university of ghana the effect of human resource

UNIVERSITY OF GHANA

THE EFFECT OF HUMAN RESOURCE MANAGEMENT PRACTICES

(COMPENSATION) ON EMPLOYEE EFFECTIVENESS

BY

ANTIE MARIAM RABIU

(10702712)

THIS LONG ESSAY IS SUBMITTED TO THE UNIVERSITY

OF GHANA BUSINESS SHOOL, LEGON IN PARTIAL FULFILLMENT OF THE

REQUIREMENTS FOR THE AWARD OF MASTER OF ART IN MANAGEMENT

AND ADMINISTRATION

SEPTEMBER 2019

University of Ghana http://ugspace.ug.edu.gh

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DECLARATION

I hereby declare that this material, which I now submit for assessment is entirely my own work and

to the best of my knowledge, contains no material previously published by another person, nor

material which has been accepted for the award of any other degree to this or any other university,

except where due acknowledgement has been made to the text.

…………………....………. ……………...……….

ANTIE MARIAM RABIU DATE

(10702712)


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CERTIFICATION

I hereby certify that this was supervised in accordance with procedures laid down by the

University.

…...………………………………………… …………...………….

DR. MAJOREEN OSAFROADU AMANKWAH DATE

SUPERVISOR


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DEDICATION

To my parents, siblings, spouse and children.


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ACKNOWLEDGEMENT

First and foremost, I give thanks to the Almighty God for the precious life, guidance and strength

granted me to write this thesis. I will forever be grateful to my supervisor, Dr. Majoreen Osafroadu

Amankwah for her invaluable contributions to this work. In spite of her busy schedule, she patiently

encouraged and guided me to complete this study. Her advice, and constructive criticisms have

been my constant source of inspiration. I am extremely grateful to her for painstakingly reviewing

and suggesting amendments to this work.

I wish to thank my family, for helping further my education and always wanting me to do my best.

I also want to thank my partner, Dr. Abubakar Saddick Al-Gabas, who encouraged me to start the

MA program and whose moral support made the long hours bearable. I extend my thanks to friends

and colleagues for their help, encouragement and cooperation, and for providing necessary

information during the research. And to anybody who in diverse ways helped me out with this

thesis, God Bless You All.

Finally, to all the authors whose work I consulted for this research, thank you and kudos to you all.


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ABSTRACT

Human Resource Management is the process through which management builds the workforce and

tries to create the human performances that the organization needs (Boxall & Purcell, 2016).

Compensation which is the ability and responsibility of a company to contribute to its employees

for their achievement of task and to appreciate their performance is one of the key HRM activity.

This study was conducted to examine the effect of compensation on employee effectiveness. This

study examined the influence of compensation on employee effectiveness as well as examined

behaviors that employees resort to when they sense compensation inequities. It also determined

whether the provision of benefits and incentives have any important effect on employees.

The study adopted a quantitative research technique by the use of questionnaires to collect data in

achieving the study objectives. A sample size of one hundred and twenty-one (121) employees was

used. The study revealed that there is a positive relationship between compensation and employee

effectiveness since compensation makes employees committed to the organization and also attracts

and motivates qualified employees to perform better and harder.

From the study, employees mostly resort to low morale when they sense compensation inequities

or go into survival mode and eventually quit when the inequities persist. The study also revealed

that providing benefits and incentives to employees reduces employee turnover, promotes the

organization’s brand and increased sales leading to increased profits.


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TABLE OF CONTENTS

DECLARATION...................................................................................................................... ii

CERTIFICATION ................................................................................................................. iii

DEDICATION......................................................................................................................... iv

ACKNOWLEDGEMENT ....................................................................................................... v

ABSTRACT ............................................................................................................................. vi

LIST OF TABLES ................................................................................................................... x

SECTION ONE ........................................................................................................................ 1

INTRODUCTION.................................................................................................................... 1

1.1 Background of the study .................................................................................................. 1

1.2 Rationale for the study ..................................................................................................... 2

1.3 Research Objectives ......................................................................................................... 3

1.4 Research Questions .......................................................................................................... 4

1.5 Significance of the study .................................................................................................. 4

1.6 Organization of the Study ................................................................................................ 4

SECTION TWO ....................................................................................................................... 6

LITERATURE REVIEW ....................................................................................................... 6

2.0 Introduction ...................................................................................................................... 6

2.1 Compensation Practices ................................................................................................... 7

2.1.2 Benefits of Compensation .............................................................................................. 11


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2.2 Employee and Organizational Performance .................................................................. 12

2.3 Theoretical Framework .................................................................................................. 14

2.3.1 Frederick Herzberg’s Two-Factor Theory .................................................................... 14

2.3.2 John Stacey Adam’s Equity Theory ............................................................................... 16

SECTION THREE................................................................................................................. 19

METHODOLOGY ................................................................................................................ 19

3.0 Introduction .................................................................................................................... 19

3.1 Research design ............................................................................................................. 19

3.2 Study population, sampling and sampling techniques ................................................... 19

3.3 Data Collection Instruments .......................................................................................... 20

3.5 Ethical Consideration ..................................................................................................... 21

3.6 Limitation of the Study .................................................................................................. 21

SECTION FOUR ................................................................................................................... 22

FINDINGS, ANALYSIS AND DISCUSSION OF FINDINGS ......................................... 22

4.1 Demographic Profile of Respondents ............................................................................ 22

4.2 Objective 1: The influence of compensation on employee effectiveness ...................... 26

4.3 Objective 2: Measures to Minimize Compensation Inequities ...................................... 39

4.4 Objective 3: Effects of the Provision of Benefits and Incentives .................................. 40

SECTION FIVE ..................................................................................................................... 42

SUMMARY, CONCLUSION AND RECOMMENDATIONS ......................................... 42


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5.0 Introduction .................................................................................................................... 42

5.1 Summary ........................................................................................................................ 42

5.3 Conclusion ..................................................................................................................... 43

5.4 Recommendation ........................................................................................................... 44

5. 5 Future Research .......................................................................................................... 44

REFERENCES ....................................................................................................................... 46

APPENDIX ............................................................................................................................. 48


x

LIST OF TABLES

Table 2.1 Frederick Herzberg’s Two-Factor Theory………………………………………...15

Table 4.1 Summary of demographic Profiles. ......................................................................... 24

Table 4.2 Satisfied with my salary ........................................................................................... 26

Table 4.3 Reward based on performance ................................................................................. 27

Table 4.4 Fair Salary ................................................................................................................ 28

Table 4.5 Equitable over payment ........................................................................................... 28

Table 4.6 Attractive compensation system .............................................................................. 29

Table 4.7 Salary reflects standards of living ............................................................................ 30

Table 4.8 Recognized and rewarded appropriately .................................................................. 30

Table 4.9 Achieving organization’s objectives ........................................................................ 31

Table 4.10 Rewarding higher performance ............................................................................ 32

Table 4.11 Qualified employees to perform better and harder ................................................ 33

Table 4.12 Competitive compensation package ...................................................................... 34

Table 4.13 Employees are compensated equitably .................................................................. 35

Table 4.14 Awareness of compensation policy in terms of service manual ............................ 35

Table 4.15 Compensation makes employees committed ......................................................... 36

Table 4.16 Same qualification receives more compensation ................................................... 37

Table 4.17 Equal compensation for the same kind of work .................................................... 38

Table 4.18 Children’s welfare facilities are satisfactory ......................................................... 38


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SECTION ONE

INTRODUCTION

1.1 Background of the study

Human Resource Management (HRM) “is a strategic, integrated and coherent approach to the

employment, development and well-being of the individuals working in organizations”

(Armstrong, 2016 p.7). Boxall and Purcell (2016, p.7) also defined Human Resource

Management as the “process through which management builds the manpower and tries to

create the human performances that the organization desires”. HRM comprises of many

practices, one of which is compensation. Effective compensation is expected to add value to

an employee’s satisfaction to stimulate employees to continually work better.

