Impact of Rewards On Employee Performance
Impact of Rewards On Employee Performance
Impact of Rewards On Employee Performance
Senior lecturer in Management Faculty of Business, Northern University Bangladesh, Dhaka, Bangladesh.
2
Assistant Manager Department of Training, Beximco Pharmaceuticals Ltd., Dhaka, Bangladesh.
3
Professor in Management Department of Management, University of Rajshahi, Rajshahi, Bangladesh.
Abstract: This study seeks to examine the relationship between rewards and employee performance as well as
to identify the relationship between extrinsic and intrinsic rewards. The study explored factors determining
extrinsic and intrinsic rewards and their impact on employee performance and actions to influence the
commercial banks for a consideration of a more systematic and structured approach to acknowledge
employees efforts which would in turn prosper high performance culture in commercial banks of Bangladesh.
Descriptive statistics based frequency tables and graphs were used in the study to provide information on
demographic variables. The results are investigated in terms of descriptive statistics followed by inferential
statistics on the variables. A total of 200 questionnaires were distributed to employees of the commercial bank
and a total of 180 employees completed the questionnaire properly. The result indicate that there is a
statistical significant relationship between all of the independent variables with dependent variables
employee work performance and all the independent variables have a positive influence on employee work
performance.
Keywords: Rewards, Intrinsic rewards, Extrinsic rewards, Employees performance.
I.
Introduction
Rewards is one of the important elements to motivate employees for contributing their best effort to
generate innovation ideas that lead to better business functionality and further improvise company performance
both financial and non-financially. According to Dewhurst et al.(2010), there are other means to reward
employees that do not just focus on financial compensation. Some of these include the praised that employees
are able to acquire from their managers, the opportunity to take on important projects or tasks, and even
leadership attention. Much research on leader power have found that supervisor reward power would be
positively associated with employee task performance, productivity, satisfaction, turnover, and organizational
citizenship behaviors( Simon,1976; Martin & Hunt, 1980; Jahangir,2006).
Employee will give their maximum when they have a feeling or trust that their efforts will be rewarded
by the management. There are many factors that affect employee performance like working conditions, worker
and employer relationship, training and development opportunities, job security, and companys overall policies
and procedures for rewarding employees, etc. Among all those factors which affect employee performance,
motivation that comes with rewards is of utmost importance. Motivation is an accumulation of different
processes which influence and direct our behavior to achieve some specific goal (Baron, 1983).Rewards can be
extrinsic or intrinsic, extrinsic rewards are tangible rewards and these rewards are external to the job or task
performed by the employee. External rewards can be in terms of salary/ pay, incentives, bonuses, promotions,
job security, etc. Intrinsic rewards are intangible rewards or psychological rewards like appreciation, meeting
the new challenges, positive and caring attitude from employer, and job rotation after attaining the goal.
According to Luthans (2000), there are two basic types of rewards, financial and non-financial and both can be
utilized positively to enhance performance behaviors of employees. Financial rewards means pay-forperformance such as performance bonus, job promotion, commission, tips, gratuities and gifts etc. Non financial
rewards are non monetary/non cash and it is a social recognition such as acknowledgement, certificate, and
genuine appreciation etc. The non financial rewards is also called materials award (Neckermann and Kosfeld,
2008).
Desired performance can only be achieved efficiently and effectively, if employee gets a sense of
mutual gain of organization as well as of himself, with the attainment of that defined target or goal. An
organization must carefully set the rewards system to evaluate the employees performance at all levels and
them rewarding them whether visible pay for performance of invisible satisfaction. The concept of performance
management has given a rewards system which contains; needs and goals alignment between organization and
employees, rewarding employee both extrinsically and intrinsically. The system also suggests where training
and development is needed by the employee in order to complete the defined goals. This training or
development need assessment of employee gives them an intrinsic motivation. Frey (1997) argues that once pay
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II.
This research is limited to employees of the commercial bank in Bangladesh. This is due to time
constraint which the research is unable to be done in other organizations in a larger area. For this study, the
researcher only focused on the group respondents from executive level and above. The numbers of respondents
that involve within this research are 180 persons. The respondents were identified using Stratified Random
Sampling.
The objective of this study is to find out the relationship between rewards and employees performance
in commercial bank in Bangladesh. More specific objectives are to find out
1. The effect of intrinsic rewards on employees performance.
2. The effect of extrinsic rewards on employees performance.
3. The relationship between extrinsic and intrinsic rewards.
Hypothesis:
The research process is the quantitative study. Quantitative research provides numerical measurement
and statistical predictability that can be representative of total population(Barson, 2003).According to Kerlinger
(1986), qualitative studies attempt to establish causal association among objectively specified variables through
testing hypotheses derived from predictive theories. The following hypotheses are taken for the study:
H0: There is no direct relationship between intrinsic rewards and employees performance.
