The History Of Performance Related Pay Business Essay


The global economic downturn had prompted organization worldwide to shift to an increasing focus, on how to engaged and motivate their employees, however employees are proactive and future oriented individual that try to deal rationally with the world as they see it, they think about their actions and act in ways that satisfy their dynamic needs (Mcmullen, 2009). Hence content theories of motivation explained while employee behave the way they do in term of their effort to strive for achievements, their work efforts are mostly proportional to the reward they received (Edward and Christopher, 2006).Organization success lies on highly motivated workforce, needs a reward system that will motivate performance, changes, and encourage the development of employee capabilities and competencies, by ensuring the right mix of appealing financial and non financial rewards to boost up employee work performance and enhance their commitment to the workforce.


The purpose of this study is to examine and analyze the impact of the current reward system in Nigeria Employer Consultative Association (NECA) on employee motivation, with the aim of prioritizing which aspect of the reward system function well and which aspects could be further developed and improved, in order to increase employee job satisfaction.

The research aim will be satisfied by fulfilling the below objectives

To explain motivation theory and different reward system used in today organization

To identify the current reward system used by NECA in motivating staff

To evaluate and prioritize the reward system in NECA and their employee perception

To suggest how the reward system could be further developed


Nigeria employee consultative association (NECA) is the umbrella organisation of employee in the organised private sector of Nigeria, formed in year 1957, to provide the forum for the government, to consult with private sector employers on social-economic and labour policy issues.The company provides a platform for private sector employers to interact with the government, labour, communities and other relevant institutions in and outside Nigeria for the purpose of promoting harmonious business environment that will engender productivity and prosperity for the benefit of all.

The reward system used in NECA comprises of combination of financial and non-financial rewards. Six different types are identified, personal bonus, performance based pay, stock and profit sharing, medical and health plan,tangible recognition, training and career development. NECA provide a positive working environments to their employees, offer a competitive pay and annual bonus rewards on employee performance, help their employee to save for the future by contributing a minimum of 5% to employee pensionable pay. The company have a medical health plan designed to make it easier for their staff to balance their work and personal life, the plan is also extended to senior staffs family member, providing them prompt access to medical treatment in registered company hospital. NECA employee are also entitled to twenty (20) paid personal holiday days each year (increasing to twenty five days after five years of services) plus eight days paid public holiday and the opportunity to sacrifice salary to buy five more additional days.The company trained and encourage staff educational developments.Depends on departmental heads one or more employee is given a tangible recognition in form of movie-tickets each week to encourage employee to make an extra effort in their daily tasks and perform better in teams. All these reward have been in used in the company for the past eight years (Interview with HR manager Bisi Ayanu).


To achieve the aims and objectives, this study is structure to create a more useful framework for the evaluation of current reward system used in NECA. Figure 1.1 shows the structure diagram of the study,it consist of five chapters with their content briefly describe below

Chapter 5. Conclusion

Chapter 4. Research findings, data analysis ,discussion and recommendation

Chapter 3. Research tools and proposed methodology

Chapter 2. Literature Review

Chapter 1. Introduction

Figure 1.1: Structure of the study

Chapter 1: Introduction

This chapter gives a brief introduction and background about the study, aims and objectives and sequential structure of the study chapter

Chapter 2: Literature review

This chapter describes the theories of motivation, definition of motivation, reward and incentives, element of total reward system and the different types of incentives.

Chapter 3: Methodology

This chapter shows the methods used in collecting data, research tools, questionnaire design consideration, study response rate, validity and reliability of the research, methodology framework, description of the proposed methodology

Chapter 4. Research findings and analysis

This chapter discusses and analyzes the aspect of the theoretical design used in construction and distribution of the emprerical survey.

Chapter 5. Conclusion and recommendation

This chapter summarize how the study aim and objectives were achieved and make a final conclusion on the study



In chapter one, background of the study, research aim and objective, structure of the study were discussed. The topic of this study is to evaluate on organisation reward system, and their impact on employee motivation.The research purpose is to increase knowledge in the area of rewards, motivation and organisation success as well as examining and analysing the impact of different reward system used in Nigeria Employer Consultative Association (NECA) in motivating their staffs, with the aim to prioritise the scheme that function well and their impact on employee satisfaction. In this chapter definition, theories of motivation, organisation reward type and element of total reward system would be discussed.


