ENHANCING EMPLOYEES' PRODUCTIVITY IN THE PUBLIC SECTOR BY DEPLOYING THE REWARD MANAGEMENT SYSTEM

CHAPTER TWO

REVIEW OF LITERATURE

INTRODUCTION

Our focus in this chapter is to critically examine relevant literatures that would assist in explaining the research problem and furthermore recognize the efforts of scholars who had previously contributed immensely to similar research. The chapter intends to deepen the understanding of the study and close the perceived gaps.

Precisely, the chapter will be considered in three sub-headings:

• Conceptual Framework
• Theoretical Framework
• Empirical Review

2.1 CONCEPTUAL FRAMEWORK

Reward Management

Rewards are an ever- present and always controversial feature of organizational life. Hartie (1995; 82) says that reward is an important part of the feed back loop in performance management. Money is not necessarily the only reward. He says that a reward will only have a positive effect if the individual value the reward and the reward is appropriate to the effort that was put in and to the achievement. Hartie

(1995;82) mention a wide range of types of reward:-

-praise

-promotion

-individual business

-merit pay

-team business

-prizes, and

-special awards.

According to Armstrong (1999; 567) reward management processes are conceived with the design, implementation and maintenance of reward systems geared to the improvement of organizational, team and individual performance. Hellrie get of all, (1999; 489) says that to be motivators, rewards must be aligned with the things they that people value. The reward can be determined by simply asking employees what things want. Employees will vary in their response, because some employee value monetary reward, where other value scheduling flexibility, especially training and development opportunities. some people sees that the jobs as a sources of a pay cheque and nothing else. Others derive great pleasure from their jobs and association with coworkers. The subject of organizational rewards includes, but goes far beyond, monetary compensation.

Reward management is also concerned with those non- financial rewards that provide intrinsic and extrinsic motivation. Intrinsic motivation is achieved by satisfying individual needs for achievement, responsibility, variety, change, influence in decision-making and membership of a supportive team. Extrinsic non- financial motivation provided directly by the organization is achieved by recognition, skills, development and learning an career opportunities. According to Hartie (1995; 198) individual differences in what employees desire and find motivating, forces managers to recognize these individual difference and managers should think about reward more broadly than just pay- linked options.

According to Satisfaction Compensation programme for growing Compenies (1997) recognization and celebration of achievement can build on job satisfaction felt buy team members.It is mentioned that there are ways to recognise successful performance. The following ways to recognise successful performance are:-

- always stop to commend accomplishment

-deliver praise and reward publicly

-delver recognition in a personal and honest manner

-ask the employees for their reward preference

-reward timeously and,

-strive for a clear, well communicated rewards system.

To understand reward management and all the aspects thereof, It is important to give a brief description and explanation of the total reward process. It is only when one understand the total reward process that one can understand the various reward systems and model and how one can use them collectively and to customize a model that will suit a specific company needs and how they can assist to achieve company's a goals and objectives.

Total Rewards Process

According to Armstrong (1999; 574) rewards process based on reward philosophies and strategies and contain the arrangement of policies; guiding principles, practices structures, and procedures which are devised and managed

to provide and maintain appropriate types and levels and pay, benefit and other forms of reward.Reward management is a process that is integrated with all aspect of human resource management and much provide a number of important levers for improving the performance and commitment. Armstrong (1999;574) illustrate the reward system with its various reward management strategies and policies as can be seen in figure I They figure show that reward management strategies and policies are driven by corporate and human resource management strategies. These strategies and policies provide guidance on the process required in four main areas:-

-non- financial reward satisfy individual needs for challenges, responsibility, influence decision making, variety, recognition and career opportunities;

-Employee benefit satisfy employees' needs for personal security and provide remuneration in forms other than pay, which meet other needs and may be tax efficient.

-Pay structure which, by combining the result of market surveys (which also contribute to decisions on benefit level) and job evolution, defined conquitable and competitive levels of pay, pay relatives (differentials) and pay progression limited

- The measurements and management performance; which measure performance in relation outputs and inputs leads to the design and operation of pay- for-

performance schemer and continuous and development and training programmes,

Total reward management can play a major role in all aspect of the operation of an organization if one implements and applies it properly and for the right- reasons. The next section focuses on the types of rewards that can be considered when designing a reward scheme.

Types of Rewards

The various types of organisational rewards are in abundance. Kretier at all (1999; 250) say these rewards can vary from subsidised lunches to stick options, from boxes of chocolates to golf club membership. The most form of reward is pay and benefits, but there are less obvious social and physical rewards. Social rewards can include a simple praised and recognition. Psychic rewards are more from the inside, and include personal feelings of self esteem self satisfaction, and accommodation. Despite the fact that rewards system vary widely, it is possible to want and integrate some common components Kretinet et al (1999: 249) refer to a general model of organisational, reward system.

The model focuses on four important components;

-types of rewards-extrinsic rewards include- financial, material, and social rewards because they come from environment and psychic rewards also called intrinsic reward because they are self granted

-Four rewards norms profit maximization (objective of each party is to maximise its net gain, regardless of how other party fares) equity (rewards should be allocational proportionate to contributions, equality reward all parties equally, regardless of their comparative contributions, and need distribute reward according to the employees' needs, rather than according to their contribution. Distributive criteria- performance/results (quality and quantity of performance); performance/action and behaviour (consideration) types of job, nature of the work, quality level in hierarchy), and

-desired outcomes- attract attended people, motivate and satisfy them, and reward them in a away that enhance personal growth and development.

