THE EFFECT OF INCENTIVE SCHEMES ON EMPLOYEE

PERFORMANCE: THE CASE OF NYALA MOTORS S.C

A THESIS SUBMITTED TO ADDIS ABABA UNIVERSITY

SCHOOL OF COMMERCE IN PARTIAL FULFILEMENT OF
THE REQUIRMENTS FOR THE AWARD OF MASTER OF
ARTS DEGREE IN HUMAN RESOURCE MANAGEMENT

BY: TESFAYE FANTU

ADVISOR: TEKELGIORGIS ASSEFA (Asst. Prof.)

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 JUNE, 2018
ADDIS ABABA, ETHIOPIA

STATEMENT OF DECLARATION

I, the undersigned declare that the research entitled “The Effect of Incentive Schemes on
employee Performance” the case of Nyala Motors S.C. is my own work. I have undertaken
the research work independently with the guidance and support of my research advisor. This
study has not been submitted for any program in this or any other institutions and that all
sources of materials used for this thesis have been duly acknowledged.

Declared by:
Tesfaye Fantu
Signature: _____________
June, 2018
Addis Ababa, Ethiopia

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 Addis Ababa University School of Commerce
The Program of Graduate Studies

This is to certify that the thesis prepared by Tesfaye Fantu G/Senbet, entitled: The Effect of
Incentive Schemes on Employee Performance; The case of Nyala Motors S.C and submitted
in partial fulfillment of the requirements for Master of Arts Degree in Human Resource
Management complies with the rules and regulations of the University and meets the
accepted standards with respect to originality and quality.

Signed by the examine committee:

Name Signature Date

Advisor
TeklegiorgisAssefa (Asst. Prof.) _________________ _______________

Internal Examiner
Abdurezak Mohammed (PhD) _________________ _______________

External Examiner
Dr. MulatuTakele (PhD) _________________ _______________

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 CERTIFICATION

This is to certify that the research thesis titled “The effect of incentive schemes on employee
performance” The case of Nyala Motors S.C. (NMSC), has been reviewed and submitted in
partial fulfillment of the requirements for award of the degree of Master of Arts degree in
Human Resource Management complies with the rules and regulations of Addis Ababa
University School of Commerce.

___________________________
TekelgiorgisAssefa (Asst. Prof.)
Advisor
June, 2018

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 ACKNOWLEDGEMENT

First and above all, I praise God, the almighty for providing me this opportunity and granting
me the capability to proceed successfully. This thesis appears in its current form due to the
assistance and guidance of several people. I would therefore like to offer my sincere thanks to
all of them.

Firstly, I would like to express my sincere gratitude to my advisor Asst. Prof.

TeklegiorgisAssefa for his professional contributions and advice, guidance and constructive
comments, which have made this piece of work possible.

I also would like to thank staff at Nyala Motors S.C. who participated in completed the
questionnaires and the whole management for overall positive feedbacks and comments.

Finally, I must express my very profound gratitude to my dear wife Hanna, my children Nati
and Eyasu, my family and my friends for understanding, support and continuous
encouragement throughout my years of study and through the process of researching and
writing this thesis. This accomplishment would not have been possible without them.

Thank you!

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List of Acronyms

DV – Dependent Variable
HR – Human Resource
IV– Independent Variable
NMSC – Nyala Motors Share Company
S.C – Share Company
SPSS – Statistical Package for Social Sciences
VIF – Variance Inflation Factors

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List of Tables and Figures

List of Tables Page

Table 3.1: Target Population and Sample 28

Table 4.1: Questionnaire Distribution and Response Rate 31
Table 4.2: Reliability Statistics 32
Table 4.3: Demographic Characteristics of Respondents 32
Table 4.4: Comparison Bases of Mean Score 35
Table 4.5: Aggregate of Financial Incentives-Mean and Standard Deviation 36
Table 4.6: Summary of Financial Incentives 37
Table 4.7: Aggregate of Non-Financial Incentives-Mean and Standard Deviation 38
Table 4.8: Summary of Non-Financial Incentives 39
Table 4.9: Aggregate of Employee Performance-Mean and Standard Deviation 40
Table 4.10: Test of Normality 41
Table 4.11: Correlations (Multicollinearity) 41
Table 4.12: Coefficients (Multicollinearity) 42
Table 4.13: Range of Correlation Coefficients 42
Table 4.14: Correlation between Financial Incentives and Employee Performance 43
Table 4.15: Correlation between Non-Financial Incentives and Employee Performance 43
Table 4.16: Model Summary 44
Table 4.17: ANOVA 44
Table 4.18: Coefficients (Multiple Linear Regression Analysis) 45
Table 4.19: Model Summary (Financial) 46
Table 4.20: Model Summary (Non-Financial ) 47
Table 4.21: Test of Hypothesis 47

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List of Figures Page

Figure 2.1: Conceptual Framework of the Study 25

List of Annexes Page

Annex 1: Questionnaire 56
Annex 2: Descriptive Statistics 62

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 Abstract

In the current competitive business environment, automotive industry is facing a lot of

challenges particularly getting the qualified employees and retaining them. This study
provides an overview of evidence of the effect of incentive schemes on employee performance
in Nyala Motors S.C, The objective of this research was to assess and examine the
relationship between incentive schemes and employee performance. The theoretical part of
the study introduces different theories of incentives, motivation and performance. The
quantitative research approach used through primary data collected from 96
respondents.Probability sampling has been chosen because the respondents were selected
using stratified sampling technique. A structure Likert Scale format questionnaire has been
used for data collection. The questionnaire consist of two parts; the first part of
questionnaire comprises demographic respondent data while second part comprises three
variables questions. The data obtained were analyzed using Statistical Packages for Social
Science (SPSS) program, descriptive analysis, normality test, reliability test,
multicollinearity test, Person’s Correlation and Multiple Liner Regression were conducted in
order to interpret the data. Statistical analysis were performed with the data in order to test
the three main research hypotheses. The main findings indicate that there is high and
moderate relationship between financial and non-financial incentives on employee
performance and has a high positive significant effect incentive schemes on employee
performance within the company. To improve employees work performance, the researcher
recommended that adopting different kind of incentive schemes, seek and obtain feedback on
how employees perceive incentives and develop a sound retention and attraction
mechanisms. This study will help the company management to an implementation of
incentive schemes system.

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Keywords: Incentive Schemes, Financial Incentive, Non-Financial Incentive and Employee
Performance.

Table of Contents
Pages
Statement of Declaration……………………………………………………………………..i
Approval Statement……………………………………………………………………….….ii
Certification………………………………………………………………………………..…iii
Acknowledgement………………………………………………………………………..…..iv
List of Acronyms…………………………………………………………...…………............v
List of Tables & Figures.……….…………………………………………………………….vi
List of Appendices……….………………………..…………………………………............vii
Abstract………………………………………..…………………………………………….viii

CHAPTER ONE…………….
………………………………………………………………....1
Introduction…………………………………………………………………..……………..1
1.1 Background of the Study………………………………………………………………1
1.2 Background of the Company……………………………………………………..........2
1.3 Statement of the Problem…………..…………………………………………….........4
1.4 Research Questions……………………………………………………………………5
1.5 Objective of the Study…...……………………………………………………….........5
1.6 Research Hypothesis………………………………………………………..…………5
1.7 Scope of the Study..………………………………………………………….……......6
1.8 Significance of the Study……………………………………………………………...6
1.9 Limitations of the Study……………………………………………………………….6
1.10 Organization of the Study.……..……………………….
………………….................7
1.11 Operational Definitions……………...………………………………….....................7

CHAPTER TWO……………………………………………………………………………...8
Review of Related Literature…………………………………………………………..…...8

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 2.1 Introduction.…..……………………………………………………………..………..8
2.2 Overview of Incentive Schemes……………………….…..…………………………8
2.2.1 Incentive Schemes………………………………………………………..……8
2.2.2 Types of Incentive Schemes..……………………………………………….....9
2.2.2.1 Financial Incentive Schemes....………………………………………..10
2.2.2.2 Non-Financial Incentive Schemes …………………………..……….12
2.2.3 Individual Incentives………………………………………………………….13

2.2.4 Group Incentives……………………………………………………………...13

2.3 Purpose of Incentive Schemes……………………………………………………….13
2.4 Conditions for Effective use of Incentive Schemes………………………………….14
2.5 Effects of Incentive Schemes………………………………………………………...15
2.6 Employee Motivation………………………………………………………………...15
2.7 Related Theories……………………………………………………………………...16
2.8 Employee Perception………………………………………………………………....17
2.9 Employee Performance…….…………………………………………………............18
2.10 Empirical Review Related to the Study……………………………………………. 20
2.11 Conceptual Framework……………………………………………………………...25

CHAPTER THREE………………………………………………………………………….26
Research Design and Methodology……………………………………………...............26
3.1 Introduction………………………………………………………...………………...26
3.2 Research Approach…………………………………………………………………..26
3.3 Research Design……………………………………………………………………...26
3.4 Target Population……………………………………………………………..……...27
3.5 Sample Technique and Sample Size……………………………………………........27
3.6 Data Collection Method and Procedures……………………………………………..28
3.6.1 Primary Data…………………………………………………………………....28
3.6.2 Secondary Data………………………………………………………………....28
3.7 Variables of the Study ……………………………………………………….............29
3.8 The Research Instrument……………………………………………………………..29
3.9 Validity and Reliability……………………………………………………………....29

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 3.9.1 Validity Test……………………………………………………………………29
3.9.2 Reliability Test…………………………………………………………………30
3.10 Method of Data Analysis……………………………………………………………30
3.11 Ethical Consideration…………………………………………………………..…...30

CHAPTER FOUR...………………………………………………………………………….31
Data Presentation, Analysis & Interpretation…………………………………….............31
4.1 Response Rate of Respondents…………….…………………………………………31
4.2 Reliability Test……………………………………………………………………….32
4.3 Demographic Characteristic of Respondents…………….…………………………..32
4.4 Descriptive Analysis……..…………………………………………………………..35
4.4.1 Mean and Standard Deviation………………………………………………….36
4.5 Normality Test………………………………………………………………………..41
4.6 Multicollinearity……………………………………………………………………...41
4.7 Inferential Analysis…………………………………………………………………..42
4.7.1 Person Correlation Analysis…………………………………………………....42
4.7.1.1 Correlation Coefficient Analysis…………….……………………… 43
4.7.2 Multiple Regression Analysis……………………………………………….....44
4.7.2.1 Regression Analysis……………...…………………………………. 44
4.7.2.2 Hypothesis Test……………………………………………….….......46

CHAPTER FIVE……………………………………………………………………………..48
Summary, Conclusion & Recommendation……………………………………..................48
5.1 Summary of Findings………………………………………………………………...48
5.2 Conclusion……………………………………………………………………………49
5.3 Recommendations…………………………………………………………………....51
5.4 Suggestion for Further Research……………………………………………………..52

References.
……………………………………………………………………………....53Annexes….
…………….………………………………………………………………...57

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 CHAPTER ONE
INTRODUCTION
1.1 Background of the Study
Human resourceis now seen as the primary resource of a company’s competitive advantage.
Therefore, the way people are treated increasingly determines whether an organization will
prosper or even survive. To ensure that people are treated fairly, organizations are
acknowledging that they need to establish an equitable balance between employee
contribution to the organization and the organization’s contribution to the employee. The
main objective of company incentive scheme is to attract, retain high performance employee,
motivate, satisfy and get maximum employees’ performance that helps owners pursue their
interests, by achieving higher outcome and better quality. Incentives are often used by
organizations to encourage their employees to work hard (Armstrong & Taylor, 2014).

Compensation is integral and utmost part of any organization and the management
periodically and annually examines it in detail. The compensation comprises incentives,
salary, bonus and other benefits that a firm has to give to their workers. In the 21 st century the
work scenario has been changed, the employee not only demands monetary rewards but extra
benefits also. Satisfied employees with their work and salary are more motivated and they
work harder because they know that after completing a certain level of goals they would be
rewarded. Dissatisfaction from job and incentives demotivate the employee that lead to
increasing in absenteeism, and job turnover rate in the organization (Decenzo & Robbins,
2006).

Currently, organizations are operating in a very dynamic and highly competitive environment
to remain relevant in the market and they are expected to respond quickly to ever changing

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customer demands (Najanja, Maina and Najagi, 2013). Incentive schemes are expected to
improve interpersonal relationships, job satisfaction, customer satisfaction, internal processes
and the organization’s innovation and improvement activities. All of which should produce
lasting effect on company performance(Carolina, 2010).

Incentive systems refer to performance linked compensation paid to improve motivation and
productivity of employees. They are designed to stimulate human efforts for improvement in
the present and for the future goals.Incentives are used by organizations in order to reach
certain goals, encourage a certain behavior and team-spirit for collective awards. Incentive
systems are not universally applicable, but are likely to play a role in enhancing individual
effort or performance where the conditions and the scheme designed are right (Manjunath
and Rajesh, 2012).

Motivation begins with the realization that individual have needs or expectations that they
want to achieve. These needs become a driving force to accomplish desired goals. Fulfilling
the desired goals gives a sense of accomplishment or satisfaction which ultimately leads to
performance and productivity. As a result company incentive scheme is influenced by the
need of its employee’s to get the desired outcome on employee’s satisfaction, motivation and
performance (Armstrong & Taylor, 2014).

