THE RELATIONSIDP BETWEEN NON-FINANCIAL BENEFITS TOWARDS JOB SATISFACTION AMONG MIDDLE LEVEL EXECUTIVES

DEVEGARAN SIO SIV ALINGAM

This project is submitted in partial fulfilment of the requirements for a Bachelor of Science with Honours (Human Resource Development)

Faculty of Cognitive Sciences and Human Development UNIVERSITI MALAYSIA SARA W AK

(2011)

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ACKNOWLEDGEMENT

First of all, thanks to Mr. Abang Ekhsan Abang Othman for being my supervisor for this Final Year Project. He had guided me all the way from the FYP 1 until the finishing on my thesis. Approving my research letters and consulting me whenever

. needed is the best part of him. A knowledgeable and understanding person had given his best on my proceedings in the report.

I would like thank the research organizations which are the labatan KeIja Raya Sarawak and labatan Ketua Menteri for allowing me to conduct the research. The cooperation from all the respected respondents was appreciated. Without their sincere responds and suggestions, this research could not succeed. This opportunity also gives me a platform to thank all my friends and seniors who had helped me throughout the completion of this report. They had supported me all the time and helped me in various ways. Especially, thanks to my friend Mohd Afnan bin Abdul Khoni for assisting me a lot in learning the Statistical Package for Social Sciences (SPSS). Good luck.

Last but not least, my deepest appreciation to my beloved family for always assisting me throughout the 3 years of study in Unimas. Moral supports and financial supports really made me to encounter the tough situations. Finally, I hope I could give back something good to the community after completing my studies.

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TABLE OF CONTENTS

Acknowledgements

Table of Contents

List of Tables

List of Figures

Abstract

CHAPTER 1 INTRODUCTION

1.0 Introduction

1.1 Background of study

1.2 Problem statement

1.3 Research Objectives

1.4 Conceptual Framework

1.5 Significant of study

1.6 Definition of terms

1.6.1 Compensation

1.6.2 Benefit

1.6.3 Non-Financial Benefit

1.6.4 Job Satisfaction

1.6.5 Middle level executives

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1.6.6 Praise 13

1.6.7 Competent Supervisory Support 13

1.6.8 Career Development Opportunities 14

1.6.9 Career Counseling 14

1.7 Limitation of study 14

CHAPTER 2 LITERATURE REVIEW

2.0 Introduction 15

2.1 Compensation 16

2.2 Non-Financial Compensation 17

2.3 Job Satisfaction 18

Job Satisfaction Models

2.3.1 Perception ofEquity 20

2.3.2 Herzberg's Two-Factor Theory 22

2.3.3 Need-Fulfillment Theory 26

2.4 Praise 27

2.5 Competent Supervisory Support 30

2.5.1 Conflict in Supervision 32

2.6 Career Development Opportunities 34

2.6.1 Perceived Motive of the Organization in Offering Benefits 38

2.7 Career Counseling 39

2.7.1 Benefits of Career Counseling to Employer 41

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2.7.2 Career Counseling within Organization 41