An employee who works to obtain extrinsic rewards such as money or praise, is said to extrinsically motivated. One who works to derive pressure from the task itself- or experience a sense of competence or self- determination is said to be instrinstically motivated.

Intrinsic Rewards

Hellriegel el al (1999;488) describe intrinsic rewards as personally satisfying outcomes, and they include feedings of achievement and personal growth. According to Kreitner et al (1999:250) psychic rewards intrinsic rewards because they are self granted.

Extrinsic Rewards

Hellriegel et al (1999:488) say an extrinsic reward are outcomes supplied by the organization, and includes salary, status, job security and spring benefits. One can compare these rewards to the job context items that Herzery called integrative factors According to Kreitner et al (1999:250) an alternative typology for organisational reward as is the distribution between extrinsic and intrinsic rewards financial, materials and social rewards quality as extrinsic reward because they from the environment.

Monetary Rewards

According to Newton and Devis (1999; 167) money has been always important to employees for the following reason:-

-because of the goods and services that it will purchase

-because it can be regarded as status symbol; and

-because it represent to employees what their employers thinks of them.

Newston et al (1997:168) says a useful way of to think about money is for applied it to some of the motivational models. The following application is mentioned: !money is measure of employee's compliments

-in the Herzberg model, pay is viewed primarily as a hygiene factor, although it may have short term motivational value.

-pay satisfies the lower order needs Maslow's physiological and security needs or Alderfer's existence needs), and !employees want additional rewards for successful performance which they attribute to their ability and skill. According to Armstrong and Murlis (1994:37) financial rewards need to be considered from three points o f view:

-the effectiveness of money as a motivator

-the reasons why people are satisfied or dissatisfied with their rewards, and

-the criteria which should be used when developing a financial reward system.

The researcher believed that money is important to people because it satisfies a number of their most pressing wants/needs. Money is significant for people not only for what it can buy also as a highly tangible method of recognizing their worth. Armstrong and Murlis (1994:39) say that although pay can motivate, to achieve lasting motivation, attention has also to be paid to the non-financial motivators.

The individuals' values, needs and employment conditions will influence the reactions towards reward policies and practices. According to the authors other factors that may affect satisfaction or dissatisfaction with pay include the degree to which:

-individual feel that their rate of pay or increase is fair;

-rewards are commensurate with the perceptions of individuals about their ability, contribution and value to the organization, and

-individuals are satisfied with other aspects of their employment their status, promotion prospects, opportunity to use and develop skills and relationships with their managers.

As mentioned above, to be continually motivated, attention should also be paid to the non-financial motivators.

Non-Monetary Rewards

Non-monetary rewards are more varied and unique than monetary rewards and other major advantages. They help meet employees' needs for recognition, growth and responsibility and most can be relatively inexpensive. In the organization, non-monetary rewards range from small merchandise rewards to certificates of appreciation. The technical requirements are equally varied, ranging from rewards with no documentation (certificates of appreciation) to rewards requiring management's signature (external rewards) before being submitted to the employees. (Office of Human Resources Management, 2002).

According to Spangenberg (1994:229) a survey was conducted by the America Productivity Centre where 99.9 percent of respondents said that recognition for a job well done is important or very important" as a motivational factor. In this survey it was ranked above competitive salary and pay for performance. Armstrong and Murlis (1994:40) say that non-financial rewards can be focused on the needs most people have and they include the following give needs:-

1. Achievement

Armstrong and Murlis (1994:40) define the need for achievement as the need for competitive success measured against a personal standard of excellence. The motivation to achievement can be increased through processes such as job design, performance management and skill or competency-based pay schemes.

1. Recognition

One of the most powerful motivation is recognition and it is necessary, because people need to know not only how well they have achieved their objectives, but also that their achievements are appreciated. Praise is probably the most common way of giving recognition, but there are other forms of recognition such as long service awards, status symbols of one kind or another; sabbaticals and work related trips abroad, all of which can be part of the total reward process. The importance recognition is defined by Armstrong and Murlis (1994:41) as a key part of the value set of the organization and this would be reinforced of education, training and performance appraisals

1. Responsibility

According to Armstrong and Murlis (1994:41) responsibility is one of the most effective ways of motivating people. People need to be made responsible for their own work and to be rewarded accordingly. Individuals are motivated when they are provided with the means to achieve their goals, increased responsibility, which motivates, people, will be determined by the way the job is designed and the use of performance management processes.

1. Influence

According to Armstrong and Murlis (1994:41) people can get motivated by the drive to exercise power. McClelland's research established that although the need for power is as important to some people as is the need for achievement, the need for affiliation has always present. The organization can provide motivation by empowering people by putting them into situations where their views can be expressed, listened to and acted upon.