H1: There is a direct relationship between intrinsic rewards and employees performance.
H0: There is no direct relationship between intrinsic rewards and employees performance.
H2: There is a direct relationship between intrinsic rewards and employees performance.
H0: There is no significant difference between intrinsic reward and extrinsic rewards on employee performance.
H3: There is a significant difference between intrinsic reward and extrinsic rewards on employee performance.
III.
Literature Review
In the globalization age, the workplace realities of previous organizations no longer exist. It is
necessary to revise carefully. It is also important for the organizations to meet and introduce new motivational
tools of employees since the change has been observed on the workplace realities in todays organizations
(Roberts, 2003). Beer et al, (1984) strongly asserts in their research of changing work environment the reality
that organizations today have totally changed, therefore it is more important for the top management to carry out
new methodologies of developing strong and durable relationship between the organization and employees for
meeting the organizational goals and fulfilling the continually changing needs of both parties. Most of the
organizations have gained the immense progress by fully complying with their business strategy through a well
balanced reward and recognition programs for employee. Deeprose (1994) argued that the motivation of
employees and their productivity can be enhanced through providing them effective recognition which
ultimately results in improved performance of organizations. The entire success of an organization is based on
how an organization keeps its employees motivated and in what way they evaluate the performance of
employees for job compensation. According to Babakus et al. (2003), the perceptions that employees have with
regards to their reward climate influences their attitude towards their employees. In addition, the commitment of
managers towards their organization is also shown by how the manager rewards his/her employees. Goulder
(1960) mentions the norm of reciprocity, which focuses on the ability of organization to accommodate the needs
of their employees, and reward them for their effort. In exchange for the rewards provided to them, employees
should reciprocate by increasing their commitment towards their organization and their work. Many studies in
the creativity literature have shown that the firms reward system plays a critical role in motivating employees to
perform creatively (Eisenberger, 1992; Eisenberger, Armeli and Pretz, 1998; Eisenberger and Rhoades, 2001).
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 Wiliams, 2001; Van Dijk and Van den
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IV.
Theoretical Framework
Reward Systems:
This study involves intrinsic and extrinsic rewards as independent variables. In independent variable
extrinsic reward includes three dimensions such as basic pay, merit pay and performance bonus. As for the
intrinsic reward, it includes four dimensions such as recognition, learning opportunity, challenging work and
career advancement.
Employees Performance:
This study involves employees performance as dependent variable. In dependent variable employee
performance encompasses three dimensions such as productivity, job quality and job accomplishment.
Relationship of the variable for this study is referred to the following figure:
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Methodology
This study is an empirical study, based on the primary data. Considering the nature of the present
study, a combination of structured questionnaire was used in order to collect relevant information from a sample
of 180 commercial bank employees. A total of 180 employees were randomly selected from a listed 12
commercial banks in Bangladesh where 2 government commercial banks, 10 non- government commercial
banks ( 4 Islami commercial banks and 6 non Islami commercial banks) namely Janata Bank Limited, Agrani
Bank Limited, Mercantile Bank Limited, Prime Bank Limited, Brack Bank Limited, Basic Bank Limited,
United Commercial Banl Limited, Datch Bangla Bank limited, Islami Bank Bangladesh Limited, Shahajalal
Islami Bank Bangladesh Limited, Al-Arafa Islami Bank Bangladesh Limited, First Security Islami Bank
Limited .The survey had been done from executive level and above. The number of questionnaire distributed to
the respondents is 200. The number of return is 189 and the number of questionnaire that is useable was
180.Both primary and secondary data are used for the study. Primary data collected through the questionnaire
with case study method, which was designed on the basis of objectives and hypotheses. It is the most
inexpensive way to gather data from respondents. The questionnaire consists of four sections namely
demographics profile, intrinsic reward, extrinsic reward and employees performance. Likert 5(five) Scale point
is used for these purposes. Descriptive and Pearson correlation analysis will be used for data analysis. A well
known statistical package SPSS (Statistical Package for Social Sciences) version16.0 was used in order to
analyze the data.
VI.
Table 6.2 indicates the age allocation of the sample of respondents from the commercial banks at which the
research was conducted. As can be seen from the figure and table, the majority of the sample (n=60) or 77.8%
was male, while the remaining 22.2% (n=40) covered of female respondents.
