THE EFFECTS OF NON-MONETARY INCENTIVES ON EMPLOYEE PERFORMANCE IN THE NIGERIAN MANUFACTURING SECTOR

Introduction

1.1. Background to the study

Motivation of employees in the workplace is essential for the growth and advancement of any organization because, in order for the organization to move forward, employees must be willing to perform effectively and efficiently. People who constitute the human element of any organization are the most valuable resources and have the potential to be a source of sustainable competitive advantage, contributing to basic organizational objectives such as high quality, profits and growth, improving productivity, service quality, efficiency and customer satisfaction. Human asset in the 21st century is considered the most important asset of any company (Hafiza, Shah, Jamsheed & Zaman, 2011). The key to an organization’s success or failure is majorly determined by how effectively and efficiently they can utilize the resources at their disposal. The available resources for organizations or institutions are human, financial, physical and information resources. The human resources compared to other resources in an organization are the most important for the successful performance of any organization (Ismaji, Zekiri, Qosja & Krasniqi, 2015). The Human Resource is the most important part and crucial of all resources for the survival of any organization or business firm. In reality, some firms realize the fact that workers are a major part of the firm and they can get the targets of the firm. If the workers of the firms are not happy, they will not take interest in attaining the targets of the firms and firms will not be able to get their targets (Muhammed, Naveed, Muhammed & Naqvi, 2014). Furthermore, organizational success rests on its employees, therefore there is a need to stress on elements that will impact on employees’ motivation and performance (Liao et al., 2007).

In order to get the best out of workers and turn things around in Nigeria, the key factor is the motivation of workers (Akinola & Akinbobola, 2014). Herzberg argued that, for an employee to be truly motivated, the employee’s job has to be fully enriched where the employee has the opportunity for achievement and recognition, stimulation, responsibility, and advancement (Imbahale, 2016). An incentive is something that motivates or encourages someone to do something (Oxford University Press). When it comes to workplace incentives they are divided into monetary and non-monetary incentives but for the purposes of this research study, non-monetary incentives as a motivator for employees in the workplace is what will be considered. A lot of studies have been carried out on the impact or effect of monetary incentives on employee performance as a source of motivation in the workplace and those studies have shown a positive relationship between monetary incentives and employee performance but it is important to note that there are other factors for employee motivation other than cash or bonuses as rewards for performance in the workplace. These include satisfaction of job, job security, job promotion, and pride for accomplishment among others. Since these are not directly related to money they are known as Non-monetary incentives (Yavuz, 2004). Also according to Atogiyire (2001), some of the things that motivate employees to work effectively include a good reward system, training and development, leadership style, promotion, work environment and so on. In order to obtain and retain the human capital necessary to be successful, organizations must create an environment where people are valued for achieving desired results (Wilson, 1999). The increasing popularity of the utilization of non-financial gifts in organizations, with the increasing economic decline, more organizations are rising up to consider the use of rewards that are not valued in terms of money as a way of ensuring that their employees work for better yields (Kepner, 2001). Non-monetary incentives and rewards offer employee autonomy and personal recognition and include pleasant work conditions, flexible work hours, training and career development, new and challenging opportunities, allowances such as free telephone calls, free fuel, and fringe benefits such as leave i.e. extra days off for excellent employees, pension, free lunch, health insurance, Holiday abroad with pay etc.

Lawler carried out a study in 1973 which has been re-explained by Wiscombe (2002) reinforcing the concept that non-monetary incentive has a remarkable outcome of achieving organizational goals. Odukah (2016) carried out a research on Factors Influencing Staff Motivation among Employees, A Case study of Equator Bottlers (Coca-Cola) carried out in Kenya. The study revealed that employee motivation at Equator bottlers was influenced by employees’ performance recognition, working conditions and training and development. Ismaji, Zekiri, Qosja, Krasniqi, (2015) conducted a study on the importance of motivation factors on employee performance in Kosovo Municipalities. The analyses of the findings from the study show how the importance of motivation that is affected by the process of performance assessment. Setting standards and building evaluation systems help strengthen governance of local authorities. The study also revealed from the obtained results that professional advancement and opportunity for promotion appear to be among the most important factors of motivation. The other important factors that the study revealed are work conditions, as well as the evaluation and the objective assessment of performance measurement.