Compensation is a factor likely to have an effect on the job satisfaction of employees.

Compensation as an HRM practice commonly refers to pay, wages, salary (remuneration) and

benefit (Tooksoon, 2011). Amin and Ismail (2014) also defined compensation as the ability

and responsibility of an organization to contribute to its employees for their accomplishment

of task and to appreciate their performance. According to them, compensation is the reward

system an organization provides to all employees who contribute to its performance.

Each organization should strive to boost and enhance employee satisfaction by providing a fair

and competitive compensation program. Along the same line, the link between pay practice

and job satisfaction is useful to influence the motivation of employees' work in order to attain

higher productivity. An organization that offers high wages is more likely to have employees’

satisfaction becoming high which may lead to high productivity. In other words, a higher wage

will increase effort by increasing workers' loyalty to the firm (Akerlof, 1984).


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To be effective, compensation practices and policies should be aligned with organizational

objectives (Vlachos, Tsamakos, Vrechopoulos & Avramidis, 2009). Therefore, in an ever-

competitive business environment, several firms nowadays try to spot innovative compensation

strategies that are directly connected to improving organizational performance (Amin,

Khairuzzaman , Zaleha & Daverson , 2014).

1.2 Rationale for the study

The rational for the study is to focus on the challenges that organizations face because of

inequities experienced by their staff. The equity theory proposes that a person's motivation is

based on what he or she considers being fair when in comparison to others (Redmond,

2013). When applied to the workplace, equity theory focuses on an employee's work-

compensation relationship or "exchange relationship" as well as that employee's attempt to

minimize any sense of unfairness which may result.

There are two (2) main processes an individual can use to restore equity: behavioral processes

and cognitive processes.

1. An individual’s power to vary the inputs or outcomes of their comparative other might

be limited, so working to change their own inputs or outcomes is usually attempted

first.

2. Cognitive processes involve developing justifications for the inequity to make it appear

equitable, distorting perceptions of inputs and outcomes, changing the comparative

other, or any other method that attempts to re-frame the perception of the situation

(Raja, 2009).

In some ways, cognitive processes need less effort than behavioral processes; however, they

are more difficult to accomplish due to the necessity of distorting one’s own perceptions. It is

important to note that behavioral options in reducing inequity involves risks. Many times,


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employees find themselves avoiding these choices because pursuing one of them and failing

could be detrimental to the level of future rewards. As a result, the individual may end up

feeling worse than before. Usually employees plan to restore inequity through mental

processes instead (cognitively). Altering your thought process is not perceived as the easier

option; however it produces a minimal risk factor in comparison to changing your behavior

(Redmond, 2013).

If an employee receives a higher remuneration than their colleague, they might still develop a

perception of inequity if that colleague has a flexible schedule, and that type of schedule is

more valuable to them than extra salary. To combat this problem, employers can implement

the cafeteria style which allows employees to select outcomes that they value most. This can

help prevent perceptions of inequity because each employee has the outcomes that they value

most. This helps increase their ratio of inputs to outcomes when compared to their co-

workers. Employers can even utilize intangible rewards like a pat on the back, a luncheon, or

perhaps a simple praise in front of co-workers. These simple intangible rewards can help

balance a measure of inputs and outcomes.

Utilizing the equity theory, this study seeks to understand how employees measure their inputs

and outcomes as well as how employers can prevent issues associated with perceptions of

inequity, such as reduced productivity, theft or employee turn-over. In addition, how can

organizations reduce or prevent negative behaviors associated with inequities and rather

enhance satisfaction and motivation of employees.

1.3 Research Objectives

The objective of this project is to shed light on the relationship between compensation and

employee effectiveness and to answer the question of whether or not there truly exist causal

and positive links between the two.


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To examine the influence of compensation on employee and organizational

effectiveness.

To examine behaviours that employees resort to when they sense compensation

inequities.

To determine whether the provision of benefits and incentives have any important effect

on employee and organizational performance.

1.4 Research Questions

1. What is the influence of compensation on employee and organizational effectiveness?

2. What are the behaviours that employees resort to when they sense compensation

inequities?

3. Does the provision of benefits and incentives have any important effect on employee

and organizational performance?

1.5 Significance of the study

The result would provide useful information to organizations when making policies on

compensation. The study would encourage organizations which may not have such policy to

adopt its usefulness of the development of the organization and its employees. The study is

expected to function as a reference point and add to the present literature on the subject matter.

Moreover, the recommendations will provide a helpful guide to Supervisors, Managers and

Consultants who train and develop employees in organizations. The study will help

organizations place importance to the development of its employees to be economically

productive and efficient.

1.6 Organization of the Study

This study is organized into five (5) sections, beginning with chapter one which consists of;

background of the study, problem statement, research objectives, research questions,


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significance of the study and organization of the study. In section two, which is the literature

review comprises of; compensation practices, compensation forms, benefits of compensation,

employee and organizational performance, and theoretical models. The third section which is

methodology also comprise of; the research design, research population, sample size and

sampling techniques, the source of data and instrumentation, data gathering procedures, data

analyses and presentation, and ethical consideration. Section four consists of data analysis and

discussion of findings. Section five has to do with the summary of major findings, conclusion,

recommendations of the study and future research.


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SECTION TWO

LITERATURE REVIEW

2.0 Introduction

This chapter casts light on the concepts of Human Resource Management, the varied bundles

of Human Resource practices, contentions surrounding theories, models and previous findings.

It looks at the concept of pay considered by many to be a major determinant of motivation to

perform work roles. It also explores two of the main theories (needs-based theories and equity

theory) and practices of rewards in the workplace and how they have an effect on performance.

The theory on reward systems and their effects on performance cannot be evaluated without

looking at how work motivation is also affected by these rewards and how that motivation is

directly connected to performance.

Human resource practices are informal approaches used in managing individuals (Armstrong,

2010). Several researchers have studied Human Resource Management Practices and its

relationship with individual and organizational outcomes. For instance, Kehoe and Wright

(2013) examined the influence of high-performance human resource practice on employees’

attitudes and behaviors. They discovered that high-performance human resource practice is

positively related to employees’ attitudes and behaviors that affects organizational commitment

and fully mediate the link between employees’ retention and human resource practices.

Furthermore, Vanhala and Ahteela (2011) investigated the relationship between human

resource management practices and trust and found that the perceptions of the fairness and

functioning of human resource management practices are connected to employee trust.

The present study therefore presents varied theories adopted by various researchers, a

conceptual review of the variables, a framework portraying a functional relationship and

summary of available literature. The section ends with a critical identification of gaps in the


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available literature. This study also targeted on compensation and the way inequities in

compensation affects employee and organizational effectiveness which are perceived to

directly have an effect on performance.

2.1 Compensation Practices

Compensation is one of the human resource management practices that normally refers to pay,

wages, salary, and benefit, etc. (Tooksoon, 2011). Compensation is the reward system a

company provides to all employees who contribute to the organization’s performance (Amin,

Khairuzzaman , Zaleha , & Daverson , 2014). The reward system is based on the performance

of the employees that ultimately enhances the firm’s performance (Syed & Yan, 2012).