The basic focus here is motivation done by offering incentive to employees. Though
incentive may be in different format, well-designed staff incentive schemes can have positive
and powerful effects on the productivity, efficiency and quality of company operations.
Conversely, poorly developed schemes can have serious detrimental effects. Incentive
schemes must be transparent so that staff members affected should be able to easily
understand the mechanics of the calculation (Wiley, 1997). Thus, the system should not be
overly complex and should contain as many objective factors and as few subjective variables
as possible.

Employee perception is a factor that can make a huge difference in the quality of the
workplace. Perception is the process of people use to make sense out of the environment by
selecting, organizing and interpreting information from the environment(Daft, 2000).

Employee performance refers to the outcome, accomplishment of work as well as the results
achieved, which is linked to the strategic goals of the organization, customer satisfaction and
economic contributions. Armstrong continues to indicate that performance has to be managed

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by taking systematic action to improve organizational, team and individual performance
(Armstrong, 2009).

In order to for Nyala to survive this situation it should retain quality human resources at all
levels that can plan as well as execute the plan. Effective incentive schemes can help an
organization to achieve its business objectives by attracting and retaining competent people.
In doing so, Nyala can maximize its retention and attraction capacity to receive maximum
contribution from its staff.

This study focused to determine the effect of incentive schemes on employees’ performance
in Nyala Motors S.C. financial and non-financialincentives are thetools to motivate the
employees to be engaged with in betterperformance in their organization.
1.2 Background of the Company
Nyala Motors S.C. was established in April 1973 in line with the commercial code of
Ethiopia by five founder members with a registered capital of Birr 50,000.00. When the
company was set up in 1973 it began its operation with the sales of Datsun automobiles and
today it has become Exclusive Distributor for world class brands in Ethiopia
representingNissan Motor Co. Ltd, UD Trucks Corporation, UniCarriers Forklifts Co.
Ltd, VE Commercial Vehicles and Macpower Automotive Battery.

Nyala Motors is operating in Addis Ababa and its five branch offices in the major regional
cities of the country (Bahir-Dar, Dire-Dawa, Hawassa, Jimma and Mekele) and is thus well
represented for both sale of vehiclesand machineries and aftersales business throughout the
country.

Nyala Motors S.C. is currently operated in three types of business services that rendered by
the Company (3S),where 3S stands forSales (vehicles and machineries), Sales (spare parts)
andSales (service/maintenance)to give the best service to its customers.

Vision
“To be the leading national assembler and distributor of superior quality Vehicles, Trucks and
Machineries supported by reliable aftersales service”

Mission
“We strive to be customer oriented national company that is socially responsible and can
bring growth through delivery of better products and services”

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Values
• The success of the company should be measured by the contribution it gives to
Shareholders, Employees, Government and Community.
• Our company’s motto is safety and quality comes first
• Working towards customers satisfaction
• Team work

Organization
Nyala Motors S. C. has a total of 254 employees at the end ofDecember 31, 2017. The
internal organizationof company consist of four divisions and seven departments that enables
the company to give the best service to its customers. In line with the company’s commitment
to be close to its customers and avail modern aftersales facility it has established five
branches in five corners of the country. Following the establishment of branches and sub-
dealers network, the customers have been privileged to have easy access to genuine spare part
sales and maintenance services provided by the company.

1.3 Statement of the Problem

In every organization human resources are the most valuable assets. One of the core
competencies inorganization is depending on the acquired human resources.One of the most
important tools at the hand of any business management to attract and retain competent
human resource is administering effective incentive schemes.Well designed and implemented
incentive schemes can significantly enhance employee performance through improving their
morale, provision of job security and motivation among others (Holtmann, 2005).

The study on employee motivation states thatmotivational incentives can produce better
employee performance. In essence, few of thesestudies are supported by an explanation of
how incentives in work place affect employeeperformance (Torrington 2008)

Incentives are important in motivating and satisfying the need of employees to be productive
and perform well, employees leave the company due to the fact that employees are not
motivated enough and low performance becomes the end result of the company.

In today’s competitive organizational world having a satisfied workforce so as to fulfill the

organization’s mission or goal is vital. As of every organization the company’s survival in a

16
competitive automotive industry is by having a satisfied workforce. One of the means to
create and retain a satisfied workforce is through installing attractive, fair and equitable
incentive system or practices.

Currently, most employees of the company are discussing informally about the incentive
schemesat hand and the researcher conducted a survey on the company’s incentives and
found that the respondents were not satisfied with the absence of commission and share
ownershipandthey are also concerned about their opportunity for career development
(promotion) and training, because the promotion and the training strategy of the company is
not fair, clear and justifiable. Even if the company promises to maximize the development
and upgrading of its employee’s skill and knowledge, it seems that it is not applicable as
promised.

The annual attrition rate of the company 8% for the year 22 employees were resigned from
the company within one fiscal year (HR department report, Jan, 2016), those employees who
left the company for a variety of reasons, but they are more likely to leave potential
employees adversely affecting the competitiveness of the company. According to the
problems associated with assumptions, this study is sought to assess and examine“The effect
of incentive schemes on employee performance” in the company, by emphasizing on
financial and non-financial incentives variables”.

Therefore, the purpose of the study was to assess and examinethis specific gap and prompts
the research questions on employee incentive schemes at NyalaMotors and scrutinize its
influence on employee performance.

1.4 Research Questions

Based on the above stated problems the study attempts to address the following research
questions.
 What is the perception of the employees on the incentiveschemes practices?
 What is the relationship between incentive schemes and employee performance?
 What is the effect of an incentive schemes on employee performance?

1.5 Objective of the Study

The main objective of the research was to assess and examine the incentive schemes of the
company and conducted study their relationship with the employee performance.

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In summary the objectives of the study were to
 To assess the employees perception towards the incentive schemes practices.
 To examine the relationship between incentive schemes and employee performance;
 To determine the effect of incentive schemes on employee performance;

1.6 Research Hypothesis

Hypothesis is a tentative explanation that accounts for a set of facts and can be tested by
further investigation. In order to address the objectives of the study and deal with the research
questions, the following hypotheses were formulated.
H1: There is a positive and significant relationship between financial incentives and
employee performance.
H2: There is a positive and significant relationship between non-financial incentives and
employee performance.
H3: The perception of incentive schemes has a significant and positive influence on employee
performance.

1.7Scope of the Study

The scope of the research focused on managerial, supervisory, sales, technical (technician)
and professional support staff working in the head office and its five branch offices (Bahir-
Dar, Dire-Dawa, Hawassa, Jimma and Mekele) in the main cities of regional states.
However,clerical, non-clerical, junior staff and those newly employed staff who are on
apprentice program were not included in the study. Therefore, this study cannot cover all
aspects of incentive schemes on the employee performance. This is due to time and other
resource constraints that compelled the researcher not to conduct in other automotive
companies in Ethiopia.

1.8Significance of the Study

Organization can make a difference if they have qualified and competent work force who are
motivated for work. Hence, owners and leaders have to be aware of that their employees are
incentivized and motivated properly to bring the intended purpose of their organization.

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Having the above in mind the study shall add valuable insights to the existing practices and
based on the research findings the company may improve its existing reward and
performance management practices. In addition it is hoped that the study will provide
important information and serve as secondary data for further research on the topic.

1.9 Limitations of the Study

The study focused onlyin one company which is Nyala Motors S.C to examine the effects of
incentive schemes on employee performance is the main limitation of this work, which may
hinder the generalizability of the study findings in other automotive industry. While the study
relates to the incentive packages that might affect employees’ job performance, it has only
focused on eight (four for financial and four for non-financial) dimensions. A study might be
incorporating a range of additional incentive dimensions, which are related with financial and
non-financial types, might have yielded a better understating of its effect on employees’
performance.

The other major problem was lack of awareness among the respondents to fill out
questionnaires with due care and return them on time. Some employees were not willing to
fill out questionnaires. These were the challenges that the researcher had faced.
1.10Organization of the Study
The study paper has organized in five chapters i.e. Chapter onepresented the background of
the study and company, statement of the problem, research questions, objectives,
significance, and scope of the studyand definition of terms. Chapter two presents the
literature review related to the topic under study.It further presents the theoretical concepts,
empirical literature studies, the conceptual framework and the hypothesis of the study.
Chapter three deals with the research methodologies, which include research approach,
design, population, sample technique and sample size, data collection and instrument, data
analysis method and research variables in the study. Chapter four discusses the empirical
findings of the study that includes data presentation, analysis and interpretation. Based on the
findings of the study, the fifth chapter presents summary, conclusion and recommendation of
the study.

1.11Operational Definitions
The following operational definitions were used for the purpose of this study.
[

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Incentive: Something that motivates employees to achieve certain objectives or meet a
target.
Compensation: The results or rewards that the employees receive in return for their work.
Rewards: Recognition to employees for their achievements and contributions.
Incentive Schemes: Amechanisms that has been designedto recognize some specific change
in behavior.
Financial Incentives: Money based rewards given when an employee meets or exceeds
expectations.
Non-financial Incentives:Acompensation given in a transaction which does not involve
cash.
Motivation:The realization that individuals have needs or expectations that they want to
meet.
Employee Performance:A person executes their specific job duties and responsibilities well.
Employee Perceptions:An individual gives meaning and interpreting to the work
environment.
Performance Based Incentive: Any incentive scheme that seeks to link pay to individual or
group performance based on pre-established criteria and goals.

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 CHAPTER TWO
REVIEW OF RELATED LITERATURE
2.1 Introduction
The chapterprovides the literature review of all findings related to this research. The
theoretical foundation has explained on the theory that is closely related with this research.
Also, a review of past empirical studies which is related to this research topic is also included
in this chapter. The proposed conceptual framework or research model and hypothesis were
developed.

2.2Overview of Incentive Schemes

Compensation is integral and utmost part of any organization and the management
periodically and annually examines it in detail. The compensation comprises incentives,
salary, bonus and other benefits that a firm has to give to their workers. In the 21 st century the
work scenario has been changed, the employee not only demands monetary rewards but extra
benefits also. Satisfied employees with their work and salary are more motivated and they
work harder because they know that after completing a certain level of goals they would be
rewarded. Dissatisfaction from job and incentives demotivate the employee that lead to
increasing in absenteeism, and job turnover rate in the organization (Decenzo & Robbins,
2006).

2.2.1 Incentive Schemes

Incentive schemes as defined by Graffin and Ebert (1993), are special pay programs designed
to motivate high performance. Incentive schemes attempt to link at least a portion of pay to
job performance to encourage higher productivity. Incentives, as often called, should be
aligned with the behaviors that help achieve organizational goals or performance. Incentives

21
are either individual or group (organization wide). In this study, financial and non- financial
incentives are designed to motivate employees to improve their performance, to increase
effort and output and by producing better results expressed in such terms as objectives for
profit, productivity, sales turnover, cost reduction, quality customer service and on time
delivery.

Incentive schemes relate compensation to productivity. A primary purpose of an incentive

scheme is to encourage greater productivity from individuals and work groups. The term
incentive refers to something that intends to ignite one and/or calls for greater effort to act in
a given manner. According to Hicks & Adams (2003), incentives are mechanisms aimed at
achieving a specific change in behavior. Whereas performance refers to how well an
employee fulfils assigned task through effort and skill, an incentive refers to an inducement
for a desired action. Incentive pay is a form of compensation given to employees upon
attainment of some form of job performance (Armstrong, 2009).

According to Torrington, Hall & Stephen(2008), Incentive is here described as an element of

payment linked to the working performance of an individual or working group, as a result of
prior arrangement. This includes most of the payment by results schemes that have been
produced by work study, as well as commission payments to sales people, skill-based pay
schemes and performance related pay schemes based on the achievement agreed objectives.
The distinguishing feature is that the employee knows what has to be done to earn the
payment, though he or she may feel very dependent on other people, or on external
circumstances, to receive it.

Incentives are designed to encourage performance of individual’s regardless of the different

type of incentives form used. Incentives play an active role in pushing forward individual’s
capacity and moving abilities, motivating them to develop their skills, and balance between
organization requirements and the individual needs which enhance the organization
performance efficiently and effectively (Marwan, 2012).

Incentives are used by organizations in order to reach certain goals, encourage a certain
behavior and team-spirit for collective awards. Incentive systems are not universally
applicable, but are likely to play a role in enhancing individual effort or performance where
the conditions and the scheme designed are right (Manjunath and Rajesh, 2012).

22
Organizations use different type of incentive schemes to motivate employees. Incentives are
designed to get the maximum performance from the employees and help retain the most
productive among them. Incentives are divided into financial incentives and non-financial
incentives which is also known as monetary or non-monetary incentives (Luthans, 2003).

An incentive is something that motivates an individual to perform an action. An incentive

program is a formal scheme used to promote or encourage specific actions or behavior by a
specific group of people during a defined period of time. Incentive programs are particularly
used in business management to motivate employees, and in sales to attract and retain
customers. All businesses use pay, promotion, bonuses or other types of rewards to encourage
high levels of performance. There would almost certainly be a positive effect on motivation,
especially if there is already an incentive scheme in place for employees (Holtmann, 2005).