1. Personal Growth

According to Hellriegel et al (1999:466), self-fulfillment or self-actualization is the highest need and therefore the ultimate motivator. Maslow defines self-fulfillment as the need to develop potentialities and skills. Although people will search for these opportunities, the organization should clarify the scope for growth and development within the company to give the individual the opportunity to achieve his potential within that specific company. Many companies and organizations feel that employee compensation is the dominating factor in employee satisfaction. Fortunately, there is a more cost effective way to improve productivity, that will significantly improve the "bottom line", William M. Mevcer, Inc. found in surveying 206 medium sized to large companies in 1998 that in organizations with higher employee turnover, compensation was the most common reason given for dissatisfaction. However in companies with very low turnover, 40% of the respondents perceived emotional factors (work satisfaction, good relationships with managers and other employees) as completely motivating their retention as compared to 21% attributing financial factors (satisfaction with compensation and benefits), as completely motivating their retention. It is important to note that compensation and benefits satisfy the two lowest needs of Maslow's hierarchy of needs, while the emotional factor satisfy. The three upper needs of the hierarchy. It is therefore important that management creates an environment in the workplace that will make employees feel better about themselves, will raise their self-esteem, and will make the company a place where they would like to spend most of their time (increasing employee satisfaction, 1999). Taking the above-mentioned views into consideration, the researcher believes that there are opportunities in nonmonetary rewards that need to be explored that could motivate people to improve performance and could lead to companies achieving their objectives. When management makes decisions on what types of rewards to implement, they should take into consideration what the aims of the reward are.

Rewards Aims

According to Kreitner et al (1999:252) a good reward system should attract people to the organization, and they have joined it should motivate them and satisfy their needs. Armstrong (1999:576) says that reward management is to support the attainment of the organization's strategic and shorter term objectives by helping to ensure that it has the skilled, competent, committed and well-motivated workforce it needs.

Armstrong (1999:577) says that the aims of a reward system should be looked at from an organization's and an employee's point of view. He further identifies the following organization's aims of reward management.

-pay a significant part in the communication of the organization's values, performance, standards and expectations.

-encourage behaviour that will contribute to the achievement of the organization's objectives and reflect the "balanced score-card" of key performance drivers;

-Underpin organization change programmes concerned with culture, process and structure;

-Support the realization of the key values of the organization in such areas as quality, customer care, teamwork, innovation, flexibility and speed of response, and

-provide value for money-no reward initiative should be undertaken unless it has been established that it will add value, and no reward practice should be retained if it does not result in added value.

Armstrong (1999:577) also identifies the following employees' aims of reward management;

-the organization should treat the employees as stakeholders who have the right to be involved in the development of the reward policies that affect them;

-the organization should meet their expectations that they will be treated equitably, fairly and consistently in relation to the work they do and their contribution; and

-the organization should be transparent they should know what the reward policies of the organization are and how the policies will affect the employees.

Reward Criteria

Although Armstrong (1999:640) refers to criteria for contingent pay when he mentions five golden rules for successful contingent pay schemes. The researcher believes that they could be made applicable to rewards in general.

These five rules are as follows:-

-targets and standard of performance should be clearly identified for employees.

-employees should be in a position to influence the performance by changing their behaviour and decisions;

-the level of rewards should meet the level of effort required and the communication of the rewards should be positively handled

-the reward scheme should be easy to understand, and

-the reward should follow the required performance as quickly as possible.

Armstrong and Murlis (1994:40) say the criteria for assessing the effectiveness of financial reward practices as means of motivation are listed as follows:

-they are internally equitable and externally competitive;

-direct motivation only takes place if the rewards are worthwhile; if they are specifically related to fair, objective and appropriate performance measures, if employees understand what they have to achieve, and if their expectations on the likelihood of achieving the reward are high, and employees understand the reward system, how they benefits from it and how the organization will help to develop the skills and competencies they need to receive the maximum benefit.

Productivity

Generally speaking, productivity is defined as the relation of output to input. Productivity is therefore, on the one hand, closely connected to the use and availability of resources. This means in short that productivity is reduced if an organisation’s resources are not properly used or if there is a lack of them. On the other hand, productivity is strongly linked to the creation of value. It is argued that productivity is one of the basic variables governing economic production activities, perhaps the most important one (Singh, Motwani & Kumavi, 2000). Elimination of waste give rise to improve productivity. Productivity is a relative concept, which cannot be said to increase or decrease unless a comparison is made, either of variations from competitors or other standards at a certain point in time, or of changes over time. Misterek, Dooley and Anderson (1992) agree that improvements in productivity can be caused by five different relationships: (1) Output and input increases, but the increase in input is proportionally less than the increase in output. (2) Output increases while input stays the same. (3) Output increases while input is reduced. (4) Output stays the same while input decreases. (5) Output decreases while input decreases even more. Productivity is an economic measure of efficiency that summarizes and reflects the value of the output created by an individual, organization, industry or economic system relative to the value of the inputs used to create them (Denisi and Griffin, 2005). They agree that organizations around the world have come to recognize the importance of productivity for its ability not only to compete but also to survive, furthermore, an organization that is serious about productivity will need to lead workers by given them direction and focus to create high quality products and services. Effective leadership in an organization results to enhance productivity (Ene, 2008). Hartzell (2011) views productivity as a measured relationship between the quality and quantity of results produced and the quantity of resources required for production. Productivity is in essence a measure of the work efficiency of an individual, work unit or entire organization. He further stressed that productivity can be measured in two ways, one way relates the output of an enterprise, industry or economic sector to a single input, such as labour or capital. The other relates output to a composite of input combined so as to account for their relative importance. The choice of a particular productivity measure depends on the purpose for which it is to be used. He further defined productivity as a war against waste. Even if the technical and economic concept of productivity is taken into consideration i.e. productivity is the ratio of output and input. This could be favourable only when planned efforts are made to utilize the scarce resources as economically as possible to achieve the best result. He concludes that among several factors affecting productivity, safety in industry, one of the most important factor to be kept in view for promoting productivity is the rate of output of a worker or machine. Nwachukwu (2002, p.56) argues that productivity is the measure of how well resources are brought together in an organization and utilized for accomplishing of set result produced in reaching the highest level of performance with the least expenditure of resources. It can be seen as the amount of production in relations to labour put in. Explaining productivity, Kerlinger (1980, p.208) states that public managers have worked under the uneasy assumption that a good, smoothly functioning programme was an effective one. He went further to explain how a manager used to think that if he or she spent the entire budget allocation and did not hear complaints from clients or the public, he or she was running an effective programme. From that perspective, productivity is equated to the quantity of public complaints. Nevertheless, several more precise measures of the public sector have emerged in recent years where productivity is measured in terms of cost efficiency, cost effectiveness, and programme worthiness.