Performance-based compensation has a positive effect on employee and organizational

performance (Vlachos, Tsamakos, Vrechopoulos, & Avramidis, 2009). Therefore, workers

should be offered rewards, incentives, and social benefits in order to motivate them to better

performance.

Hence, Gomez-Mejia, Berrone, (Dessler, 2011)and Franco-Santos (2010) argue that companies

can only outperform others once they have a successful business strategy and smart

compensation system that helps and gets support from the highest-paid executives and right

down to the lowest-paid worker. Based on the literature review, compensation, rewards, and

social benefits are considered as one of the independent variables in order to examine its impact

on employee and organizational performance.

2.1.1 Forms of Compensation

According to Dessler (2011), compensation may be divided into two (2) forms - Direct and

Indirect compensation which are discussed below in detail.


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2.1.1.1 Direct/Financial Compensation

Direct Compensation is usually restricted to the direct cash benefits that the employees receive

on monthly, bi-monthly or weekly basis for the services they render as employees of a specific

organization. They are salary, hourly (wages), commission and bonus types of wages. It may

even be in the form of stock bonus compensation, where employees of the organization are

given the chance to own shares within the organization they work for and at the end of each

year they have the opportunity again to gain some dividend in the form of equity on their shares.

This is also referred to as Executive Stock Options (ESO).

Salary

This type of reward is customarily a set sum of remuneration over a defined period of time.

The frequency of payment is another part of the compensation and is based on industry

standards. In general, there is an expectation from the employer of a longer-term commitment

from the employee for providing a regular uninterrupted compensation stream via a salary.

Wages

This is an amount per hour of service to the employer, more commonly used to compensate

unskilled and skilful laborers within the work force. This kind of compensation comes with an

implied understanding that in times of slow or minimal workloads, the employee might not be

used to provide services. In effect, there is no guarantee of a regular cycle of pay.

Commission

When compensation is based on volume or some form of performance, this is often referred to

as commission-based remuneration. Different terms used include piecework or

piecemeal. Many industries used this kind of remuneration to get a minimum standard of

production in exchange for compensation. It is used to shift risk from the employer to the


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employee. There are two ways to calculate commission. One is based on volume of services

and the other is based on sales.

Bonuses

Bonuses are used to increase performance from the employee. This is often a variable type of

remuneration and is more commonly found with salaried workers to incentivize them for a

specific goal whether time or volume based. Other reasons used for bonuses are to increase or

maintain retention of certain skills or the pool of skill-sets required within the

company. Generally bonuses are paid when a company meets certain financial standards or

goals over an extended period of time. Bonuses are not usually used with hourly or

commission-based employees due to the nature of the type of compensation already

established.

2.1.1.2 Indirect Compensation/Benefits

Dessler (2011) refers to Indirect Compensation as the indirect monetary and non-financial

payments employees receive for continuing their employment with the company which are an

important part of every employee’s compensation. Other terminologies like fringe benefits,

employee services, supplementary compensation and supplementary pay are used. Indirect

compensation is primarily the various types of benefits and long-term incentives.

Martocchio (2013) states that fringe benefits include any kind of programs that provide time

off, employee services and protection programs. According to Van der Westhuizen (2017),

fringe benefits refer to indirect forms of compensation that are meant to attract, retain and

motivate employees. Rose (2014) attests that fringe benefits consist of non-cash elements of

the reward that are provided by the employer either to all employees or differentiated by level.

Employee benefits consist of arrangements made by employers to improve their employees’

well-being. The benefits are provided additionally to pay and form important parts of the total


https://sajhrm.co.za/index.php/sajhrm/article/view/913/1449#CIT0033_913



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rewards package (Armstrong, 2012). Benefit packages for employees are integral to the

monetary reward package, and for many organizations, the employer brand determines the type

of benefits offered, that successively, support the messages to be delivered via the employer

brand.

According to Armstrong (2009), Indirect Compensation or Employee benefits are elements of

remuneration given additionally to the various forms of cash pay. Benefits included are paid

vacation, sick leave, health & life insurance and maternity/family leave. They also include

items that are not strictly remuneration such as annual holidays. It involves rewards provided

by organizations to employees for their membership, attendance or participation in the

organization. Attributable to the increasing costs of fringe benefits, some people also label

them as 'hidden payroll’. The basic purpose of fringe benefits or supplementary compensation

is to attract and maintain effective and efficient human resources and to motivate them.

From the above literature, it can however be deduced that most researchers who have

considered work in this field agree on the definition of the term compensation and also agree

on the types of compensation being considered by this review. Some have also classified

compensation into fixed and variable compensations. These are terms that relate to the concept

of direct and indirect compensation; also, generally referred to as primary and secondary

compensation. Compensation has a motivational effect and therefore implies that having a

compensation structure in which the employees who perform better are paid more than the

average performing employees is vital to enhancing organizational performance (Hewitt,

2009).



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2.1.2 Benefits of Compensation

According to Desslar (2011), Compensation is also used to:

Recruit and retain qualified employees: Recruitment and retention of qualified

employees is a common goal shared by many employers. To some extent, the

availability and cost of qualified candidates for open positions is set by market factors

beyond the control of the employer. While an employer may set compensation levels

for new hires and advertise those salary ranges, it does so in the context of other

employers seeking to hire from the same applicant pool.

Increase or maintain morale/satisfaction: Morale and job satisfaction are affected by

compensation. Usually there is a balance (equity) that has to be reached between the

monetary value the employer is willing to pay and also the sentiments of worth felt by

the employee. In an endeavour to avoid wasting cash, employers may opt to freeze

salaries or salary levels at the expense of satisfaction and morale. Conversely, an

employer wishing to reduce turnover rate may seek to increase salaries and salary

levels.

Reward and encourage peak performance: Compensation may be used as a reward for

exceptional job performance. Examples of such plans include: bonuses, commissions,

stock, and profit or gain sharing.

Achieve internal and external equity: External equity refers to the similarity of the

practices of different organizations of the same sector. If perceived like this, it can be

said that the program is considered competitive or externally equitable. Usually, these

comparisons are done in external labor markets where the wages vary. There are various

factors that contribute to make these variations, for example, geographical location,

education and work expertise. Internal equity is employees' perception of their duties,

compensation, and work conditions as compared with those of other employees in


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similar positions within the same organization. As this comparison is usually made

within the company, issues with internal equity may result in conflict among

employees, mistrust, low morale, anger and even the adoption of legal actions. Workers

can make the evaluation of internal equity regarding two main points. On one hand,

procedural justice is the person’s perceived fairness of the process (assigned tasks) and

procedures used to make decisions about him/her. On the other hand, distributive justice

refers to the perceived fairness in the distribution of outcomes (salaries). The classic

objectives of equity-based compensation plans are retention, attraction of new hires and

aligning employees and shareholders’ interests with the long-term success of the

company.

2.2 Employee and Organizational Performance

Aguinis (2013) defines performance management as a continuous process of identifying,

measuring and developing the performance of individuals, groups and aligning performance

with the strategic goals of the organization. In addition, Swanepoel et al. (2014) affirm that

performance management is an action based on performance measures and reporting, which

ends up in improvement in employee behavior, motivation and work processes as well as

promoting innovation. Performance management is viewed more broadly as a management

tool that aims to enhance the performance of a company (Goh, 2012).