2.2.2 Types of Incentive Schemes

Generally, incentive schemes are classified into two types: financial incentive and non-
financial incentives which is also known as material or non- material incentives. Material
incentives according to Hongoro and Normand (2002), are those provided for specific group
of workers to motivate them for a specific behavior. Non-material (non-financial) incentive
schemes on the other hand are directed at moral motivation to serve in the interest of the
community. However, classified incentives into individual incentives and group incentive
schemes. For this research, the following specific incentive programs are relevant to
organizations to motivate the employees:

2.2.2.1 Financial Incentive Schemes

Financial incentives mean the amounts paid to employees, either in the form of a lump sum
or in the form of monthly payments including all additional income for the individual. They
are considered the oldest forms of incentives which characterized by quick and immediate
form that make individuals feel of an immediate feedback of their effort.Money whether it is
in the form of wages, piecework or any other incentive pay, bonuses, stock options, company
–paid insurance, or any other things that may be given to people for performance is
important. The way to ensure that money has meaning, as a reward for accomplishment and
as a way of giving people pleasure from accomplishment, is to base compensation as much as
possible on performance (Pamela, 2015). The following are the mostfinancial incentive
schemes:

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Bonus Incentive: Bonus incentive is a payment on the accomplishment of planned specific
objectives. The intent of this incentive scheme is to influence certain behaviors towards the
attainment of goals or set objectives. Once the objectives are met, the payment is made
(Gomez-Mejia, 2014).
Cash Incentives: This is payment for performance that meets established criteria. Employees
are paid certain sum of money or savings bond. Successful suggestions, for example, are
recognized with a sum of money equal to the fraction of the cost of the savings attributed to
the suggestion.
Piece Rate: Under this incentive scheme, a uniform price is paid per unit of production.
Employees may therefore be compensated according to the number of pieces they produced
or processed. Compensation is therefore directly proportional to the level of productivity or
results obtained. The scheme is easy to calculate and employees may determine or predict
their rewards in the short term and regulate their pace of work in accordance with the level of
compensation they want to attain (Ugwu Ude and M.A.Coker, 2012)
Commission: Used typically with sales people, commissions are incentive compensation
based on a percentage of total sales. A good number of sales people work on a salary (base
pay) plus commission. Others work on a straight commission basis only. Commission
according to (Armstrong, 2009) is intended to act as an incentive, a reward and a means of
recognizing achievement. A commission only incentive scheme provides a sales person for
example, with incentive payment based on a percentage of the sales turnover they generate,
while a base salary plus commission scheme provide for a proportion of total earnings to be
paid in commission, and the rest in a fixed salary.
Profit Sharing: Profit sharing is an incentive compensation plan that results in the
distribution of a predetermined percentage of the company’s profits to employees. This plan
is used to integrate the employee’s interests with those of the company. It is the payment to
eligible employees of sums in the form of cash or shares related to the profits of the company
during a specified period of time(Nwachukwu, 2009). This scheme is claimed to increase
employees’ commitment to their company by linking pay to profit and hence improve the
level of mutual interest. A profit sharing plan is designed to pay out incentives when the
company is most able to afford it and it may come in the form of current distribution plan,
deferred plan and combined plan.
Gain-sharing:(Armstrong, 2009) emphasizes that gain-sharing is a formula- based company
or factory wide incentive plan that provides for employees to share in the financial gains
resulting from increases in added value or another measure of productivity. Gain-sharing

24
plans (also known as productivity incentives) generally refer to incentive plans that involve
many or all employees in a common effort to achieve a company’s productivity objectives.
Gain sharing aims to relate the payouts much more specifically to productivity and
performance improvements within the control of employees.
Golden handcuffs: Sometimes called retention or loyalty incentives, golden handcuffs are
used by a company to retain talented employees by demonstrating that they are valued for
their contributions and by working fairly and consistently. Golden handcuffs make it difficult
and costly for an employee to leave the organization. Golden handcuff packages include
share options for managers, high salary scale, and high retirement benefits. The standard
established by this incentive scheme is too high for any other company to meet up. This is
why the scheme is called “golden or executive handcuff”; it ties the employee fully to the
organization. This scheme is one of the recent incentives provided to employees in many
private organizations.
Share Ownership: This plan intends to make employees co-owners of the company. It
creates a provision for employees to have a stake in the company and longer term
compensation by giving them options to buy shares at a future date for their current market
price. Stock options are motivational to employees because they confer on employees the
right to buy the company’s stock at a specified price.

The individual gains several psychological and social benefits as a result of enhancing his/her
purchasing power to satisfy his/her needs of goods and services. But financial incentives
alone are not sufficient unless assisted by other types of incentives. Their effects are limited
to satisfy the biological needs of individuals and have a little impact after it reaches the limit
of needs. Therefore individuals are not seeking to increase production for additional financial
gains, thus cannot be financially motivated to contribute in increasing production except for a
certain amount based on their efforts (Marwan, 2012).

2.2.2.2Non –Financial Incentive Schemes

Non-financial incentives are those related to aspects of psychological needs, the increased
attention to this aspect came after the emergence of human relations theories. Those
incentives are based on respect of a human being who has feelings, hopes and aspirations. It
could be in the form of participate in decision-making, training, career development
(promotion) certificates of thanks and appreciation (Marwan, 2012). Specifically, the
following are the major non-financial incentive schemes:

25
Recognition: Employee recognition as an incentive, offer relatively low cost but high-impact
means to reward to employees. This recognition could be done by holding annual dinners,
luncheons, banquets etc…at which high-achievers or performers are celebrated. Other
recognition techniques include the distribution of T-shirts, certificates and gold nameplates.
Sometimes high performing employees are featured in organizational in house newsletters
and in some cases are the subjects of press releases.
Career Development (Promotion): A movement of a position in which responsibilities and
presumably prestige are enhanced and empowerment is also the process which enables
employees to set their own work goals and solve problems within their sphere of
responsibility and authority can be considered as incentives.
Training.The provision of a formal training scheme is important. As Herzberg stated,
without training, workers will not be able to fulfil their potential. Training can be on-the-job,
learning by doing, or off the job, such as studying at a local or abroad training institutes. On
the job training has costs such as management or supervisor time spent training, and potential
reduction in quality of output. Off the job training, means lost production, and disruption,
also the newly qualified worker may seek to use his qualifications to seek better employment
elsewhere.
Working Conditions: A positive working environment is an important element inefforts to
recruit and retain staff. Thisincludes providing a safe working environment for staff and
proactively responding toemerging risks, as well as creating a positive organizational culture.
In this sense,every member of an organization in the way that they deal with their own
workdemands, their colleagues and their customers can play a role in providing a
positiveenvironment where people will want to work.

Special Opportunities: Available records suggest that management in some organizations

used special opportunities as incentive schemes. These special opportunities include the
chance to experience work autonomy and clarity of roles andresponsibilities, job security,
sabbatical and study leave, recreational facilities, favored assignments, flexible working
hours, coaching and mentorshipcan be considered as non-financial incentives to employees

2.2.3 Individual Incentives: Under an individual incentives mechanism, there is a direct link
between individual performance and remuneration. Such incentives can lead to a rather
narrow focus, however, and may reduce staff members’ intrinsic motivation or could promote
unhealthy competition, furthermore, in some situations it is hard to distinguish properly
between individual and group performance, which makes it difficult to design and implement

26
a scheme that is transparent and fair, individual incentive schemes are often used for credit
officers. (Holtmann, 2005).

2.2.4Group Incentives:A group incentives scheme is designed to promote effective

teamwork, as the bonus is dependent on the performance and output of the team as a whole.
Under group incentive plan, each employee is paid incentive on the basis of collective
performance of his/her group to which he belongs. Within the group, each employee gets an
equal share of the incentive.Incentives help to drive performance by influencing important
individual and organizational behaviors. Incentives therefore seek for levels of reward that
vary depending on the contribution of the individual, team and operating organization overall,
business success. Incentives can be used to reward targets which may be measured by quality,
by quantity or by both (Hall, 2004).

\ 2.3 Purpose of Incentive Schemes

According to Caruth, Middlebrook and Frank (1982), the general purpose of incentive
schemes is to increase productivity in the organization. By relating compensation to output,
an employer is attempting to induce workers to turn out a greater volume of work thereby
lowering the cost of producing a single unit of output. Specifically, the purpose of incentives
to both an employee and the organization is to:
 Improve motivation
 Tie pay to performance
 Recognize differences in employee performance
 Increase competition among employees
 Attract and retain productive employees
 Reduce absenteeism
 Reduce idle time
 Reduce or control costs
 Utilize equipment more effectively
 Relate increases in compensation to increases in productivity
 Avoid additions to employees
 Create uniform processing costs
 Direct efforts toward achieving organizational objectives and so on

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2.4Conditions for Effective use of Incentive Schemes
Caruth (1986) stated that incentive schemes are not a panacea for an organizations
productivity problems are not they universally applicable to all types of work organizations.
Effective use of incentives hinges upon a number of conditions. In general, these conditions
are: the nature of work itself, control systems and the human responses to incentives.
Specifically, the following are the conditions necessary for the administration of an effective
incentive schemes:
 Direct relationship between effort and output.
 Readily identified units of output
 Even and continuous work flow
 Standards of performance
 Quality standards
 Measurement systems
 Opportunity for cost reduction
 A good unit cost system
 Sufficient financial inducement
 Reasonable time spans for payment
 Reliable stable technology
 Selective application
 Top management commitment
2.5 Effects of Incentive Schemes
The effects of incentive schemes as emphasized by Rajkumar (1996) can be organized under
the following categories:
 Sociological effects - Incentives assemble employees into various social groups,
serving as group motivators. Group incentive plans encourage employees to be
acknowledged as significant partners of a team. The teamwork tends to discourage
marginal performance by any member who may be enticed to be aberrant. It also
eases individual enmity.
 Economic effects - Greater productivity outcome from incentive plans will lead to
lower consumer cost, increased purchasing power, and improved living standard of
the employees. Incentives also encourage the employees to offer suggestions for

28
 improvement, discover different tools, methods, and equipment for more efficient
operations to increase productivity and profitability.
 Effect on employees - Employees on incentive plans will provide greater attention
against interference or stoppage caused by faulty equipment, material shortage or lack
of production standards and report conditions that lead to unhealthy industrial
relations.
 Effect on cost reduction - The design of incentive plans must allow for changing
technologies and focus on all factors of production and not just labor alone. It should
not ignore opportunities for cost reduction in areas such as efficient utilization of
materials, supplies, and cycle time.

2.6Employee Motivation
Herzberginvestigated the question “what do people want from their jobs?” through this
question, Herzberg identified the factors that lead to extreme satisfaction (motivators) and
extreme dissatisfaction (hygiene). Factors leading to satisfaction such as achievement,
recognition, responsibility, the work itself, advancement and growth are also called intrinsic
factors, whereas those leading to dissatisfaction, when not present, such as company policy
and administration, supervision, interpersonal relations and working conditions are called
extrinsic factors. Herzberg argued that there are two distinct human needs portrayed, namely
as physiological need that can be fulfilled by money, for example to purchase food and
shelter and the physiological need to achieve and grow and this need is fulfilled by activities
that cause one to grow (Pamela, 2015).Motivation factors are related to work content while
hygiene factors are related to work environment.

Motivation is initiated by the conscious or unconscious recognition of unsatisfied needs.

These needs create wants, which are desires to achieve goals or obtain something. Goals are
then established which will satisfy these needs and wants and a behavior path is selected in
which it is expected and will facilitate the achievement of the goal. It is assumed that if the
goal is achieved the need will be satisfied and the behavior is likely to be repeated, next time
a similar need emerges. If the goal is not achieved the same action is less likely to be
repeated(Armstrong, 2009).

Maslow’s theory of motivation stated that employees to satisfy five need levels: physiological
needs, security need, belongingness need, self-esteems and self-actualization. Behavior is
therefore motivated by unsatisfied needs (Chukwuma & Obiefuna, 2014).

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Employee motivation forms the foundation that enables the organization to raise the
confidence of staff, give them a unified approach to workmore aggressively, help staff to
identify and capitalize on individual strengths, match training emphasis to practical needs of
the organization,and cultivate lines of communication with fresh ideas and innovation
(Alexander, 2002).

Incentives must be affordable, transparent and appropriate to thebusiness and the jobs that
they relate to. It is worth introducing them afterconsulting with staff or unions. Managers
should therefore look at whetherother incentives will increase staff motivation. For instance,
in a salesenvironment an employer may wish to offer extra pay or benefits whentargets are
achieved (Hall, 2004).

2.7Related Theories
Although several theories explaining the effectsof incentives on effort have been offered.
These four theories represent thepredominant explanations offered for the effects ofincentives
on effort direction, perception, duration,and intensity.The theories are expectancytheory,
equity theory,agency theory (via expected utility theory) andgoal-setting theory.

Expectancy theory (Vroom, 1964) proposesthat people act to maximize expected

satisfactionwith outcomes. Expectancy theory posits that anindividual’s motivation in a
particular situation is a function of two factors, the expectancy aboutthe relationship between
effort and a particular outcome(e.g. a certain level of pay for a certain level ofperformance),
referred to as the ‘‘effort-outcome expectancy’’ and the valence (attractiveness) of the
outcome. The motivation created by thesetwo factors leads people to choose a level of
effortthat they believe will lead to the desired outcome.

Equity theory(Adams, 1963) suggests that employee perceptions of what they contribute to
theorganization, what they get in return, and how their return-contribution ratio compares to
othersinside and outside the organization,' determine how fair they perceive their
employment relationship to be. Perceptions of inequity are expected to cause employees
totake actions to restore equity. Unfortunately, some such actions (e.g., quitting or lack
ofcooperation) may not be helpful to the organization.