Reward is the way in which employees are remunerated at their workplaces, it depends on policies rather than individual benevolence to enhance participation, productivity, motivation, quality and quantity of work (Unnikrishna, 2009). It do not have direct and immediate effect on performance but it create more favourable attitude towards the organisation, leading to an increasing employee long-term commitment and better job performance (Shield, 2007).

Reward is an incentive that logically comes before and influences the requisite behaviours. Employee behaviour will change by working harder or prioritising their actions, if they know they will be rewarded with something of value to them (Torrington et al, 2009). Edward and Christopher (2006, p.2) argue that organisation have the capacity to reward employees in different ways, with the belief that employee won’t automatically begin to work, continue to work, or work harder for any organisation, they need to be motivated to take up employment, punctual daily at work, perform efficiently, and to accept organisation behaviour changes. However effort and behaviour which the organisation wishes to encourage must be paid in return with incentives, to enhance effectiveness, productivity and to generate a positive outcome for the organisation and its employee (Torrington et al, 2009).


Motivation is the desire that determines goal –directed behavior, it explain what management can do to encourage people to apply their efforts and abilities, in the ways which will help to achieve the organization goals and as well as satisfying their needs (Armstrong, 2002, p.55). In the work context, motivation is a psychological process that results from the interaction between an employee and the work environment, it operates in two ways. First, employee can motivate themselves by seeking, finding and doing work which leads them to expect that their goals will be achieved, secondly employee can be motivated by management through such methods as pay, promotion and praise (Armstrong, 2002, p. 55).

According to Arnold et al (1991), motivation consist of three component: direction - what a person is trying to do; effort – how hard a person is trying; persistence - how long a person keeps on trying, it process could be initiated by employer recognising employee unsatisfied need, establishing a goal which it is thought will satisfy the need and determining a course of action which is expected to lead towards the attainment of the goal. Motivation elements are of two type intrinsic and extrinsic motivation.

Intrinsic motivation refer to the motivation derived from the work itself, in so far as it satisfies people need or at least lead them to their achievement of goal expectation, itself generated,in that individual seek the type of work that satisfies them.Factor affecting intrinsic motivation include, responsibility (feeling the work is important and having control over one’s own resources), freedom to act, scope used in developing skills and abilities, interesting and challenging working environment, opportunities for advancement and growth. Intrinsic motivators, are mostly concerned with the quality of work life, and tend to have a long-term effect (Armstrong, 2002, p.56).

Extrinsic Motivation is something that is done to or for people to motivate them.These includes rewards such as payrise, praise or promotion and punishment such as disciplinary action or criticism, it provide satisfaction and pleasure that the task itself, might not provide. Extrinsic motivator has an immediate and powerful effect, but does not tend to last long (Armstrong, 2002, p.56).

Figure 2.1. Intrinsic and Extrinsic motivation (Michael Armstrong, 2002)


Motivation theories are the most widely accepted explanation for why people at work behave the way they do in terms of their efforts to strive for achievement, it help to appreciate the complexity in the process of motivation, based on individual needs, explaining why their needs keep changing overtime, in general these theories explain motivation as the product of internal drives that encourage employers to move toward the satisfaction of individual needs. Major content theories of motivation are;Taylor instrumentality theory, Maslow’s need theory, McClelland need theory, and Expectancy process theory (Armstrong, 2002, and Beardwell and Claydon, 2007), all which are closely discussed below.

Maslow's hierarchy of Needs theory beliefs that an unsatisfied need create tension and disequilibrium, it is a theory of personality, which start from the fundamental physiological needs and lead through safety, social and esteemed needs, to the need for self fulfilment, as shown in the figure below

Figure 2.2: Maslow's hierarchy of Needs (Beardwell and Claydon, 2007)

Maslow's hierarchy theory of needs had been criticized in motivating workforce because there is little evidence that support its strict hierarchy and the fact that people satisfy only one motivating need at a time. The theory also fails to prove any clear relationship between needs and behaviour, and is therefore unable to predict when a specific need will be manifested (Beardwell and Claydon, 2007).