According to Aguinis, (2009), the definition of performance does not include the results of an

employee’s behavior, but only the behaviors themselves. Performance is about behavior or

what employees do, not about what employees produce or the outcomes of their work.

Perceived employee performance represents the general belief of the employee about his

behavior and contributions in the success of organization.




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Equitable total compensation leads to augmented profits because motivated employees help to

increase sales and customer satisfaction. Inequitable total compensation can create turnover,

which costs money not only in recruitment and replacement costs but also in lost business while

the position is vacant. Organizational performance means the organization sales growth, market

share growth, financial growth and the overall growth of an organization. Organizational

performance encompasses three (3) specific areas of firm outcomes:

Financial performance (profits, return on assets, return on investment, etc.)

Product market performance (sales, market share, etc.) and

Shareholder return (total shareholder return, economic value added, etc.)

(Richard, Devinney, Yip, & Johnson, 2009).

Rose (2014) states that recognition refers to a process of acknowledging or giving special

attention to a high level of accomplishment or performance, such as customer care or support

to colleagues, which is not dependent on achievement against a given target or objective.

Greene (2011) attests that recognition may be utilized in lieu of financial awards, as particularly

it could be argued that people used time that theory should have been spent on other

organizational businesses and that the salary provided compensation. Abu Bakar, Mohamad

and Sharmeela-Banu (2015) posit that recognition is the demonstration of appreciation for a

level of performance, an achievement or a contribution to an objective. It may be confidential

or public, causative or formal and it is always in addition to pay. The link between recognition,

teamwork and job satisfaction is a very important occurrence to take note of because it indicates

that dimensions, which constitute job satisfaction, do not essentially act alone in determining

the job satisfaction of employees.





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2.3 Theoretical Framework

Another approach to motivation looks at theories for explanation. Two major theory types are

discussed in this subsection. They are the needs-based theories (Herzberg’s two factor theory)

and the equity theory of motivation. These theories of motivation have been used to explain, in

different ways, what motivates people to perform well in their work.

2.3.1 Frederick Herzberg’s Two-Factor Theory

The two-factor model of satisfiers and dissatisfiers was developed by Herzberg, Mauser and

Snyderman (1957) following an investigation into the sources of job satisfaction and

dissatisfaction of accountants and engineers. The main implications of this research, according

to Herzberg are that the wants of employees are divided into two (2) groups. One group

revolves round the need to develop in one’s occupation as a source of personal growth. The

second group operates as an essential base to the first and is associated with fair treatment in

compensation, supervision, working conditions and administrative practices. The fulfillment

of the needs of the second group does not motivate the individual to high levels of job

satisfaction and to extra performance on the job. In order to satisfy this second group of needs

the prevention of dissatisfaction and poor job performance must be ensured. Herzberg argues

that it is necessary to have hygiene factors at a suitable level merely to reach a neutral feeling

about the job. The theory is simple and supports the argument that employers should take effort

on improving hygiene factors from the workplace and also emphasize on motivation factor to

develop the right people on the job.

Herzberg’s theory does not look directly at performance. Rather, it looks at job satisfaction.

However, his study remains relevant, because job satisfaction is closely connected to

performance. According to Herzberg’s theory, there are two independent factors that influence

job satisfaction. These are:


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1. Hygiene factors – These prevent job dissatisfaction. Hygiene factors are based on the

needs of the organization so as to stop unpleasantness in the working environment.

When employees are under the impression that these factors are inadequate, it could

lead to dissatisfaction in the work place.

2. Motivators – These have a positive influence on job satisfaction. Motivating factors

could lead to an individual’s need for personal growth. When in existence, motivating

factors could easily contribute to job satisfaction. When it is most effective, it could

motivate an employee to perform above average and above expectations.

Table 2.1 Frederick Herzberg’s Two-Factor Theory

HYGIENE FACTORS MOTIVATORS

Company policies and administration Status

Competent Supervision Recognition

Quality of Interpersonal relations Challenging / stimulating Work itself

Working conditions Responsibility

Salary, wages and other financial benefits Advancement

Job security Personal Growth & achievements

Source: Herzberg, Mauser & Snyderman (1957)

Essentially, Herzberg is saying that the motivators will give employees the drive they need to

work harder. The hygiene factors will merely keep them content with their job overall.

According to his theory, financial benefits are hygiene factors. Compensation is a hygiene

factor not an incentive or motivator. In other words, compensation doesn’t actually improve

performance – rather, it secures the fort against employees feeling sad and unhappy in their

roles, and helps boost retention rates.


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Conversely, Herzberg’s two-factor model has been criticized because no attempt was made to

measure the link between satisfaction and performance. However, Herzberg had huge influence

on the job enrichment movement, which sought to design jobs in a way that will maximize the

opportunities to get intrinsic satisfaction from work and therefore improve the standard of

living of employees. His emphasis on the distinction between intrinsic and extrinsic motivation

is also important.

2.3.2 John Stacey Adam’s Equity Theory

Adams (1965) describes equity theory as the perception of how you are treated compared to

others and in essence that you will be more satisfied and motivated if you think you are being

fairly treated. This procedural justice element to how rewards are interpreted runs deep in terms

of this performance and motivation. Armstrong (2010, 10 p.41) states that “in general, use an

evidence-based approach, which essentially means managing reward systems on the basis of

evidence rather than opinion, on understanding rather than assumptions, and on an unrelenting

commitment to gather the necessary facts to make more intelligent and informed decisions”.

The behavioral psychologist, John Stacey Adams, developed a useful model for explaining

why employee perceptions concerning fairness matters. Equity Theory (Adam's Equity

Theory) explains the thought process an employee uses to determine the fairness of

management decision making. The core of equity theory says that people judge the fairness of

their treatment based on how others like them are treated. Employees make social comparisons

to others who are similarly situated in the organization.

Equity theory shows that inequities (perceived or real) harm employee motivation. Employees

who feel that they are receiving inequitable treatment will be emotionally motivated to gain

equity. What does this behavior look like? When inequities persist, employees may do any of

the following:


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Decrease inputs (give less time, do less work)

Push for more output from the company (more pay, authority)

Go into survival mode (do their job and little more)

Become resistant (act out on other issues)

Become overly competitive (focus on reducing the outputs of others)

Quit

These outcomes harm an organization's bottom line and where organizational turnover occurs

the loss is two-fold (economic and talent based). Clearly, equity theory shows why employee

perceptions concerning fairness do matter. Once employees believe that the workplace is

unfair, they grow to distrust organizational leadership. When leaders choose to ignore this

distrust, employee morale and motivation suffers. Organizations can sow the seeds of inequity

and distrust in everyday operational matters. It does not require a leader to have a significant

ethical and moral lapse to bring this about.

Adam theory is concerned on social comparison in which, individuals can gauge the fairness

of their work outcomes as compared to others. Perceived inequity occurs when one compares

their rewards received for their work contribution which may appear less than the rewards that

other people are getting for their work. The theory states when inequity exists, people are

motivated to function less at their work place to balance up the sense of reward that they

received.

The general message of equity theory is that individuals are driven by the fair distribution of

rewards or outcomes as a result of their inputs or contribution and in the amount they perceive

appropriate. Whereas quite evidently equity theory largely focuses on wages or reward


18

comparisons, Adams (1963) argued that inequity exists as a psychological construct rather than

as an objective standard. Moreover, whenever inequity is perceived, both observing person and

reference person feel negatively affected.