Agency theory (Baiman, 1982, 1990; Eisenhardt,1989), via its assumption that
individualsare expected utility maximizers, adds furtherstructure in explaining the effects of
incentives on effort. Specifically, a fundamentalassumption of agency theory is that
individualsare fully rational and have well-defined preferencesthat conform to the axioms of

30
expectedutility theory. Further, individuals are presumedto be motivated solely by self-
interest, where self-interestis described by a utility function that containstwo arguments:
wealth and leisure. Individualsare presumed to have preferences for increases inwealth and
increases in leisure. Thus, incentivesincrease an individual’s desire to increase
performanceand concomitant pay. In turn, this desiremotivates individuals to exert costly
effort becauseincreases in effort are presumed to directly lead toincreases in expected
performance.

Goal-setting theory (Locke & Latham, 1990)proposes that personal goals are the
primarydeterminant of and immediate precursor toeffort. In other words, personal goals are
the stimulantof the incentive induced effort increasesdescribed above. In particular, research
indicatesthat specific and challenging personal goals lead togreater effort than goals that are
vague or easy orno goals at all. Challenging goals lead to greatereffort than easy goals simply
because people mustexert more effort to attain the goal. While goal-setting theoryallows for
expectancies to affectpersonal goals, evidence shows that assigned goalshave a much larger
effect on personal goals thando expectancies. Consequently, goal-setting theory providesa
description of the effect of incentives oneffort that goes beyond their effects on
expectanciesand outcomes.

2.8Employee Perceptions
According to Daft (2000), perceptions are the way people organize and interpret their sensory
input, or what they see and hear, and call it reality. Perceptions give meaning to a person‘s
environment and make sense of the world. Employee perception is a factor that can make a
huge difference in the quality of the workplace. When employees view the employer, their
work, and their relationships within that workplace as being positive, there is a good chance
the employee will be productive and remain with theemployer for a long time. Negative
perceptions of the company and the working environment can cause qualified employees to
seek opportunities elsewhere.

Concerns about the accuracy of management perception of a direct link between pay and
individual productivity will motivate employees to higher levels of performance. According
to Thorpe and Homan (2000), such a view flies in the face of research which emphasizes the
importance of a whole complex of factors when understanding motivation. Furthermore, even
if this perception of a direct link between pay and productivity were valid, it is doubtful that it

31
would remain unaffected by the influence of workplace pressures, both social, economic and
political.

2.9Employee Performance
Employee performance is referred to as whether a person executes their job duties and
responsibilities well. Performance is a critical factor in organizational success. The maximum
level of workers performance happens when they feel their endeavor is rewarded and
compensated completely. There are many factors that affect employee performance like
working conditions, employee and employer relationship, training and development
opportunities, job security, and company‘s overall policies and procedures for rewarding
employees.

According to Armstrong (2009), employee performance refers to the outcome,

accomplishment of work as well as the results achieved, which is linked to the strategic goals
of the organization, customer satisfaction and economic contributions. Armstrong continues
to indicate that performance has to be managed by taking systematic action to improve
organizational, team and individual performance; where individual performance management
process is associated with both financial and non-financial incentives. The author concludes
that Organizations are obliged to meet the needs of their stakeholders, in this case employees,
by rewarding their employees equitably according to their contribution.

Measuring performance is of great importance to an incentive plan because it communicates

the importance of established organizational goals. “What gets measured and rewarded gets
attention” (Bohlander et al, 2001). In discipline of human resource management, different
writers suggest the following indicators for measuring employee performance and they
include: quality that can be measured by percentage of work output that must be rework or is
rejected; Customer satisfaction that can be measure by the number of loyal customers and
customer feedback. Also, timeliness, measured in terms of how fast work is performed by the
employee when given a certain task; absenteeism/tardiness/early out observed when
employees absent themselves from the work; and achievement of objectives measured when
an employee has surpassed his/her set targets, he/she is then considered to have performed
well to achieve objectives (Hakala, 2008; Armstrong, 2009).

The management of individual performance within organizations has traditionally centered

on assessing performance and allocating reward, with effective performance seen as the result
of the interaction between individual ability and motivation. It is increasingly being

32
recognized that planning and an enabling environment have a critical effect on individual
performance, with performance goals and standards, appropriate resources, guidance and
support from the mangers all being central (Torrington, Hall & Stephen, 2008).

Individual employee is motivated by different incentives or benefits and it is important to

know how they are motivated and what can satisfy them in order to encourage them to have
right attitudes to work which will invariably enhances employee performance and
organizational productivity. Intrinsic motivators are critical in meeting a person’s needs,
because they describe a pattern of how an individual may behave (Marwan, 2012)

Most important of all is the question of setting standards and monitoring individual
performance. Within a sales environment it is relatively easy to track sales performance, but
with the increasing emphasis on quality and consumer accountability, what quality measures
could the manager introduce for staff to provide the correct cocktail of checks and balances?
What about staff who apparently have no output? Once defined, the manager need to set up
systems to monitor progress. Sometimes the cost of monitoring may outweigh the financial
benefits of higher performance, so how can the manager refine the scheme to deliver a
balanced result and a bottom-line, incremental profit. (Fisher, JohnG., 2000).

Davis (1995) observes that performance management is a joint process that involves both the
management and the employee who identify common goals which correlate to the higher
goals of the institution. Davis further states that when employees are effectively rewarded,
then the organizations will experience increased productivity and improved quality of output.
Similarly, when people are valued, shown trust, listened to and encouraged to do better, they
reciprocate by being responsible and productive. Consequently, commitment and loyalty of
the employees to the organization is enhanced and thereby the organizational culture and
values are developed.
2.10Empirical Review Related to the Study.
A number of studies were conducted to improve understanding of incentive system and the
extent to which its relation on commitment, motivation and performance efficiency.

Miller and Whitford (2006) argued that the role of incentives has expandedconsiderably in
view of the fact that it has been studied rigorously in principal agencytheory. There is a
strong relationship between management incentiveand risk-taking which would subsequently
lead to better firm performance. Therole of incentives on behavior has been well documented

33
in the literatures.Incentives come in the form of financial rewards or other types of incentive-
basedremuneration such as stock option, share ownership, rewards, and bonuses.Employees’
performance is substantially better under incentive plans which aresubstantiated by
supportive innovative work practices.

Palmer (2012) defines incentives as the external temptations and encouraging factors that
lead the individual to work harder; they are given due to the individual's excellent
performance since he will work harder and produce more effectively when he feels satisfied
in the institution. In addition to this, incentives can also be defined as the consideration of the
excellent performance, assuming that the salary is enough to make the worker appreciate the
value of the job that also satisfies his basic needs in life (Palmer, 2012).

Boela (2005) states that, incentives are offered in order to focus theemployee's attention to
the business objectives of the employer, and addthat they are normally used to stimulate
performance and particularly toincrease sales and control costs.

George (2002) says that incentives work best alongside a good payscheme, good working
conditions and other good managementpractices, such as performance management,
appraisals andappropriate communication and training programmes.

According to study financial incentives improved performance over30 per cent compared
with those who did not get incentives. Also other researchers haveconducted similar
empirical studies and found that performance increase in groups withfinancial bonus systems
whereas in control groups’ performance usually stays at thesame level (Petty, Singleton &
Connell (1992), Furthermore Locke et al. (1980), compared individualpay incentives, job
enrichment and employee participation and found that financialrewards are most efficient.

Holtmann (2005) contends that if incentive schemes are to be effective, they must be
accepted by those they target. To assure acceptance, they should be in line with two
principles, i.e. fairness and transparency, according to which employees’ judge their
remuneration. According to the author, fairness and transparency are the two most important
requirements for staff incentive schemes in business organizations. Pertaining to fairness as
Holtmann (2005) mentioned that the goals or reference standards set out for employees must
be attainable, staff members who perform better than others should receive higher
compensation and the compensation system should reflect the hierarchical levels within the
organization.

34
According to Milkovich & Newman (2005), bonus pay is a financial reward given to
employees in addition to their fixed compensation. Bonus pay is the most common form of
cash incentive. Bonuses can be accrued and paid out at different intervals, such as monthly,
quarterly, or annually. Bonus sizes vary between 10% and 50% of the total pay. This pay plan
is also apparently based on individual performance, but bonuses do not increase employees’
base pay and therefore are not permanent.

In most cases, staff incentive schemes are employed to enhance productivity. To analyze the
present staff productivity and thus to appraise the potential for improvement, we could
compare our staff in terms of productivity (e.g. in the number of transactions of counter sales
staff or in the number of stock spare parts of parts sales supervisor, or in the capacity of
branch managers to develop their branch and staff). If there were high disparities, which can
at least partly be explained by disparities in staff motivation, we could further ask how staff
incentives would contribute to a higher overall performance of staff (Carolina, 2010).

Monetary incentives can be defined as the ways of monetary return offered for service
rendered by employees (Kyani, Akhtar & Haroon, 2011; Sorauren, 2000). Examples of
monetary incentive include pay rise, bonus, stock option and etc (Mathauer & Imhoff, 2006).
It can also be further explained as the amount paid to employees, either in the form of lump
sum or monthly payment which makes individuals perceive as an immediate feedback of
their efforts contributed (Al-Nsour & Jordan, 2012).

There are also some studies which have ended up indifferent results. According to these
studies, financial incentives have no effect or havenegative effect on performance. In their
review Camerer and Hogarth (1999),found that in studies researching financial incentives the
most common result was thatfinancial incentives have no effect on mean performance.
Pfeffer’s example also statesagainst motivating effect of money. According to Pfeffer
(1998),Southwest Airlineshave never used financial rewards in order to improve performance
and they arenumber one in productivity in the industry in which financial incentives are
commonlyused. Moreover fixed pay generates more effort thanfinancial incentives paid
based on employees’ performance.

Dan Ariely (2006) stated that employees are paid as per their performance in various types of
jobs, which is usually seen as an enhancing factor for productivity of an employee in
comparison to the employees who are receiving non contingent pays. However,

35
psychological research suggests that excessive rewards can also result in a decline of
performance. Research has been conducted as a set of experiments in the U.S. and in India to
test whether very high monetary rewards can decrease performance. In this research the
subjects worked on were different tasks and received performance-contingent payments that
varied in amount from small to very large relative to their typical levels of pay. With some
important exceptions, very high reward levels had a detrimental effect on performance. These
results challenge the assumption that increases in motivation would necessarily lead to
improvements in performance.

Jeffrey and Shaffer (2007), state that non-financial tangible incentives are effective because
they are veryvisible. Because of visibility, the symbolic value of non-financial tangible
incentives ishigher than other incentives. Another reason for the effectiveness of non-
financial tangibleincentives can be that these incentives are usually distributed right after
performance.Instead in financial incentives’ case it can take months before incentives
aredistributed to employees. In this case reward-compensation relation is not so tight thanin
situation where reward is given right after performance. This can have effect on
motivationand performance. Jeffrey and Shaffer (2007), also state that financialincentives are
easily perceived as part of a basic pay. In this case financial incentivescan lose their
motivating impact. Instead non-financial tangible incentives are reallynoted and employees
perceived them as extra reward. Because of that in some casesnon-financial tangible
incentives can be more effective than financial incentives. Oneproblem in non-financial
tangible incentives is that people like different things (Jeffrey& Shaffer 2007). One can be
motivated through football tickets whereas the othercan find a holiday trip more attractive. It
is challenging for manager to decide whichwould be appropriate incentive in different
situations. Another problem is that at lowerincome level non-financial tangible incentives can
be perceived worthless because ofthe need for money (Jeffrey & Shaffer 2007).

According to Kube et al. (2008), credited more output in non-financial gift as compared to
monetary gifts. Non-financial gifts contribute a great deal to employee satisfaction and this
satisfaction shows long-term results. Kube et al. (2008) also carries the social exchange
phenomenon. In his study, results show the higher impact of non-financial incentives on
social exchange theory compared to monetary rewards. In another study Kube et al. (2006)
describe that financial rewards are beneficial in short-term period and ineffective for long-
term period. He also states that non-financial rewards have a significant and consistent effect
on their satisfaction.

36
In accordance with productivity is the sustained rate at which employees are achieving the
agreed minimum outputs of work as agreed to within an organization, it is the rate at which
goods are produced, especially in relation to the time, money and workers required to
produce them. Holtmann and Grammling (2005) conducted a preliminary research on 86
institutions and found that 83% of the total respondents agreed on the fact that incentive
schemes had a high effect on increasing the productivity of employees. They also said that
many managers use incentive schemes to try to improve productivity. Thus, staff incentive
schemes have powerfuleffects on the staff productivity of the organization and thereby are
able to boost staff performance.

Non-monetary incentives are non-cash benefits given by company to employees to retain,

reward and motivate them for their excellent job performance (Woodruffe, 2006). Non-
monetary incentives are deemed more valuable than monetary incentives as it shows respect
and appreciation on employees’ accomplishment (Gale, 2002). In the research of Nelson
(2001) which is conducted in United States showed that there is a strong bond of relationship
between non-monetary incentives and employees’ job engagement.

According to Houston (2000).Non-financial incentives come in many forms such as gifts,

rewards, travel. Some are more tangible than others since they are visible and/or can be
compared to financial benefits. Less tangible incentives relate for instance to work flexibility,
independence of working, recognition of one’s work, the possibility of advancement. The
value of non-financial material incentives seems to be perceived as a function of
psychological processes

Gomes et al (2003) said that Incentive systems are an important part of organizational
motivation and are central to helping diagnosticians understand the forces that drive the
organization. Organizational incentives refer to both the reason for staff to join an
organization, and the way an organization rewards and punishes its staff. Incentive systems
can encourage or discourage employee and work group behavior. Organizations must
continually seek ways to keep their employees and work groups engaged in their work,
motivated, efficient and productive. An organization’s success can depend on its ability to
create the conditions and systems (formal and informal) that entice the best people to work
there. Also, a good incentive system encourages employees to be productive and creative,
fosters loyalty among those who are most productive, and stimulates innovation.