McClelland need theory identified three needs which motivate workforce; - the three needs are achievement, affiliation, and power. The theory belief that employee have different levels of these needs, some have a greater need for achievement, others a stronger need for affiliation, and still others a stronger need for power. It assumes that motives are part of personality triggered by environmental factors (Armstrong, 2002, p58).

Taylor instrumentality theory approached to motivation is based exclusively on a system of external controls, argued that people work only for money, with the assumption that people will be motivated to works if rewards and penalties are tied directly to their performance. Is a theory based on the principle of reinforcement, stating that it is impossible, through any long period of time, to get workmen to work much harder than the average men around them unless they are assured of a large and permanent increase in their pay, the theory had been criticised because it fails to recognise a number of other human needs, nor does it take account on the fact that the formal control system can be seriously affected by the informal relations between workers (Armstrong, 2002).

Expectancy theory of motivation argues that motivation is likely only when a clearly perceived and useable relationship exists between performance and outcome, and the outcome is seen as a means of satisfying needs.The theory believe that extrinsic financial motivation, such as an incentive or bonus scheme –works only if the link between effort and reward is clear, and the value of the reward is worth the effort. Expectancy theory belief that there are two factors that determine the effort people put in their jobs, firstly value of the reward to individual in so far as it satisfies their need for security, social esteem, autonomy and self actualisation, and the probability that reward depends on effort, as perceived by individuals i.e, their expectation of the relationship between effort and reward, the theory state that greater the value of a set of rewards, higher the probability that receiving each of these reward depends upon effort, which as to be effective effort to produce the desired performance(Armstrong 2002, p 60).

Equity theory belief that people will be better motivated if they are treated equitably, it is concerned with people’s perception on how they are treated in relation to others. The theory indicates that pay satisfaction depends on the difference between the actual pay received by employees and what they feel they should have received. According to Bagraim (2007), employees who perceive that they have been under-rewarded or over-rewarded, restore equity by changing their own inputs, or choosing a different person for comparison, or ultimately quitting the job. Equity theory is important because it highlights the fact that employees are not only concerned with the absolute amount of rewards they receive, but with the rewards they receive relative to the rewards of others (Bagraim, 2007).

These theories of motivation discussed above widely explain why organisation needs a reward system that motivate performance, reward change, and encourage the development of individual and organisation capabilities and competencies.


Total reward system is concern with financial and non financial rewards that provide intrinsic and extrinsic motivations for employees, organisation need the right mix of financial and non financial rewards for their reward scheme to be effective (Armstrong, 2009).Financial rewards encompass base pay, contingent pay, and benefit. Non financial rewards are the reward that does not involves any direct payment arising from work itself such as training and career development, positive work place and involvements of people. Element of total reward may include some or all of the following , as well as traditional elements of pay and benefits packages: such as flexible benefits, access to professional and career development, a challenging role at work, freedom and autonomy at work, opportunity for personal growth, recognition of achievements , preferred office space or equipment, capacity to raise matters of concern, involvement in decisions that affect the way work is done, flexible working hours opportunities for working from home, and secretarial support (Purcell and Hutchinson, 2007).

Total reward has a particularly strong potential to enhance the reputation of an organisation, hence the use of total reward is often closely associated with the desire to communicate to employees the value of their employment package. The purpose of total reward system is to create a cluster where all the different rewards processes are connected and mutually reinforcing each other, with the aim to enhance recruitment, retention and performance levels and maximize the impact of rewards on employee motivation, job engagement, and organisation commitment (Swanepoel et al, 2003).

Figure 2.3. Component of the total financial rewards (Armstrong and Brown, 2006)

The benefit of total reward system as explained by (Armstrong and brown, 2006):

Greater impact – when different types of rewards are combined, they will have a deep and long-lasting affect on the motivation, commitment and engagement of employees.

Enhancing the employment relationship – total reward appeals more to employees due to the fact that it makes the maximum use of relational as well as transactional rewards.

