conferences. The issue has been sparked by the reasons for this tendency as well as the right route for assigning blame. A number of reforms in the public sector, including work ethics, transparency, dedication, and commitment to duties, are among the measures taken to increase the productivity of the country’s workforce.
According to Nwachukwu (1988:29), Nigerians have traditionally held the view that Nigerian workers are often sluggish, lethargic, reluctant to act, indifferent, and dishonest in their attitude. These employees are believed to lack the fervor, vigor, and momentum of hardworking individuals, and they despise hearing about efficiency, commitment, competence, determination, and productivity, which are characteristics of people in a production-oriented culture. In production-oriented societies, employers do all possible to maintain and recruit quality employees. Employers seek to enhance the morale of their employees with the goal of evoking a positive attitude toward work, while employees respond by devising methods for the success of their organizations. In Nigeria, there are insufficient stimuli to elicit such responses; hence, worker performance, morale, and productivity remain below average.
This study focuses on the low productivity of the Enugu State Local Government Service Commission between 1999 and 2007 due to irregular and inadequate salaries and other fringe perks. The issue is best described by posing key questions.
Does the Enugu State local government service commission continue to deal with irregular salaries and wages?
Does Enugu State’s local government service commission continue to struggle with inadequate pay and wages?
Do the amounts of fringe benefits provided by the Enugu state local government service commission have an effect on employee morale?
What can be done to increase the productivity of commission employees?
Are salaries and other fringe benefits established through collective bargaining between the trade union and the commission’s management?
What (financial/non-financial) incentives and fringe benefits increase the morale of Enugu state local government service commission employees?
1.3 OBJECTIVES OF THE STUDY
The study’s overarching purpose is to determine the effects of salary incentives and fringe benefits on the productivity of Nigerian workers (1999-2007).
The particular aims are:
Determine why the problem of irregular salaries and wages occurs in organizations, particularly the Enugu state local government service commission.
Determine why the problem of inadequate salaries and wages persists in organizations, particularly in the Enugu state local government service commission.
Determine whether the degree of fringe benefits paid to commission employees affects employee morale.
Determine the type of incentives that encourage commission employees and the relationship between these incentives and employee output.
Determine if salaries and other benefits are set by collective bargaining.
Determine whether financial or non-financial incentives improve employee morale.
1.3 Importance of the Research
Productivity enhancement is significant because it affects the level of life, the pay that employees can receive, and the organization’s potential profit. Productivity influences costs, pricing, output, employments, and investments, and so contributes to the growth and fall of businesses and sectors. Understanding the effects of salary incentives and fringe benefits on productivity in the context of any company contributes to its increased efficacy and productivity. Therefore, in order to reach a high level of production, individuals who contribute to it must be cared for, and their needs and welfare should be met swiftly and adequately. Employees should be entitled to their own portion of productivity dividends. Numerous studies on the aforementioned topic have been undertaken on both private and public organizations, but none have concentrated on the Enugu state local government service commission. This study aims to address that void, especially considering that, despite the existence of fundamental organizational concepts, their applicability varies from organization to organization.
The application of this work to employment circumstances in the Enugu state local government service commission and other organizations with similar problems is anticipated to have a significant impact. Equally, the research will examine the techniques by which salary incentives and fringe benefits might be utilized as realistic productivity-enhancing tools. It will serve as a practical guide for individuals who seek to use incentive-based productivity enhancement approaches in their workplaces.
The empirical research will serve as a road map for organizational staff who are experiencing a fall in production and the means to prevent future occurrences. It will be of considerable use to people responsible for the management of a workplace at any organizational level, including executives, managers, supervisors, public administrators, government officials, and other human resource managers.
In addition to serving as a theoretical foundation, this study will contribute to the current body of research regarding the impacts of salary incentives and fringe benefits on productivity. It will be used as a resource in business schools, management programs, training sessions, development seminars, and conferences on how to best encourage employees and enhance productivity.
1.5 SCOPE OF THE STUDY AND LIMITATIONS
The research will examine the operations of the Enugu state local government service commission in regard to the wage incentives and fringe benefits provided to commission employees. It was not possible to generalize all operational areas of the commission’s activities, thus the scope of the study was limited to policies related pay incentives and fringe benefits as they influence the seventeen local government areas of the state of Enugu. Between 1999 and 2007, the study will focus on the effects of wage incentives and other fringe benefits on the productivity of Enugu state local government service commission employees.
This effort is constrained by the lack of a standard library within the commission from which to gather information on the organization, policies, and overall programs and activities of the commission. Second, there is no database from which to evaluate other crucial information about the commission. Since we are doing survey research that relies on the opinions, attitudes, values, and preferences of the people, we also experienced certain obstacles. The possibility of biased responses cannot be ruled out entirely since respondents may be concerned that their responses may negatively impact their job security.
In addition, the animosity of certain public employees who are hesitant to provide essential information to researchers on the grounds that it has been classified as “secret.”
These constraints were overcome by visiting several local government headquarters, where I was able to obtain relevant data and documentation on the administration, functions, and successes, regulatory and supervisory tasks of the Enugu state local government service commission. I also obtained a letter from the head of the public administration and local government department at the University of Nigeria, Nsukka, assuring the commission that my research is just an academic activity and that the information gathered will be kept in strict confidence.
THE IMPACT OF FINANCIAL INCENTIVES IN NIGERIA’S GOVERNMENT-OWNED ORGANIZATIONS
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