19

SECTION THREE

METHODOLOGY

3.0 Introduction

This section presents on the research methodology that was adopted for the study. It covers;

research design, study population and sampling, data collection, reliability and validity, ethical

considerations, data analysis and limitations of the study.

3.1 Research design

According to Creswell (2009), the choice of any research approach should be informed by the

aim of the study and the research questions that the study sought to find answers to. The study

was a survey type in the form of cross-sectional study in which data were collected once across

a population through random sampling technique. A quantitative research approach was

adopted since the data was gathered using structured questions. Also, the research study can be

replicated given its high reliability.

3.2 Study population, sampling and sampling techniques

The population is the larger pool from which sampling elements are drawn and to which

findings can be generalized. The population encompasses all the elements that make up the unit

of analysis (Terre-Blanche, Durheim, & Painter, 2006). The study considered employees across

Ghana. The size of the sample determines the statistical precision of the findings. Therefore, a

sample size of 121 employees were used for the study. Simple random sampling techniques

was adopted to get the samples. This method is to allow each element of the population to have

an equal probability of being selected. All the questionnaire disseminated were retrieved.

Therefore, the response rate is 121

121 X 100 which is 100%.


20

3.3 Data Collection Instruments

Self-administered questionnaires were used in collecting the primary data for the research. A

lot of the data that was collected from this source mostly directed the conclusions and provided

the majority of empirical evidence. The questionnaires were closed ended questions and it was

based on the research questions and objectives of the study. Respondents were also given

detailed instructions as to how the questionnaires is to be completed and returned. For

questionnaire sample, see Appendix. For the purpose of data collection, Google forms was

created for the questionnaires to be disseminated online to employees. The questionnaire was

designed into four sections. Section A was the demographics i.e., gender, age, marital status,

experience etc. Section B was for the influence of compensation on employee and

organizational effectiveness. They were supposed to answer against each item of the

questionnaire in this section on the Likert scale ranging from 1 (strongly disagree) to 5 (strongly

agree). The respondents were asked to indicate whether they strongly disagree, disagree,

neutral, agree or strongly agree to each question asked. Section C was for the measures to

minimize compensation inequities (behaviors to resort to when employees sense inequity) and

section D was for the effects of the provision of benefits and incentives to both employees and

their organizations.

3.4 Data Analysis

The study was descriptive and after a field collection of the primary data, Statistical Package

for Social Sciences (SPSS) was used to analyze the obtained data. This software is to facilitate

the analysis by helping to generate frequency distribution tables and charts, measurement of

central tendencies and hypothesis testing (when necessary). The responses were coded and

keyed into SPSS. From the obtained results, presentation was done using tables, bar charts and

pie charts.


21

3.5 Ethical Consideration

The rights, nobility, benefit and well-being of the individuals who participated in the study was

taken into consideration. The author assured them that this rule is critical to the distinctive

components in the study. Secondly, consent for partaking in the study was given by respondents

and also the author stayed away from deception. The respondents were guaranteed of the

confidentiality of their information received.

3.6 Limitation of the Study

This sample size is not sufficient enough to reflect the factual image of the organizations

functioning. Firstly, in this study, a small size sample was used to analyze the impact of human

resource management practices on organizational performance. As the behaviors of employees

change with changing the environment and organizational practices, so we should collect data

more than one time and compare the results. So, it is important to follow the best human

resource management practices, so as to enhance the performance of employee which

ultimately would lead to the profitability.


22

SECTION FOUR

FINDINGS, ANALYSIS AND DISCUSSION OF FINDINGS

This section seeks to present the results of findings and discussions on the effect of human

resource management practices (compensation) on employee and organizational effectiveness.

The results are the outcome of the investigation on the objectives of the study.

4.1 Demographic Profile of Respondents

4.1.1 Gender of Respondents

Majority were female (59%) with the number of respondents being 71 and males being 41%

with the number of respondents being 50. This clearly shows that; the study had a lot of female

respondents than males which is typical in many researches.

4.1.2 Age Distribution of Respondents

Majority of the respondents were aged between 20-29 years which is 56%, followed by 30-39

years which is 35%, 40 - 49 years which is 5% and 50-59 years is 4%.

4.1.3 Marital status

From the study, 54.5% of the respondents were single while 43.8% respondents were married.

1 person was divorced and another 1 widowed. This implies that; most of the respondents were

single.

4.1.4 Highest Qualification

Majority of the respondents have tertiary education which is 64.5%, followed by masters which

is 23.1%, high school was 5.8%, doctorates was 3.3% while others was 3.3%. This shows that

most of the respondents have tertiary education.


23

4.1.5 Type of Organization, Sector or Industry

Majority of the employees work in private organizations which is 52% while public

organizations was 48%. From the study, most employees do work in private organizations.

4.1.6 Number of Employees in respondents’ Organization

Majority of the employees are in organizations with staff membership of 1-50 employees which

is 41.3%, followed by above 500 which is 33.9%, 51-100 was represented by 11.6%, 201-500

was 8.3% while 5% of the respondents represent 101-200.

4.1.7 Type of employment contract

Majority of the respondents are full-time workers which is 70.2%, followed by contract

workers which is 15.7%, part time workers which is 8.3%, temporal workers which is 4.1%

while others is 1.6%.

4.1.8 Number of years in the organization

Majority of the respondents have worked with their organization for 1-5 years which is 73.6%,

followed by 6-10 which is 18.2%, 11-15 years which is 3.3%, 16-20 years which is 0.8%, 21-

30 years which is 0.8% while above 30 is 3.3%.


24

Table 4.1 Summary of demographic Profiles.

Gender of Respondents Frequency Percentage

Female 71 59

Male 50 41

Total 121 100

Age Distribution

20 - 29 68 56

30 - 39 42 35

40 - 49 6 5

50 - 59 5 4

50 and Above 0 0

Total 121 100

Marital Status

Single 66 54.5

Married 53 43.8

Divorced 1 0.8

Widowed 1 0.8

Total 121 100

Highest Qualification

High School 7 6

Tertiary 78 65

Master 28 23

Doctorates 4 3

Other 4 3


25

Total 121 100

Type of organization

Private 63 52

Public 58 48

Total 121 100

Number of Employees

1-50 50 41.3

51-100 14 11.6

101-200 6 5

201-500 10 8.3

Above 500 41 33.9

Total 121 100

Type of employment contract

Full-time 85 70.2

Part time 10 8.3

Contract 19 15.7

Temporal 5 4.1

Others 2 1.6

Total 121 100

Working Experience

1 – 5 years 89 73.6

6- 10 years 22 18.2

11 -15 years 4 3.3

16 - 20 years 1 0.8


26

21 – 30 years 1 0.8

Above 30 years 4 3.3

Total 121 100.0

Source: Field data, 2019

4.2 Objective 1: The influence of compensation on employee effectiveness

4.2.1 Satisfied with my salary

From the respondents, 15.7% strongly disagreed, 14.9% disagreed, 33.9% was neutral, 26.4%

agreed and 9.1% strongly agreed. This implies that there is a neutral influence of compensation

on employee effectiveness. According to Frederick Herzberg’s Two-Factor Theory, salary is a

hygienic factor and when employees are under the impression that these factors are inadequate,

it could lead to dissatisfaction in the work place. However, its provision does not lead to

motivation. This finding appears to confirm Hertzberg’s assertion. This is shown in Table 4.2

