CHAPTER ONE

INTRODUCTION

1.1 Background to the Study

Organisations everywhere are concerned with how to use their human capital to raise productivity. Employees are widely regarded as an organisation's most important asset, and the productivity and success of any organisation depend heavily on its staff. Understanding what encourages employees to put in extra effort is therefore central to improving organisational performance. One of the most important human resource management tools for this purpose is the reward system, which helps organisations to attract, motivate and retain good employees.

A reward system covers anything that employees value and are willing to receive in exchange for their contribution to work. It includes the people, processes, rules and decisions involved in allocating pay and benefits. Organisations commonly provide rewards in the form of wages and salaries, promotions, long-service awards, certificates, end-of-year bonuses and other fringe benefits. Rewards are meant to encourage behaviour that helps the organisation to achieve its goals. Employees tend to judge the adequacy of rewards by comparing what they put into the job, such as education, experience, effort and time, with what they receive in return, such as pay, promotion and recognition, a principle described by equity theory (Adams, 1965). A well-administered system can encourage quality work and strengthen employees' commitment, but a poorly administered one can lower morale, reduce productivity and, in extreme cases, increase labour turnover.

Rewards are usually divided into extrinsic and intrinsic types. Extrinsic rewards, such as salaries, wages, bonuses and fringe benefits, are tangible and financial. Intrinsic or non-financial rewards, such as praise, recognition, a sense of accomplishment, opportunities to lead and personal development, relate to the work itself and to how employees are treated. Research finds that both types influence employee performance (Mdhlalose, 2023). The debate over which matters more has led to the idea of total rewards, which combines financial and non-financial elements into one strategy to attract, motivate and retain employees. Karikari et al. (2018) examine how employees' total rewards, financial and non-financial, influence organisational performance, and they point out that firms often emphasise one type at the expense of the other.

Evidence from Nigeria supports the importance of rewards. In a study of beverage companies in South-West Nigeria, Awoniyi et al. (2022) found that the reward system has a significant positive effect on employee productivity, and they recommended that rewards should be fair, realistic and offered both intrinsically and extrinsically. Kowo et al. (2018) surveyed employees of Cadbury Nigeria Plc in Lagos and found that bonuses significantly affect employee motivation and that employee benefits significantly affect job satisfaction. In the public sector, Akinlotan et al. (2024) found a significant relationship between monetary rewards and employee performance at Lagos State University, and a significant difference between financial and non-financial reward management in their effect on workers' effectiveness. Sanni et al. (2019) found that reward systems and performance measurement have significant negative effects on dysfunctional behaviour among employees of small and medium manufacturing firms in Kwara State, which means that good reward practices can reduce undesirable workplace behaviour.

Employee performance itself is not a single thing. Koopmans et al. (2013) describe individual work performance as having separate dimensions: task performance (how well employees carry out the core duties of their job), contextual performance (behaviour that supports the wider organisational and social environment, such as cooperation and effort), adaptive performance (how well people adjust to changes in work) and counterproductive work behaviour (behaviour that harms the organisation, such as absenteeism, off-task behaviour and theft). A related study found that task performance accounted for 36% of experts' ratings of work performance, while the other three dimensions accounted for between 20% and 22% each (Koopmans et al., 2014). Because different rewards may influence different aspects of performance, this study examines specific links between reward elements and performance dimensions. These are the sense of accomplishment and task performance, recognition and appreciation and contextual performance, salaries and wages and counterproductive behaviour, and fringe benefits and adaptive performance.

Despite the evidence, designing a reward system that satisfies both the organisation and its employees is difficult, because workers' needs differ and a system that works in one organisation may fail in another. Organisations therefore need to understand how their current reward practices affect employee outcomes. This study examines this question in three manufacturing companies in Lagos State: Unilever Nigeria Plc, Cadbury Nigeria Plc and Nestlé Nigeria Plc.

Company Profiles

Unilever Nigeria Plc. The company was established in 1923 as Lever Brothers West Africa, a soap manufacturing business, and is the oldest surviving manufacturing organisation in Nigeria. Following mergers and acquisitions it expanded into foods and personal care products, and it adopted the name Unilever Nigeria Plc in 2001. It was listed on the Nigerian Stock Exchange in 1973. Its business covers personal care, foods and home care, and at the time of the study it employed over 1,200 full-time staff in administration, technical and production, and sales and marketing.

Cadbury Nigeria Plc. The company was incorporated in Nigeria on 9 January 1965 as a company limited by shares and has been listed on the Nigerian Stock Exchange since 1976. It manufactures and sells branded fast-moving consumer goods, mainly in Nigeria and also for export to other West African countries. Its brands fall into three categories: refreshment beverages, confectionery and intermediate cocoa products.

Nestlé Nigeria Plc. Nestlé Nigeria Plc is a food manufacturing and marketing company founded in 1961. It operates in two segments, food and beverages, and produces and markets well-known brands of infant formula and cereals, bouillon cubes, confectionery, malted and milk beverages and bottled water.

1.2 Statement of the Problem

Many organisations still find it hard to build a reward system that fits both the organisation's needs and employees' expectations. There is often a gap between what employees believe they should be paid and what organisations are prepared to spend, and this affects employees' sense of accomplishment and their attitude to work. Uncertainty in the fast-moving consumer goods sector can add to the strain by causing feelings of job insecurity, stress and burnout, which reduce performance.

