The Effect Of Compensation Management In Organizational Performance (a Case Study Of Copen Group).

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CHAPTER ONE

INTRODUCTION

    1. Background of the Study

Compensation Management is one of the most complex and dynamic issues in organizational performance. For an organization to achieve its stated objectives, there is the need to effectively manage compensation, taken into cognizance one of the core aspect of resource management known as compensation management (Anyebe, 2003). The ability of a manager to achieve its stated objectives to a large extent depends on the effective implementation of compensational packages in order to motivate the subordinates and employees within and beyond their expectation. Compensation Management plays a crucial and functional role because it is the heart beat of human resource management. It is also vital to both employees and the employer (Begbie, Bussin, &Schurink, 2011). This is because employees typically depend on wages and salaries, and must be equivalent to the work done. However, to managers, compensation decisions influence the cost of doing business and thus, their ability to sell at a competitive price in the product market (Barry et al, 1995) It is an obvious fact that effective implementation of favorable compensation management will not only aid in stabilizing and retaining employees but also helps in reducing labour turnover within the organization. Employees’ compensation can be seen as all forms of financial returns and tangible benefits that employees receive as part of an employment relationship. It can be referred to as the totality of the financial and non-financial rewards an employee receives in return for his/her labor or services (Bernadin 2005).

Sola &Ajayi (2001) see compensation management as a process of establishing the structure of wages level for the various positions designing incentive systems, setting individual wages and incentives within the established structures. It is an integral part of human resources management that affects the performance of employees because it establishes the degree of relationship between employer and the employee. The manufacturing sector is one of the sectors responsible for the food and beverage industry. It is one of the sub-sectors of the manufacturing sector but responsible for the manufacturing of daily products, beverages, seasoning, convenience foods confectionaries and staple foods (Harrison, &Liska, 2008).

The turbulent management-labour crisis over continuous agitation for increased pay in the public services all over the world is challenging public sector organizations to utilize their employees more effectively to improve organizational performance (Hewitt, 2009). In Nigerian Civil Services, pay has become the driving force for seeking employment in the industry. It therefore becomes imperative that organizations establish and adopt a compensation system that can motivate employees to work while at the same time not eating too deep into the organization’s resources New Delhi (Chiang, &Birtch, (2008). Remuneration does not simply compensate employees procedures that will attain maximum return on Naira spent in Compensation is payment in the form of hourly wages or annual salary combined with benefits such as insurance, vacation, stock options, etc. that can positively or negatively affect an employee's work performance. Compensation is the remuneration received by an employee in return for his/her contribution to the organization. It is an organized practice that involves balancing the work-employee relation by providing monetary and non-monetary benefits to employees. Compensation is an integral part of human resource management which helps in motivating the employees and improving organizational effectiveness (Danish & Usman, 2010).

Employees are pivotal to the achievement of organisational goal and enhancing the competitive advantage of the organisation in the global world and within the industry where the business firm is operating. Hence the leadership role of the employee’s in achieving this cannot be underestimated and to this done adequate measure must be put in place by the organisation through well managed compensation structure (Pearce, 2010). Therefore, compensation management as one of the fundamental functions of human resource department is meant to attract, retain, developed employees toward attaining organisational effectiveness, efficiency and competitive advantage in the globalised world (Adeoye, 2001; Tsai, 2005; Adeoye, Elegunde, Tijani&Oyedele, 2012).

Compensation management is a veritable instrument that affects the decision of job applicants and employees within the organisation. It has aided the firms to achieve their competitive edge over their competitors in the industry (Heneman& Judge, 2000; Ivancevich, 2004; Hyondong, 2006). Furthermore, a lot of monetary resources are invested on crafting, organising as well as administering organisational remuneration arrangement. Despite its vital contribution toward the success and development of the firm, scholars and even practitioners have lamented that there is a slow pace in the advancement of compensation research (Heneman& Judge, 2000; Kersley& Forth, 2005). In most recent times, the plan release cum adoption of reward management, have gone through a major shift that are dramatic in nature. This has reflected the motivational aspect in the employees’ leadership roles and performance (Heneman& Judge, 2000; Purcell et al., 2003).