37
Most researchers have concentrated on the cause and effect relationship of the incentives
schemes andworkplace productivity or organization performance, few writers have bothered
to look behind the scenes at theinternal and external factors that infuse or diffuse life from the
incentives schemes. Some findings that could beapproximated to explain the environments
surrounding applied incentives are those of Towers (1990) andBernadin and Russel (1993).
Towers concluded that factors necessary for success of team incentives are
seniormanagement commitment, employee support/involvement, emphasis on
communications, related HR activities,e.g. training, performance measurement at levels
below corporate, shorter payout periods, operational or blendedrather than wholly financial
measures. Bernadin and Russel (1993) also listed factors such as employees’involvement and
value of money, realistic productivity goals and fair performance measurement as necessary
forsuccessful financial incentives administration.

According to Perry (2006), financial incentives improve task performance significantly, but
effectiveness dependent on organizational condition. Meta-analysis of 72 field studies
indicated that an organizational behavior using monetary incentives improved task
performance by 23% whereas social recognition did so by 17% and feedback by 10%.
However, after combining all the three motivational reinforces, performance improved by
45%. This is a stronger effect on performance than when each was applied separately.
Feedback combined with money and social recognition produced the strongest effect on
performance.

To summarize, the key practical messages of the effect of incentive schemes on employee’s
performance as Armstrong (2009) described that, financial incentives provided by employers
in the form of pay will help to attract and retain employees and for limited periods, may
increase effort and minimize dissatisfaction. Non-financial incentives related to
responsibility, achievement and the work itself may have a longer-term and deeper impact on
motivation. Incentive schemes should therefore include a mix of financial and non-financial
rewards.
2.11Conceptual Framework
Incentives are designed to encourage performance of individuals. Regardless of the incentive
forms, incentives play an active role in pushing forward individual’s capacity and moving
abilities, motivating them to develop their skills and balance between organization
requirements and the individuals’ needs which enhance the organization performance

38
efficiently and effectively. According to (Armstrong & Taylor, 2014) financial incentive
works when a link between effort and reward is clear and the value of the reward is worth the
effort.

This study hasinvestigated all the elements of incentive schemes. The paper has also find out
organizations use incentive schemes as a number one tool to attract and retain their qualified
and key employees and also facilitates them to improve their performance.The conceptual
framework of the study specifies the nature of the study, which is depicted in the
diagrammatic form of Figure 2.1. According to the model, dependent variable is employee
performance and the independent variables are incentive schemes (financial and non-
financial).

Fig 2.1 conceptual frameworkof the study.

Financial Incentives
Bonuses
Profit Sharing
Stock Ownership
Commission

Non-Financial Incentives
Recognition
Career Development
Working Conditions
Training Opportunity
Independent Variables (IV)
Dependent Variable (DV)

Employee Performance

39
Source: The study adopted the conceptual framework (Armstrong & Taylor, 2014).

CHAPTER THREE
RESEARCH DESIGN AND METHODOLOGY
3.1 Introduction
This chapter presents the design and methodology used in the study. It includes the research
approach, design,target population, sampling strategy, the data collection procedures, the
source of data, the instruments used for gathering data, data analysis, issues pertaining to

40
validity and reliability, and ethics and the statistical techniques were used to analyze the
summarized data.

3.2 Research Approach

The study conducted as a quantitativestudy approach to research in order to depict the effect
of incentive schemes on employee performance. According to Burns and Grove (1993),
quantitative survey is the most appropriate one to use if the purpose of an investigation is to
describe the degree of relationship which exists between the variables. Besides, it also helps
in examining and describing the interactions among those variables.Therefore, employees of
Nyala Motors S.C. have been chosen as the statistical population. The choice of this approach
is determined by the fact that this study has attempted to answer questions about the
relationship between incentive schemes and employee productivity.

3.3Research Design
The purpose of the study is to assess and examine the relationship between the incentive
schemes and employee performance. The study is a survey in which data were collected from
the targeted population. According to Singh (2006), research design is essentially a statement
of the object of the inquiry and the strategies for collecting the evidence, analyzing the
evidences and reporting the findings, with the view to address its objectives, the study used a
quantitative methods.

The researchconducted two research designs these are descriptive and explanatory research
designs. A descriptive research design wasapplied to describe the data and characteristics of
the samples in order to understand and systematically describe the incentive schemes of the
case organization and also to identify the most influential variables that affect employee’s
performance. On the other hand, explanatory research also conducted to get an understanding
and identification of the study variables. A research that focuses primarily on the construction
of quantitative data follows a quantitative method. The researcher were not going to develop
theories nevertheless to test research hypothesis that demand the researcher to use numerical
data which is one of the characteristics of a quantitative method.
3.4Target Population
The target population is defined as a collection of elements or objects that possess the
information sought by the researcher (Malhotra & Birks, 2006).The study population was
comprised of 145 representatives of Nyala Motors S.C. was chosen as a unit of analysis for
this study. The specific company wasselected because it is one of the leader automotive
dealer in the country. Target population are employees of the company located in Addis

41
Ababa (head office) and the branch offices (Bahir-Dar, Dire-Dawa, Hawassa, Jimma and
Mekele). All complete lists of employees’relevant data obtained from head office, Human
Resource Department of the company. As at December 31, 2017,a total of 254 employees
were engagedwithin the company in different job position.

3.5 Sample Technique and Sample Size

Sampling technique is used to represent the characteristic of the targeted population so that
the researcher can draw a general conclusion on the entire population. Stratified sampling
technique was used in this research and it is one of the probability sampling techniques. The
used of probability sampling technique is because there is a defined sampling frame for this
research. Therefore, the probability of inclusion for every member of the population is
determinable.As it is stated on the scope of the study, clerical,non-clerical, junior and
apprentices were not included in the study. Therefore, the researcher focused only on
employees who are at the technician level and above. These employees were divided into five
groups based on the position they hold as Managerial, Supervisory,Sales, Technicians and
Professional Support Staff. Depending on this fact, proportional stratified sampling technique
was applied for the study.The researcher believes that, it allows in obtaining a great degree of
representativeness from each strata and the population were adequately represented in the
sample from the strata.According to (Yamane, (1967) to determine the number of elements to
be selected form each stratum the researcher can use a simplified formula for calculation of
sample size, suggestedthat for a 95% confidence level and e=0.05, with a population of
145the size of the sample representatives, 107 respondents were targeted for this research:-

n
Where;
N=Number of population
n= sample
e=standard error at 95% confidence level
Based on this ,the number of sample has been taken from each stratum of the five strata are as
follows.

42
Table 3.1: Target Population and Sample.

Number of TargetedSa
Position Employees Percentage mple
Managerial 18 12% 13
Supervisor/Foreman 26 18% 19
Sales Staff 35 24 % 26
Technincain 42 30% 31
Professional support staff 24 16% 18
TOTAL 145 100% 107

Source for number of employees: (HR Deparemtnet Report, December, 2017).

3.6Data Collection Method and Procedure

The study were incorporated the use of various methods in the process of data collection in a
bid to come up with sound, concrete and credible research findings. The researcher therefore
amalgamated the use of structured questionnaire and documentary analysis in the process of
collecting bothprimary and secondary data.

3.6.1 Primary Data

Primary data was used for better understanding of the issue under the study and collected
from respondents at Nyala Motors S.C.(head office and branch offices), who were assume to
give firsthand information on the subject under study. The self-administered survey
questionnaire was used to collect the data from the respondents.Before beginning actual data
collection, the researcher has briefed the management team and other concerned staff with
regard to the purpose of the research.

3.6.2 Secondary Data

43
Secondary data was gathered from sources like; annual reports, journal articles, internet,
magazines, newspapers and books related to the subject of the study and these were consulted
at length to extract the information required to support the findings from the study
respondents.

3.7Variablesof the Study.

In this study, variables were examined these are the general incentive schemes at the case of
the company. Incentive types which may affect employee’s performance level that was
classified as independent variables (IV) financial and non-financial incentivesand employee
performance as dependent variable (DV).

3.8 The Research Instrument

The research instrument that was used to collect primary data is a five point Likert scale
structured questions that can be used to access the essential data from respondents.Hard
copies of the questionnaires were passed personally to the target respondents while soft
copies of the questionnaires were sent through e-mails to the targetrespondents in the effort to
obtain their responses. The designed instrumental questions includetwo main parts. Part one
is aimed to collect demographiccharacteristic and profile information of therespondents and
parttwo is closed ended aimed to collect independent and dependent variables consisted of 40
(forty) questionswhich were intended to measure the perceptions, the effect and
relationshipbetween incentives and employee performance, using five point Likert scale
anchored by stronglyagree to strongly disagree.Thus, the respondents were requested to select
their ownchoice of the five point Likert scale alternatives in order to specify their level of
agreement or disagreement on each question items.The scale of measurement used for the
study were interval, nominal and ordinal. An interval scale of measurement was based on
ordered interval that are of equal length and zero value is arbitrary, nominal scale of
measurement was applied for categorical data and ordinal scale of measurement was used
based on categorical data that involve on rankings and ordered values. All question items
were attached as annex 1.

3.9Validity and Reliability Test

44
3.9.1 Validity Test
Validity refers to the extent to which data accurately reflects what they are meant to reflect. It
means that the instrument measures what it is supposed to measure. Thus effect of incentive
schemes measurements are adopted from various scholar works. Items in the questionnaire
are prepared using a five point-Likert scale except the demographic items and an additional
comments in related to the study. Maximum effort was exerted to create logical link between
the items in the questionnaire and the objective of the study. The researcher directly
contacted with the staff of the company to collect primary data and he also had a chance to
assess all appropriate sources of information makes the data obtained valid.
3.9.2 Reliability Test
Reliability test was conducted to ascertain the reliability level of the research. The reliability
of a measure indicates the extent to which the measure is without bias and offer consistent
measurement across time (Sekaran, 2003). Cronbach’s alpha is a reliability coefficient that
indicated how well the items are positively correlated to another. The closer Cronbach’s
alpha is to 1, the higher internal consistency reliability (Sekaran, 2003).

3.10Method of Data Analysis

Data analysis is the process of bringing order, structure and meaning to the mass of
information gathered. After collecting all the necessary data, these data were coded and
edited, analyzed and rephrased to eliminate errors and ensure consistency. Data collected
from the respondents were entered into a computer and analyzed with the use of statistical
packages for social scientists (SPSS) Version: 20, which assisted to summarize the coded
data and expedited data analysis.
Data collected from the questionnaireswere carefully analyzed, summarized and interpreted
by using both descriptive and inferential statistics. The descriptive statistics include
frequencies, valid percentages, means and standard deviation. These were used to present the
demographic characteristics of the respondents and incentive schemes practices part of the
questionnaires in a summarized manner.Inferential statistics was computed and used to come
up with conclusion on how representative was the sample to tale about the relations between
financial and non-financial incentives (independent variables) on employee performance
(dependent variable) were made by using Pearson product- Moment Correlation Coefficient
and Multiple regression analysis for the other two objectives that is ‘determining the
relationship between financial and non-financial incentives with employee performance and
the effect of incentive schemes on employee performance’. Hypothesis testing were

45
conducted at 95% confidence intervals and eventually, findings, conclusions and
recommendations were drawn from the entire population.

3.10 Ethical Consideration.

The researcher used data from employees which are collected through self- administer
questioner; permission is obtained from employees. To maintainconfidentiality, the
respondents were informed that the information they provide are confidential and used only
for academic purpose. The respondents were informed not to write their names on the
questionnaire. The data that were collected is kept confidential and the researcher tried to
work on the paper with standard professional ethics.

CHAPTER FOUR

46
 DATA PRESNTATION, ANALYSIS AND INTERPRTATION

This chapter presents the analysis of data from the survey. Once the raw data was obtained it
was coded and entered into the computer program. In addition to this, background
information of respondents were presented in different format.
The Statistical Package for Social Sciences (SPSS) version 20 was used to analyze the data.
Descriptive statistics were used to summarize, organize and simplify the findings in a
systematic way. The result are presented in figures, percentages and tables and the summary
statistics such as means, standard deviations are computed for each incentive schemes
dimensions and employee performance in this study. This is followed by presentation of
inferential statistics based on each hypothesis formulated for the study.

4.1 Response Rate of Respondents

Data were collected from employees of Nyala Motors S.C. Indeed, 107 questionnaires were
distributed to the targeted population across the head office and its five branch offices (Bahir-
Dar, Dire-Dawa, Hawassa, Jimma and Mekele), out of which 96 questionnaires were
completed and returned successfully which is representing 89.7%response rate.

Table 4.1: Questionnaire Distribution and Response Rate.