Training and career development, recognition, job promotion and fringe benefits such as medical/health insurance, pension and holiday abroad with pay are the non-monetary incentives to be considered for this study. A lot of studies have been carried out on the impact of non-monetary incentives on employee performance in various organizational sectors but an in-depth study is still needed to be carried out in the Nigerian manufacturing sector as employees in that sector are mostly compensated with monetary incentives. Manufacturing organizations have overlooked the importance of also including non-monetary incentives to motivate their employees to perform better and they believe, just like most organizations do, that monetary incentives such as pay increases, bonuses and others as compared to incentives such as recognition, opportunities to participate in organization’s decision making as posited by (Aktar et al., 2013).

Employee Performance can be viewed as how an employee accomplishes or fulfils his duties in relation to how they are going to be used to achieve organizational objectives. Employee performance is said to be a function of ability, effort, skill, environment, and motivation (Ackah, 2014). Employee Performance is a fundamental component that facilitates organizational growth and sustainability, specifically being affected by the reward system employed in an organization (Ngulube, 2003). The greatest interest of every organization is to achieve its goals. The achievement of organizational goals to a great extent is dependent on various resources, and human resource is one major resource which is directly related to the achievement of an organizational goal. Hence, the performance of employees is considered very significant in the achievement of organizational goals (Ackah, 2014.) According to Hafiza et al. (2011), there are several factors that can affect employee performance like training and development opportunities, working conditions, worker-employer relationship, job security and company overall policies and procedures for rewarding employees. Among the factors that affect employee performance, motivation that comes with rewards is of utmost importance (Carraher, Gibbson & Buckley, 2006). Aktar et al. (2012) contend that non-monetary incentives which are represented by recognition, learning opportunities, challenging work and career advancement, have been found to be an effective tool in motivating workers and consequently increase their performance. Blanchard and Witts (2009) argue that when corporations fail to take the time to actively recognize and reward good performance, the desire for the job weakens with every unrecognized triumph. From this, it can be understood that it is very important for employees to get feedback on their performance because it motivates the employees’ desire to do well.

For this study, the employee performance variables to be focused on are employee productivity and employee profitability. Productivity has a ripple effect in the workplace, meaning that consistent level of productivity and work habits set the standard for other employees as well (Ackah, 2014). The manufacturing sector plays a vital role in any economy for two main reasons; firstly by generating direct and indirect employments and secondly by contributing to the growth of overall Gross Domestic Product (GDP). Therefore, the development of this sector is significantly important for any country irrespective of the level of development. However, the manufacturing sector in many countries is in a state of transition (Vilasini et al, 2015). Preamble Central Bureau of Statistic (BPS) Indonesia stated that the production of manufacturing industry in the food industry rose 8.20 percent and has contributed the most in shaping the National Gross Domestic Product (GDP) in Indonesia throughout 2011 until now (Purbasari & Septian, 2017). However, an analysis of the GDP figures based on current prices obtained from the National Bureau of Statistics showed that the manufacturing sector’s contribution dropped as at the end of December 2016 and it was as a result of decrease in productivity. According to Nwosu et al (2013), in any of the production unit, production workers or employees issues may either be power, trainings, maintenance, motivations, technology and safety of others which are also issues of the company’s management. Constant changes or upheavals in procedures or hierarchy can also negatively affect employee productivity (Jayarathna, 2014). High employee absenteeism is a product of de-motivation on the part of employees whose end result is delayed service delivery and decrease in employee productivity (Tahani et al, 2015). Lack of meeting set deadlines and early closure of work reduce employee productivity (Stella, 2008).

