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THE RESPONSE OF EMPLOYEES TO INCENTIVE SCHEME

(IN CASE OF COMMERCIAL BANK OF ETHIOPIA, DILLA


BRANCH)

A RESEARCH PAPER SUBMITED IN PARTIAL FULFILMENT OF THE


REQUIREMENT FOR THE BACHELOR OF ARTS IN MANAGEMENT

BY: GEBEYAW ABIYE

ADVISOR: ROBEL. H (MBA)

DEPARTMENT OF MANAGEMENT
COLLEGE OF BUSINESS AND ECONOMICS
DILLA UNIVERSITY

JUNE, 2017
DILLA, ETHIOPIA
APPROVAL SHEET

These research entitled “THE RESPONSE OF EMPLOYEE TO INCENTIVE


SCHEME IN CASE OF COMMERCIAL BANK OF ETHIOPIA DILLA
BRANCH” prepared and submitted by Gebeyaw Abiye for the partial
fulfilment of bachelor of art degree in management.

Advisor signature date

__________ ___________________ _____________

Chairperson signature date

__________________ ____________________ _______________

Examiner signature date

_____________ ______________ ___________

Head of department of management signature date

_____________ ______________ ___________


ACKNOWLEGEMENT

First and for most I would like to thanks my Almighty GOD for let me to stay in life to this date
and enable me to complete my paper.

Next I would like to express my heart full gratitude to my advisor Robel. H (MBA)for his careful
criterion, suggestion, encouragement and lap whose valuable comment have a decisive impact up
on the outcome of the paper.

And also I would like to thanks my family for their unforgettable support in every aspect from
primary school until today.

Finally, I like to thanks to commercial bank of Ethiopia dilla branch employees and manager for
providing me valuable information and data,

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TABLE OF CONTENT
Content Page
ACKNOWLEGEMENT...................................................................................................................i
LIST OF TABLE............................................................................................................................iv
ABSTRACT....................................................................................................................................v
CHAPTER ONE
1. INTRODUCTION....................................................................................................................1
1.1.Background of the Study........................................................................................................1
1.2 Statement of the problem.......................................................................................................2
1.3 Objectives of the study...........................................................................................................3
1.3.1 General objective.............................................................................................................3
1.3.2 Specific objectives...........................................................................................................3
1.4 Significance of the study........................................................................................................3
1.5 Scope of the study..................................................................................................................4
1.6 Limitation of the study...........................................................................................................4
1.7 Organization of a paper..........................................................................................................5
CHAPTER TWO
2. LITERATURE REVIEW.............................................................................................................6
2.1 Definition and Nature of Incentive........................................................................................6
2.2 Financial Incentives:..............................................................................................................6
2.3 Employer’s perspectives about Benefits:...............................................................................8
2.4 Organizations often establish pay policies of two kinds:.......................................................8
2.4.1 Pay and Employees Response:........................................................................................8
2.4.2 Pay and motivation:.......................................................................................................10
2.5 Non-financial incentives:.....................................................................................................11
CHAPTER THREE
3. RESEARCH METHODOLOGY..............................................................................................13
3.1 Research design....................................................................................................................13
3.2 Target population..................................................................................................................13
3.3 Sample size..........................................................................................................................13
3.4 Sampling technique..............................................................................................................13
3.5 source of data.......................................................................................................................14
3.6 Method of data collection....................................................................................................14
3.7 Data analysis and interpretation...........................................................................................14
CHAPTER FOUR
4. DATA ANALYSIS AND PRESENTATION..............................................................................16
4.1. Introduction.........................................................................................................................16
4.2. Background of Respondents:..............................................................................................16
4.3 satisfaction of basic salary...................................................................................................19
4.4 Incentive beside the basic salary..........................................................................................19

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4.5 kinds of incentive based the basic salary.............................................................................20
4.6 Employees Attitudes to Incentives.......................................................................................20
4.7 Satisfaction of employees towards payment........................................................................21
4.8 working conditions of the respondents................................................................................22
4.9 Response of employees about reward..................................................................................23
4.10 Recognition of Respondents..............................................................................................23
4.11 Provision of the same reward for equal work level............................................................24
4.12 chance of advancement......................................................................................................25
4.13 Which one do you prefer to get from your bank?..............................................................25
4.14opportunity for further position...........................................................................................26
4.15 Job Satisfaction..................................................................................................................26
CHAPTER FIVE
5. SUMMARY CONCLUSION AND RECOMMENDATION....................................................28
5.1. Summary of the Major Findings.........................................................................................28
5.2. Conclusion..........................................................................................................................29
5.3. Recommendation................................................................................................................30
REFERENCES
APPENDIX

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LIST OF TABLE

Table 4.1. sex, age, educational level, work experience and range of salary...............................17

Table 4.2. Satisfaction of basic salary............................................................................................19

Table 4.3. Incentives beside the basic salary.................................................................................19

Table 4.4. Kinds of incentive based on employee’s salary............................................................20

Table 4.5. The impact on incentives on employee’s attitude.........................................................20

Table 4.6. Number respondents and percentage of responses for satisfaction of employees........21

Table 4.7. About working conditions.............................................................................................22

Table 4.8. Employee’s attitude about reward.................................................................................23

Table 4.9. Recognition of respondents...........................................................................................23

Table 4.10. Providing the same reward for equal work level........................................................24