Organisation Performance

Organizational performance comprises the actual output or results of an organization as measured against its intended outputs (or goals and objectives).According to Richard et al. (2009), organizational performance encompasses three specific areas of firm outcomes: (a) financial performance (profits, return on assets, return on investment, etc.); (b) product market performance (sales, market share, etc.); and (c) shareholder return (total shareholder return, economic value added, etc).

Organizational performance is the ultimate dependent variable of interest for researchers concerned with just about any area of management (Devinney et al., 2010). This broad construct is essential in allowing researchers and managers to evaluate firms over time and compare them to rivals. In short, organizational performance is the most important criterion in evaluating organizations, their actions, and environments. This importance is reflected in the pervasive use of organizational performance as a dependent variable as noted in Figure 2.1 (Conceptual Framework for this research).

Performance Measurement

There are several methods that have been put forward for measuring organisational performance at employee and organisational level. One group of performance measures who are traditional are financial and accounting based and these were based on the assumption organisation performance is only measure in quantifiable units. These financial measures include income or sales from operations, rate of return on investment and residual income (Warren et al., 2008). Without disregarding the merits of the financial and accounting measures in assessing performance, the fact that they were cost based and backward looking provided little motivation

(Manzoni & Islam, 2009).

There are now new enhanced metrics to measure performance being adopted by financial specialists and these include measures such as activity based costing and economic value added (Beheshti & Beheshti, 2010). Another recent concept to measure performance is that balance scorecard.

According to Manzoni and Islam (2009), the balance scorecard is a set of various performance measures of a company. In addition to financial performance, a balance scorecard normally includes performance measures for customer services, innovation and learning, and internal processes. For example, performance measures for customer service consist of the number of customer complaints handled, the number of repeat customers, efficiency of service delivery and quality of customer services as well as change/improvement in job skill level. Customer surveys can also be used to get together measures of customer satisfaction with the company as compared to competitors although this not common used. The performance measures of internal processes take account of the length of time it takes to manufacture a product or process a service as in service-based organisation and these need more time to track down and assess

Taljaard (2003) indicated that, performance can be measured by the performance appraisal and it was broadened to include the management tools. Performance can also be measured in terms some output produce such as the quality or quantity of job, job design and others (Jalaini, 2013). Furthermore, Taljaard (2003) also claimed that there are some researchers quoted that the job performance should be designed in order to achieve the organizational objective. Nevertheless, it has been demonstrated that when certain specifiable conditions exist, reward systems can motivate workers to increase their performance (Gerhart and Milkovich, 1992; Lawler, 1990; Jalaini et al., 2013).

In this study, organisational performance of commercial banks was measured at two levels: employee job performance (speed, accuracy and number of transactions completed in given period) and overall organisation performance in terms of sales volume and productivity).

Reward Systems and Organisation Performance

The two types of reward system have mixed results in terms of their effect on employee and overall organisational performance. Next is their detailed discussion.

1. Effect of Intrinsic Rewards on Individual and Organization Performance The intrinsic rewards have been found to have an effect on both individual and organizational performance. For example, the employees in an organization have reached the esteem stage of development and possibly the self-actualization phase through the impact of intrinsic rewards (Mikander, 2010). The intrinsic rewards encourage and enhance both employees and employer to be able to challenge them and accomplish new tasks and cooperate with others to work in a harmony environment (Ong and The, 2012). Apart from that, intrinsic rewards enable the employees to have greater concentration and keep them in energizing and self-managing (Yasmeen, Faroog & Asghar, 2013). By having the high levels of intrinsic rewards, employees become the informal recruiters and marketers for their organization in which they recommend their friends to work in the organization and recommend product and services to potential customers.

According to Thomas (2009), intrinsic rewards create a win-win situation for organization and its employees. The employees feel happy and satisfied as they experience feelings of achievement and self-worth, which create job satisfaction and translates into improved work performance. At the same time, the organization increases its sales volume and profit because of the increase in employee job satisfaction has collectively increased aggregate form’s performance.