In Indonesia, a study carried out by Purbasari & Septian (2017) highlighted that the success of the manufacturing industry is a problem for the manufacturing companies and it is concerned with how to maintain the performance of the organization that has actually contributed to the nation and state. They stated that another problem faced by the company’s management is preserving the competitive ability that can be demonstrated by the success of the organization to achieve high performance, because not a few large-scale manufacturing companies in the food and beverage industry in Indonesia go public and succeed. According to MC Benakanakonda (2015), in India, industries are located beyond the industrial complexes and are facing problems like transportation cost, quality of roads not up to the mark and scarcity of power, all these problems naturally affect the production of industrial goods which is as a result of low productivity of workers. Also problems such as lack of skilled labours and industrial expertise persons, few workers in the study region with industrial skills. The lack of these skills could be said to be as a result of lack of adequate training. Another peculiar problem is labour absenteeism. The absence of labourers from work is a frequent problem. This could be as a result of lack of proper motivation. Pommi & Suruchi (2015) carried out a study on non-monetary incentives to motivate workers in a garment manufacturing firm in Delhi, India. The study revealed that there is a gap between the manager’s and worker’s perspective regarding motivation and that non-monetary rewards help to increase the motivation of worker so that they can perform better in their workplace. Also if there are strong policies for motivation, the attrition rate of good workers is reduced. Jayasuriya et al (2017) also carried out a study in a tile manufacturing company in Sri Lanka and found that when considering the factors affecting the employee’s motivation salary, training, incentives, appreciations, working hours and communication can be identified as key factors. The researchers also found that on the other hand, situations like long hours working in a factory, high work pressure, low appreciation and poor recognition may cause de-motivation in the work place.

In the context of Africa, Kotler and Kallen (2007) cited in Tahani et al (2015) describe how non-financial motivation result in employee motivation and how it affects in behaving positively towards the following ways: employees who stay loyal to the organization and speak positively about the organization. Robbines and Judge (2007) indicated that satisfied employees drive the organization to have an increased productivity. A study carried out by Tahani, Oyagi & Ondabu (2015) in Somaliland found that the lack of motivation on the part of employees is exhibited by late reporting to work and early closure even as early as 11 am more so in the government ministries. This has resulted into delayed productivity and low rates of development for the country at large. According to Dugguh (2014) based on his research findings in a cement manufacturing company in Nigeria show that low productivity occurs because poor employee motivation, and it implies that motivation has link to productivity since motivated employees are productive employees. Another study evidenced that workers of manufacturing firms in Nnewi, Nigeria show that they are poorly motivated, therefore low productivity, so tangible reward need to be increased via promotion, overtime allowance, and holiday with pay (Maduka & Okafor, 2014).

Over the years, the performance of employees in the Nigerian Manufacturing sector has been stagnant. It has neither aggressively gone down nor their performance level risen up. They perform just adequately enough to meet production targets and deadlines. Adenikinju and Chete (2002), conducted an empirical analysis of the performance of the Nigerian manufacturing sector over a 30-year period and observed that the sector was performing with satisfactory growth levels from 1970 to 1980. However, after that phase there was a sharp decline in the growth and profitability of the Nigerian manufacturing sector. Especially after 1983, the negative effects of the oil price collapse in the international oil market can be clearly seen on the sector’s performance. It is rarely heard of these manufacturing firms using non-monetary incentives as a form of remuneration. Effective non-monetary rewards can change a person’s attitude in the workplace which itself brings a positive change in the environment and also enhances employee performance (Neelam, Uzma & Almas, 2013).