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Frequency distribution of the respondents experience level is shown in table 1.4 , it can be seen that most of the
respondents experience level was 4-6 year(26.7%), 1-3 year(24.4%) and 10-12 years followed by 22.2 % .
Descriptive Statistics
Descriptive statistic in the form of arithmetic means and standard deviations for the independent
variables and dependent variable for the respondents were computed and presented in Table
R
a
.702
.994b
Change Statistics
R Square
Adjusted R
Square
F Change
Sig. F Change
.492
.987
-.015
.983
128.80188
72.02799
.970
236.116
.254
.000
From above calculation it shows that there was a significant correlation between dependent variable
and independent variables which mean employees performance 70.2% depend on intrinsic and extrinsic reward.
Here Extrinsic the above table also shows that there was a strongly significant correlation between extrinsic and
intrinsic rewards. R Square were .492 and .987 which told us that about 49% and 98.7% relation between
dependent variable and independent variables is explained by independent variables include in this model.
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Model
Regression
Residual
Total
Regression
Residual
Total
F
.970
Sig.
.254a
236.116
.000a
From ANOVA test it shows that the table Sig. value o.o5 is greater than the calculated Sig. Value
0.000. So, it rejected the null hypothesis at 5% level of significance and also 1% level of significance. It means,
there was a significant correlation between dependent variable and independent variables. Therefore,
employees performance depends on rewards as well as intrinsic rewards strongly depend on extrinsic rewards
in different commercial banks in Bangladesh.
Table 6.8: Dimension Correlations rewards and employees performance
Employees performance
Extrinsic rewards
Intrinsic rewards
Employees performance
1
.549(.169)
.496(.197)
Extrinsic rewards
.549(.169)
1
.994**(.000)
**(
Intrinsic rewards
.496(.197)
.994 .000)
1
**. Correlation is significant at the 0.01 level (2-tailed).
Table shows all the correlations between the variables examined in the study. The correlation
coefficient was shown a strong relationship, r = 0.549 between extrinsic rewards and employees performance.
The correlation coefficient was shown a strong relationship, r = 0.496 between intrinsic rewards and employees
performance. Meanwhile intrinsic rewards also showed a strong relationship r = 0.994 toward extrinsic rewards
with the significant level less than 0.01.
Table 6.9: T-test Employees performance over intrinsic and extrinsic rewards
Model
t
Sig.
Standardized Coefficients
Beta
Basic Pay
.642
1.452
.121
Performance bonus
.478
.941
.208
Career Advancement
.491
.977
.200
Recognition
.374
.698
.267
Learning opportunity
.427
.819
.236
Challenging Work
.671
1.566
.107
Dependent Variable: Employees performance.
The t-test shows that there are significant relation between extrinsic and intrinsic rewards and
employee performance. The results of hypotheses testing are summarizes in table which is given below:
H1:
H2:
H3:
VII.
Result
Supported
Supported
Strongly
Supported
Like all research studies, this study is not without some prominent limitations. First, in the present
study only limitation is the geographic sample limited to Dhaka areas. Understanding the empirical versatility of
the phenomenon requires further investigation by covering outside the city of the Dhaka where life living costs
are lower that life living costs of Dhaka.
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Now a day human resource is considered to be the most important resource of an organization to
remain competitive in the business world. Acquiring the right workforce and then retaining that force is one of
the challenges to the organization. The result from this study examined and determined the relationship between
rewards and employees performance and also determined the relationship between intrinsic and extrinsic
rewards. Based on a result from Pearson Correlation Analysis, it showed that there was a positive relationship
between rewards and employees performance and also showed a highly positive significance in the relationship
between intrinsic and extrinsic rewards.
The results of correlation matrix have supported the hypothesis that there exist a positive relationship
among extrinsic rewards, intrinsic rewards and employees performance. The correlation matrix also strongly
supported the hypothesis between extrinsic rewards and intrinsic rewards. There are two factors included in the
extrinsic rewards such as basic pay and performance bonus. Basic pay is a highly significant factor which
affects employee performance than performance bonus. Both are positive significant factors which affect
employees performance. There are four factors included in the intrinsic rewards such as recognition, learning
opportunity, challenging work, career advancement. Among all of the four factors challenging work is a highly
significant factor which affects employees performance.
Based on result of the study, it is showed that only extrinsic or intrinsic rewards are not sufficient to motivate
employee to perform work highly. If commercial bank of Bangladesh keep both types of rewards for the
employees than it will increase their employees performance. Because there strong correlation between
intrinsic and extrinsic rewards.
Acknowledgements
The authors are grateful to Md. Mofedul Islam Apu for IT related support toward formatting this article.
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