Table 4.2 Satisfied with my salary

Frequency Percent Valid Percent Cumulative Percent

Strongly disagree 19 15.7 15.7 15.7

Disagree 18 14.9 14.9 30.6

Neutral 41 33.9 33.9 64.5

Agree 32 26.4 26.4 90.9

Strongly agree 11 9.1 9.1 100.0

Total 121 100.0 100.0

Source: Field data, 2019


27

4.2.2 Reward based on performance

From the analysis, 18.2% of the respondents strongly disagreed, 17.4% disagreed, 28.9% was

neutral, 21.5% agreed and 14.0% strongly agreed. This means, reward can be or may not be

based on performance. This is shown in Table 4.3

Table 4.3 Reward based on performance



Disagree 21 17.4 17.4 35.6

Neutral 35 28.9 28.9 64.5

Agree 26 21.5 21.5 86.0

Strongly agree 17 14.0 14.0 100.0

Total 121 100.0 100.0

Source: Field data 2019

4.2.3 My salary is fair considering what other people are paid

From the respondents, 14% strongly disagree, 17.4% disagreed, 30.6% was neutral, 22.3%

agreed and 15.7% strongly agreed. This implies there is a neutral response to whether salaries

are fair considering what others are paid for. This affirms John Stacey Adam’s Equity theory

(1965) concerning social comparison in which, people will gauge the fairness of their work

outcomes as compared to others. This is shown in Table 4.4


28

Table 4.4 Fair Salary



Disagree 21 17.4 17.4 31.4

Neutral 37 30.6 30.6 62.0

Agree 27 22.3 22.3 84.3

Strongly agree 19 15.7 15.7 100.0

Total 121 100.0 100.0


4.2.4 Equitable overtime payment

From the respondents, 42.2% strongly disagreed, 14% disagreed, 15.7% was neutral, 15.7%

agreed and 12.4% strongly agreed. From the study, there is no equitable overtime payment.

This is shown in Table 4.5

Table 4.5 Equitable over payment



Disagree 17 14.0 14.0 56.2

Neutral 19 15.7 15.7 71.9

Agree 19 15.7 15.7 87.6

Strongly agree 15 12.4 12.4 100.0

Total 121 100.0 100.0



29

4.2.5 Attractive compensation system

From the analysis, 28.9% of the respondents strongly disagreed, 20.7% disagreed, 24% was

neutral, 16.5% agreed and 9.9% strongly agreed. Form the respondents, compensation systems

are not attractive. According to Frederick Herzberg’s Two-Factor Theory, Hygiene factors in

which compensation is one of the factors, are based on the needs of the organization in order

to prevent unpleasantness in the working environment. When employees are under the

impression that these factors are inadequate, it could lead to dissatisfaction in the work place.

This is shown in Table 4.6

Table 4.6 Attractive compensation system



Disagree 25 20.7 20.7 49.6

Neutral 29 24.0 24.0 73.6

Agree 20 16.5 16.5 90.1


Total 121 100.0 100.0


4.2.6 Salary reflects standard of living

From the respondents, 22.3% of them strongly disagreed whiles 15.7% disagreed, 38.8% was

neutral, 19% agreed and 4.2% strongly agreed. This implies that, employees’ salaries may or

may not reflect the standard of living. This is shown in Table 4.7


30

Table 4.7 Salary reflects standards of living



Disagree 19 15.7 15.7 38.0

Neutral 47 38.8 38.8 76.8

Agree 23 19.0 19.0 95.8


Total 121 100.0 100.0


4.2.7 Recognized and rewarded appropriately in respondent’s organization

From the respondents, 27 (22.3%) strongly disagreed, 19 (15.7%) disagreed, 47 (38.8%) was

neutral, 23 (19.0%) agreed and 5 (4.2%) strongly agreed. This confirms that; employees can

either or not be recognized and rewarded appropriately in the organization in which they work

since majority of the respondents neutrally agreed. According to John Stacey Adam’s Equity

Theory (1965), when inequity exists, people will be motivated to function less at their work

place to balance up the sense of reward that they received. This is shown in Table 4.8

Table 4.8 Recognized and rewarded appropriately



Disagree 21 17.4 17.4 37.2

Neutral 44 36.4 36.4 73.6

Agree 23 19.0 19.0 92.6


Total 121 100.0 100.0



31

4.2.8 Compensation packages encourage employees to achieve their organization’s

objectives


neutral, 25 (20.8%) agreed and 32 (26.4%) strongly agreed. This implies that; majority of the

respondents strongly agree to the fact that compensation packages encourage employees to

achieve organization’s objectives. This supports Frederick Herzberg’s Two-Factor Theory

(1957) since organizational objectives are motivators, when it is most effective, it could

motivate an employee to perform above average and above expectations. This is shown in

Table 4.9

Table 4.9 Achieving organization’s objectives



Disagree 16 13.2 13.2 26.4

Neutral 32 26.4 26.4 52.8

Agree 25 20.8 20.8 73.6

Strongly agree 32 26.4 26.4 100.0

Total 121 100.0 100.0


4.2.9 Profit sharing/bonuses as a mechanism to reward higher performance


neutral, 31 (25.6%) agreed and 22 (18.2%) strongly agreed. The majority of the respondents

agreed to the above and this means, profit sharing or bonuses are used as a mechanism to reward

higher performance. This is shown in Table 4.10


32

Table 4.10 Rewarding higher performance



Disagree 18 14.9 14.9 38.0

Neutral 22 18.2 18.2 56.2

Agree 31 25.6 25.6 81.8

Strongly agree 22 18.2 18.2 100.0

Total 121 100.0 100.0


4.2.10 Compensation attracts and motivates qualified employees to perform better and

harder


neutral, 39 (32.2%) agreed and 32 (26.5%) strongly agreed. From the study, majority of the

respondents strongly agreed to the statement above and this implies that, compensation attracts

and motivates qualified employees to perform better and harder. This affirms the study of

Vlachos (2009), which indicated that performance-based compensation has a positive effect on

employees and organizational performance. This is shown in Table 4.11


33

Table 4.11 Qualified employees to perform better and harder



Disagree 11 9.1 9.1 19.8

Neutral 26 21.5 21.5 41.3

Agree 39 32.2 32.2 73.5

Strongly agree 32 26.5 26.5 100.0

Total 121 100.0 100.0


4.2.11 Compensation package of the organization is competitive


neutral, 23 (19.0%) agreed and 15 (12.4%) strongly agreed. The study shows that majority of

the respondents neutrally agree to the statement “compensation packages of the organization is

competitive”. This implies that; compensation packages can be or may not be competitive in

the organization and it supports the work of Gomez-Mejia et al. (2010), which in the study

argued that firms can only outperform others when they have a successful business strategy

and good compensation system that helps and gets support from the highest-paid executives

and down to the lowest-paid employee. This is shown in Table 4.12 below.