Table 4.11. Chance for advancement.............................................................................................25

Table 4.12. Getting incentives.......................................................................................................25

Table 4.13. Opportunity for further position..................................................................................26

Table 4.14. Satisfaction of employees on current job....................................................................27

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ABSTRACT

The study was conducted to investigate the response of employees to incentive scheme in
commercial bank of Ethiopia in Dilla branch. Incentives and employee’s response are the most
inter related concepts in any organizations whether it is service giving or manufacturing
organization to encourage employee’s performance, incentive has a great impact. The data that
are necessary for accomplishment of the research paper were collected through questionnaires
systems. The sample was selected from the employees of organization using simple random
sampling techniques The data gathered in the aforementioned manner presented and analyzed
using descriptive method. The greater thing that was expected from this study is to come up with
the result the employee’s effort increases as incentive increase and vice versa. This on the other
hand, is important for the performance of the commercial bank of Ethiopia in Dilla branch.
According to the findings of the study, the researcher reached at conclusion that incentive have a
direct impact on employee’s performance based on the findings and conclusion of the study
possible suggestions are recommended.

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CHAPTER ONE
1. INTRODUCTION

1.1 Background of the Study

The role of economic incentives in determining behavioral is a major interest to economists


within the domain of labor economics much theoretical attention will focus on the optimal form
of contracts between institutions and the workers (Mandel London and Gregoldham 1997).
Employees incentive from employment point of view is the main part of employee’s relationship
policies regarding to salaries, wages and other earnings have a major impact on their overall
income and standard of living.

From the employer’s point of view pay is a great influential tool for furthering the organizations
strategic goals. First par has a major impact on employee’s attitudes and behaviors. It influences
the kind of employees who are attract to remain with the organization and it can be a great
influential tool to bring in to line current employees and interest with those of the
organizational(Judr Rich 1992).

Second employee incentive is typically a significant organizational cost and thus requires close
examination. Methods of pay have long been an important issue in organizations relation that
affect both employer and employee. However most of the research on this topic will focus on
how methods of pay affect the organization with little evidence on whether employees against
from it. So on this study the researcher will try to focus on how workers respond to incentive.

Psychologists Frederick Herzberg (1971) and his associates develop a need theory called two
factors. Hygiene factors. According to Herzberg a manager poor landing of hygiene factor
(maintenance of factors) is a primary cause of un happiness on job. When the factors are
sufficient in quality they do not necessary act as motivators. Herzberg (1975). It includes salary
job security working condition status company policy and quality of technical supervision and
quality of interpersonal relationship. Motivation factors are primary factors of job satisfaction.
Different peoples require different kinds of motivation factors what stimulates one worker may

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not affect others. These factors include achievement recognition responsibility advancement the
work itself and possibility of growth (plunkett and attner 1998).

Incentive is a subject that is near and dear to employees and employers it is both potentially
powerful influences an employee’s behavior and attitude. To employees is a reward that is a
source of both economic and psychological income the task facing the employers is to allocate
this reward in a way that optimize the return on money spend in employees to motivation to join
the organization perform effectively stay and attend work regularly and satisfaction
(Henemanedol 1998). It is clear that organizations use various methods for paying employees on
the bases of performance these may include merit pay individual incentives team incentives and
organization wide incentives.

In general incentives have a great impact in any organization whether it is a manufacturing or


service giving organization. Employees in every organization or institution have a very special
look towards incentive because it gives them a great deal of satisfaction in their job my
contribution lies on overseeing the incentives having a good essential thing for the employees to
motivating them to work effectively and efficiently to achieve the goals. So I have a great deal to
incentives because incentive is a major and crucial thing to perform tasks as much as possible in
the deliberate arrangement of people.

The researcher would contribute on the response of employee to incentive scheme through that
incentive can help for the employee and the organization by motivating the employee. So as the
researcher widely done theoretically and practically over viewing that incentive is highest
important for the employee motivation to work efficiently and effectively.

1.2 Statement of the problem


Employee’s incentive is the main part of employee relationship and it is main part of
organization over all human resource function that deals with every type of reward individuals
receive in exchange for performing organizational task. That is why most individuals seek
employment. (George Sherman 1976) the need to undertake this study arises from common
problems which are seen in most organizations to our country. These problems are lack of job
satisfaction lack of experienced man power high turnover and soon.

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The main cause for most of those problems were poor methods of pay and incentive
organizations use. In most organizations very little emphasis was given for compensating their
employees. So the aim of this study wasnot only to investigate the presence of incentive in the
organization but also to assess the response of worker’s top incentive scheme. Further schedule
training facilities were not properly monitor and deliver to staff timely and attempts have been
made to show the issue of arguments towards incentive as motivation tool to achieve higher level
of performance (James nickel and Sandra anneal 1990).

In general, this study was tried to answer the following basic questions which was considered as
a guide for the study such as:

- What is the response of employees on salary increment in respect of performance?


- What is the contribution of the employees in the commercial bank of Ethiopia?
- Do the institutions try to motivate the employees by providing incentive?
- Are there any non- financial incentives provided by commercial bank of Ethiopia?