Enhancing cost-effectiveness – because total reward communicates effectively the value of the whole reward package, it minimizes the undervaluing of the true costs of the packages.

Flexibility to meet individual needs – due to the variety of rewards, the total reward

is able to answer the individual needs of the employees and hence bind them more strongly to the organization.

Winning the war for talent – because relational reward processes are more difficult to replace than individual pay practices, total reward gives the organization the ability to attract and retain talented employees by differentiating their recruitment process and hence becoming a great place to work.

Edward and Christopher (2006, p.3) in their report argue that not all reward system help in motivating and retaining the right employee in an organisation, some of the reward system function well and some do not. Donovan (2008) in her report stated that before any organisation put together any motivation system, they should profile the targeted audience and ensure the reward they offer will appeal to any individual. Organisation could motivate employee with rewards and incentives, which will enable them to satisfy their needs or provide them with goals to attain as long as those goals are worthwhile and attainable, but individual employee need and goal associated with them vary, making it difficult and impossible to predict precisely how a particular reward or incentives will affect individual employee behaviour (Armstrong and Murlis, 1994). Managements in their opinion have to decide the kind of reward system most appropriate for their organisation, it impact in the company business so as to attract and retain staff of the desired calibre, experience and qualifications, also minimising expenditure on wages and salaries over the long run, by directing effort and enthusiasm in a specific direction, thereby encouraging particular types of employee behaviours and motivating workforce, to maximise organisational performance and facilitate effective management change (Torrington et al, 2009). Most commonly used organisation rewards include bonuses, stocks, person-based pay, merit –pay plans, promotion and praise, training and career development, recognition and celebration, profit sharing, performance related pay, skilled based pay, pension schemes, health insurance (Bach, 2005; Edward and Christopher, 2006).which are closely discuss below


2.6.1 Skilled Based Pay

Skills based pay is an input-based payment scheme that linked pay progression to the number and depth of skills that employees develop and use. It is paying for the horizontal acquisition of skills and the vertical development of skills needed to operate at a higher by undertaking a wider range of task, is a way of changing organisational culture to one that puts value on its employees. the scheme gives the employee opportunity to influence their pay by acquiring more skills in line with the organisation changing needs and facilitates functional flexibility through multi-skilling and teamwork, it create employee commitment by offering employee a chance to develop their career, and enables the organization to respond faster and more effectively to the needs of customers (Shield, 2007).

2.6.2 Bonus System

Cash reward bonus is used to motivate performance and retain excellent performing employee, it almost immediately be paid at high level, thus providing a powerful incentives for employee to perform well and change their behaviour to company required standards, organisation mostly use the scheme to alert employee of any changes , employee failure to new changes mean deteriorating performance and thus smaller financial rewards, it make staffs more focused on how to improve performance and more willing to accept change when their pay is based on performance (Purcell and Hutchinson, 2007).

2.6.3 Performance Related Pay

Performance-related pay (PRP) is a method of remuneration that links pay progression to an assessment of individual performance, usually measured against pre-agreed objectives. It works on the assumption that if an employee is offered monetary bonuses for a job well done, they will perform better (CIPD, 2012). The scheme has two varieties, merit –based system: based on the assessment of an employee’s performance against previously set objectives, and the goal based system, where the employer and employee arrange a meeting and agree a list of objectives which are set to be met within a specified period (Torrington et al, 2009). The Performance related pay scheme is not fully addressing the changing need of people and requires a high administrative costs, communication tools and performance management strategies to support it, the scheme is mostly about communication, and employees have to be told how the programme works and how they will be measured through feedbacks. The scheme objective is to encourage high performance level by linking performance to pay, with a notion of equity and fairness among employee and to improve the recruitment and retention of high quality employee . In order for performance related pay to work it should be based on clear and measurable targets that are agreed by both the employer and employee (Swanepoel et al, 2003).