34

Table 4.12 Competitive compensation package



Disagree 22 18.2 18.2 40.5

Neutral 34 28.1 28.1 68.6

Agree 23 19.0 19.0 87.6

Strongly agree 15 12.4 12.4 100.0

Total 121 100.0 100.0


4.2.12 Employees are compensated equitably


neutral, 26 (21.5%) agreed and 10 (8.3%) strongly agreed. This shows that employees think

they are compensated equitably but not at all times since majority of the respondents neutrally

responded and therefore affirms the work of Hewitt (2009), which shows that having a

compensation structure in which the employees who perform better are paid more than the

average performing employees is vital to enhancing organizational performance. This is

supported by John Stacey Adam’s Equity Theory which shows that individuals are driven by

the fair distribution of rewards or outcomes as a result of their inputs or contribution and in the

amount they perceive appropriate. This is shown in Table 4.13


35

Table 4.13 Employees are compensated equitably



Disagree 28 23.1 23.1 42.9

Neutral 33 27.3 27.3 70.2

Agree 26 21.5 21.5 91.7


Total 121 100.0 100.0


4.2.13 I am aware of the compensation policy of the organization in the conditions of service

manual


neutral, 30 (24.8%) agreed and 16 (13.2%) strongly agreed. Majority of the respondents agreed

to the statement and this shows that; employees are aware of the compensation policy of their

organizations in the conditions of service manual. This is shown in Table 4.14

Table 4.14 Awareness of compensation policy in terms of service manual



Disagree 22 18.2 18.2 38.9

Neutral 28 23.1 23.1 62.0

Agree 30 24.8 24.8 86.8

Strongly agree 16 13.2 13.2 100.0

Total 121 100.0 100.0



36

4.2.14 Compensation makes employees committed to the organization


neutral, 40 (33.1%) agreed and 31 (25.6%) strongly agreed. From the study, compensation

makes employees committed to their organizations since majority of the respondents agreed to

the statement. This is shown in table 4.15

Table 4.15 Compensation makes employees committed



Disagree 12 9.9 9.9 16.5

Neutral 30 24.8 24.8 41.3

Agree 40 33.1 33.1 74.4

Strongly agree 31 25.6 25.6 100.0

Total 121 100.0 100.0


4.2.15 My colleague in another department with the same qualification receives more

compensation than I do


neutral, 28 (23.1%) agreed and 29 (24.0%) strongly agreed. The study revealed that; colleagues

in another department with the same qualification receive more compensation that they do since

majority of the respondents strongly agreed to the statement. This affirms John Stacey Adam’s

Equity Theory (1965) which shows that, perceived inequity occurs when one compares their

rewards received for their work contribution which may appear less than the rewards that other

people are getting for their work. This is shown in Table 4.16


37

Table 4.16 Same qualification receives more compensation



Disagree 20 16.5 16.5 31.4

Neutral 26 21.5 21.5 52.9

Agree 28 23.1 23.1 76.0

Strongly agree 29 24.0 24.0 100.0

Total 121 100.0 100.0


4.2.16 Compensation is managed to ensure that all employees receive equal compensation

for the same kind of work


neutral, 23 (19.0%) agreed and 16 (13.2%) strongly agreed. Majority of the respondents

neutrally responded to the statement “Compensation is managed to ensure that all employees

receive equal compensation for the same kind of work” and this implies that employees can

really tell if compensation is managed to ensure that all employees receive equal compensation

for the same kind of work. This is shown in Table 4.17


38

Table 4.17 Equal compensation for the same kind of work



Disagree 19 15.7 15.7 33.1

Neutral 42 34.7 34.7 67.8

Agree 23 19.0 19.0 86.8

Strongly agree 16 13.2 13.2 100.0

Total 121 100.0 100.0


4.2.17 The welfare facilities like medical, housing, canteen, transport, recreation &

education for the children of employees are satisfactory in this organization.


neutral, 23 (19.0%) agreed and 17 (14.0%) strongly agreed. From the study, majority of the

respondents neutrally responded to the statement and this shows that employees cannot really

tell if welfare facilities medical, housing, canteen, transport, recreation and education for the

children of employees are satisfactory in this organization. This is shown in Table 4.18

Table 4.18 Children’s welfare facilities are satisfactory



Disagree 21 17.4 17.4 44.7

Neutral 27 22.3 22.3 67.0

Agree 23 19.0 19.0 86.0

Strongly agree 17 14.0 14.0 100.0

Total 121 100.0 100.0



39

4.3 Objective 2: Measures to Minimize Compensation Inequities

4.3.1 Which of the following do you resort to when you sense inequity?

Responses Percentage

Quit 16 13.2

Anger 14 11.6

Mistrust 22 18.2

Low morale 57 47.1

Conflicts among employees 15 12.4

The adoption of legal actions 8 6.6

Distrust organizational leadership 31 25.6

Become resistant (act out on other issues) 9 7.4

Decrease inputs (give less time, do less work) 23 19

Go into survival mode (do their job and little more) 23 19

Push for more output from the company (more pay, authority) 35 28.9

Become overly competitive (focus on reducing the outputs of

others)

9 7.4

Others, please specify 7 5.6


From the study, employees mostly resort to low morale when they sense inequity, followed by

push for more output from the company (more pay, authority), distrust in organizational

leadership, decrease inputs (give less time, do less work) and go into survival mode (do their

job and just a little more), mistrust, quit, conflicts among employees, anger, become resistant

(act out on other issues) and become overly competitive (focus on reducing the outputs of

others) and the adoption of legal actions. These findings affirm the work of Vanhala and


40

Ahteela (2011), in which they investigated the relationship between human resource

management practices and trust and found that the perceptions of fairness and functioning of

human resource management practices are connected to employee trust. John Stacey Adam’s

Equity Theory indicates that employees who feel that they are receiving inequitable treatment

will be emotionally motivated to gain equity and therefore employees may show the

aforementioned behaviors.

4.4 Objective 3: Effects of the Provision of Benefits and Incentives

4.4.1 What benefits do your organization provide?


Time off 43 35.5

Sick leave 78 64.5

Paid vacation 20 16.5

Annual holidays 54 44.6

Health and life insurance 56 46.3

Maternity/family leave 76 62.8



According to the respondents, most of benefits provided by their organization is sick leave

which is respectively followed by maternity or family leave, health and life insurance, annual

holidays, time off, paid vacation and others. According to Armstrong (2009), the

aforementioned are some benefits that organizations do provide.


41

4.4.2 What is the effect of providing these benefits on employees?


Attract employees 34 28.1

Retain employees 68 56.2

Motivate employees 88 72.7



Form the survey, there are many effects of providing these benefits on employees but the most

effect is that; it motivates employees, retains and attract employees respectively. These findings

were confirmed by Armstrong (2009), who notes that benefits included are paid vacation, sick

leave, health & life insurance and maternity/family leave and the effect of providing these

benefits on employees are that, it helps to motivate, retain and attract employees.

4.4.3 What is the effect of providing these benefits on the organization?


Reduce employee turnover 61 50.4

Promotes the organization’s brand 60 49.6

Increases sales leading to increased profits 54 44.6



In terms of the effect of providing these benefits on the organization, the study revealed that;

it reduces employee turnover, promotes the organization’s brand and increased sales leading to

increased profits respectively. This support the work of Armstrong (2009), which indicated that

the effect of providing these benefits to organizations are to reduce employee turnover,

promotes the organization’s brand, increased sales leading to increased profits.


42

SECTION FIVE

SUMMARY, CONCLUSION AND RECOMMENDATIONS

5.0 Introduction

This part presents a summary of the findings of the study as well as the conclusions,

recommendations and directions for further research.

5.1 Summary

This research examined the effect of human resource management practices (compensation)

on employee and organizational effectiveness. The research had the objectives to examine the

influence of compensation on employee and organizational effectiveness. Also, it examined

behaviours that employees’ resort to when they sense compensation inequities and also to

determine whether the provision of benefits and incentives has any positive effect on employee

and organizational performance.

In achieving these objectives, questionnaires were used to collect data. A sample size of one

hundred and twenty-one (121) employees were selected and questionnaire were administered

to them, in which 121 questionnaires were retrieved. The following findings were revealed:

Firstly, there is no equitable overtime payment and the compensation system is not attractive.