Questionnaire Questionnaire Response

Position Distributed Completed Rate %
Managerial 13 13 100
Supervisor/Foreman 19 17 89
Sales Staff 26 24 92
Technincain 31 26 84
Professional support staff 18 16 89
TOTAL 107 96 89.7

47
Source: Own Survey, 2018

4.2 Reliability Test

Chronbach‘s alpha is a coefficient of reliability. It is commonly used as a measure of the
internal consistency or reliability of a psychometric test score for a sample of examinees. It
was first named by Lee Chronbach in 1951, as he had intended to continue with further
coefficients. According to Sekaran (2003), if alpha coefficient is below 0.6, the reliability is
weak. Alpha coefficient which ranges from 0.6 to 0.8 is considered to be moderately strong.
If the alpha coefficient is above 0.8, they are considered to be very strong Cronbach’s alpha
values are dependent on the number of items in the scale.

Table 4.2: Reliability Statistics

Sr. No. Dimension Cronbach’s N of
Alpha Items
1 Financial Incentive Schemes .848 16
2 Non-Financial Incentive Schemes .895 16
3 Employee Performance .863 8
4 Reliability Statistics of Total Scale .933 40
Source: Own Survey using SPSS

As indicated in table 4.2 above scale reliability Cronbach’s Alpha coefficients for financial
incentives is .848, for non-financial incentive is .895 and for employee performance is .863
and merged incentives and performance questionnaires .933 respectively. Thus the study also
demonstrates very strong internal consistency and the total Cronbach’s Alpha coefficient is .
933. Therefore, this study demonstrates very strong reliability.

4.3 Demographic Characteristics of Respondents

This section explains the demographic profile of the surveyed respondents. It includes
gender, age, marital status, educational qualification,and years of service,current position and
monthly income.The frequency and the percentage of the respondents profile are summarized
in table 4.3 below.
Table: 4.3: Demographic Characteristics of Respondents

48
No. Variables Frequency Percentage
1 Gender
Male 74 77.1
Female 22 22.9
Total 96 100
2 Age
Below 25 4 4.2
25-35 45 46.9
36 – 45 34 35.4
46 – 55 12 12.5
Above 55 1 1.0
Total 96 100
3 Marital Status
Single 35 36.5
Married 59 61.5
Divorced 1 1.0
Other 1 1.0
Total 96 100
4 Educational Qualification
Certificate 2 2.1
Diploma 22 22.9
First Degree 61 63.5
Master Degree 10 10.4
Other 1 1.0
Total 96 100
5 Years of Service
Below 5 40 41.7
5 – 10 39 40.6
11- 15 12 12.5
16 - 20 5 5.2
Total 96 100
6 Current Position
Managerial 13 13.5
Supervisory 17 17.7
Sales staff 24 25.0
Technician 26 27.1
Professional Support staff 16 16.7
Total 96 100
7 Monthly Income
Below 5,000.00 13 13.5
5,000.00 -10,000.00 34 35.4
10,001.00 – 20,000.00 37 38.5
20,001.00 – 30,000.00 5 5.2
30,001.00 – 40,000.00 4 4.2
Above 40,000.00 3 3.1
Total 96 100

Source: Own Survey using SPSS

49
Based on personal data obtained from the respondents result on table 4.3 above shows that,
77.1% of them were male whereas the remaining 22.9% were female.This indicates that there
is male dominancy within the company.

Age of the respondents shows that majority of respondents 46.9% were aged 25 to 35, this
indicates that the company employs young generation (millennials).Millennials born 1981 to
1999, they were raised at themost child-centric time in the history. Due tothe great deal of
attention and high expectationsfrom parents, they are confident andmay appear cocky. Also
known as GenerationY, they are the largest generation in theworldwide workforce, and are
still growing (Birkman, 2016).Therefore, the company incentive scheme design should
accommodate its workforce age composition. Since, young generation are more volatile for
turnover for financial and other differentials.

The respondents were asked that to state the marital status; which showed 61.5% of them
were married employees and the remaining 36.5% were not. Here it’s easily understand that
the majority of the respondents are married employees. This implies that most of them have
an additional responsibilities.

Academic qualification of the respondent’s shows thatthe highest percentage 63.5% of

employeesrepresent category of First degree, the next larger group Diploma holders which is
22.9% of the respondents and the next level a Master degree 10.4% and the minimal
percentage was certificate which is 2.1% and other level 1.0% respectively. This implies that
most of the employees of the company are first degree holder that means most of them are
skilled and professionals.

Duration of services was another personal factor,the highest percentages of 41.7% represents
employees below 5 years , the next level is 40.6% serving the company in between 5 to 10
years and rest 12.5% serving with the company more than 10 years of services and the
minimum 5.2% serving the company in between 16-20 years. This implies that most of Nyala
Motors S.C. staff are new and serving less than 10 years.They are more familiar with the
activities of the company and can provide useful insight in the maintenance of good
performance.

Job category of the respondents based on the result Technician 27.1%, Sales staff 25%,
Supervisor/Foreman 17.7%, Professional Support staff 16.7% and Management 13.5%

50
respectively. This implies that most of the respondents are Technicians and Sales staff,
therefore, the company may consider them as a core staff for the sales and servicebusiness.

The respondents’ monthly income shows that the majority of the respondents are 38.5 % in
between 10,001.00 to 20,000.00, the next level is 35.4% which is 5001.00-10,000.00, the
next level is 13.5% below 5,000.00 and the rest are in different categories. This shows that
the company pay system level on the salary range of 10,001.00–20,000.00 and it gives some
highlights to see the open market salary scale specifically within the automotive industry and
other companies too.

4.4 Descriptive Analysis

The second part of the research questions seeks to understand what the incentive schemes of
Nyala Motors S.C. looks like, what type of incentive scheme techniques are applicable to
employees which has been analyzed and presented on following tables and presented. Hence
analyzed by comparing the mean and standard deviation score of each variable. According to
Zaidaton & Bagheri (2009), the mean score below 3.39 is considered as low; the mean score
from 3.40 up to 3.79 is considered as moderate and mean score above 3.80 is considered as
high as illustrated in table 4.4 below.

Table 4.4: Comparison Bases of Mean Score

Sr.No. Mean Score Description
1 < 3.39 Low
2 3.40 – 3.79 Moderate
3 > 3.80 High

Source: Zaidatol & Bagheri (2009)

4.4.1Mean and Standard Deviation
Mean and standard deviation of all the questionnaire items were also computed in AnnexC.
The mean values of most items ranges from 2.93 to 4.49. This can be concluded that these
items are more towards agreed and strongly agreed. For standard deviation, most of the items
have a standard deviation of less than 1 which means that there is little dispersion of data.

Table 4.5:Aggregate of Financial Incentives Mean and Standard Deviation.

Financial Incentives Mean Std. Deviation
Annual bonus based on the company financial targets and 4.46 .614
achievements.
Profit sharing scheme helps a strong sense of 4.22 .861
belongingness to the company.

51
Profit sharing scheme improves company performance by 4.09 .895
attracting qualified staff.
Profit sharing scheme has a significant role on the 4.08 .890
retention of key staff.
The existing company bonus pay system is inspiring me to 4.03 .934
a higher performance.
I am ready to increase my work efforts in order to gain the 4.01 1.091
share ownership.
A competitive commission for efficient service delivery 4.01 1.071
and productivity.
Share ownership is the most important factor in employee 4.00 1.036
performance.
Commission can encourage me to improve the sales 3.92 1.149
performance.
Commission can contribute to more excellence and 3.92 1.111
healthy competition within the company.
Commission usually motivates me to perform better in the 3.84 1.069
company.
The share ownership in place favors top management than 3.83 .970
employees.
Bonuses are paid fairly for extra work, efficiency and 3.82 .821
achievements.
The company usually provides bonuses for all its 3.76 1.203
employees’ according to the job grade.
Employees often endeavor to meet the set targets to be 3.57 .971
entitled a stock ownership.
The management of the company is fair in the 3.41 1.011
implementation of profit sharing scheme.
Total 3.94 0.981

Source: Own Survey, 2018

Table 4.6: Summary of Financial Incentives

Financial Items Mean Std. Deviation

Bonus 4.02 .590

Profit Sharing 3.95 .667
Stock Ownership 3.85 .760
Commission 3.92 .934
Total 3.94 .738

Source: Own Survey, 2018

According to rank a general list of Financial Incentives consisting of the ones offered by the
company and some are not offered,these results are presented in table 4.5 and 4.6 above.

52
As indicated in the above table the mean values of annual bonus mean 4.02 and profit sharing
mean 3.95 are slightly above the average i.e. 3.94 this means the incentive schemes of the
company with the mentioned variable is satisfactory. But the mean value of employees on
commission with a mean 3.92 and stock ownership mean 3.85 are below average this indicate
that the company incentive scheme with this regard is not satisfactory. When the aggregate
mean result is 3.94 (high) seen the financial incentive schemes of the company is highly
satisfactory. The study is agreed with the findings of (Stajkovic and Luthans, 2003),that,
money has been shown to attract, motivate, and retain employees as well as to serve as a
reinforcement of employee performance.

This indicates that the employees attach different weights to variousfinancial incentives and
also show high rating for annual bonusbased on the company financial targets and
achievements andprofit sharingscheme helps a strong sense of belongingness to the company
and low rating for commission and stock ownership,that someincentives are more powerful
than others in motivating employee'sperformance.

Table 4.7:Aggregate of Non-Financial Incentives - Mean and Standard Deviation.

Non-Financial Incentives Mean Std. Deviation

A positive working conditions is important for me to 4.49 .858
perform well on my job.
The work environment can elicit greater commitment in 4.03 .827
me to perform my best.
Management recognizing employees whose efforts 3.97 .989
make a difference.
Feeling a spirit of teamwork and cooperation among co- 3.96 .905
employees.
Organizational policies and procedures can promote 3.86 .958
employee ownership.
The company grants a tangible gifts/trophy, I am more 3.84 .977
motivated to perform better.
The contents of the training program makes 3.76 1.044
thecompany's employees to be moreproductive.
Incentive travel to boost the morale of individual or 3.66 1.186
team for work is well done.
The companyis committed to the training and 3.50 1.179
development of its employee.
The company provides me with skills and knowledge 3.42 1.185
that will benefit my future career.
I have participated in the decision making of the 3.15 1.196
company goals.
When an employee performs well consistently they are 3.11 1.213

53
promoted to next level
Promotion purely depends on performance and fairly 3.09 1.206
distributed within the company.
Employees are encouraged to participate in various 3.05 1.080
seminars and workshops.
There are enough promotion possibilities to stimulate 2.97 1.192
me to higher performance.
Employees are promoted when theyearn academic 2.93 1.324
qualifications or special training.
Total 3.55 1.082
Source: Own Survey, 2018
Table 4.8: Summary of Non- Financial Incentives
Non-Financial Items Mean Std. Deviation
Recognition 3.65 .805
Career Development (Promotion) 3.03 1.064
Working Conditions 4.09 .653
Training Opportunity 3.43 .894
Total 3.55 .853

Source: Own Survey, 2018

According to the above table 4.7 and 4.8 the company incentive schemes of training
opportunity with mean 3.43 and promotion (career development) the mean value is 3.03are
not satisfactory because the mean results are below average mean 3.55. But all other non-
financial incentives working conditions mean 4.09 and recognition mean 3.65 are
satisfactory, since the mean result are above average mean, When the aggregate mean result
is 3.55 (Moderate) seen the non-financial incentive schemes of the company is moderately
satisfactory.In their study (Cameron and Pierce, 1997) concluded that praising people for
their work leads to greater task interest and performance and that tangible reward also
enhance motivation when they are offered to people for completing work or for attaining or
exceeding specified performance standard.

This implies that the employees attach different weights to various non-financial incentives
and also show high rating for working condition and recognition and low rating for the
training and promotion (career development) as well.
Table 4.9:Aggregate of Employee Performance – Mean and Standard Deviation

Employee Performance Mean Std. Deviation

Employees’ attitude and commitment have positive 4.40 .718
influence on company’s overall performance.
Employee performancehelps bothemployee 4.27 .968
development andorganizational improvement.

54
Superior’s regular feedback is key in the improvement 4.06 .927
of an individual’s performance.
The management leadership style has an effect on the 4.01 .827
level of performance inclination.
The existing incentive scheme program has its own 3.99 .814
influence on company’s overall targets and
achievements.
Employees are motivated to work collectively towards 3.92 .937
achievingcommon goals.
Performance based incentive scheme encouraged me to 3.91 .974
exert more effort and improve my productivity.
Employee adherence to the expected standard is a key 3.91 .930
indicator in measuring the performance.
Total 4.06 .887
Source: Own Survey, 2018

As can be seen from the table, the research questionnaire explore how do employees perceive
the incentive schemes on employee performance, employee responses to the above questions.
Based on the response of the respondent for those dependent variable of employee
performance questionnaires is slightly above and below average. This implies that the
employees of the company are highly (substantially) and moderately perceived the employee
performance. When the aggregate mean result is 4.06 (high) seen the effect of incentive
schemes on employee performance of the company seemsvery satisfactory.This is consistent
with the findings of Kohn, (1993), Powell, (1998) who stated that not all writers agree that
incentive plans or programs will always lead to positive outcome.This implies that different
incentive schemes indeed work in boosting employeeperformance and their presence or
absence can make a significance difference in organizational performance.

4.5 Normality Test

The underlying assumption in Pearson Correlation and Multiple Linear Regression is the data
tested must be normally distributed. Therefore, normality test is conducted to ascertain
whether the data are normally distributed as to fulfill the normality assumptions before
proceeding to further tests.Assumption of normality will be fulfilled when the p-value is more
than 0.05 (Razali & Yap, 2011). Table 4.10 below indicated that the p-value is greater than
0.05, which implies that there was no evidence for the presence of abnormality in the data.
Table 4.10: Test of Normality

55
 Kolmogorov-Smirnova Shapiro-Wilk

Statistic df Sig. Statistic df Sig.