Furthermore, intrinsic rewards facilitate greater levels of satisfaction and competency.As results, employees have more interest, excitement, fun and confidence in performing tasks which leads to enhanced organizational performance. However, research by Uco (1992) suggested that organizations should pay employees equitable salaries, not tied to performance, so as to attract and ensure participation, and to rely more on intrinsic motivational techniques to improve performance (Uco, 1992).

1. Effect of Extrinsic Rewards on Individual and Organization Performance

The extrinsic rewards cover the basic needs of income to survive (to pay bills), a feeling of stability and consistency (the job is secure), and recognition (my workplace values my skills). Hellriegel (1999) say an extrinsic reward is outcomes supplied by the organization, and includes salary, status, job security and fringe benefits. One can compare these rewards to the job context items that Herzberg called hygiene (maintenance) factors. Queresh, Zaman & Ali (2010) indicated that (extrinsic) financial rewards and social recognition rewards impacted on employees' performance. Generally as, an effort to stimulate employees’ creativity, many managers have used extrinsic rewards (e.g. monetary incentives and recognition) to motivate their employees (Fairbank and Williams, 2001; Van Dijk and Van den Ende,

2002).

While empirical research has shown that extrinsic rewards help enhance individuals’ creative performance and which contribute ultimately towards organisation performance. However, the impact of extrinsic rewards on group effectiveness or work performance is unclear and the models provide little guidance regarding specific type of rewards that maximise particular outcomes in work group. However, Sajuyigbe, Bosede and Adeyemi (2013), found that reward dimensions have significant effect on employees’ performance. In particular, they found that pay, performance bonus, recognition and praise are the tools that management can use to motivate employees in order for them to perform effectively and efficiently. Thus, workers reward package matters a lot and should be a concern of both the employers and employees.

In brief, it appears each research comes with slightly results suggesting neither of the rewards can be considered to a more effect of job performance and/or organisational performance.

2.2 THEORETICAL FRAMEWORK

Herzberg’s Two Factor Theory

The theory suggested that people have two sets of needs. (i) Their needs as animals to avoid pain. Their needs as humans to grow psychologically, Herzberg’s study consisted of a series of interviews that sought to elicit responses to the questions. From the results Herzberg concluded that the replies people gave when they felt good about their jobs were significantly different from the replies given when they felt bad.

Intrinsic factors, such as work itself, responsibility and achievement seem to be related to job satisfaction. Clearly employees who feel good about their work tend to attribute these factors to them. In contrast, dissatisfied employees tend to cite extrinsic factors such as supervision, pay, and company policies and working condition (Dieleman, et al., 2004).

This theory is relevant to this study because it mentions two factors that affect work performance. That is, extrinsic which include salary and promotion and intrinsic factors which include praise and recognition. Therefore, in this research, rewarding commercial bank employees’ in terms of both intrinsic and extrinsic rewards would be expected to have effect on work performance of employee work which when aggregated and collectively their performance are extrapolated at company level measures overall organisational performance.

2.3 EMPIRICAL REVIEW

The role of Reward Management on Organizational Performance:-

Downsizing and organizational performance; A review of the literature from a stakeholder perspective in Hong Kong, Kammeyer et al (2001: 269) observed that scholars studying downsizing and performance often concentrate on one aspect of the phenomenon at a time without addressing the totality of factors influencing organizations.

The result is that some proclaim improvements from cost training and strategic focus, while others assert deterioration in performance due to employee resentment and negative societal reactions. This review integrates desperate findings using the stakeholder theory of the organizations, developing a model relating organizational actions to stakeholder evaluations and reactions; which ultimately affect profitability and survival. Research propositions are developed based on evidence from a wide variety of literature bases, including organizational behaviour management, sociology, finance, and medicine. Additionally, implications of this model for future theory and research regarding organizational downsizing are developed.

"Reward practices and organizational performance in Tennessee", Allen and Helms (2002:19) observed that many current reward practices have not been studied to determine whether their rewards are related to organizational performance. This article describes a study undertaken to explore the relationship between reward practices and organizational performance. The findings suggest that a small group of reward practices is linked to greater perceived organizational performance. Suggestions for manager as well as recommendations for further research are provide.

In another related study on "Employee perceptions of the relationship between strategy, rewards and organizational performance in Dalton State College", Allen and Helms (2002:200) in their study explores the relationship between organizational strategy, reward practices, andfirm performance. Researchers have not extensively investigated this potentially important topic. This study presents some initial empirical evidence that supports the notion that different types of reward practices more closely complement different generic strategies and are significantly related to higher levels of perceived organizational performance.

"Islam Hadhari's Principles and Reward Management Practices; A Conceptual Study in Malaysian Private Organizations", Zulkiflee et al (2011:2162) in their study opines that many best practice models exist that describe successful approaches to reward management which influence by the cultural, legal,organizational and administrative challenge's in Islamic world. Thus, the decision in setting and designing reward programs in raising productivity through human effort has always been controversial, studies that were undertaken in numerous countries have shown varying degrees of success of such practices. Even though there is a substantial amount of foreign literature on this subject, there is a paucity of information concerning the extent of such application in Malaysia. As Malaysia is a predominantly Muslim country, Islam, through national culture influences organizations. This study is an attempt to provide further insights into the theory and practice of reward management in the local context as Malaysia is implementing Islam Hadhari's principles in the country. The study adopts a qualitative approach. A tentative research model is developed first, based on an extensive literature review. The qualitative field study they is carried out to explore the perceptions of reward management in the Malaysian private organizations from the Islamic perspective. Twelve Malaysian private organizations of various sizes are studied via interviews with key personnel. The study will also contribute theoretically and practically by providing direction and suggestions in designing and implementing the reward programs for the private organizations in the Malaysian environment.

