CONTINGENT PAY AND EMPLOYEE PERFORMANCE IN THE BANKING INDUSTRY: A STUDY OF SELECTED BANKS IN ONITSHA METROPOLIS

ABSTRACT
This study sets out to examine the impact of contingent pay on employee performance in the banking industry. Probabilistic sampling technique has been used for the study. Four research questions and three hypotheses were formulated to guide the study. To achieve this, data were collected through a well-structured questionnaire from five banks in Onitsha Metropolis. The data were presented in frequency tables and analyzed using chi-square test statistics. The result of the analysis showed that, there is a significant relationship between contingent pay and employee performance, that contingent pay has impact on the employee performance. Employee performance has greatly improved since the introduction of performance-based pay. The main recommendation of the study is that organizations should introduce performance-based pay in order to reduce their staff cost instead of mass retrenchment. They should also seek the input of the employee in setting performance standards.

CHAPTER ONE 

INTRODUCTION

1.1.  BACKGROUND OF THE STUDY
In the 80s, there were great similarities between banking job and civil service. Bankers were not given targets and can stay in the office, drink coffee and attain to their customers. Staff rarely go out prospecting except few occasions they are mandated to recover bad loan. Customer on their own accord went to bank to open accounts. Grades were determined by the year of experience and qualifications. Salary was based on grade and everybody in the same grade received the same salary irrespective of one’s competence, skill, knowledge, and contribution. Nepotism was the order of the day. The banking environment was not really challenging. Once the people have confidence in the bank, the bank would have all business. Competition was not fierce as it is now and the cost of doing business was not so high. There was no need to invest huge funds in software and other security gadgets. The sophisticated crimes and fraud witnessed today in banking industry were not so then. The challenging investment opportunities were not there. But a lot have change in 21st century. The business environment has become turbulent and complex. For managing in turbulent environment, there is a requisite variety imperative, which states that the complexity and subtlety of the firm’s response must match the complexity and subtlety of the environment (Roy Ashby, 1956). The requisite variety theory can be seen as a contingent theory (Onwuchekwa, 2000)

In order to survive in such unpredictable, turbulent and complex business environment, banks have adopted measure for survival. Hence the introduction of contingent pay packages. Every business organization is in business to either maximize profit or minimize cost. It is a fact that all employees do not have the same education, experience, strength, skills, competence, motivation, passion or attitude. Some organization could no longer bear the wage bill but still understand the importance of having a satisfied /motivated workforce.

Banks and some other organizations in a strategic move for survival, have embarked on a search for motivational tools that have the capacity to sustain high performance, reward performers, punish non-performers and reduce staff cost. Hence this has informed the choice of the title of this study.


1.2.  THEORETICAL FRAMEWORK:
The equity theory of motivation forms the theoretical framework for this study. This theory was propounded by Adam Stacy J 1963 It states that a major input into job performances and satisfaction is the degree of equity (or inequity) that people perceive in their work situation. It is based on the assumption that a major factor in job motivation is the individual’s evaluation of the equity or fairness of the reward received. Equity can be defined as a ratio between the individual’s job inputs such as effort or skill and job reward such as pay or promotion (Stoner, Freeman and Gilbert, 2005). Most discussions and research on equity theory focus on money as the most significant reward in the work place. People compare what they are being paid for their efforts with what others in similar situations receive for theirs. When they feel inequity exist, a state of tension develops within them which they try to resolve by appropriately adjusting their behaviour (Robins, 2000).

This research is based on this theory since every staff in the bank is rewarded based on their skill, knowledge, effort, education, experience competence and performance.