1.3 Objectives of the study


1.3.1 General objective
The main objective of the study was to assess the impact of incentives scheme on employee’s
efforts and to verify the response of employee’s incentive in commercial bank of Ethiopia

1.3.2 Specific objectives


Specifically, the research would be tried to address the following specific objectives

- To assess the different kinds of incentives that the institutions uses


- To examine employees and employer’s attitude towards incentive
- To investigate how to use financial incentive to motivate employees
- To identify the non- financial incentives providing by the organization.

1.4 Significance of the study


From the researcher point of view, the finding of this research would be great emphasis about
incentive and its impact on employee’s performance in our country. Furthermore, it would be
used as a source of reference regarding incentive and its impact on employees in human resource
management and other courses of departments of management last but not least some of the
recommendations to be made in the study in some to be used by concern bodies for instance
policy maker office manager’s instructors and students conducting like this research

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The finding to this research helps me to get a new knowledge regarding incentive. This research
is useful for policy maker to make things as easily by searching a new thing. For other researcher
this study also very important to identify the problems or impacts of incentive on employees and
to get appropriate understanding from the solutions that are given from that problems.

1.5 Scope of the study


The researcher focused on the study on the response of employee to incentive scheme in
commercial bank of Ethiopia because commercial bank of Ethiopia has the largest bank in
Ethiopia and the most widely used bank and it has many branches other than other banks.

The target population of the study was on commercial bank of Ethiopia because of the bank
found in near places and because of budget and time constricts.

1.6 Limitation of the study


Unfortunately, researches usually do not get end without having limitations.

For this research too, the short comings were the followings;
-Time constraint – the very detail study of the research was limited by shortage of time.
-Lack of written and supportive documents.
-Some respondents were careless infilling the questionnaires.
-Questionnaires that were distributed were turned back by my great effort. Beyond this there
were few questionnaires that were not turned back.
-Some employees were not willing to give information

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1.7 Organization of a paper

This study would contain five chapters the first chapter includes; Introduction, Background of
the study, statement of the problems, objectives of the study, significance of the study’s, scope of
the study, limitation of the study, and organization of the paper. The second chapter involves
literature review the third chapter contains research methodology and the fourth chapter involves
data analysis and presentation, the fifth chapter involves summary, conclusion and
recommendation.

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CHAPTER TWO
2. LITERATURE REVIEW
2.1 Definition and Nature of Incentive
It is necessary to clarify the literature meaning of fundamental term incentive before
going to their application. Incentive: is the systematic process through which a person is
encouraged to do the organizations take effectively. (Plunkett, Attner,1998). Incentive
applies in business or non- business firms. We can define incentive as; part of the
organizations overall human resource function that deals with every type of reward
individuals receive in exchange for performing organizations task. In other words,
incentives for operation employees, for managers and executives, for other professionals
and non-managerial employees and for sales people can be given (Blinder, A.1990 paying
on productivity).

It is a chief reason why most individuals seek employment. Employees labor and loyalty
for financial and non-financial incentives. (Gary Dessler,2003). According to Ivancevich
there are two kinds of incentives; Financial and non-financial incentives.

2.2 Financial Incentives:


Financial compensation is ether direct or indirect. Direct financial incentive consists of
the pay on employee receives in the form of wages, salaries, bonuses, or commissions. In
direct financial incentive is benefits and services. It can be all employer provided reward
and services, other than wages and salaries, arising from the following categories, legally
required social insurance payments, private insurance and retirement plans, payment for
time not worked, extra cash payment other than bonus on performance, costs of services
like subsidized cafeterias, closing allowances and so forth (Ivancevich, 1998). What are
benefits? Benefits, direct and indirect financial and non-financial payments employees
receive for continuing their employment with the company are on important part of just
about every employee’s compensation. They include things like health and life insurance,
pensions, time of with pay, and child care facilities.

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Benefits are the major expense for most employers. In developing benefits plans,
employers must address a number of policy issues. These include; what benefits to offer;
who receives coverage, whether to include retires in the plan; whether to deny benefits to
employees during initial “probationary” periods; how to finance benefits; the degree of
employee choice in determining benefits; cost containment procedures; and have to
communicate benefits options to employees. There are many benefits and various ways to
classify them. We will classify them as (i) pay for time not worked, (ii) insurance
benefits (iii) retirement benefits, and (iv) services. (GARY Desseler, 2003).

Financial incentive, due to its various senses and nature, has been a major cause of
disagreement among scholars, organizations, employees and countries. In fact, incentive
was listed as one of the six complementary issues in Human resource management. One
can see these findings and views of scholars that regular provision, proper follow-up of
its effect and feedback from employees are indispensable attributes related financial
incentive if it has to enhance worker’s performance. Hence benefit of financial
incentives seems to relay more one how it is carried out rather than on weather an
organization provides financial incentive or not. Its main focuses of this study to see the
impact incentive on employees. So that, some related literatures will be discussed in
some details. Incentive plans provide financial or non-financial rewards to employees
who make substantial contribution to organization effectiveness. There are many kinds
of incentive plans, offering various rewards and different bases some plans tie rewards to
the output of individual employees, others rewards based on profitability of the
organization. However, the purpose of all incentive plans is to in courage employees to
achieve specific organizational goals such as increasing profit, lowering costs, rising
productivity, improve product quality and so on (French, 1998). On the other hand,
performance, which is the other main concern of this study, is also the main concern of
many scholars. As a manager, if you want to attain in higher level of performance, you
must be sure that you and your employees have the ability, motivation and resources to
meet objectives today’s employees have less interest in extra hour, job dedication,

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attendance, and punctuality knowing how to motivate will help you eliminate or reduce
these performance problems (Lousier, 1997).

