Effects of Performance Incentives on Employee Efficiency

The purpose of the study was to determine the effect of performance incentives on employee efficiency in Deposit Money Banks (DMBs) in Dutsin-Ma Local Government Area (LGA) of Katsina State, Northwest-Nigeria. The population of the study comprised the sixty (60) employees of all the DMBs in Dutsin-Ma LGA of Katsina State, Nigeria (vis-à-vis First Bank Nigeria Ltd., United Bank for Africa PLC and Unity Bank PLC), of which a sample of 52 respondents was drawn using the proportional stratum allocation technique and the simple random sampling technique. The primary data was collected through the use of a structured questionnaire and was analysed through descriptive and inferential statistics using the Statistical Package for Social Sciences (SPSS) version 20. The study, thus, found that DMBs in Dutsin-Ma, Katsina State encourage employees through performance incentives and there are positive significant differences among the performance incentives used (vis-à-vis training, better working environment, benefits, base pay, feedback, recognition, participation, career development, profit sharing, gain sharing, initiative rewards and special rewards); financial performance incentives have a positive significant effect on employee efficiency in DMBs in Dutsin-Ma, Katsina State and non-financial performance incentives have a positive significant effect on employee efficiency in DMBs in Dutsin-Ma, Katsina State. Hence, the study concluded that there is a positive significant effect of performance incentives on employee efficiency in DMBs in Dutsin-Ma LGA of Katsina State, Northwest-Nigeria. The study, therefore, recommends that Management should increase the level of performance incentives they give their employees or as enjoyed by their employees in order to increase and sustain their employees’ levels of efficiency. Management should continue to give their employees financial incentives and continue to allow their employees enjoy non-financial incentives in order to increase and sustain their efficiency, make them be willing to increase the speed at which they work, and for them to continue to do their work with no errors.

TABLE OF CONTENTS

Chapter One: Introduction ………………………………………………..…………….. 1

1.1 Background to the Study ......…………………………………………………….…… 1

1.2 Statement of Research Problem .....................................................................................  3

1.3 Objectives of the Study ……………………………………………………………….. 5

1.4 Research Questions ………………………………………...………………………….. 5

1.5 Research Hypothesis …………………………………………………………………... 6

1.6 Scope of the Study …………………………………………………………………...   6

1.7 Significance of the Study ……………………………………………………………..  7

1.8 Definition of Technical Terms ………………………………………………………..   7

Chapter Two: Literature Review ……………………………………………………….  9

2.1 Introduction …………………………………………………………………………..   9

2.2 Concept of Performance Incentives …………………………………………………..  9

2.2.1 Financial Performance Incentives ………...…………………….…………………… 10

2.2.1.1 Base Pay ……………………………………………………………………..……..            11

2.2.1.2 Profit Sharing …………………………...………………….………………..…….. 12

2.2.1.3 Gain Sharing ………………………………………….……………………..…….. 12

2.2.1.4 Benefits ……………………………………………….……………………..…….. 13

2.2.1.5 Initiative Rewards ……………………………………………….…………..……..            13

2.2.1.6 Special Rewards ……………………………………………….…...………..……..            13

2.2.2 Non-financial Performance Incentives ……………………………………………… 13

2.2.2.1 Feedback …………..………………………………………………………..……..  14

2.2.2.2 Recognition …………………………......………………….………………..…….. 14

2.2.2.3 Participation …………………….…………………….……………………..…….. 16

2.2.2.4 Better Work Environment …………………………….……………………..……..            17

2.2.2.5 Career Development …………………………………………….…………..…….. 18

2.2.2.6 Training ………….…………………………………………….…...………..…….. 19

2.3 Concept of Employee Efficiency ………………………………………………………            19

2.3.1 Major Interpretations of the Term "Employee Efficiency" ………………….……...   21

2.3.1.1 Productivity-oriented Approach …………………………………………………..  21

2.3.1.2 Objectives-oriented Approach …………………………………………………….. 22

2.3.1.3 Performance-oriented Approach …………………………………………………..  22

2.3.2 Measuring Employee Efficiency …………………………………………………….  22

2.3.3 Ways to Improve Employee Efficiency ……………………………………………..  23

2.3.4 Seven Traits of an Efficient Employee ……………………………………………..   32

2.4 Conceptual Framework ………………………………………………………………..  34

2.5 Review of Empirical Studies ………………………………………………………….  35

2.5.1 Relationship between Financial Performance Incentives and Employee Efficiency     40

2.5.2 Relationship between Non-financial Performance Incentives and Employee

Efficiency ……………………………………………………………...………….. 40

2.6 Theoretical Review ……………………………………………………………………. 40

2.6.1 The Expectancy Theory ………………………………………………..……………. 40

2.6.2 The Equity Theory …………………………………………………………………..  45

Chapter Three: Research Methodology ………………………………………………..  48

3.1 Introduction …………………………………………………………………………… 48

3.2 Research Design ………………………………………………………………………. 48

3.3 Population of the Study ……………………………………………………………….  49

3.4 Sample Size and Sampling Technique ………………………………………………… 49

3.4.1 Sample Size ………………………………………………………………………….  49

3.4.2 Sampling Technique …………………………………………………...…………….  50

3.5 Sources & Method of Data Collection …………………………………………………            51

3.6 Validity and Reliability of Data Collection Instrument …………………….………… 52

3.6.1 Validity ……………………………………………………………………..……….. 52

3.6.2 Reliability ……………………………………………………………………………  52

3.7 Method of Data Analysis ………………………………………………………………            53

3.8 Measurement of Variables …………………………………………………………..… 54

3.9 Summary of Chapter …………………………………………………………………... 54

Chapter Four: Data Presentation, Analysis and Interpretation ……………………..    55

4.1 Introduction …………………………………………………………………………… 55

4.2 Data Presentation ……………………………...………………………………………. 55

4.2.1 Respondents’ Demographic Characteristics ………………………………………… 55

4.2.2 Performance Incentives Adopted by Deposit Money Banks in Dutsin-Ma

Local Government Area of Katsina State to Encourage Employees …………....… 58

4.2.3 Effects of Financial Performance Incentives on Employee Efficiency in Deposit

Money Banks in Dutsin-Ma Local Government Area of Katsina State …………... 63

4.2.4 Effects of Non-financial Performance Incentives on Employee Efficiency in Deposit

Money Banks in Dutsin-Ma Local Government Area of Katsina State …………... 65

4.3 Test of Hypotheses ……………………………………………………………………. 68

4.3.1 Hypotheses One …………………………………………………..…………………. 68

4.3.2 Hypotheses Two …………………………………………………..………………….            78

4.3.3 Hypotheses Three ………………………………………………..………………….. 83

4.4 Discussion of Research Findings ……………………………………………………… 89

Chapter Five: Summary, Conclusion and Recommendations …..…………………….  92

5.1 Summary of Findings …………………………………………………………………. 92

5.2 Conclusion ……………………………………………………………….……………. 94

5.3 Recommendations …………………………………………………………………….. 95

5.4 Limitations of the Study ………………………………………………………………. 95

5.5 Contributions to Knowledge ……………………………………………………..…… 96

5.6 Suggestion for Further Studies …………………………………………………..……. 96

References ……………………………………………………………………………........            97

Appendix ………………………………………………………………………..…………            103