2.8 Conclusion 44

CHAPTER 3 METHODLOGY

3.0 Introduction 45

3.1 Research Design 46

3.2 Population and Sample 46

3.3 Instrument ofResearch 48

Section A: Demography 49

Section B: Praise 49

Section C: Competent Supervisor Support 50

Section D: Career Development Opportunities 50

Section E: Career Counseling 50

3.4 Data Collection 51

3.4.1 Pilot Study 51

3.4.2 Data Screening Test 58

3.4.3 Actual Study 60

3.5 Reliability and Validity 60

3.5.1 Reliability 60

3.5.2 Validity 61

3.6 Data Collection Method and Procedures 62

3.6.1 Primary Data 62

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3.6.2 Secondary Data 63

3.7 Data Analysis Technique 64

3.7.1 Descriptive Statistics 64

3.7.2 Inferential Statistics 64

3.7.3 Pearson Correlation Analysis 65

3.8 Conclusion 67

CHAPTER 4 FINDINGS AND DISCUSSION

4.0 Introduction 68

4.1 Demographic Factor Analysis 68

4.1.1 Gender 69

4.1.2 Age 70

4.1.3 Ethnicity 71

4.1.4 Length ofTenure 72

4.1.5 Marital Status 73

4.1.6 Educational Background 74

4.2 Pearson Correlation Coefficient Analysis 75

4.5 Multiple Regression Analysis 81

4.5.1 Model Summary 83

4.6 Conclusion 84

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CHAPTER 5 SUMMARY, IMPLICATIONS AND RECOMENDATIONS

5.0 Introduction 85

5.1 Summary of the study 86

5.2 Implications of the study 88

5.2.1 Implications to theories 88

5.2.2 Implications to the robustness of research methodology 90

5.2.3 Implications to Human Resource Practitioners 90

5.3 Limitations of the study 93

5A Recommendations 94

5.4.1 Employees 94

5.4.2 Future Researchers 95

5.5 Conclusion 97

Bibliography

Appendix 98

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LIST OF TABLES

Table 2.1 Conflict Reactions

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Table 2.2 Cause ofConflicts 32

Table 2.3 Perceived Motive of the Organization in Offering Benefits 36

Table 2.4 Benefits of in-house career counselors & career counseling programs 39

Table 3.1 Five Point Likert Scale 48

Table 3.2 Cronbach's Alpha Reliability Value 50

Table 3.3 Analysis of the Cronbach's Alpha (Praise) 51

Table 3.4 Analysis of the Cronbach's Alpha (Competent Supervisory Support) 52

Table 3.5 Analysis of the Cronbach's Alpha (Career Development Opportunities) 52

Table 3.6 Analysis of the Cronbach's Alpha (Career Counseling) 53

Table 3.7 Analysis of the Cronbach's Alpha (Overall Job Satisfaction) 53

Table 3.8 Data Screening Test 55

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Table 3.9 Interpretation of the Correlation Coefficient 62

Table 3.10 Summary of Statistical Analysis Techniques 62

Table 4.1 Demographic Factor Analysis(Gender) 65

Table 4.1 Demographic Factor Analysis (Age) 66

Table 4.3 Demographic Factor Analysis (Ethnicity) 67

Table 4.4 Demographic Factor Analysis (Length of tenure) 68

Table 4.5 Demographic Factor Analysis (Marital Status) 69

Table 4.6 Demographic Factor Analysis (Educational Background) 70

Table 4.7 Correlation between independent variable with job satisfaction (Praise) 71

Table 4.8 Correlation between independent variable with job satisfaction 72 (Competent supervisory support)

Table 4.9 Correlation between independent variable withjob satisfaction 74 (Career development opportunities)

Table 4.10 Correlation between independent variable with job satisfaction (Career counseling) 75

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Table 4.11 Multiple regression model summary 76

Table 4.12 Multiple regression ANOV A 77

Table 4.13 Multiple regression Coefficients 79

Table 4.14 Model Summary of Multivariate Regression Analysis

Table 5.1 Summary of the Relationship between non-financial benefits towards job satisfaction 81

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LIST OF FIGURES

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Figure 1 Conceptual Framework 7