An employee’s total compensation has three components. The relative proportion of each
(known as the pay mix) varies extensively by the firm. The first and in most firms, larges
element of total compensation, the fixed pay on employee receives on a regular basis,
either in the form of salary (example: a weekly or monthly pay checks) or as a hourly
wage. The second component of total composition is pay incentives, programs designed
to reward employees for good performance. These incentives come in many forms
(including bonus and profit sharing). The last component of total compensation is
benefits, sometimes called indirect compensation. Benefits encompass a wide variety of
programs (LloydL. Byars and Lessile W. Rue, 1997).

2.3 Employer’s perspectives about Benefits:


From the employer’s point of view, pay is a powerful tool for furthering the organizations
strategic goals. First pay has a major impact on employee’s attitudes and behaviors. It
influences the kind of employees who are attracted to remain with theorganization and, it
can be a powerful tool for aligning current employees interest with that of broader
organization, second employee’s incentive is typically a significant organizational cost
and thus requires close examination.

2.4 Organizations often establish pay policies of two kinds:


Involves incentives for the job for employees who hold the job and incentives based on
characteristics of employees. Then pay depends partly on the jobs and partly in character
of employees, such as length of services or levels of performance.

2.4.1 Pay and Employees Response:


High performance requires much more motivation, ability, adequate equipment, good
physical working conditions effective leadership and management, health, safety and
other conditions all help to raise performance level.

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But employee’s motivation to work harder and is obviously an important factor. a number
of studies indicates that if pay is tied to performance the employee produces higher
quality of work. (I Ivancevich, 1998).

Pay for performance (Incentive) programs can improve productivity but managers need
to consider several challenges in their design and implementation. Employees may be
tempted to do only what they get paid for, ignoring those intangible aspects of the job that
are not being explicitly rewarded. Co-operational and team work may be damaged if
individual merit pay is too strongly emphasized individual merit systems assume the
employees in control of primary factors affecting his/her work out put, an assumption that
they may not be true individual performance is difficult to measure, which makes
decisions difficult to make. Pay incentive systems can be perceived as an employee right
and can be difficult to attempt to the organization’s challenging needs. Incentive pay
plans attempt to relate pay to performance to reward above arrange performance rapidly
and directly. Although good performance can be rewarded through the base wage or
salary structure either by raising an individual’s pay within the range of the job or by
promoting the individual into a higher pay grade, these rewards are often subject to
delays and other restrictions, therefore, such rewards are often not viewed by the
recipients as being directly related to performance incentive plans attempts to strengthen
the performance reward relationship and thus motivate the affected employees, the idea is
to have employees think of themselves as business partners by sharing the financial risk
and rewards of doing business (Lioyd L. Byars and Lesile W.Rue 1997).

Moreover, its contribution to worker’s higher level of performance has been issue of
argument among educators. There are research studies that in favor of or against
financial incentives contribution to employees’ higher level of performance the data in
most studies supported the idea that regularly provided monetary insensitive contributes
to higher level of performance achievement. Besides more recent research on monitory
incentive has offered a clear support for the view that financial incentives enhances
higher level of performance achievement if it is regularly provided (Lousier, 1997).

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Employees compensation is a central part of employment relationship. From the
employees point of view, polices having to do with wages, salaries and other earnings
having a major impact on their overall income and their standard of living that employees
attained great importance, great decisions which they evaluate their relationship with the
organization. Therefore, pay decision must be carefully managed and communicated
(Noel, Gerhart, Wrignt,1997)

2.4.2 Pay and motivation:


Over the year agreement many organizations have tried to determine whether pay can be
used to motivate high performance. Although by no means universally successfully, such
investigations have frequently found that pay can administered in ways that yield higher
employees performance. Furthermore, the manner in which pay appears to operate is so
generally consistent with the predictions made by exceptional model. (Heneman;
Schuwab; Fossum; resume; dyer; 1998).

Of all the topics that have most differentiated the management of blue-color and white
color workers, the stress on matching effort to pay for manual workers has been among
the most striking. Traditionally, the focus has been an immediate and direct incentives
for output, with piece work and payment by result (PBR) schemes. More recently there
has been a shift towards bonus schemes which reward motivation and performance over
the long term. The impact on motivation and performance, however, is disputed. People
feel that the amounts of money are too small to be significant and the yearend company
performance is remit from what they personally do. However, others argue that the
effects on motivation are more diffuse, and that even a small improvement in employee
attitudes can be highly significant in the long term (people and Jenktins,1990). It is worth
remembering also that the commitment of Japanese employees in major companies drives
in large part from futures of their system which have a long term.

Orientation namely, life time employment, seniority promotion system, (Chris Hendry,
1991). Reward systems tad to the performance of individual employees are known as
individual incentive plans. Individual incentive plans take several forms, depending on

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the category of workers for which they are designed. In most cases, certain in guaranteed
and the rewards represent additional compensation. Individual incentive plans for
production workers typically after additional financial compensation to those employees
who produce workers typically after additional financial compensation to those
employees who produce work over and above a specified quantity or quantity when
properly designed. Such plans are intended to assist increasing efficiency, however, not
accomplish alone. (French, 1998)

Pay employees are incentive system traditionally used with production workers is the
piece rate plan (or piece work plan), in which compensation is based on the number of
unit produced. In most piece rate plans the workers is guaranteed a base rate or minimum
hourly wage that assumes certain rate of production, and is paid extra for production
above that rate under a straight piece rate plans, the worker is paid on additional set
amount for each unit produced above the standard under differential piece rate plans, the
workers who exceeds standard production is compensated at a higher rate for all work
than workers who satisfy only the minimum standard (French, 1998).