A study was carried out by Yamnin & Khushboo (2016) on non-monetary rewards in the manufacturing industry. The primary objective of the study was to study the non-monetary rewards provided to the employees in the manufacturing sector. The various Non-Monetary Rewards which are provided to the employees in the manufacturing sector are Recognition, Working Environment, Training and Development, Career Opportunities, Autonomy and Team Rewards. From this, the importance of also offering non-monetary incentives to employees to motivate them can be seen. Whereas the efficiency of each worker, abilities of each worker are different which results in variability in the performance of the workers (Muhammed, Naveed, Muhammed & Naqvi, 2014). The study by Maslow (2004) shows rewards’ impacts vary from one person to another, and that there are some persons who may respond at a higher note to any type of reward offered in an organization. Therefore it can be understood that as employees and their needs differ, so also what each employee will consider as motivation will differ. The profitability, productivity and efficiency of employees in the Nigerian manufacturing industry will be better if managers and employers consider including non-monetary incentives to the total reward packages of their employees. In our country Nigeria, where human resources are found to be plenty, non-monetary rewards can be used as a vital instrument in employee performance and productivity as motivated employees are more productive, more efficient and more willing to work towards organizational goals than the employees who are experiencing low levels of motivation (Okwudili, 2015).

From the foregoing, this study seeks to ascertain the effect of non-monetary reward on employee performance in the Nigerian manufacturing industry.

1.2 Statement of the problem

The manufacturing sector is one of the widest and most active sectors in the Nigerian economy. In recent times, it has been of growing concern for the management of manufacturing industries to motivate their staff to perform and do better in terms of their service and contribution towards achieving organizational targets and objectives. This is majorly because manufacturing output is the major driver of economic growth in most developing countries (Ekpo, 2011) and the people who create those manufacturing outputs are the employees of those firms, therefore, if they decide to not perform their duties optimally due to lack of adequate motivation, it will have a strain on the organization as well as the Nigerian economy. Lack of motivation has hindered employee performance in this sector and urgent attention is needed to eradicate this. According To Akinola & Akinbobola (2014), a major challenge confronting the Nigerian manufacturing industry is how to evolve appropriate motivational strategies to generate high level of performance from its employees, without compromising company’s profit motives.

Organizations have failed to implement recognition as a form of motivation and this is a very crucial factor towards employee motivation in the workplace. Essentially, from the reviewed literature it was concluded that lack of recognition will lead to low morale, high staff turnover and low productivity. According to Rizwan & Ali (2010), employees take recognition as their feelings of value and appreciation and as a result it boosts up morale of employee which ultimately increases productivity of organizations. Therefore, from this, it can be said that if employees don’t get recognized properly, it will result in low morale which will affect their productivity in the workplace. According to Warren (2007), most people leave their job not because of under payment, but because they feel overlooked and neglected; which is as a result of lack of recognition for good performance. In the absence of absence of recognition, employees get dissatisfied and do not perform to the standards (Saira et al, 2014).

There is also inadequate training and career development opportunities in modern organizations and this is also an issue of motivation. Recently our society is driven by technology and the employees at the workplace are also driven by technology. Hence, technical training at the workplace becomes very essential. Along with technical training, soft skill training is needed to perform well at the job. A properly designed training program will definitely make the employees more productive (Ganesh & Indradevi, 2015). Also, in recent years, business organizations are characterized by turbulences of organizational change, stiff competition and market globalization resulting from technological advancement (Motlokoa et al, 2018). However, few employees have the requisite skills, knowledge, abilities and competencies needed to work effectively. As a result, many require extensive training to acquire the necessary aforementioned requisites to be able to make substantive contribution towards the organization’s growth (Asfaw et al, 2015). If employees are to experience flexibility and effectiveness on the job, they need to acquire and develop knowledge and skills, and if they are to believe that they are valued by the organization they work for, then they need to see visible signs of management’s commitment to their training and career needs (McDowall & Saunders, 2010). In addition, every organization faces many challenges regarding changed nature of work and workplace environment due to technological advancement or any other factor. This rapid change requires competent, efficient, skillful, flexible and knowledgeable workforce for attainment of organizational goals and long term profitability. For developing such skills and competencies in employees, training plays a vital role along with motivation and encouragement (Sadaf et al, 2014). Lack of provision of adequate training and development from the organization may lead to conflict between the employer and employee. One might clearly imagine how failure to provide training and education by the organization could result in conflict between employer and employee. Such conflict could potentially lead to any number of complicated scenarios, including but not limited to formal complaints by the employee which eventually become actual law suits against the organization, all of which could cost the industry time, energy, and money. When businesses withhold opportunities for training and development, they also fail to demonstrate an understanding of how to identify organizational conflict (Truitt, 2011). Another arising issue is that in most of the cases training is considered for new employees only being that it is good to invest more on development of their skills so that they can increase their productivity, but is important to note that ongoing training of current employees is as important as of new employees; it helps them to adapt their daily routine work according to rapidly changing job requirements and to improve their performance on current job and prepares them for an intended job (Sadaf et al, 2014). In their study, the highlighted that most companies are encountered many problems regarding their employees like absenteeism, turnover, lack of commitment, motivation and capabilities, having insufficient knowledge and skills etc.