"The Impact of reward and recognition programs on employee's motivation and satisfaction: A co-relational study", Ahmad (2008:67) in his study highlighted the impact of reward and recognition programs on employee's motivation and satisfaction. The study was conducted from October till December, 2008. The sample chosen for the study is 80 employees of UNILEVER companies. The factor affecting satisfaction were identified; payment, promotion, working condition, personal. As analysis showed immense support for positive relationship between reward and employee satisfaction. All these results are statistically significant thus providing rigor and generalizability in research. The exploratory study suggests for the positive relationship between reward and satisfaction.

"Individual attitudes, organizational Reward System and Patenting Performance of R & D Scientists and Engineers in Munich", Lee et al (2006:595) in their study observed that the interactive process perspective of innovation suggests that the innovation performance of individual R & D scientist or engineers (RSEs) is influenced by a nexus of interaction between individual attributes and organizational characteristics. While numerous empirical studies have investigated the effects of various sets of individual and organizational antecedents on the innovation performance of individuals, few have examined the interaction affects between the two. This study addresses this gap in the literature by providing empirical evidence on the interactive effect of the attitudes of individual RSEs and the organizational reward system on the patenting performance of these RSEs.

In another related study on "The Bonus as Hygiene Factor' the Role of Reward Systems in the high performance organization in the Netherlands", Waal et al (2011:1) in their study, observed that the on going debate about the effects of bonuses on managers' performance and the role of reward systems in organizations has still no led to a unanimous conclusion among academics and practitioners. Those in favour of bonuses state that applying bonuses and putting emphasis on monetary rewards increases productivity and organizational performance, while those against bonuses claim that use of bonuses and monetary rewards leads to counter productive results. A key question often overlooked in the discussion is; how important is handing out bonuses for an organization to become and stay successful for a longer period of time? This study describes the results of research into the characteristic of "High performance organization" (HPOs) and the role of bonuses and reward systems in creating and maintaining HPOs. The research result shows that the use of bonuses or implementation of certain types of reward systems have neither a positive nor a negative effect on organizational performance. This may be explained by the fact that reward systems are hygienic factor for an organization. If an organization does not have an appropriate reward system (whether or not including bonuses) it will run into trouble with its employees and have difficulty improving its performance. If it does a situation which employees expect and consider to be normal. It can start working on becoming an HPO.

"A case study of performance appraisal in a small public sector organization". The gaps between expectations and experience in UK", Mooney (2009:3) in his study sets out to identify the gaps between expectations and experiences of performance appraisal in a small sector organization. The document explains how passenger focus, the rail watchdog, has undergone a successful corporate transformation from the previous federal network of regional committees into a new credible consumer body. The organization has a new vision, and robust business planning processes have been introduced. However, there is a need to improve performance management through a new performance appraisal system. The overall purpose of the research is to assess the gaps between expectations and experiences in order to inform a new system.

The literature review explains the background to the development of performance and its measurement in the public sector. It includes a detailed analysis of thinking on performance appraisal. The literature review concludes that performance appraisal can greatly benefit organizations, but appears to not be delivering in many cases. A conceptual model is developed to frame the empirical research.

The research takes the form of a case study, and the findings were collated through qualitative interviews. A focus group was conducted, which framed the issues of concern and these were explored in much more detail through semi-structured interviews. The findings revealed

that there was a high level of understanding from staff of the need for performance appraisal. The largest gap between expectations and experiences lay in the current system, with respondents particularly concerned about the lack of training and over simplistic documentation. Non-measurement of competencies was also a concern. Respondents were generally positive about recent experiences of appraisal. The findings suggest that motivated managers have made the system work for them, despite concerns about process, and respondent believe farmers is generally achieved. More attention is required to appraise team effort. There was little appetite for a system that links appraisal to financial reward. The conclusions of the research have informed the main recommendation, to develop a new system that is much more comprehensive, and incorporates training and guidelines, that new system should be developed through engagement with staff.

Tsai (2010:1) in his study on "Reward and incentive compensation and organizational performance: Evidence from the semi-conductor industry in Taiwan", noted that the link between reward and incentive compensation and organizational performance has attracted increasing research interest in recent years. This study examines that link by testing two sets of hypotheses; organizational performance is positively associated with (1) the use of reward and incentive practices, such as profit related payment schemes, employee share ownership schemes, project sharing schemes and group performance related pay schemes; and (2) the effective use of reward and incentive compensation practices. The hypotheses were tested empirically using data collected from interviews with 25 HR managers and surveys of 21 senior operations managers and 1129 employees in Taiwanese semiconductor companies. The results of the statistical analysis demonstrate that companies using profit related payment schemes out perform other companies; and the effective linking of reward and incentive compensation to employee performance is positively related to organizational performance.