Compensation packages encourage employees to achieve organizational objectives. Also,

compensation attracts and motivates qualified employees to perform better and harder but

profit sharing or bonuses are not mechanisms to reward higher performance. Compensation

makes employees committed to the organization. The welfare facilities like medical, housing,

canteen, transport, recreation and education for the children of employees are not satisfactory.

Secondly, to minimize compensation inequities, employees resort to the following; low morale,

conflicts among employees, the adoption of legal actions, distrust in organizational leadership,

become resistant (act out on other issues), decrease inputs (give less time, do less work), go


43

into survival mode (do their job and little more), push for more output from the company (more

pay, authority) and become overly competitive (focus on reducing the outputs of others).

Thirdly, organizations do provide benefits and such benefits are in order of importance as; sick

leave, maternity or family leave, health and life insurance, annual holidays, time off, paid

vacation and other. To the organisation, the effect of providing these benefits are to reduce

employee turnover, promote the organization’s brand, increase sales leading to increased

profits.

From the analysis of data, there is a relationship between compensation and employee

effectiveness and since compensation makes employees committed to the organization,

compensation packages encourage employees to achieve organizations’ objectives. It also

attracts and motivates qualified employees to perform better and harder. It can be concluded

that compensation has a positive effect on organizational effectiveness. When there is an

effective compensation system, employees’ performance increase and when compensation is

not effective, it will lead to a decrease in employees’ performance.

5.3 Conclusion

The study contributes in understanding the influence of Human Resource Management

practices on the performance of employees. The results provide the sufficient evidence to say

that, Human Resource Management practices have a positive and statistically significant

relationship with employee performance. The results show a significant and positive

relationship between compensation and performance evaluation.

A comprehensive compensation system can contribute a lot to attract and retain competitive

human resources and can also shape the behaviours and performance of employees. The results

of the present study are in accordance with and validate the results of earlier studies creating


44

harmony with the results that Human Resource Management practices of compensation have a

positive and significant relationship with employee performance.

5.4 Recommendation

At the end the researcher recommends that all policy makers of human resource management

should be more concerned with policies and practices related to employees which results into

developing the employees’ performance.

Based on the findings and conclusions, the following are the researcher’s recommendations:

Organizations should provide employees with bonuses, incentives and job security

when employees are able to achieve their targets which will enhance performance.

Since Human Resource Management practices (compensation) have a very strong

positive relationship with employees’ performance.

Since it is clear from the findings that the welfare facilities like medical, housing,

canteen, transport, recreation and education for the children of employees are not

satisfactory, management should put in place effective measures to improve the welfare

facilities.

The study indicated that there is no equitable overtime payment and this implies that,

there should be a compensation structure in which the employees who perform better

are paid more than the average performing employees because compensation has a

motivational effect and is vital to enhancing organizational performance.

5. 5 Future Research

Regardless of some limitations, this study contributes well to understand and validate the

relationship of the Human Resource Management practices and employee performance. Future

studies can take larger samples to validate the results of the present study. Studies can also


45

include other Human Resource Management practices to their models and some other

variables, which can mediate or intervene the relationship of Human Resource Management

practices and employee performance.


46

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APPENDIX

UNIVERSITY OF GHANA BUSINESS SCHOOL

M.A MANAGEMENT AND ADMINISTRATION

QUESTIONNAIRE ON THE EFFECT OF HUMAN RESOURCE MANAGEMENT

PRACTICES (COMPENSATION) ON EMPLOYEE AND ORGANIZATIONAL

EFFECTIVENESS.

Dear Respondent,

I am a Masters student of Management and Administration at the University of Ghana Business

School, conducting a research on ‘The Effect of Human Resource Management Practices

(Compensation) On Employee and Organizational Effectiveness”. The objective of this

questionnaire is to shed light on the relationship between equitable compensation and

organizational effectiveness.

The information required is strictly for academic purpose and any information provided would

be treated with the utmost confidentiality. Your candid and impartial opinion is highly solicited.

If you need findings of this research, please send a request to [email protected]. Thanks

for your time and cooperation.

Antie Mariam Rabiu.

INSTRUCTION: Please tick √ beside the responses that are applicable.

SECTION A: Demographics/ Bio-Data

1. Gender

Male [ ] Female [ ]

2. Age range

20-29 [ ] 30-39 [ ] 40-49 [ ] 50-59 [ ] 60&above [ ]


mailto:[email protected]

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3. What is your marital status?

Single [ ] Married [ ] Divorced [ ] Widowed [ ] Others [ ]

4. What is your highest qualification?

High School [ ] Tertiary [ ] Masters [ ] Doctorate [ ] Others [ ]

5. What type of organization or sector are you in?

Private sector [ ] Public sector [ ]

6. How many employees are in your organization?

1 – 50 [ ] 51-100 [ ] 101-200 [ ] 201-500 [ ] Above 500 [ ]

7. What type of employment contract do you have?

Full-time [ ] Part-time [ ] Contract [ ] Temporal [ ] Others [ ]

8. How long have you been employed in the organization (Years)?

1–5 [ ] 6-10 [ ] 11-15 [ ] 16-20 [ ] 21-30 [ ] Above 30 [ ]


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SECTION B:

Thinking about your work and the working environment, to what extent do you agree or

disagree with the following statements:

Strongly Disagree Disagree Neutral Agree Strongly agree

1 2 3 4 5

NO The Influence of Compensation On Employee and

Organizational Effectiveness

1 2 3 4 5

10 I am satisfied with my salary

11 I am rewarded based on my performance

12 My salary is fair considering what other people are paid

13 There is equitable overtime payment

14 The compensation system is attractive

15 My salary reflects my standard of living

16 We are recognized and rewarded appropriately in this

organization

17 Compensation packages encourage employees to achieve

organization’s objectives

18 Profit sharing/bonuses are used as a mechanism to reward

higher performance.

19 Compensation attracts and motivates qualified employees to

perform better and harder

20 The compensation package of this organization is competitive

21 In this organization employees are compensated equitably


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22 I am aware of the compensation policy of the organization in

the conditions of service manual

23 Compensation makes employees committed to the

organization

24 My colleague in another department with the same

qualification receives more compensation than I do

25 Compensation is managed to ensure that all employees receive

equal compensation for the same kind of work

26 The welfare facilities like medical, housing, canteen, transport,

recreation & education for the children of employees are

satisfactory in this organization.

SECTION C: Measures to Minimize Compensation Inequities

27. Which of the following do you resort to when you

sense inequity?

Please tick as many as

applicable

Quit

Anger

Mistrust

Low morale

Conflict among employees

The adoption of legal actions

Distrust organizational leadership

Become resistant (act out on other issues)

Decrease inputs (give less time, do less work)


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Go into survival mode (do their job and little more)

Push for more output from the company (more pay,

authority)

Become overly competitive (focus on reducing the outputs

of others)

Others, please specify

SECTION D: Effects of the Provision of Benefits and Incentives

28. What benefits do your organization provide? Please tick as many

as applicable

Time off

Sick leave

Paid vacation

Annual holidays

Health & life insurance

Maternity / family leave


29. What is the effect of providing these benefits on employees?

Attract employees

Retain employees

Motivate employees



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30. What is the effect of providing these benefits on the organization?

Reduce employee turnover

Promotes the organization’s brand

Increased sales leading to increased profits


Thank you for your valuable time and cooperation to complete this questionnaire.

…………………..


university of ghana the effect of human resource

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