These problems arise because of overall absence of training, ineffective training programs, fail to plan training and develop its model and also fail to implement the model in training programs. Imran & Tanveer (2015) also highlighted an issue regarding training and career development stating that it is an undeniable fact that in response to the changing work practices if employees are not provided with chances to enlarge their professional experiences then this may lead them to skill obsolescence. In order to maintain sustainability, organizations must see continuous employee training and development as invaluable (Nda & Fard, 2013). Training and development is very essential at all employee levels, due to the reason that skills erode and become obsolete over a period of time and has to be replenished (Nishtha and Amit (2010).

The issue of promotion is very sensitive in any organisation and, as such, it is expected that it should be treated with high standard (Odeku, 2013). He further highlighted that a lot of issues usually arise regarding promotion in the workplace, especially if it is perceived that there have been unfair practices during the promotion process. Undoubtedly, this will definitely affect the employee who is aggrieved with the process and may also impact the workplace environment by making employees not want to put in their best because of the perception that, when it comes to uplifment, the employer might act unfairly. If employees perceive that their hard work and contribution to the organization is not opening promotional opportunities for them, when in actual fact, they deserve such opportunities, it will affect their work performance and by extension their profitability.

Fringe benefits are critical in any organization (Urbancova & Syndrova, 2017). However, Dixit and Bhati (2012), argue that poor compensation packages have been a major factor affecting employees’ performance. A good choice of fringe benefits shows that the organization appreciates the human potential and is willing to invest in its employees (Daly, 2012). However, the fact that organizations do not provide any fringe benefits is an issue which needs a solution because lack of fringe benefits will de-motivate employees which will affect their performance.

Workers leave organization due to the fact that they are not motivated enough (Maduka & Okafor, 2014). The literature reviewed for this study found that most manufacturing organizations make use of monetary incentives most especially increase in salary to encourage their workers to perform better and very few make use of non-monetary incentives. According to Whitley (2002), pay does not seem to boost productivity levels in the long term and money does not improve performance. Effective non-monetary benefits can change a person‘s attitude in the workplace which itself brings a positive change in the environment and also enhances employee performance (Rajendran, Mosisa & Nedelea, 2017). However, not enough studies on the effect of non-monetary incentives on employee performance have been carried out in the manufacturing sector.

For the literature examined for this study, there is huge attention being given to studying the effects of non-monetary incentives like job promotion, recognition and training and career development on employee performance as a whole but no in-depth study has been done to determine the effects the above incentives will have on specific employee performance factors, therefore further research needs to be done in the area of establishing the respective effects. It is from the foregoing that this study seeks to examine the effects of non-monetary incentives on employee performance in the Nigerian manufacturing sector.

1.3 Objectives of the study

The overall objective of this study is to determine the effects of non-monetary incentives on employee performance in the Nigerian manufacturing sector.

The specific objectives of this study are to:

1. Determine the effect of recognition on the productivity of employees in the Nigerian Manufacturing sector
2. Determine the effect of training and career development on the productivity of employees in the Nigerian Manufacturing sector
3. Determine the effect of job promotion on the profitability of employees in the Nigerian Manufacturing sector
4. Determine the effect of fringe benefits on the profitability of employees in the Nigerian Manufacturing sector.