Employee Performance .137 96 .000 .900 96 .000

Financial Incentives .088 96 .064 .969 96 .021
Non-Financial Incentives .080 96 .142 .974 96 .056
a. Lilliefors Significance Correction

4.6 Multicollinearity Test

Multicollinearity will occur if some or all of the independent variables are highly correlated
with one another. It shows the regression model has difficulty in explaining which
independent variables are affecting the dependent variable. As shown in the table 4.11, there
is no multicollinearity problem among all the IVs in this study as the highest correlation
between IVs is less than 0.9 (Wheeler & Tiefelsdorf, 2005), which is 0.733 (correlation
between financial incentives and employee performance).
Table 4.11:Correlation
Financial Incentives Non-Financial Employee
Incentives Performance

Pearson Correlation 1 .571** .733**

Financial Incentives Sig. (2-tailed) .000 .000

N 96 96 96
**
Pearson Correlation .571 1 .563**
Non-Financial Incentives Sig. (2-tailed) .000 .000
N 96 96 96
** **
Pearson Correlation .733 .563 1

Employee Performance Sig. (2-tailed) .000 .000

N 96 96 96
In addition, table 4.12 below multicollinearity problem can also be assessed based on the value of
tolerance and VIF for independent variables. Optimal value for tolerance and VIF should be above 0.10
and below 10 respectively in order to avoidmulticollinearity problem as suggested by Hair, Babin,
Money & Samuel (2003). Hence, the result below indicated that there is no multicollinearity problem in
this study.
Table 4.12: Coefficients
Model Unstandardized Standardized t Sig. Collinearity
Coefficients Coefficients Statistics

B Std. Error Beta ToleranceVIF

1 (Constant) .556 .320 1.739 .085

56
 Financial Incentives .709 .096 .610 7.348 .000 .674 1.485

Non-Financial Incentives .200 .078 .214 2.578 .012 .674 1.485

a. Dependent Variable: Employee Performance

4.7 Inferential Analysis

4.7.1 Pearson Correlation Analysis
Pearson's correlation was used to measure the strength of linear relationship between two
variables. The number representing the Pearson correlation is referred to as a correlation
coefficient. It ranges from -1.00 to +1.00, with zero representing absolutely no association
between the two variables. Correlation coefficient can be either positive or negative,
depending upon the direction of the relationship between the variable (Hair et. al, 2003).
Table 4.13 below shows the meanings of the different range of correlation coefficient.

Table 4.13: Range of Correlation Coefficient

Coefficient Range Strength
+0.91 to +1.0 Very Strong
+0.71 to +0.90 High
+0.41 to +0.70 Moderate
+0.21 to +0.40 Small but definite relationship
0 to +0.20 Slight, almost negligible

Source: Hair et. al, (2003)

4.7.1.1 Correlation Coefficient Analysis

Correlation analysis was used to show the strength of the association or the relationship
between the variables involved. Inter-correlations coefficients (r) were calculated by using
the Pearson‘s Product Moment.

Table 4.14: Correlation Coefficient between Financial Incentives and Employee

Performance

Financial Incentives Employee Performance

Pearson Correlation 1 .733**

Financial
Sig. (2-tailed) .000
Incentives
N 96 96
**
Employee Pearson Correlation .733 1
Performance Sig. (2-tailed) .000

57
 N 96 96

**. Correlation is significant at the 0.01 level (2-tailed).

 Table 4.14 show that the correlation coefficient between financialincentives and
employee performance is .733 which is high associated with each other at one percent
level of significance (r 0.733, P < 0.01). It can be concluded that employee that
awarded with financial incentives will have higher engagement to the organization
performance.
 There is high (substantial) and statistically significant relationship between financial
incentive schemes and employee performance.

Table 4.15:Correlation Coefficient between Non-Financial Incentives and Employee

Performance

Employee Performance Non-Financial Incentives

Pearson Correlation 1 .563**

Employee
Sig. (2-tailed) .000
Performance
N 96 96
**
Pearson Correlation .563 1
Non-Financial
Sig. (2-tailed) .000
Incentives
N 96 96

**. Correlation is significant at the 0.01 level (2-tailed).

 The results show that the correlation coefficient between non-financial incentives and
employee performance is .563 which is moderate associated with each other at one
percent level of significance (r 0.563, P < 0.01). It can be concluded that employee
that awarded with non-financial incentives will contribute higher engagement to the
organization performance.

 There is moderate and statistically significant relationship between non-financial

incentive schemes and employee performance.

4.7.2 Multiple Liner Regression

Multiple linear regression analysis is a method which uses more than one IV to explain the
variance in a DV (Ghani & Ahmad, 2011).The study aims to investigate the relationship

58
between the independent variable (financial and non-financial incentive schemes) with the
dependent variable (employee performance) in Nyala Motors S.C.

4.7.2.1 Regression Analysis

In order to determine the extent to which the explanatory variables explain the variance in the
explained variable, multiple regression analysis was performed. Table 4.16 below shows that
regress financial and non-financial incentive schemes as independent variable on employee
performance as dependent variable.

Table 4.16: Model Summary (Multiple Liner Regression)

Model R R Square Adjusted R Std. Error of the

Square Estimate

1 .753a .568 .558 .42265

a. Predictors: (Constant), Non-Financial Incentives,
Financial Incentives

The model summary table 4.16 includes the independent variables (financial and non-
financial incentive schemes) and dependent variable (employee performance). As indicated in
the above model summary and below ANOVA table, the liner combination of the
independent variables were significantly related to the dependent variable,

Table 4.17: ANOVA

Model Sum of Squares df Mean Square F Sig.

Regression 21.822 2 10.911 61.079 .000b

1 Residual 16.613 93 .179

Total 38.435 95

a. Dependent Variable: Employee Performance

b. Predictors: (Constant), Non-Financial Incentives, Financial Incentives

Based on the ANOVA table 4.17, the F-value of 61.079 is considered very enough. While the
significance value of 0.000 is less than 0.05. Since it is less than 0.05, it can conclude that the

59
Independent variables (financial and non-financial incentives) were significantly explain the
variance in employee performance.

Table 4.18: Coefficients (Multiple Liner Regression)

Model Unstandardized Coefficients Standardized t Sig.

Coefficients

B Std. Error Beta

(Constant) .556 .320 1.739 .085

1 Financial Incentives .709 .096 .610 7.348 .000

Non-Financial Incentives .200 .078 .214 2.578 .012

a. Dependent Variable: Employee Performance

According to the coefficients table 4.18, financial incentives (p < 0.01), and non-financial
incentives (p < 0.05) are all significantly affecting employee performance in the company.
This is because the significance values of all two IVs are less than alpha value 0.05. In other
words, the result showed that financial incentives as well as non-financial incentives are
strongly related with employee performance in the company.

In addition, Standardized Coefficients Beta value is used to test the effectiveness of each IV
in affecting the dependent variable. In this research, it is found that financial incentives (β =
0.709) is the most effective factor in affecting employee performance among the two IVs.
However, non-financial (β = 0.200) is found to be the least effective factor in affecting
employee performance compare to financial incentives.

According to the Coefficients table, the regression equation is written as:

Y= a + b1X1 + b2X2
Where,
X1 = Financial Incentives (IV)
X2 = Non-Financial Incentives (IV)
Thus, the equation of the model employed in this research can be written as:-
Employee Performance = 0.556 + 0.709(Financial) + 0.200(Non-Financial).

The result of the regression model shown in table 4.16 indicates that the extent or percentage
that the IVs can explain the variations in the DV. Therefore, R=.753, F = 61.079 (P=0.000).

60
The R square of the model = .568 and Adjusted R square = .558 shows that approximately
57% of the total variation in the dependent variable (DV) i.e. employee performance is
explained by the linear combination of the independent variables (IV)i.e. financial and non-
financial incentive schemes. However, 43% (100% - 57%) of the variation in the DV is
unexplained in this research. In other words, there are other additional variables that are
important in explaining employee performance that have not been considered in this research.
Both the R square and the adjusted R square values in this study are found to be sufficient
enough to infer that the fitted regression line is very close to all of the data points taken
together. For such data, R square greater than 20% is still large enough for reliable
conclusions (Cameron Trivedi, 2009; Hsiao, 2007, cited in Nyamsogoro, 2010).

4.7.3 Hypothesis Test

Analysis of the research was done in light of research questions and hypothesis proposed in
the plan of the paper. Accordingly, all the three hypothesis results presented as follows.

Examining the relationship between incentive schemes and employee performance.

Hypothesis 1: There is a positive and significant relationship between financial incentives

and employee performance.

Table 4.19:Model Summary(Financial)

Model R R Square Adjusted R Std. Error of the

Square Estimate
a
1 .733 .537 .532 .43516

a. Predictors: (Constant), Financial Incentives

According to table 4.19, Since the correlation coefficient of financial incentives r 0.733, p <
0.01 and the regression of r = 0.733 and r square 0.537 and adjusted r square 53 %, which is
implies that high relationship between financial incentivesand employee performance,
Therefore, the hypothesis is accepted.

Hypothesis 2: Thereis a positive and significant relationship between non-financial

incentives and employee performance.

Table 4.20: Model Summary(Non-Financial)

61
Model R R Square Adjusted R Std. Error of the
Square Estimate
a
1 .563 .317 .310 .52854

a. Predictors: (Constant), Non-Financial Incentives

A presented in table 4.20 the analysis part, correlation coefficient of opportunity for non-
financial incentives scheme r = 0.563, p < 0.01 and the regression of r = 0.563 and r square =
0.317and adjusted r square 31%, which implies that moderate relationship between non-
financial incentives and employee performance. Therefore, the hypothesis is accepted.

Assessing employee‘s perception of incentives and its influence on employee

performance.

Hypothesis 3: The perception of incentive schemes has a significant and positive influence
on employee performance.

As it presented in table 4.13 abovethe correlation coefficient of financial and non-financial

incentive schemes r = 0.753, p < 0.01and the regression of r = 0.753 and r square = .568 and
adjusted r square = 56%, which implies that high positive influenceof incentive system on
employee performance. Therefore, the hypothesis is accepted.

Based on the above research findings, the test result of the three formulated hypotheses were
summarized as in the table 21 below.

Table 4.21: Summary of Tested Hypothesis

No. Tested Hypothesis Test Result
1 There is a positive and significant relationship between financial Accepted
incentives and employee performance
2 There is a positive and significant relationship between non-financial Accepted
incentives and employee performance
3 The perception of incentive schemes has a significant and positive Accepted
influence on employee performance.

62
 CHAPTER FIVE
SUMMARY OF MAJOR FINDINGS, CONCLUSIONS AND RECOMMENDATIONS

This is a concluding chapter. It provides the summary, conclusion and recommendations and
including suggestions of further studies.

This chapter presents a summary of the major findings gathered from the analysis of the data.
Conclusions have been drawn from the study and recommendations put forward that may
help to deal with the challenge of the effect of incentive schemes on employee performance
at Nyala Motors S.C

5.1 Summary of Findings

The main objectives were to assess the employee’s perception towards the incentive schemes,
to examine the relationship between incentive schemes and employee performance and

63
todetermine the effect of incentive system on employee performance in NMSC.Generally,
descriptive, correlation and multiple regressions analysis were performed in order to conduct
the research analysis.

 According to table 4.3the findings 22.9% and 77.1% from the total population of 145
respondents were female and male respectively.With regard to age distribution 46.9%
and 35.4% were in the ages between 25-35 and36-45 years respectively. Based on the
findings on educational qualification 63.5% were first degree holder and the result
show that on the job category 27.1% and 25% from the respondents were technician
and sales staff respectively.

 As regards to descriptive statistics mean result, the average mean value of financial
incentives is 3.94, non-financial incentives is 3.55 and employee performance is 4.06
this shows that employees in Nyala Motors S.C.highly and moderately motivated
towards on employee performance. Boela (2005) states that, incentives are offered in
order to focus the employee's attention to the business objectives of the employer.

 In this study it is observed that the absence of practice on commission and stock
ownership and the variables are below average mean 3.94, has a significant influence
on the sales and overall company performance.

 As a result showed and the literature in regards to opportunity for career development
(promotion) and training and the variables are below average mean 3.55, has an
impact on high performance employee.

 Results from person product moment correlation coefficient revealed that, there ishigh
(substantial)and moderate and statistically significant relationship between financial
and non-financial incentive schemes and employee performance. The model summary
of multiple regression analysis it was 75.3% and also showed that the proportion of
the variation in employee performance explained by the liner combination of financial
and non-financial incentive schemes is 56.8% (from r 2 value) which is statistically
significant at 99% confidence level as indicated from F-statistic.

 There is high relationship between financial incentives and employee performance as

it was 73.3% positive and significant relationship and can make 53.7% variance. Al-
Nsour and Jordan (2012) explained monetary incentive as the amount paid to

64
 employees, either in lump sum or monthly payment which makes individuals perceive
as an immediate feedback of their effort contributed. The reason behind for
employees to have great emphasis on monetary incentives might be due to the impact
that monetary incentive brings in terms of better living standard and stronger sense of
security.

 There is moderate relationship between non-financial incentives and employee

performance as it was 56.3% positive and significant relationship and can make
31.7% variance on employee performance. Jeffrey and Shaffer (2007), state that non-
financial tangible incentives are effective because they are very visible. The reason
for employees to prefer non-financial incentive might be due to the fact that it brings
greater satisfaction psychologically.