Figure 2 Adam's Perception of Enquiry Model 19

Figure 3 Herzberg's Two Factor Theory 22

Figure 4 Model of Contemporary Career Success 34

Figure 5 Model for career counseling within organization 41

Figure 6 Pilot test formula 49

Figure 7 Data collection procedure 59

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ABSTRACT

THE RELATIONSHIP BETWEEN NON-FINANCIAL BENEFITS TOWARDS JOB SATISFACTION AMONG MIDDLE LEVEL EXECUTIVES

Devagaran slo Sivalingam

This study aims to investigate the relationship between praise, competent supervisory support, career development opportunities and career counseling towards job satisfaction among middle level executives. In other word, this research were done to identify is there any relationship between non-financial benefits towards job satisfaction among middle level executives. Besides that, other elements such as gender and age in the demographic factors were not part of this research. The data sets that were obtained were analyzed using descriptive statistics and inferential statistics. Pearson correlation was used widely in the statistical analysis to measure the degree of relationship between the dependent variable and independent variables in this research. Apart from that, multiple regression were also one of the measurement medium to measure the most dominant factor which caused the job satisfaction among the selected middle level executives. The respondents that were obtained are 84 and the questionnaires distributed are 150 sets to the two organizations namely the Jabatan Kerja Raya Sarawak and Jabatan Ketua Menteri Sarawak. At the final section of this study, the findings shows that there are significant and a high relationship of praise, competent supervisory support, career development opportunities and career counseling towards job satisfaction among the middle level executives. Among the high percentages obtained for the variables, career development opportunities were the most dominating factor in the research. The findings of this research can helpful to the human resource practitioners where the significance of non-financial benefits were deeply researched here. On the other hand, this can be a base for the future researchers where they can use the research to be a reference. Other than that, future researchers are recommended to compare the existence of the non-financial benefits in the private and government sectors.

T ABSTRAK

PENGARUH GANJARAN BUKANKEWANGAN TERHADAP KEPUASAN KERJA DI KALANGAN PEGAWAl PERTENGAHAN

Devagaran all Sivalingam

Kajian in; bertujuan untuk mengkaji dan menentukan pengaruh pujian kepada pekerja, sokongan penyelia yang kompeten, peluang pembangunan kerjaya dan kaunseling kerjaya terhadap kepuasan kerja di kalangan pegawai pertengahan. Dalam erti kata yang lain, kajian ini dilaksanakan untuk mengenalpasti pengaruh ganjaran bukan kewangan terhadap kepuasan kerja di kalangan pegawai pertengahan. Pengaruh demografik seperti jantina dan unur tidak menjadi sebahagian daripada tujuan kajian ini. Untuk mengukur data yang diperolehi dalam kajian ini, statistik diskritif dan statistik inferensi telah digunakan. Koefisi Pearson telah digunakan dengan ban yak untuk mengukur tahap perhubungan di antara factor bersandar dan factor tidak bersandar. Selain itu, regresi berganda juga digunakan untuk mengukur faktor-faktor yang paling dominan yang mempengaruhi kepuasan kerja dalam kalangan pegawai pertengahan. Sebanyak 85 responden telah diperolehi daripada 150 set borang soal selidik yang telah diedarkan di organisasi kajian dimana terdiri dari Jabatan Kerja Raya Sarawak dan Jabatan Ketua Menteri Sarawak. Di akhir kajian ini, keputusan kajian ini menunjukkan bahawa terdapat hubungan yang tinggi and positif faktor pengaruh pujian kepada pekerja, sokongan penyelia yang kompeten, peluang pembangunan kerjaya dan kaunseling kerjaya terhadap kepuasan kerja di kalangan pegawai pertengahan. Di kalangan semua faktor-faktor ini, faktor peluang pembangunan kerjaya telah menjadi faktor yang paling dominan. Penemuan kajian diharapkan dapat menbantu para pengamal sumber manusia dimana kepentingan ganjaran bukan kewangan telah dibincangkan dengan terperinci dalam kajina ini. Di sam ping itu, pengkaji pada masa akan datang boleh mengunakan kaijian ini sebagai satu sumber untuk apa-apa kajian lain. Para pengkaji pada masa hadapan juga disarankan untuk membuat perbandingan kewujudan ganjaran bukan kewangan antara sector swasta dan sector awam.

Chapter 1

Introduction

1.0 Introduction

First of all, this chapter will discuss in depth on the background on the study,

problem statement, research objectives, conceptual framework, research hypothesis,

significant of study, definitions of terms and the limitations of the study. The main

intention of this research is to look into the relationship between non-financial

compensation and job satisfaction among the middle level executives. Apart from that

this study will also identifies the ideas and issues that had been proposed in the past

similar researches.