"Reward system and its impact on employee motivation in commercial bank of Sri Lanka Plc, in Jaffna District", Pratheepkanth (2011:2) in his study noted that increasingly, organizations are realizing that they have to establish an equitable balance between the employee's contribution to the organization and the organization's contribution to the employee. Establishing the balance is one of the main resource to reward employees. Organizations that follow a strategic approach to creating this balance focus in the three main components of a reward system, which includes, compensation, benefits and recognition. Studies that have been conducted on the topic indicates that the most common problem in organizations today is that they miss the important component of Reward, which is the low-cost, high-return ingredient to a well-balanced reward system. A key focus of recognition is to make employees feel appreciated and valued. Research has proven that employees who get recognized tend to have higher self-esteem, more confidence, more willingness to take on new challenges and more eagerness to be innovative. The aim of this study is to investigate whether rewards and recognition has an impact on employee motivation. A biographical and work motivation questionnaire administered to respondents. The results also revealed that staff, and employees from non-white racial backgrounds experienced lower levels of rewards, different factors that motivate employees. Notwithstanding the insights into the research, results need to be interpreted with caution since a convenience sample was used thereby restricting the generalizability to the wider population.

"Relationship Between Rewards and Employees

Motivation in the non-profit organizations of Pakistan", Nadia et al (2011:327) in their study empirically examined the relationship between rewards and employee's motivation in the non-profit organization of Pakinstan. Employees of three organizations (PERRA, World Vision and SUNGI Development Foundation) working in Khyber Pakhtonkhuwa Province of Pakinstan were taken as sample of the study. Self designed questionnaire was used for data collection. 125 questionnaires were distributed and 107 were returned, hence the response rate was 85.6%. The data was analyzed using the techniques of rank correlation coefficient and multiple regression analysis. All the findings were tested at 0.01 and 0.05 level of significance. The result concludes that there is a direct relationship between extrinsic rewards and the employee's motivation. However, intrinsic rewards found an insignificant impact on employee motivation.In another related study on "incremental effects of reward on creativity in Newark", Eisenberger and Rhoades (2001:736) in their study examined 2 ways reward might increase creativity. Firstly reward contingent on creativity might increase extrinsic motivation. Studies 1 and 2 found that repeatedly giving preadolescent students reward for creative performance in 1 task increased the creativity in subsequent task. Study 3 reported that reward promised for creativity increased college students' creative task performance, second, expected reward for high performance might increase creativity by enhancing perceived self-determination and, therefore, intrinsic task interest. Study 4 found that employees' intrinsic job interest mediated a positive relationship between expected reward for high performance and creative suggestions offered at work. Study 5 found that employees perceived self determination mediated a positive relationship between expected reward for high performance and the creativity of anonymous suggestions for helping the organization.

"Influence of extrinsic and intrinsic motivation on employees' performance in Oyo State", Akanbi (2000:1) in his study investigated the influence of extrinsic and intrinsic motivation on employees performance. Subjects for the study consisted of one hundred workers of Flour Mills of Nigeria Plc; Lagos. Data for the study were gathered through the administration of a self designed questionnaire. The data collected were subjected to appropriate statistical analysis using Pearson Product Moment Correlation coefficient, and all the findings were tested at 0.05 level of significance. The result obtained from the analysis showed that there existed relationship between extrinsic motivation and employees performance, while no relationship existed

between intrinsic motivation and employees performance. On the basis of these findings, implications of the findings for future study were stated.

Egwurdi (1981:4) also investigated motivation among Nigerian workers using a sample of workers of high and low occupational levels. The hypothesis that low income workers will be intrinsically motivated was not confirmed and the expectation that higher income worker will place a greater value on intrinsic job factors them low income workers was also not confirmed. This shows clearly the extent of value placed on extrinsic job factors. Akerele (1991:50) observed that poor remuneration is related to profit made by organization. Wage differential betweenhigh and low income earners was related to the low morale, lack of commitment and low productivity. Nwachukwu (1994:38) blamed the productivity of Nigerian workers on several factors, among them is employer's failure to provide adequate compensation for hard work and the indiscipline of the privileged class that arrogantly displays their wealth, which is very demoralizing to working class and consequently reduced their productivity of Nigerian workers on several factors, among them is employer's failure to provide adequate compensation for hardwork and the indiscipline of the privileged class that arrogantly displays working class and consequently reduced their productivity. Judging from all these empirical studies and findings, one may generally conclude that a good remuneration package, which tier financial rewards to individual performance, can be expected to result in higher productivity.

Another study carried out which is of importance to this research is that of Wood (1974:217). He investigated the correlation between various workers attitudes and job motivation and performance using 290 skilled and semi-skilled male and female paper workers. The study revealed that highly involved employees. Who were more intrinsically oriented towards their job did not manifest satisfaction commensurate with company evaluations of performance. They depended more on intrinsic rewards as compared to those who were more extrinsic in orientation. Also in a related study, Kulkarni (1983:) compared the relative

importance of ten factors such as pay, security, etc. which are extrinsic to the job, and other intrinsic factors like recognition self-esteem responsibility etc among 80 white collar employees. And it was hypothesized that higher value will be placed on intrinsic rather that extrinsic job factors. Data was obtained through personal interview in which individuals were asked to rank each factor according to its importance. The result did not uphold the hypothesis and it shows two extrinsic factors adequate earnings and job security as the most important. Also, it was found that there were no consistent trend between the findings of this study and similar studies using blue-collar workers, except in ranking of adequate earnings and job security. The above are empirical works carried out by different researchers in the areas of rewards and organizational performance. However, the question is what magnitude of performance variation can rewards both extrinsic and intrinsic induce taking into consideration the argument and counter argument on the consequences of trying rewards to performance.