In Nigeria, rewards in manufacturing are often poorly matched to employees' effort and skill. Awoniyi et al. (2022) note that mismanaged reward systems lead to low productivity and that frequent turnover in manufacturing companies results from poor remuneration and the loss of skilled workers who move to better-paying firms. Where recognition, appreciation and fringe benefits are limited or absent, employees may become less cooperative and less customer-oriented, and may show poor attitudes such as lateness, delayed sales calls and indifference to customers' problems. Such behaviour lowers performance, sales and profit. Management in many organisations also gives little attention to special recognition for outstanding individual or team achievement, performance-based rewards and other non-financial incentives, so employees feel less motivated and are more likely to focus on looking for other jobs than on improving their performance.

Most Nigerian studies treat performance as a single measure such as productivity, motivation or job satisfaction (Awoniyi et al., 2022; Kowo et al., 2018). Fewer studies look separately at task, contextual, adaptive and counterproductive performance in large manufacturing companies in Lagos. This study fills that gap by examining how specific reward elements relate to these performance dimensions in selected manufacturing companies in Lagos State.

1.3 Objectives of the Study

The main objective of the study is to examine the effect of the reward system on employee performance in selected manufacturing companies in Lagos State. The specific objectives are to:

1. evaluate the effect of sense of accomplishment on task performance in selected manufacturing companies in Lagos State;
2. examine the effect of the recognition and appreciation system on contextual performance in selected manufacturing companies in Lagos State;
3. determine the effect of salaries and wages on counterproductive behaviour in selected manufacturing companies in Lagos State;
4. assess the effect of fringe benefits on adaptive performance in selected manufacturing companies in Lagos State; and
5. determine the effect of the combined reward system variables on employee performance in selected manufacturing companies in Lagos State.

1.4 Research Questions

In line with the objectives, the study answers the following questions:

1. What is the effect of sense of accomplishment on employees' task performance in selected manufacturing companies in Lagos State?
2. What is the effect of the recognition and appreciation system on employees' contextual performance in selected manufacturing companies in Lagos State?
3. What is the influence of salaries and wages on employees' counterproductive behaviour in selected manufacturing companies in Lagos State?
4. To what extent do fringe benefits affect employees' adaptive performance in selected manufacturing companies in Lagos State?
5. What is the effect of the combined reward system variables on employee performance in selected manufacturing companies in Lagos State?

1.5 Hypotheses

The following null hypotheses are tested in the study:

• H01: Sense of accomplishment has no significant effect on employees' task performance in selected manufacturing companies in Lagos State.
• H02: The recognition and appreciation system has no significant effect on employees' contextual performance in selected manufacturing companies in Lagos State.
• H03: Salaries and wages have no significant effect on employees' counterproductive behaviour in selected manufacturing companies in Lagos State.
• H04: Fringe benefits have no significant effect on employees' adaptive performance in selected manufacturing companies in Lagos State.
• H05: The combined reward system variables have no significant effect on employee performance in selected manufacturing companies in Lagos State.

1.6 Scope of the Study

The study investigates the reward system and employee performance in selected manufacturing companies in Lagos State. It is limited to three companies, namely Unilever Nigeria Plc, Nestlé Nigeria Plc and Cadbury Nigeria Plc. Manufacturing companies were chosen because reward systems are especially important to them, and limiting the study to three firms allows an in-depth examination of the research focus in each one. Lagos State was chosen because it is the commercial centre of the country.

The target respondents are staff of the technical and production departments. The population, drawn from the companies' 2016 annual reports, is 3,105 staff. The sample size, determined with the Taro Yamane formula (Yamane, 1967), is 459, which includes a 30% provision for non-response. Simple random sampling is used. Data are collected with a questionnaire and analysed with descriptive and inferential statistics to examine the relationships among the study variables. The study assesses the reward systems currently used in each company and examines their effect on employee performance outcomes.

1.7 Significance of the Study

The study is expected to be significant in the following ways:

1. Knowledge. It increases understanding of how reward systems affect employee performance in Nigerian manufacturing, and it gives students and teachers of management additional evidence to draw on.
2. Manufacturing firms and employers. Firms can use the findings to design and apply fair reward systems that improve individual and collective performance and the efficiency of organisational processes. Employers can also learn to avoid haphazard or selective reward practices by building skilled human resource departments that select, train and equip staff and reduce the withholding of effort.
3. Employees. Better and more satisfying rewards can help workers to give their best and complete the tasks assigned to them.
4. Government and policy makers. Bodies such as the Public Service Commission can use the findings when formulating policies on fair reward systems for private and public sector workers.
5. Society. The study encourages the adoption of sincere, transparent reward systems that enable people to perform well at work and in their daily lives.

References

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Awoniyi, C. I., Akilo, A. M., Kazeem, T. C., & Awoniyi, S. O. M. (2022). Reward system and employee productivity of selected beverage companies in Southwest, Nigeria. UNILAG Journal of Business, 8(1).

Karikari, A. F., Boadi, P. O., & Sai, A. A. (2018). Employees' total rewards and corporate performance. Human Systems Management, 37(3), 311–317. https://doi.org/10.3233/HSM-17186

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Kowo, S. A., Popoola, M. A., Akinrinola, O., & Salau, A. A. (2018). Moderating influence of organizational reward system on employee's performance. Socio-Economic Challenges, 4(2), 114–122. https://doi.org/10.21272/sec.2(4).114-122.2018

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