Managers have come to realize that a motivated and satisfied work force can deliver
powerfully to the bottom line profits. Motivation is the major part of manager’s Job.

Generally, a motivated employee will try harder to do good Job than someone who is not
motivated. However, performance is not simply based on motivation. Three independent
factors determine the level of performance attained:

Ability, motivation and resources. For a maximum performance level, all the three
factors must be high. If any factor is low or missing, the performance will be adversely
affected. When performance is not at the standard level or above, you must determine
which the standard level above you must determine which performance factor needs to be
improved, and improve it. (Lousier, 1997).

2.5 Non-financial incentives:


Like praise, self-esteem, and recognition, affect employee’s motivation and satisfaction.
A more comprehensive study of incentive would include a special emphasis on financial
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incentives. Objective of incentives are to be create a system. A system of rewards that is
equitable to the employer and employee alike. The desired outcome is an employee who
is attracted to the work and motivated to do a god job for the employer.

Incentive should be adequate, equitable, cost-effective, secure, incentive providing, and


acceptable to the employee. (Ivancevich, 1998). Employee’s incentive is a central part of
the employment relationship. From the employee’s point of view, policies having to do
with wages, salaries and other earnings have a major impact on their overall income and
their living standard. Employees attach great importance to pay decisions when they
evaluate their relationship with the organization. Therefore, pay decisions must be
carefully managed and communicated, (Noel, Hellenbeck; Gernart; Wright, 1997).

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CHAPTER THREE
3. RESEARCH METHODOLOGY
3.1 Research design

The researcher wouldhave utilized descriptive study rather than fundamental, Analytical
andother. It wouldhave expected to be suitable in order to accessing employee to incentive
scheme. Because descriptive study concerns with arranged, summarized and presented numerical
data in the form of table that the reader understands easily.

3.2 Target population


The total population of the study in Dilla branch 250 according to commercial bank of Ethiopia
Dilla branch.

3.3 Sample size


It wasimpossible to collect data from the whole population due to large population size, so it
would not be easy to organize and analyze the responses. The sample size would be determined
by taking sample that the total population size in the organization was 250 employees from the
population the study would take 153 of 250 as a sample.

The researcher wouldusethe following formula to calculate sample size

n= N where n =sample size


1+Ne2 N= total number of population
e = standard error

N= 250

250/1+250(0.05)2=250/1.625=153

3.4 Sampling technique


It was obvious that there are two kinds of method of sampling namely probability and non-
probability method of sampling.

However, the researcher wouldtake the former method because of under this sampling technique
every items of the target population has an equal chance of inclusion in the sample.

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Even though there are a number of probability sampling such as simple random sampling,
systematic sampling,stratified sampling, cluster sampling and multistage area sampling the
researcher only selected simple random sampling because of its many advantages random
sampling each element in the population has equal chance of being included in the sample
sampling process in simple because it requires only one stage of sample selection

3.5 source of data

In order to carry on any research activity information should be gather from proper sources. The
more valid is the source of information, the more reliable have been the information received
which in turn would lead to reliable conclusion (Solomon 2005).

Generally, in accomplishing the research both primary and secondary source would be used. The
primary source of data collected from employees in commercial bank of Ethiopia. In addition,
the secondary source of data wasrelated research manual books and internet.

3.6 Method of data collection

The data collection methods depend on certain factors time fund nature and objective of the
study. The collection method also affected by source of data to be used. In collecting data from
the primary source questionnaires with both open and close ended items were distributed for
employees in the commercial bank of Ethiopia in Dilla branch. Secondary source of data support
between the extent to which data need and already available data (Henderson and David swine
Bart 1986).

This type of data collection has advantageous for the research because it was the case to access
and gather the need information with little obstacles, cost effort and time than the previous
means of data collection (Kyle Burns 1992).

3.7 Data analysis and interpretation

Before starting the analysis all the collected data should be identifying and grouped in to
homogenous group. Identifying errors that occurred in the course of data collection. Editing was
conducted, editing followed by classification which is done using data attribute means according
to the type of data gather. The close ended item questions in the questionnaires was tailed and put

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in percentage and tabulation. After this the open ended items were analyzed and summaries in a
coherent and easily understandable manner.

The processed of data was further processed and analyzed by tabulation statements and
percentages depending on nature of the data. The nature of the study is descriptive of surrey type
where documentary information and questionnaires employed as mechanisms of data collection.
The overall important points have been discussed and main finding on the study have been
properly expressed to arrive at reliable conclusions and recommendations.

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CHAPTER FOUR
4. DATA ANALYSIS AND PRESENTATION
4.1. Introduction
As indicated on the methodology section 153 questionnaires schedule were prepared to be
administered for 153 sample respondents, but out of 153 questionnaires only 115 sample
responded, the remaining 38 Questionnaires were not responded on responded due to some
personal problems of the field assistant.