1.1 Background of Study

Today, in many industries people are more concern on how to effectively

motivate staff and its becoming more important. Yet, the 50 years of organizational

research done by various people throughout the world founds one reason. That is the

employee is satisfied by giving them a comprehensive compensation and benefit

package either fmancially or non-financially. Comprehensive compensation packages

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will attract the right person for the job. Despite, these kinds of good benefits forces

the employee to remain working in the organization.

The state of an organization to retain the employees is the hardest task to

handle with. The employee's satisfaction on the compensation packages will make

them satisfy and stay in the organization. Organizations that are more to project-based

jobs will have a major turnover process after every project is done. This is because

the employees will tend to move to another organization to engage with new projects.

Major reasons for this migration of work are because the employees seek for a better

compensation in other organizations. In accordance for that, such organizations must

prepare an attractive compensation packages from other organizations. By offering

attractive compensation packages, the employee turnover will be lesser and the job is

not leaved empty. As for the main purpose the employee will be able to perform their

best task and deliver it the organization or customer.

Apart from that, a good compensation package will make the employee to stay

and contribute their knowledge. According to Michael Silverman (1994) in his

publication quotes that financial rewards are important as a mechanism to aid recruit

and retain talent, and as a means of providing tangible recognition of effort or

contributions. His quote clearly shows that financial reward is the best way to

recognize an employee's performance. This is like whenever the term compensation

and benefit arises the employees or people will view it in perspective of financial

reward only. Apparently, the alternative job satisfier in compensation that plays the

major role in employee's retention is the non-financial compensation issues. These

non-monetary motivators can influence employee's behavior and satisfaction that

leads to employee turnover.

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Our nation is moving towards a well developed country where vision 2020

that is inspired by our former Prime Minister Tun Dr. Mahathir Mohammad is the

target. In sequence of developing the nation, the developments of human capital is

now one of the important agenda. Human capital is where workforce is being

developed into a skilled labor for the industry. As far as the development progresses,

when there is a need for labor there should be a good compensation packages to

attract them. Generally, the employee's compensation will be focused into financial

rewards such as wages, salary, bonus and many more. These are the major things that

will attract an employee to the organization.

Recently, our country faces an economic recession where most industries

were on freeze because of other major economic downturn in foreign countries. As an

effect, the price of some commodities went up slightly. The noticeable price hike is ,J

for the petroleum products and sugar productions. These kinds of environment makes '~

the cost of living becomes high and needs more financial balance to cope with. One

of the most important significance is where the demand for non-financial

compensation gets high. This is because of the cost of living increases and everyone

needs something more than their normal fmancial wages.

As Gratton (2004) notes ' .... while motivation is determined by both monetary

and non-monetary factors, money has come to play an overlay important role in our

thinking about the causes ofbehavior. In most companies, very limited time and effort

are spent on considering non-monetary sources ofmotivation. 'By this way, we could

see the importance of non-financial or non-monetary compensation.

Furthermore, some people are confused with the concept of reward and

recognition. This situation exists because in most organizations these two concepts

had been overlapped between among the concepts. Here, we must learn to

differentiate the state of rewards and recognition. Reward is something that someone

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will get in return after he completes certain task successfully. Rewards can be like

remuneration or compensation for services. On the other hand, the concept of

recognition defines that a special notice or acknowledgement for something that had

been done by the employee. A typical example of recognition is like an employee

receiving a medal of honor for effectiveness in his job. Hence, these two concepts are

totally different in their way of understandings. In a usual situation the action of

giving rewards is what promised by the organization to the employee, while

recognition is offered after the employee had done something good or excellent. As

Hansen et al. (2002) states, differentiating the recognition and rewards becomes a

tough job for many organizations now days.

1.2 Problem Statement

According to some of the experts in human resources as we seen before in

~ackground section the need for non-financial compensation is high yet many

organizations deny it. This is because the organizations do have enough exposure on

the significance of non-financial compensation. They focused on giving out wages

and bonuses to the employees as the traditional methods. Organizations not realize

that this kind of non-monetary compensation can satisfy their employees and this can

increase the productivity.