1.3.  STATEMENT OF PROBLEM
Banks are not charitable organizations and every staff must add value and must earn his/her pay. They must justify their continuous stay with the bank. Employees’ experience, education, skill and competence are not the same and they should not be rewarded equally. The cost of doing banking business in Nigeria is so high and banks have observed that greater percentage of their cost is staff cost. The bank cannot afford to spend their hard earned profits on who are contributing little or nothing to their profit. In recent times, a bank in Nigeria announced that most of its business offices are making loss and can no longer bear their current wage bill. As a result, a lot of staff were retrenched. Right sizing could demoralize other staff; expose bank’s technology and security software to competition and fraudsters. It could affect the bank’s image. Most banks have resorted to a system of contingent pay. A payment structure that is based on performance, contribution and competence. Work is not inherently distasteful. People who contribute meaningfully to the accomplishment of the bank objectives should be fairly rewarded.

Staff who are lazy, who avoid responsibilities and lack passion, ambition or creativity should be made to rewrite their scripts.


1.4.  OBJECTIVE OF THE STUDY
The major objective of this study is to find out what an organization stands to gain or lose when the issue of contingent pay is not properly addressed. To do this, we hope to address the following:

a.                 To identify various performances based rewards used in banks

b.                 To investigate the impact of contingent pay on employee performance
c.                 To find out how contingent pay acts as motivational tool

1.5.  RESEARCH QUESTIONS
The following research questions are formulated for this study:

1.                 Is your annual pay package tied to your performance on the job?

2.                 Do you have an opportunity to buy the bank’s share with a low-interest loan for staff?
3.                 Is the bank’s pay scheme fair and devoid of bias?

4.                 Has performance improved since the introduction of performance-based pay?


1.6. HYPOTHESES OF THE STUDY:
H0:       Employee’s performance is not directly proportional to
employees’ reward.

H1:       Employees performance is directly proportional to employee
reward

H0:         Contingent  pay does not motivate staff to greater
performance

H1:         Contingent pay motivates staff to greater performance

H0:         Contingent pay does not improve employee’s performance

H1:         Contingent pay improves employee’s performance

1.7. SIGNIFICANCE OF THE STUDY
The significance of this study is to reveal the relationship between contingent pay and performance and to expose the managers to most effective contingent pay that can be used in their organizations. The findings of this research will be useful to managers in various organizations, students of tertiary institutions, lecturers in tertiary institutions, practitioners of other fields requiring good working knowledge of the topic.


1.8.  DELIMITATIONS AND LIMITATIONS OF THE STUDY
To treat this problem as a whole will be too much for the requirement of this work. Therefore, we will study United Bank for Africa (UBA) Plc, First Bank of Nigeria Plc, Zenith Bank Plc and Union Bank of Nigeria considering the time available and cost implication for this research. This work will be restricted to performance related pay contribution related pay profit sharing recognition schemes and Employee and executive share schemes. We will also limit the scope to the period between 2000 to 2009.

In a research work of this sort, there are many constraints; the bank are staff a re reluctant to air their views pointing out that they are constrained by the oath of secrecy which they took before their appointment. A lot of funds are needed for typing, transportation, and meeting other demands of this work. Also the time available for this work is short and it is not easy combining the research and the demanding task of being a banker.

1.9. DEFINITION OF TERMS AND CONCEPTS
i.                   Contingent pay is the payment of cash to individuals in the form of performance pay or bonus on the basis of their own performance or that of their team or organization.
ii.                 Performance Related Pay (PRP) schemes relate to a proportion of pay to indicators of performance such as quality, flexibility, contribution to team work and ability to achieve target.
iii.               Contribution related pay is a process for making pay decisions that are based on assessments of both the outcomes of the work carried out by individuals and the level of competence and competency that has influenced these outcomes.
iv.               Bonus is a cash reward for past performance
v.                 Team is defined as two or more people who interact and influence each other towards a common purpose.
vi.               Motivation is the factor that causes, channels, and sustains an individual’s behaviour.

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Item Type: Project Material  |  Attribute: 98 pages  |  Chapters: 1-5
Format: MS Word  |  Price: N3,000  |  Delivery: Within 30Mins.
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