Accordingly, results express that both financial and non-financial incentive schemes has a
positive effect on employee performance.Organizations that provide effective incentives are
more likely to have satisfactory job performance from employees. Incentive schemes do have
significant correlation with employee performance motivation and productivity in
organizations. (Ugwu Ude and M.A. Coker, 2012)

5.2 Conclusion
The purpose of the study to examine the effect of incentive schemes on employee
performance and from the findings and the results it can be concluded that, incentives play a
major role in enhancing performance in an organization. While goals and feedback clearly
boosts performance, adding an incentive will enhance job interest and persistence.The results
show that both financial and non-financial incentives are used and perceived in terms of
importance, almost satisfactorily at NMSC. In relation to employee performance, results
show that many employees in NMSC believe incentives have a positive effect on employee
performance.
The following conclusions can be drawn:-

The first research objective was to assessthe employees’ perception towards the incentive
schemes. Employees perceive incentives given are not rightful. Since non-management

65
employees take the large number to the responses, it is conclude that non-management
employees are moderately satisfied with the incentives of the company

The main objectives were to examine the relationship between incentive schemes and
employee performance and to determine the effect of incentive system on employee
performance.According to the result of descriptive mean analysis, correlation coefficient
analysis and regressionanalysis proved that the incentive schemes which means financial and
non-financial incentive schemes are valuable predictors and have an effect on employee
motivation and performance. More over when each variable is seen based on computation of
means of the different financial and non-financial schemes in relation to employee
performance showed that they are satisfactorily satisfied. However, Nyala Motors
S.C.employees’ performance is affected by the mentioned factors because the mean value the
mentioned variables are below average. The respondents think that the items are not
acceptable and competitive relative to both the market and the automotive industry.

Based on the results of the study it was understand that financial incentive schemes
influences employee job performance more than non-financial incentive schemes in
aggregate. However, it is important to note that only financial or non-financial types are not
sufficient to motivate employees to attain best perform level, employees should implement a
combination of both types of incentive schemes to get the best out of their employees.

Incentive schemes can be regarded as the fundamental expression of the employment

relationship, commitment, engagement, satisfaction and company performance development.

The researcher, therefore concludes from the findings that the effect of incentive schemes on
employee performance is of paramount important to the company. In turn, human
performance of any sort is improved by designing, implementing, reviewing and adjusting the
incentive schemes system that is appropriate and satisfying.

5.3 Recommendations
Incentive schemes are fast becoming increasingly a popular technique in attracting,
motivating, developing, and retaining employees in organizations. Experience has shown that
organizations that provide effective incentives are more likely to have satisfactory job
performance from employees.Based on the findings and conclusions of this study, there are
recommendations forwarded for better improvement of employees work performance:-

66
  As per the findings of the descriptive research results are concerned, the incentive
system of Nyala Motors S.C. has been to bring motivation of employees slightly
above the neutral point this implies that employees are moderately motivated. This
calls for a work to be done in the HR policy makers of the company. Those in a
responsible position to amend and implement the incentive policies have to see best
benchmarking practices.
 Management should come up with short term employee attraction and retention
mechanisms. The company cannot go far with unmotivated employees. If employees
are not doing their best to the company and they don’t consider that the company as
the best of all possible organizations for which to work, implies employees loosing
motivation and commitment to the work and the company.
 Performance goals should be clearly defined andregular reviewing of the performance
of employees against performance target standards and recognize accordingly
 Management should seek and obtain feedback on the measure of employee
satisfaction survey on how employees perceive incentives. Feedback combined with
appropriate incentive schemes produce the strongest effect on employee performance
after identifying the incentive schemes which motivates employees most.
 The management needs to developrightful incentive schemes that include a mix of
both financial and non-financial incentives. Incentive type would influence
performance differently when applied to the employee. Managers will therefore need
to strategically identify incentives that lead to high performance among the
employees.
 Bonus payment is important but it is not the single most important factor for
motivating employees. There are some other important factors that could maximize
employee performance should be taken into consideration such as commission and
stock ownership based on the nature of the job and the role of the employee.
 The company should create opportunities for employee promotion (career
development) and training by providing cross border job opportunities and skill
development that should be provided to boost up employee performance.
 Financial incentives are key in employee incentive schemes, non-financial incentives
supplement the sameto maximize job productivity, quality and quantity. The company
should come up with long term incentives strategy.

67
  The company should design mechanism that helps to recognize the topperformer
employees by the management in an individual and group level based on work
performance makes a significant differences in terms of the overall productivity of the
company.

Finally, it is important to suggest that incentive schemes would be more effective

whenimplemented consistently,fairly and transparently. This would work with
organizationalpolicies, procedures and structure supported by the top management.

5.4 Suggestions for Further Research

This study examined the effect of incentive schemes on employee performance at NMSC by
selecting specific variables. However, there are so many variables not included in this study.
Thus, it is recommended for future researchers to further assess factors affecting employees
work performance by incorporating additional variables. To this end therefore, a further study
should be carried out to identify other factors which may affect performance but which have
not been studied to determine their effect.

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Part I: Personal Data

1. Gender: 1. Male 2. Female

2. Age: 1. Below 25 2. 25 - 35 3. 36 - 45 4.

46 - 55 5. Above 55

72
3. Marital Status: 1. Single 2. Married 3. Divorced 4. Other

4. Educational Qualification

1. Certificate 2. Diploma 3. First Degree

4. Master’s Degree 5. Other, please state ____________

5. Years of Service in your current company

1. Below 5 years 2. 5 - 10 years 3. 11 -15 years

4. 16 - 20 years 5. Above 20 years

6. Job Category

1. Management Staff 2. Supervisor 3. Sales Staff 4.

Technician 5. Professional Support Staff

7. Monthly Income

1. Below -5,000.00 2. 5,000.00 - 10,000.00

3. 10,001.00 - 20,000.00 4. 20,001.00 - 30,000.00

5. 30,001.00 - 40,000.00 6. Above 40,000.00

Part 2: Close Ended Research Instruments for Data Collection

73
This section is seeking your opinions regarding the type of incentives which are most relevant
to you. You are asked to indicate the extent to which you agree or disagree with each
statement using 5 Likert scale. [Strongly Agree; (SA), Agree; (A), Neutral; (N), Disagree;
(D) or Strongly Disagree; (SD)]. Please mark to indicate the extent to which you agree or
disagree with the following statements.

Sr. Question Items Rating Scales

No. SD D N A SA
1 2 3 4 5

Financial Incentives
A. Bonuses

1 Annual bonus based on the company financial

targets and achievements.
2 The existing company bonus pay system is
inspiring me to a higher performance.
3 Bonuses are paid fairly for extra work,
efficiency and achievements.
4 The company usually provides bonuses for all
its employees’ according to the job grade.
B. Profit Sharing

5 Profit sharing scheme improves company

performance by attracting qualified staff.
6 Profit sharing scheme has a significant role on
the retention of key staff.
7 Profit sharing scheme helps a strong sense of
belongingness to the company.
8 The management of the company is fair in the
implementation of profit sharing scheme.
Sr. Question Items SD D N A SA
No. 1 2 3 4 5
C. Stock Ownership
9 Share ownership is the most important factor in
employee performance.
10 I am ready to increase my work efforts in order
to gain the share ownership.
11 The share ownership in place favors top
management than employees.
12 Employees often endeavor to meet the set
targets to be entitled a stock ownership.
D. Commission

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13 Commission usually motivates me to perform
better in the company.
14 A competitive commission for efficient service
delivery and productivity.
15 Commission can encourage me to improve the
sales performance.
16 Commission can contribute to more excellence
and healthy competition within the company.
Non-financial Incentives.

E. Recognition

17 Management recognizing employees whose

efforts make a difference.
18 The company grants a tangible gifts/trophy, I
am more motivated to perform better.
19 Incentive travel to boost the morale of
individual or team for work is well done.
20 I have participated in the decision making of
the company goals.
Sr. Question Items SD D N A SA
No. 1 2 3 4 5

F. Promotion & Career Development

21 There are enough promotion possibilities to

stimulate me to higher performance.
22 Promotion purely depends on performance and
fairly distributed within the company.
23 Employees are promoted when they earn
academic qualifications or special training.
24 When an employee performs well consistently
they are promoted to next level.
G. Working Conditions

25 A positive working conditions is important for

me to perform well on my job.
26 Organizational policies and procedures can
promote employee ownership.
27 Feeling a spirit of teamwork and cooperation
among co-employees.
28 The work environment can elicit greater
commitment in me to perform my best.
H. Training Opportunities

29 The company is committed to the training and

development of its employee.
30 The contents of the training program makes the
company's employees to be more productive.
31 The company provides me with skills and

75
 knowledge that will benefit my future career.
32 Employees are encouraged to participate in
various seminars and workshops.
Sr. Question Items SD D N A SA
No. 1 2 3 4 5

Perception on Employee Performance

33 Performance based incentive scheme
encouraged me to exert more effort and
improve my productivity.
34 Employee adherence to the expected standard is
a key indicator in measuring the performance.
35 Employee performance helps both employee
development and organizational improvement.
36 Employees’ attitude and commitment have
positive influence on company’s overall
performance.
37 Superior’s regular feedback is key in the
improvement of an individual’s performance.
38 Employees are motivated to work collectively
towards achieving common goals.
39 The management leadership style has an effect
on the level of performance inclination.
40 The existing incentive scheme program has its
own influence on company’s overall targets and
achievements.

Any additional comments relevant to the study.

___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
_______________

Thank You!

Annex:2

Descriptive mean of the response of the respondents for each questions

N Minimum Maximum Mean Std. Deviation

76
Annual bonus based on the
company financial targets 96 2 5 4.46 .614
and achievements.
The existing company bonus
pay system is inspiring me to 96 1 5 4.03 .934
a higher performance.
Bonuses are paid fairly for
extra work, efficiency and 96 2 5 3.82 .821
achievements
The company usually
provides bonuses for all its
96 1 5 3.76 1.203
employees’ according to the
job grade
Profit sharing scheme
improves company
96 2 5 4.09 .895
performance by attracting
qualified staff
Profit sharing scheme has a
significant role on the 96 2 5 4.08 .890
retention of key staff.
Profit sharing scheme helps
a strong sense of
96 2 5 4.22 .861
belongingness to the
company
The management of the
company is fair in the
96 1 8 3.41 1.011
implementation of profit
sharing scheme
Share ownership is the most
important factor in employee 96 1 5 4.00 1.036
performance
I am ready to increase my
work efforts in order to gain 96 1 5 4.01 1.091
the share ownership
The share ownership in
place favors top
96 1 5 3.83 .970
management than
employees.
Employees often endeavor
to meet the set targets to be 96 1 5 3.57 .971
entitled a stock ownership

77
Commission usually
motivates me to perform 96 1 5 3.84 1.069
better in the company
A competitive commission
for efficient service delivery 96 1 5 4.01 1.071
and productivity
Commission can encourage
me to improve the sales 96 1 5 3.92 1.149
performance
Commission can contribute
to more excellence and
96 1 6 3.92 1.111
healthy competition within
the company
Management recognizing
employees whose efforts 96 1 5 3.97 .989
make a difference
The company grants a
tangible gifts/trophy, I am
96 1 5 3.84 .977
more motivated to perform
better.
Incentive travel to boost the
morale of individual or team 96 1 5 3.66 1.186
for work is well done
I have participated in the
decision making of the 96 1 5 3.15 1.196
company goals
There are enough promotion
possibilities to stimulate me 96 1 5 2.97 1.192
to higher performance
Promotion purely depends
on performance and fairly
96 1 5 3.09 1.206
distributed within the
company
Employees are promoted
when they earn academic
96 1 5 2.93 1.324
qualifications or special
training
When an employee performs
well consistently they are 96 1 5 3.11 1.213
promoted to next level.
A positive working conditions
is important for me to 96 1 5 4.49 .858
perform well on my job.

78
Organizational policies and
procedures can promote 96 1 5 3.86 .958
employee ownership.
Feeling a spirit of teamwork
and cooperation among co- 96 1 5 3.96 .905
employees
The work environment can
elicit greater commitment in 96 1 5 4.03 .827
me to perform my best
The company is committed
to the training and 96 1 5 3.50 1.179
development of its employee
The contents of the training
program makes the
96 1 5 3.76 1.044
company's employees to be
more productive
The company provides me
with skills and knowledge
96 1 5 3.42 1.185
that will benefit my future
career.
Employees are encouraged
to participate in various 96 1 5 3.05 1.080
seminars and workshops
Performance based
incentive scheme
encouraged me to exert 96 1 5 3.91 .974
more effort and improve my
productivity.
Employee adherence to the
expected standard is a key
96 1 5 3.91 .930
indicator in measuring the
performance.
Employee performance
helps both employee
96 1 5 4.27 .968
development and
organizational improvement
Employees’ attitude and
commitment have positive
96 2 5 4.40 .718
influence on company’s
overall performance
Superior’s regular feedback
is key in the improvement of 96 1 5 4.06 .927
an individual’s performance

79
Employees are motivated to
work collectively towards 96 1 5 3.92 .937
achieving common goals
The management leadership
style has an effect on the
96 1 5 4.01 .827
level of performance
inclination
The existing incentive
scheme program has its own
influence on company’s 96 2 5 3.99 .814
overall targets and
achievements.

Valid N (listwise) 96

80