Various researches has been done in the field of compensation and benefit yet

the researches all more towards financial compensation or also called as formal

compensation that en employees get as return of the services given. There are a range

of financial compensation can be such as wages, salary, bonus, cash allowances and

more. While researches more keen towards financial compensation, this research will

look into the importance of non-financial benefits that employees gets. As a

measurement the satisfaction of the employee towards non-financial benefits is

evaluated. Employee satisfaction is the important subject in a well established

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organization. A satisfied employee will contribute service happily and these will

effect on the job performance. As in an overall picture, employee's satisfaction will

have an effect on production of outputs or services provided.

There are many types of non-financial compensation, the major ones that can

be seen in Malaysia is like praising the employee, providing car loans, nominate

employees to receive recognition medals, training opportunity and sports facilities.

These kinds of benefits will have an impact on the satisfaction of the employee.

Therefore, what would happen if employers do not aware or provide these non­

financial benefits? Nowaday, career satisfaction would be only fulfilled if the

employee feels his needs in the organization are fulfilled. Here the non-financial

support is much needed to satisfy the employee. If the organization does not provide

the employees with extra benefits like this, some consequences will arise.

Firstly, the problem that will take place is career dissatisfaction. This is where

the employee will start to feel themselves is not being appreciated in the organization.

Career dissatisfaction will lead to poor work performance. As we are known, an

employee must be well treated and equally respected. When this mutual

understanding had been disengaged, the chances for employee's productivity to

decline are high. These will make the problem even worst, when the productivity

decrease the quantity of products checked out from the organization will also become

lesser. When, less products goes into the market, there will be a shortage of product

and this is the time for competitor to take a chance to fulfilling the demand by

delivering his products.

Secondly, career dissatisfaction will increase the employee turnover in a

particular organization. Employee retention in the organization must be very good in

the sense of giving them what they deserved. When the employee realizes that the

organization is providing less informal benefits like non-financial compensation, they

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will tend to move to another potential organization. Employee will make a

comparison between the current organization's benefit and what are other

organizations offering. So, when, there is a need for non-financial benefits the

organization must feel it and offer whatever is possible as this will reduce the amount

of employee's turnover. The cost of recruiting employees is pretty high and the

organization must avoid to this kind of state.

Finally, employees who feel dissatisfied will seek for ways that they can get

the benefits. Situations like this will often occur where employees themselves will

request for the benefits. This is like asking for training opportunities to enhance one's

career strength and request for sports and social facilities as for the health wellness

purpose and to build good connections.

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1.3 Research Objectives

For this particular research, a set of objectives have been set up. This is where

it is alienated into 2 parts where general and specific objectives.

General Objective

To study the relationship between non-financial and approach towards job

satisfaction.

Specific Objectives

1. To determine the relationship between praise from the management

and to the employees satisfaction on their job.

2. To determine whether a competent supervisory support gives a sense

of satisfaction for the employee in the job.

3. To determine on how satisfy is the employees when the organization

provide career development opportunities to recognize employees

good performance.

4. To determine whether organizations career counseling activities

enhance the employee's self-motivation level during work.

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Some of the research questions that was able to ask:

1. Is there any relationship between praise on attitude towards job satisfaction?

2. Is there any relationship between competent supervisory supports on attitude

towards job satisfaction?

3. Is there any relationship between career development opportunities on attitude

towards job satisfaction?

4. Is there any relationship between career counseling and attitude towards job

satisfaction?

5. What is the most dominating variable among the four to the approach towards

job satisfaction in an overall prospectus?

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1.4 Conceptual Framework

Independent Variables Dependent Variables

NON-FINANCIAL BENEFITS

CAREER REWARDS Approach towards job

Praise• satisfaction Competent Supervisor Support •

• Career Development Opportunities

• Career Counseling

Figure 1: Conceptual Framework of the Study I.