4.2. Background of Respondents:


Before we start the response analysis it is useful to discuss some demographic characteristics of
respondents involved in the survey. The variables included in the study area are Gender, age and
educational background, work experience and basic salary.

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Table 4.1. sex, age, educational level, work experience and range of salary

1 Sex Number of In percentage(%)


respondent
Male 60 52.17
Female 55 47.83
Total 115 100
2 Age
15-25 45 39.13
26-45 53 46.09
46-65 17 14.78
Above65 - -
Total 115 100
3 Educational
level
12 completed - -
certificate - -
diploma 6 5.2
degree 69 60a
Above degree 40 34.78
Total 115 100
4 Work experience
0-4 51 44.35
5-6 17 14.78
7-10 12 10.44
above10 35 30.43
Total 115 100
5 Range of salary
300-600 - -
601-1000 - -
1001-2000 7 6
2001-3000 - -
Above3000 108 94
Total 115 100
Source; questionnaire,2017

As it can be noted from the table 4.1 from the total number of respondents, 39.13%(45) are in the
age range of 15-25, 46.09%(53) of them are in the age range of 26-45, 14.78%(17) of them are
in the age range of 46-65. According to the data the majority of employees are between age of
26-45 years. This shows most of the employees in the organization are matured.

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According to the table above, of the available total number of respondents 52.17% (60) are male
where 47.83% (55) are females. This indicates that the number of women in the administration
office is less.

As it can be noted from the table 4.1 from the total number of respondents, 39.13%(45) are in
the age range of 15-25, 46.09%(53) of them are in the age range of 26-45, 14.78%(17) of them
are in the age range of 46-65. According to the data the majority of employees are between age
of 26-45 years. This shows most of the employees in theorganization are matured. As we can see
from the above table 4.1, 34.78% of the respondents are master’s holders, 60% of the
respondents are degree holders, 5.2% of the respondents are diploma graduates, while there is no
12 completed and certificate in the institution. When we assess the information acquired,
majority of the sample respondent’s educational levels are diploma holders. With regard to work
experience of respondents all the respondents were asked to specify their service years in the
administration, the result for this questionnaire item showed out of total sample respondents 51
respondents have service years below four years, 17 respondents have service years from 5-6
years, 12 respondents have service 7-10 years and 35 respondents have service year above 10
years.

Human resource management literature supported that having more service years on the job can
enhance performance of the employee to do a job in better ways. The above result shows that
most of the respondents have service year of less than four years. Therefore, clearly one can
observe that the administration area employees of the bank have relatively low workexperience
on their job.

As shown in table 4.1, 6% of the respondents are in salary range Br 1001-2000, none of the
respondents are in salary range of birr 2001-3000,94% of the respondents get in the salary range
of above 3000 birr, none of the respondents has a salary range of 300-600 and 601-1000 from the
above data almost all respondent’s salary range is above 3000.

Even if the fact that the organization has currently the above situation, from the employees point
of view some human resource literatures clearly stated that pay is a necessary of life. So that, it
is one of the chief reason people seek employment basic salary is a type of reward an individuals
receive in exchange for performing organizational tasks. And it is also one of the main methods

18
used by the organizations to attract employees and motivate them forwards achieving effective
employees’ performance.

This shows that all of the respondents are satisfied with the current composition they provided by
the organization.

4.3 satisfaction of basic salary


Table 4.2. Satisfaction of basic salary.

Response No of respondents Percentage of respondents


Yes 70 61
No 45 39
Total 115 100
Based on the above table 4.2 information that indicates70 (61%) of respondent were responds
‘yes’ and 45 (39%) of respondents were responds’ no’. therefore, we conclude that the majority
of employees are satisfied.

4.4 Incentive beside the basic salary


Table 4.3. Incentives beside the basic salary

Response No of Respondents Percentage of

Respondents
Yes 50 43
No 65 57
Total 115 100
Source: questionnaire, 2017
Further question (item 7), in an attempt to find out what other kinds of incentive are provided for
employees by the institution besides their basic salary. As per the responses obtained from the
subjects 50(43%) of the employees are provided with some kind of incentive besides their basic
salary and 65(57%) the employees not provided with the kinds of incentives beside their basic
salary.

4.5 kinds of incentive based the basic salary


Table 4.4. Kinds of incentive based on employee’s salary

19
Item No of Respondents Percentage of response
Bonus 15 13
Commission 40 35
Medical expense coverage 25 22
Insurance 35 30
Total 115 100
Source; questionnaire 2017

In the table 4.4 showed above 15(13%) of the respondents said as they get bonus, 40(35%)
of the respondents get the commission incentives from their organization, 25(22%) of the
respondents replied as they gain medical expense coverage from their work performed, 35(30%)
of the respondents said gets their insurance incentives. These compensations are bonus,
commission, and medical expense coverage that is provided in case insurance so on. However,
results showed that other types of compensations like, insurance which is very important and
attractive to stimulate the employee to achieve higher level of performance are not included in
the compensation system of commercial bank of Ethiopia

4.6 Employees Attitudes to Incentives


Table 4.5. The impact on incentives on employee’s attitude

Item No of Respondents Responses in Percentage


Feeling of being motivated 43 37.39
Felling of belongingness 27 23.48
Felling of happiness and Satisfaction 40 34.78
Felling of being recognized 5 4.35
Total 115 100
Source: questionnaire, 2017

The behavior and action of employee is indispensably shaped by their attitudes. The type and
direction of changes imposed on attitude of employee will have a strong influence on his/her
behavioral actions like job involvement and organizational commitments (John M. Ivancevich).
Hence, the success of any incentive program does not depend only on fair payment but also it is
to build, reshape the work forces attitude towards desired direction for accomplishment of
institutional goals.