2.6.4 Merit- Pay Plan

Merit –pay plan are mostly used by organisation to reward employee for performance, The plan depend on stability of employee performance over time to reflects a pay level for performance, after a while it become a permanent part of employee pay, thereby leading to a weak relationship between basic salary pay and employee performance pay (Bash, 2005). Merit-pay plan in most cases do little to motivate performance and often do not even help retain right employee, because individual performance often varies considerably over their working life, poor performer employee can end up with high pay and outstanding performer with low pay, such as in a case of new employee performing outstanding well and a longer term employee performing poorly, the poor performer might still be very motivated and comfortable with is wages without any improvement than the better performer, this will have negative downturn to the organisation standards. Merit–pay plan mostly create a situation whereby dismissal is the only way to punish employee not performing to standards so as to encourage performing staff (Edward and Christopher, 2006).

2.6.5 Stock and Profit Sharing

Profit sharing is an incentive based compensation program where employees are rewarded with company shares or a percentage of the company's profit, comparing to other reward scheme such as bonuses, it effect on employee motivation is likely to be less because the connections between performance and pay are weaker (Edward and Christopher 2006), although stock and profit sharing scheme is a good motivator, broad base employee stock ownership can create culture of ownership and cause employee to focus on the organisation strategic, business, and financial objectives, it could induces change in work attitude and behaviour by making employees want to improve productivity since their rewards are tied to organisational performance, the scheme also give management a platform on which to stand and talk about the advantage employee will experience when putting their best in job, they can go beyond saying that success of the company is good for you because it will lead to improved organisation performance and increase your personal wealth. The flaw of the scheme is that it depends on the economy and how the stock market evaluates company earnings, intangibles, and prospects. Employee pay levels may decline if the company do not meet its profit expectations, it might also be difficult for employee to know the impact of their work performance on the profitability of the company, due to the fact that employee receive the profit sharing money regardless of their own performance (Torrington et al, 2009).

2.6.6 Training and Career Development

Training and career development are formal approach taken by organisation to ensure that employee have proper qualifications and experience available when they are needed by the organisation. Training and development are important activities in all organisations for sustained organisational success and growth. Rapid changes in technology and changing customer demands require continual retraining of experienced employees to perform new and changed jobs. Employee who are given the opportunity to learn, grow their careers, are appreciated, and are more willing to make long-term commitments towards an organisation.

The major purpose for career management is to match the employee needs, abilities, and goals with the current or future needs of the organisation (Armstrong, 2009).

2.6.7 Recognition and Celebration

Recognition is the demonstration of appreciation for a level of performance, achievement or a contribution to an objective. It can be confidential or public, causal or formal. In addition to reward, employees also need recognition. Individuals like to share their achievements with others and have it recognized and celebrated. Recognition works as an excellent motivator in satisfying people needs, it is also a cost-effective way of enhancing achievements and enables people to feel involved in the company culture.

Recognition and celebration does not work as an alternative to a base pay, they are only adders, not replacements for pay. However together with a solid pay approach, recognition and celebration is an effective way to make rewards communicate effectively, when used

Properly it gives the company an opportunity to communicate the role that employees should

Play in making the organization a success (Zingheim and Schuster, 2000).

There is six types of recognition.

Verbal and written recognition is for examples expressions of praise or a personal

thank-you note. This type of recognition costs nothing and it makes people feel good.

Work-related recognition can be educational and training opportunities, a special

Project assignment, lateral or vertical career opportunities or special office and work equipment.

Social recognition. Examples of this are pizza parties, dinners and articles in


Financial recognition such as; cash, stock options and stock grants.

Symbolic recognition includes T-shirts, coffee mugs, sculptures, jackets and plaques.

Tangible recognition consist of gift certificates, trips, meal tickets, merchandise

and tickets to entertainment events.

Recognition, whether it is cash or non-cash has an advantage over base pay and variable

Pay, because it can be used at any time. The company can immediately reward and acknowledge something of importance that was not necessarily planned, such as unexpected and outstanding achievements of individuals and teams. Non-cash recognition can be especially meaningful to employee, since it can be customized or personalized, it also gives the company a possibility to distinguish themselves from other employers due to the fact that this type of recognition cannot be imitated by other company (Zingheim and Schuster, 2000).