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This conceptual framework consists of four independent variables and they

are praise, competent supervisor support, career development opportunities and career

counseling. The dependent variable where thus study will be centered is the .',

employees approach towards job satisfaction in the organization. The reason this four

variables had been chosen is because of its comparativeness in the Asian context and

specifically in Malaysia.

When discussing about non-financial benefits or also known as fringe benefits

in the western countries, there are many types of these kinds of benefits. Some of the

organizations in the west provide child care services for working parents, company

cars for eligible executives, sports and social club facilities and much more. These

benefits are just at the place when attempting research in the western context.

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Apparently in the Malaysian context it is understood based on few readings on

journals and books there are other kind non-financial benefits that are being practiced

here. It's very common practice in some organizations where some even don't know

that that practice falls under their non-financial benefits to the employees. In this

particular study, the organizations benefits structure will be tested in the sense of non­

financial benefits.

1.5 Significant of Study

This research is done to find out the factors that satisfying employee in the

term of benefits especially non-financial compensations. The non-financial factors are

like praise, car allowances, nomination-based recognition scheme, probability to

undergo training, personal counseling programme, child care programme and sports

and social facilities. This research is rarely done by any researches currently. There

are many concerns on researching about the relationships between financial ,.

compensation to variables like job motivation, job satisfaction, employee turnover

and more. Thus, this research will discover the relationships between non-financial

compensation and benefit towards job satisfaction among the middle level executives

in an organization. When we talking about non-financial benefits that someone will

get in his organization, there are various types of it under the same roof. The term

non-financial benefits can also be called informal benefits from the organization. This

study is important because now days, many organizations in Malaysia overlooked the

significant of it. This is because the mentality is still like 20 or 30 years before where

financial wages is the main purpose of working. As for now, in the working field

employees are looking forward to something informal but can satisfy them and keep

them in the organization.

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As for the organization, they may consider the findings of this research to

increase the job satisfaction in the terms of gaining non-financial benefits among

employees to improve their productivity and performance as well. The organization

must be exposed to the functions of non-fmancial compensation. A report by IDS

(2002) contends that it is the act of recognition itself and the esteem it gives to

employees that is the heart of motivation provided by non-financial recognition.

Employers expe~tations is getting higher these days and they want to maximize

revenue as well maximize the employee. As a token of appreciation, the non-financial

benefits can provide employees with something tangible that they can remember.

Significance of this study is to identify whether certain types of non-financial benefits

can influence the employees. According to a research done by IDS (1999), there is no

standard approach to implement the non-financial recognition of benefits. Lastly, it is

hoped that this research paper will enable the future researchers to continue looking

for variables in this field as this can be a base for them. It also can bring them to a

better understanding on the factors quoted in this study. Researchers can study each

of these in more detailed way.

1.6 Deimition of terms

1.6.1 Compensation

Conceptual- According to Free Management Library compensation is payment to an

employee in return for their contribution to the organization, that is, for doing their

job. The most common forms of compensation are wages, salaries and tips.

Operational - Compensation is something in return when an employee works for an

organization. In this case employees will get compensation that is not stated in the

working contract or more known as informal compensations.

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1.6.2 Benefit

Conceptual - Employee benefits typically refers to retirement plans, health life

insurance, life insurance, disability insurance, vacation, employee stock ownership

plans, etc.

Operational - Benefit means the gaining's that an employee gets when he works for

an organization. Usually benefit relates to non-fmancial inputs that an employee will

get in his career.

1.6.3 Non-Financial Benefit

Conceptual - 'a non-cash award given m recognition of a high level of

accomplishment or performance by the employees. (Rose, 1998)

Operational - Non-financial benefit in our research means the advantages that

employee gets apart from his financial compensation such as praise, career

development opportunities.

1.6.4 Job Satisfaction

Conceptual - Job satisfaction reflects the nature of the work performed, the

characteristics of the organization and individual needs and values (Hodson and

Sullivan, 1995, p. 94).

Operational- Job satisfaction here mainly refers to the happiness of employees when

they get the non-financial benefits from the employer. This will link to the overall

performance of the employee.

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