Mayson and Barret (2006) in a study on the impact of reward on employee performance found that a firm’s ability to attract, motivate and retain employees by offering competitive salaries and appropriate rewards is linked to firm performance and growth. On the other hand, Inés and Pedro (2011) found that the compensation system used for the sales people has significant effects on individual salesperson performance and sales organization effectiveness. Therefore, in an ever competitive business environment, many companies today are attempting to identify innovative compensation strategies that are directly linked to improving organizational performance (Denis and Michel 2011). According to Nebeker et al. (2001) Customer’s satisfaction and organizations performance is the result of its employee’s satisfaction. There has been research proving a positive relationship between stock bonus and employee performance. The evidences in Taiwan suggest that there exist positive associations between the amount of stock bonuses and firms’ operating performance. It is also found that firms with larger firm size or high growth opportunity tend to adopt stock bonus. Performance-based compensation is the dominant human Resource practice that firms use to evaluate and reward employees’ efforts (Collins and Clark, 2003). Evidently, performance-based compensation has a positive effect upon employee and organizational performance. In a quantitative content analysis of the narrative descriptions of 50 rapid-growth firms and a comparison group of 50 slow-growth companies conducted by Barringer et al., 2005 results demonstrated that employee incentives differentiated the rapid-growth from the slow growth firms. Firms that were rapid-growth oriented provided their employees financial incentives and stock options as part of their compensation packages. In doing so, firms managed to elicit high levels of performance from employees, provide employees the feeling that they 20have an ownership interest in the firm, attract and retain high-quality employees, and shift a portion of a firm’s business risk to the employees. Delery and Doty (1996) identified performance-based compensation as the single strongest predictor of firm performance. Both performance-based compensation and merit-based promotion can be viewed as ingredients in organizational incentive systems that encourage individual performance and retention (Cho et al. 2005). Collins and Clark (2003) studied 73 high-technology firms and showed that the relationships between the HR practices and firm performance (sales growth and stock growth) were mediated through their top managers’ social networks. Cho et al. (2005) suggested that incentive plans is effective in decreasing turnover rates. Banker et al. (2001) conducted a longitudinal study of the effectiveness of incentive plans in the hotel industry and found that incentive plans were related to higher revenues, increased profits, and decreased cost. In a related study Paul and Anantharaman (2003) found that compensation and incentives directly affect operational performance. To be effective, compensation practices and policies must be aligned with organizational objectives. While performance-based compensation can motivate employees, sometimes employees perceive it as a management mechanism to control their behaviour (Lawler and Rhode, 1976). In such a case, employees are less loyal and committed, thus compensation plans have the opposite than desired outcome (Rodrıguez and Ventura, 2003). Employee turnover can significantly slow revenue growth, particularly in knowledge-intensive industries (Baron and Hannan, 2002).

Quresh, Zaman and Shah (2010) in their Pakistan in cement industry found that there is a direct relationship between extrinsic rewards, intrinsic rewards and the employees’ performance. The study also found that recognition techniques (approaches) used in cement factories are good for the maximum performance of employee’s. This study is relevant but different from the current study as the later is dealing with target population of white collar jobs, while the former examined factory workers. Furthermore, this research examined the relationship between extrinsic rewards, intrinsic rewards, financial rewards and social recognition rewards and organisation performance, while the new study specifically examines the effect of intrinsic rewards (social recognition and appreciation) and extrinsic rewards

(salary, bonus and performance promotion) on job and organisation performance.

Aktar, Sachu & Ali (2012) examined the impact of intrinsic rewards (recognition. Learning opportunities, challenging work and career advancement, and extrinsic rewards (basic salary and performance bonus) on employee performance in twelve commercial banks of Bangladesh as is in this study. The study found that each factor within both extrinsic and intrinsic reward was a highly significant factor which affects employees’ performance. In contrast, the study conducted by Yasmeen, Farooq and Asghar (2013) on the impact of rewards on organizational performance in Pakistan revealed that there exists insignificant and weak relationship between salary, bonus and organization performance. However it found that there exists moderate to strong relationship between promotion and organization performance. Although these two studies are similar to the current study, they were conducted outside Tanzania and because of cultural difference and other idiosyncrasies, the impact of rewards on organisation performance could yield different outcomes in

Tanzania.

The study conducted byOng and Teh (2012) on reward system and performance within Malaysian commercial banks found that most of the commercial banks provide both monetary and non-monetary rewards; adoption of reward system is not influenced by age and size of the organization. The study however, found a negative relationship to exist between extrinsic rewards and financial performance of organizations and intrinsic rewards are positively related to financial performance of organizations. The proposed study however, includes financial and non-financial indicators as the dependent variables.