The previous chapter dealt with the literature of the study with regarding the research problem, theories while employees are motivated at work place. In this chapter the process of research and proposed method of conducting the study research is discussed, starting by defining research methodology, various approaches to research, source of data used, method of data collection and analysis tools used in research.


Research methodology as defined by Collis and Hussey (2003, p 55), is the overall process of the research study, comprising of the framework used in collecting and analysing data. Research methodology is concerned with the following issue

What is the reason for collecting data

What data is collected

Where is the data collected

How is the data collected and analysed

The topic discussed under the methodology explains the reason behind the selection of research methods and tools used in the study.


Primary and secondary data are source used in collecting data for research process, primary data is first hand information used directly in the actual study, and secondary data is hand data with an existing work written by others. Ways of combing data is to combine both data source by utilizing secondary data to analyse gathered primary data (Daniel Muijs, 2004).

In this study for the theoretical background of the research objectives, secondary data such as textbook, academic journals, magazines, industry code of practices, were used to deepen knowledge on motivation process and theories, element of total reward system, and different type of rewards and incentives. Issuing of questionnaire, interview with the human resource manager are the main primary source adopted in collecting first handed information, so as to gain knowledge on the subject, thus drawing conclusion to the study.


The research questionnaire design is based on Salkind (1997) explanation of collecting respondent data, which state that in collecting respondent data, a variety of measures such as nominal and ordinal scale are used. Nominal scale describes variables that are categorical in nature and can be classified under one category such as question about age, gender. Ordinal scale of measurement called likert scale is a method of measuring people attitude by combining their scores on a variety of items into a single index, mostly used in ranking variables. The questionnaire was design in three parts, and to reduce respondent frustration and to have a higher response rate, the research questionnaire was presented in a simple manner and sent via email. The first part used the nominal scale to asked respondent question about age, gender, and number of years working for NECA.

The second part adopts the likert scale to measure the employee respondent attitude toward the current organisation reward scheme. As Bargain (2007) suggested that employee will be more concerned not about the amount of reward they received, but their reward relative to what other received, also equity theory of motivation belief that people are better motivated if they are treated equitably. The first survey question will be designed to determine if the organisation reward schemes are rightfully distributed with equity, the result will be presented in a tabular form for further discussion.

As suggested by the expectancy theory of motivation, to enable employee to perform to require standard, there must be a clear link between reward and efforts, any reward given to employee must be able to match their work effort in satisfying their needs. The second survey question will ask respondent how the current organisation reward scheme matches their work effort. The result will be presented in a tablular form for easy analysis.

Maslow's hierarchy theory of needs stated that any employee unsatisfied needs will create them tension and disequilibrium. Armstrong (2002), also suggest organisation need to encourage people to apply their effort and ability by satisfying their needs, so they can help to achieve the organisation goal, although Beardwell and Claydon (2007), belief is almost difficult to predict employee specific need, the third survey question we ask the respondent their view on the quantity and quality of the scheme in satisfying their needs, the result will be presented in tablular form for discussion.

As literature reviews, reward scheme organisation used in motivating staff will only have a long time effect on employee if its concerned with their quality of life (Armstrong, 2002). The last survey question in the second part will ask respondent how the current scheme affects their work life, result will be presented in a tabular form for further discussion.

Finally as literature also reviews, for organisation to achieve success it need a motivated workforce, whose needs are almost satisfied. Although Edward and Christopher (2006) argue every organisation has the capabilities of rewarding their employee in different ways, employee in their option will choose and continue to work hard for any organisation, if they are being motivated with reward that satisfy their need. Is now a question how satisfy are the employee with the current reward scheme used in NECA? The last part of the questionnaire survey will be designed to determine how satisfied employee are with current individual rewards scheme, the questionnaire is designed in such a way that employee will make their judgement of comparison with the scheme, how it satisfies their needs for job commitments. Proposed research AHP tools will then be used to analyse their responses and to show the priority relationship that exist between individual reward schemes. The result will be presented as a bar chart.