In the context of organisational effectiveness, leadership roles cannot be underestimated and the critical existence of an organisation is largely anchored on the leadership that exists within the sphere of the firm. It is reiterated that the wire link between the vision, strategic direction and change of the organisation is leadership. Leadership has been in existence for as long as people on earth have co-existed and it is present in all the cultures (Rukmani et al., 2010; Fibuch, 2011). Bontis and Serenko (2009) and Ilies et al., (2006) viewed leadership from the managerial perspective and opined that managerial leadership is the grace to be able to encourage, arouse, mentally excite, propagate, anchor, visibly coordinates the organisational goals, and show good examples to subordinates. Articulate leaders must be ready to give feedbacks about the different aspects of the subordinates’ effort that may have positive result on self-efficacy, job satisfaction, and commitments of employees with focus on areas of improvement (Shea and Howell, 2009; Jawahar, 2006; Bontis&Serenko, 2009).

 1.2     Statement of the Problem

In today’s work environment, there is more change and uncertainty, there is increased need for empowered employees, there is decline in traditional incentives, there is rise of nontraditional incentives and there is increased use of variable compensation. In organization, compensation is usually narrowed to cash and as a result, employers only have a tunneled vision when it comes to the issues of compensation for their employees. The company has also attempted to give attention to employee compensation strategies. However, employees themselves have failed to recognize the fact that their compensation is a package and not only related to cash. The byproduct of the above understanding of compensation strategy is that it is managed to a moderate extent and most of the time employee performance could be affected and vice versa. The study therefore sought to address this gap by investigating the effect of compensation management in organizational performance.

 

1.3     Objective of the Problem

The main objective guiding the study was to investigate the effect of compensation management in organizational performance: a case study of Copen Group

The specific objectives are:

1 to determine the extent at which compensation management affect employee’s performance in Copen Group 

2 To access the rate at which welfare services affect employee’s performances in Copen Group 

3 To explore relationship between compensation management and improved productivity in Copen Group 

4 To explore the relationship between compensation management and retirement of staff in Copen Group 

 

1.4     Research Questions

1 What is the extent at which compensation management affect employee’s performance in Copen Group?

2 what is the rate at which welfare services affect employee’s performances in Copen Group? 

3 what is the relationship between compensation management and improved productivity in Copen Group? 

4 what is the relationship between compensation management and retirement of staff in Copen Group? 

 1.5     Hypothesis

Hypothesis One

Ho: Compensation management does not affect employee’s performance in Copen Group 

Hi: Compensation management affect employee’s performance in Copen Group 

Hypothesis Two

Ho: welfare services does not affect employee’s performances in Copen Group 

Hi: welfare services affect employee’s performances in Copen Group 

Hypothesis Three

Ho:  there is no significant relationship between compensation management and organization

Hi: there is a significant relationship between compensation management and organization

Hypothesis Four

Ho:  there is no significant relationship between compensation management and retirement benefits of staff

HI:there is a significant relationship between compensation management and retirement benefits of staff.

1.6     Scope of the Study

The study covers only Copen Services Limited which is articulated and organised firm with diversified interests in Real Estate, Construction, Services, and Consultancy.
Copen Services Limited is the fruit of the desire of a number of young, honest, knowledgeable and experienced professionals, with over 20 years cognate post-graduation/practical experience in public and private service, to pool together their resources for the service of humanity.

 1.7     Significance of the Study

Compensation management in organization is an important business approach because it can enhance a company’s ability to achieve the ultimate goal and gain competitive advantage over its competitors.

This study is important for organization, employees, academia and even government. Customers will have access to better and qualitative services from the organization. Employees can also have improved conditions of service due to better organizational performance. Organizations can gain in terms of superior performance. The research can also benefit the academia in terms of addition to knowledge.

 1.8     Limitation of the Study

There always exist many constraints militating against a good research work. Among these limitations/ constraints include the unwillingness attitude of some individuals and civil servants to come up with relevant information, for some reasons best known to them.

Another constraint is that of reaching to the appropriate respondents. Most of our respondents do not reside where they can be easily reached and this posed a problem for the researcher.

Besides, some of the respondents subjected the researcher to some rigorous bureaucratic process thereby making it hard for the researcher to get some relevant information needed for the study and this also posed a limitation to the researcher.

However, despite these constraints, the research was successfully carried out through persistence and perseverance.

 

1.9     Definition of Operational Terms

Compensation: The process of concealing or offsetting a psychological difficulty by developing in another direction.

Management: the process of dealing with or controlling things or people

Organization: an organized group of people with a particular purpose, such as a business or government department.

Performance: the action or process of performing a task or function.

Business: A business is an organization or enterprising entity engaged in commercial, industrial or professional activities. A company transacts business activities through the production of a good, offering of a service or retailing of already manufactured products

Profit: a financial gain, especially the difference between the amount earned and the amount spent in buying, operating, or producing something

Money: Money is any item or verifiable record that is generally accepted as payment for goods and services and repayment of debts in a particular country or socio-economic context.

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