To examine the attitude of respondents towards the impact of having compensation on their
work, the employees were asked to explain the kinds of feeling; they have when they are

20
provided with compensation. The result showed that 37.39% of all the sample respondents
responded that feeling of being motivated, 23.48% responded that felling of belongingness,
34.78% responded that felling of happiness and satisfaction and only (5) employees responded
that feeling of being recognized.

From the above result one can possibly say that compensation and motivation go hand in hand
since the majority of the responses (i.e. 37.39%) responded that having compensation will have
the impact of felling being motivated to achieve better performance level, pay and performance
level have a direct relationship. (Ivancevich, John m. Human Resource management).

4.7 Satisfaction of employees towards payment


Table 4.6. Number respondents and percentage of responses for satisfaction of employees

No Response No of respondent Percentage %


1 Strongly agree 22 19.13
2 Agree 35 30.43
3 Neutral 31 27
4 Strongly disagree 8 7
5 Disagree 19 16.5
6 Total 115 100
Source: questionnaire, 2017

Table 4.6 reveals that, from total respondents 30.43% respondent answered agree for the question
19.13%respondents strongly agree,27%of respondent neutral for the question,16.5% of the
respondent are dis agree and the rest 7%respondents are strongly disagree.The dominant effort of
the respondents replied that the rewards that receive are satisfactory for the amount of effort to
contribute to the job.

In general, the responses given indicates that, employees get incentive and salary, it is
satisfactory level for the amount of effort the employees exert the job. This satisfaction to the
reward they receive also arise from employer’s success to understand the educations level,
number of years they stay in the organization and the experience they have.

4.8 working conditions of the respondents


Table 4.7. About working conditions.

No Response No of respondent Percentage %

21
1 Strongly agree 14 12.17
2 Agree 21 18.26
3 Neutral 30 26
4 Strongly disagree 11 9.56
5 Disagree 39 33.9
6 Total 115 100
Source: questionnaire, 2017

To analyze whether the working condition of the administration is satisfactory or not, As we can
observe from the above table4.7, of the available total number of respondents, 33.9%
respondents answered disagree for the question,18.26% responds agree,26%of the respondents
are neutral for the question 12.17% of respondents answered strongly agree and the rest 9.56% of
respondents responds strongly disagree. The majority of respondents that the working condition
of the bank is not satisfactory because of the limitation of the suitableness of the policy of
working condition.

4.9 Response of employees about reward


Table 4.8. Employee’s attitude about reward.

No Response No of response Percentage %


1 Strongly agree 20 17.4
2 Agree 10 8.7
3 Neutral 15 13.1
4 Strongly disagree 30 26
5 Disagree 40 34.8
6 Total 115 100
Source: questionnaire, 2017

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Table 4.8indicates the employee’s attitude about reward is that 34.8% of respondents answered
disagree,26% responds strongly disagree,13.1% of respondent responds neutral,8.7% of
respondent answered agree and the rest 17.4% of responds strongly agree.
Therefore, more than half of the respondent responds that the reward that you receive compared
to the organization or employees receive for the same work is less or not equal to compared to
other organization.

4.10 Recognition of Respondents


Table 4.9. Recognition of respondents

No Response No of response Percentage %


1 Strongly agree 21 18.3
2 Agree 37 32.2
3 Neutral 23 20
4 Strongly disagree 20 17.3
5 Disagree 14 12.15
6 Total 115 100
Source: questionnaire, 2017

With regard to recognition, respondents were asked as whether they are provided with such
recognition from the institution or not. And the result showed in table 4.9 that 32.2% of
respondents answered agree,18.3% respondent responds strongly agree,20% of respondents
responds neutral,17.3% respondent responds strongly disagree and the rest 12.15% of respondent
answered disagree about the question. The dominant respondent answered that the work
recognition provides from the bank or institution is well recognized.

4.11 Provision of the same reward for equal work level


Table 4.10. Providing the same reward for equal work level

No Response No of response Percentage %


1 Strongly agree 28 24.35
2 Agree 32 27.8
3 Neutral 16 13.9
4 Strongly disagree 13 11.3
5 Disagree 26 22.6

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6 Total 115 100
Source: questionnaire, 2017

Table (4.10) that is the question which is: is your employer’s consistent with each employee in
providing the same reward for equal work level? Out of 115 respondents 27.8% of the employees
says agree, 24.35% of the total employee’s responses strongly agree, 22.6% of respondent’s
responses disagree, 13.9% responds neutral and the rest 11.3% respondent responds strongly
disagree. Therefore, the observation indicates that employer’s consistent with each employee in
providing the same reward for equal work level.

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4.12 chance of advancement

Table 4.11. Chance for advancement

No Response No of response Percentage %


1 Strongly agree 17 14.8
2 Agree 23 20
3 Neutral 15 13
4 Strongly disagree 25 21.73
5 Disagree 35 30.4
6 Total 115 100
Source: questionnaire, 2017

When further asked the subject if they are provided with the chance for advancement that 30.4%
of respondents answered disagree, 21.73% of respondent responds strongly disagree, 20% of
respondent responds agree 14.8% responds strongly agree and the rest 13% are neutral.