1.4 Research Questions

The following questions will be answered in the course of the study:

1. To what extent does recognition affect the productivity of employees in the Nigerian Manufacturing sector?
2. To what extent does training and career development affect the productivity of employees in the Nigerian Manufacturing sector?
3. To what extent does job promotion affect the profitability of employees in the Nigerian Manufacturing sector?
4. To what extent does fringe benefits affect the profitability of employees in the Nigerian Manufacturing sector?

1.5 Research Hypothesis

H01: There is no significant effect of recognition on the productivity of employees in the Nigerian manufacturing sector.

H02: There is no significant effect of training and career development on the productivity of employees in the Nigerian manufacturing sector.

H03: There is no significant effect of job promotion on the profitability of employees in the Nigerian manufacturing sector.

H04: There is no significant effect of fringe benefits on the profitability of employees in the Nigerian manufacturing sector.

1.6 Operationalization of Variables

Y=

Where

X= Independent Variable

Y=Dependent Variable

Where

X= Non-monetary Incentives

Y= Employee Performance

X= (x1, x2, x3, x4)

Y= (y1, y2, y3, y4)

Where

X1 = Recognition

X2= Training and career development

X3= Job promotion

X4= Fringe benefits

And

Y1= Productivity

Y2= Profitability

Therefore,

Y=

Y1=

Y1=

Y2=

Y2=

1.7 Scope of the study

The study will focus on the effect of non-monetary incentives on employee performance and how it will be affected specifically by some other variables that will be used as moderators. The study will cover Nigerian Breweries which is a manufacturing firm operating in Lagos State, Nigeria. The employees of the firm will cover the target population of the study. The study time frame is 2019.

1.8 Significance of the study

The present study is significant in the following ways;

The management of manufacturing companies most especially in Nigeria would find the outcome of this study highly relevant in explaining and emphasizing the need to incorporate non-monetary incentives as part of the total reward package of the average employee. The information would be highly useful in encouraging and motivating employees especially those who work hard and perform well to keep up such performance. The management team of this study’s case study will also benefit directly by having access to information on how to better motivate their employees to enhance their performance in the workplace.

This study will provide information that will benefit the manufacturing companies located in Nigeria on how to not only motivate their employees with pay but also with the non-monetary incentives that will be chosen for this study and also highlight the importance.

Since the manufacturing sector is one of the highest contributing factors to the Nigerian economy, the government needs to seek ways to ensure production activities go on and the people who will ensure this are the human resources (workforce). The outcome of this study will serve as a pointer on how to make laws that will have the interest of employees from this sector in view.

This study will expose how adequate non-monetary incentives can motivate employees to perform better in the workplace. With the review of relevant literature and data gathering to ascertain their views on non-monetary incentives, it will inform the researcher to make commendable recommendations that will enhance and contribute to knowledge the interest on the present study focus.

1.9 Operational definition of terms

Non-monetary incentive:

These are those forms of additional rewards given to employees that is beyond the weekly or monthly monetary pay compensation.

Recognition:

This is the appreciation and acknowledgement of an individual’s effort in doing something that distinguishes him from others.

Training & Career Development:

This is the process by which an individual enhances his existing knowledge and skills and acquires new ones for self-improvement to be reflected in his performance and Career development is the progression of an individual to a desired state in his occupational path which involves continual learning and opportunity seeking for self-improvement and fulfilment.

Promotion:

This refers to the process whereby an employee moves from a particular level in his field or job to an increased level with higher status and responsibilities.

Fringe Benefits:

This refers to various non- pay additional advantages given to an employee separate from his salary.

Employee Performance:

This refers to the method whereby workers in an organization accomplish their job-related duties to achieve set organizational objectives.

Productivity:

This refers to the ability of the employee to yield output which will contribute to the organization.

Profitability:

For this study, this refers to the extent to which an employee is able to contribute to the total financial gain of the organization.

Efficiency:

This refers to the ability of a worker to carry out his activities promptly whilst minimizing the use and wastage of materials