Many model and techniques have being developed to assist in collecting and analysis problems for decision making process, however qualitative and quantitative are the basic form used in this study. Qualitative analysis is based on gathering data using different methods in seeking opinion and collecting information from personnel having experience about the study area, it includes methods such as questionnaire interviews, case studies, feedback form, etc (Sapsford and Jupp, 2006). The author had used questionnaire interview in order to conduct the qualitative part of this study, whose data established the basis for further quantitative analysis to the study. According to Williams, et al (2008) Quantitative analysis enable a mathematical expression, to illustrate the objectives and links that exist within the subject using one or more quantitative methods, such as Hierarchy process, faultTree Analysis (FTA), Event Tree Analysis (ETA), Failure Mode and Event Analysis (FMEA), so that it can be examined in an unbiased manner. As this study aim to model on the identify organization reward system, and prioritize in hierarchy, the aspect that function and the aspect that needed to be improved to increase staff motivation, the hierarchy process is used by the author to conduct the quantitative part of the study.

Quantitative research is a relatively easy way to gather data from a large number of respondents, it could however be time consuming due to the large quantity of information, either descriptive, meaning that the study is measured only once, or experimental which means that the subject is measured before and after (Daniel Muijs, 2004 p3). The research was designed to be descriptive.


Framework used for the methodology in this study is shown in Figure 3.1

Consistency in judgments

Prioritizing reward system

Reward system numerical weighting value

Grouping of the reward system

Identification of the reward system

Figure 3.1: Methodology structure

3.6.1 Reward system Identification

The reward systems used in NECA were identified during a phone conversation with the company HR personnel. Combination of both financial and non-financial reward system are used by the company in motivating their staffs as stated below.

Personal bonus

Performance based pay

Stock and profit sharing

Tangible recognition

medical and health plan

Training and career development

3.6.2 Grouping of the reward system

The reward systems used by the organization are grouped into clusters. The grouping consist of three clusters, main cluster being the motivator incentives, second cluster representing the financial and non financial group and the third cluster indicate sub-item derive from the identify incentives.

3.6.3 Weighting value

The weighting value of individual reward system would be determined by sending out a questionnaire to staff of the company, who have benefitted from the company reward scheme, to use the comparison table converting verbal judgement into a numerical rating value (Appendix2), to compare the individual scheme. In any occasion where the judgement of the respondent went contrary to the others, they will be notify, and seek their opinion in reconsidering their decision.

3.6.4 Prioritizing reward system

After identifying the numerical weighting of the scheme, the priority of scheme would be developed using quantitative analysis techniques to synthesize the relative importance of the reward scheme. AHP method would be use to prioritize the organization reward scheme, to shows numerical weighting value of all respondent that closely reflect the preference of each reward system to each other, as well as the consistency in respondent judgments (William et al, 2008).


AHP is a mathematical methods developed by Satty (1980) to solve complex multi criteria decision problem. It is base on providing judgments using a pair wise comparison of criterion (Williams et al, 2008). The Judgments is normally base on the professional knowledge and experience of the decision maker about the criterion. AHP has being widely used in many fields such as planning, selection of best alternatives, resolving conflict, optimization of problem with other techniques such as linear programming , Fuzzy logic, and quality function deployment (Arslan, 2009). Shang and Sueyoshi (1995) use AHP method to quantify the elusive benefit associated with cooperate and long time objectives of flexible manufacturing system (FMS) for a manufacturing company. Cheng (1997) use AHP method along with Fuzzy logic approach to evaluate naval factual missile system. Zhang and Cui (1999) took advantage of AHP when developing a project evaluation system to determine the reasonable investments ratio and the weights of sub-system for local constraint in other to manage people investments in their economy to state information center in china. Takamura and Tone (2003) used AHP method to determine the weight criteria during site evaluation study for relocating Japanese government out of Tokyo. Liu and Hai (2005) used AHP method to determine the voting weighting criteria for selecting suppliers. Wang et al, (2008) used AHP method among the methodology use in determining the weight of criteria during bridge risk assessment on bridge structures. Arslan (2009) used AHP method to quantitative evaluate the precautions used on chemical tanker operation.

3.7.1 Steps for using AHP

Analytical Hierarchy process (Wang et al, 2008) involve ranking a complex multiple criteria decision making problem into hierarchy, allowing decision maker to provide judgments about the relative importance of each criterion, determine overall priority and ranking of each criterion. A priority judgment is made on a pair wise comparison.

Steps involve in AHP methodology are

Identification of decision problem

Developing a hierarchy representation of the problem criterion. AHP allow decision

Problem to be structured in term of overall goal, criteria to be used and decision alternatives. Figure 3.2 represent hierarchy of selecting suitable candidate for a job, first level represent an overall goal to select most suitable candidate for the job, second level is divided into 3 criteria of candidate pertaining to the job.

A: General skill, B: Complementing work factor, C: individual factors.

Third levels are sub-decisioning alternative contributing to each criterion. For General skill (A) sub- decision include A1 work experience, A2 foreign Language, A3 Bachelor degree, A4 Master Degree. Complementing work factor (B) sub- decision includes B1 Decision making, B2 Working as a team, B3 Effective Timing, B4 willingness. Individual factors(C) sub- decision includes C1 Core Ability, C2 Appearances, C3 Age, C4 culture (Gungor et al, 2007).

Figure 3.2: Hierarchy for selecting suitable candidate

Making a pair wise comparison of each criteria using pair wise scale showing a verbal description of the relative importance between the criteria being converted into a numerical rating. In these situation to select a suitable candidate ,assuming it was suggested that when comparing the criteria groups, General skill is strong important than Complementary factor a numerical rating of 3 is assigned to A-B pair wise comparison, which is then use to construct the pair wise matrix as show in Table 3.2

Table3.1. Matrix for criteria group
















Synthesizing using the weighting vector in the pair wise comparison matrix to calculate the priority of each criterion, it consist of three steps

Calculating the sum of the values in each column of the pair wise comparison matrix

Dividing each element in the pair wise comparison matrix by its column summation, the resulting matrix is referred to as the normalized pair wise comparison matrix.

Computing the average value of the element in each row of the normalized pair wise comparison matrix. The average value results of the row indicate numerical priority value of the criteria. Mathematical expression of the synthesization is show equation in Equation 1


Where is the weighting vector of a specific element in the pair wise comparison matrix, and. (Chen et al, 2006).

The advantage of using AHP is the ability to measure the consistency for pair wise comparison judgment of the expert, AHP introduces a Consistency Index (CI) and Consistency Ratio (CR) whose value if less than or equal 0.1 indicating a reasonable consistency in the pair wise comparison of the judgment, however according to (Karahalios et al, 2011) it was suggested that CR value could be near 0.2 when any attempt to reduce the value will not improve the judgments.

Step in computing the CR includes:

Multiplying each value in the column of the pair-wise comparison matrix by the priority of the items,

Sum up the value across the row to obtain a vector known as weight sum,

Divide the element of the weight sum vector by priority of each criterion

Computing the average of the value to get the maximum Eigen value ( λmax),

Calculate approximate CR and CI values using Equation 2 and 3.

(William et al, 2008)

CR = CI (2)


CI = λmax – n (3)


RI is random index for matrix size as shown in Table 3.3 and n represent the number of item compare, λmax is the maximum eigenvalue of an (n×n) comparison matrix. Mathematical expression of the eigenvalue is show equation in Equation 4


Table 3.2 Average random index values



















Source: based on satty (1994)


According to Employee Survey solution, the response rate generally varies, thus, a response rate less than 65 percent is considered too low and a response rate of more than 75 percent is considered good. The author believe that the research and questionnaire were conducted in a carefully and proper manner, twenty five questionnaires were sent out to respondent, twenty out of which were returned, with high respondent rate of eighty percent, the author draw into conclusion that the result speak generally for the whole company.


The reliability of a research is measured by how similar the results would be if another researcher conducted the same study (Collis and Hussey, 2003). The result from the research might varies slightly depending on the responders response to questionnaire , which might be because of some factors such as their interest in the study, honesty ,willingness to give insight information, and their relationship to the author , also the fact that the respondent are the co-worker might have affected some of the answers relating to job satisfactions, respondents might have been unwilling to answer truthfully , fearing that it could affect their relationship to the employer.