From the above results one can observe that the institution almost providing for employee a
chance of advancement because of by seeing the employee response.

4.13 Which one do you prefer to get from your bank?

Table 4.12. Getting incentives

Item No of respondents percentage


To be paid well 41 36
To have job security 30 26
To improved working condition 15 13
Good interpersonal relationship 29 25
Total 115 100%

Source; questionnaire 2017.

The result for this questionnaire item showed above 41(36%) of sample respondents are which is
they prefer to be paid well, 30(26%) of the respondents responded to have job security, 15(13%)
of the respondents replied improved working conditions, 29(25%) of the respondents said that
have a good interpersonal relationship. From the above result one can observe that most of the

25
respondents are within the first order needs in hierarchy needs. As per Maslow’s hierarchy of
needs is concerned employees who are in this level are mostly motivated earning direct financial
reward compensation.

4.14opportunity for further position


Table 4.13. Opportunity for further position

Response Number Percentage


Yes 71 61.74
No 44 38.26
Total 115 100

Source: questionnaire, 2017

Table 4.13 deals with the respondents if they have provided opportunity for further position,
61.74% of the respondents said that the institution have provided opportunity for further
position, the remaining 38.26% of the respondents have not provided opportunity for further
position by the organization.

From the above data one can observe clearly that majority of the respondents (61.74%) have
provided opportunity for further position.

4.15 Job Satisfaction


As job satisfaction is a result of many factors the institution, literature suggested that managers
should identify and innovate factors which decrease the job satisfaction of employees in the
study some attempts have been made to assess as whether employees have job satisfaction or not.
Further attempts were also made identify reasons for employee’s satisfaction or dissatisfaction on
the job.

26
Table 4.14. Satisfaction of employees on current job

Response Number Percentage


Yes 55 47.83
No 60 52.17
Total 115 100
Source: questionnaire, 2017

Data in Table 4.14 revealed that 52.17% of respondents are dissatisfied, where as 47.83% of
sample employees are satisfied on the job. These implies that majority of the respondent
dissatisfied on current job. According to the above question majority of the respondents are
dissatisfied. Because the policy, administration of the bank do not suited for the employees.

27
CHAPTER FIVE
5. SUMMARY CONCLUSION AND RECOMMENDATION
5.1. Summary of the Major Findings

As the result of this study showed, like many other institution incentive is considered as part and
parcel of wider strategy. Therefore, to their importance, the response of employees to incentive
scheme requires assessment to realize their effectiveness in hitting the intended targets:

 Some of the sample respondents are not satisfied in their basic salary they get from the
institution.
 Besides the basic salary, employees of the institution are provided some kinds of
incentive system like bonus, commission, and medical expense coverage, top up payment
and so on. However, other types of compensations like insurance, health insurance and
the like which are very important and attractive to stimulate employees to achieve high
level of performance are not included in the compensation system of the organization.
 Majority of the respondents believe that compensation has a power to enhance a feeling
of being motivated, belongingness, happiness and satisfaction and recognition and hence,
this will lead to a higher performance.
 Attitudes of employees towards incentive: the incentive they receive differ from
employees to employees but most of employees think that the incentives they receive are
not satisfactory for the amount of effort they exert in their job, the amount of incentive
they receive are low when they compare it with other organization employees receive to
same kinds of job and also most employees think that their employers are not consistent
in providing incentive to all employees equally. These reasons for dissatisfaction have a
major effect in commercial bank of Ethiopia.
 Employee’s primary need is to be paid well, in order to support themselves and their
families. However, those motivational factors like recognition, achievement,
advancement and so on are needed and necessary for employees in any organization.
 Employees in the organization have job satisfaction if they are provided with job security,
good personal relationship, good working conditions, good salary and the like. This job
satisfaction will have effect on employee’s response in great amount.

28
 Regarding employer’s attitude towards incentive and its impact on their employees,
majority of the employers able to see the change in performance employees that comes
from salary increment and presence of other kinds of incentives. It is also clear from the
study that the presence of salary increment and other incentives are the main reasons for
employees being attracted and feel motivated. And qualified and experienced individuals
can be attracted to the institution and also results in low rate of turn over.
 The majority of respondents supported both financial and non-financial incentive plan
and the remaining were interested in financial incentives only.

5.2. Conclusion

 As the findings of this research disclosed that the incentive employees received are not
satisfactory for the amount of effort they exert into their job, so this dissatisfaction have a
major effect for the performance of the institution.
 Incentive is so systematic in its operation. The employer uses many tactics to reward their
employees so that they can systematically motivate their employees to serve well. So
from this we can conclude organizations can encourage their employees to serve well,
feel belongingness, by giving different kinds of incentives systematically, as a result they
can achieve their goals.
 The findings of this study indicates that the effects of incentive on employee’s response
have made valuable improvement, so we can conclude from this as incentive given to
employees they may try to do more and more for providing better service as a result
quality of service increases.
 The primary need of the administration employees is to be paid well, to have job security,
have good working conditions, have good interpersonal relationships with their co-
workers and their employers. So we can conclude from this if institution works
efficiently in giving a hygiene factor motivation for the employees serve the organization
successfully and as a result the organization would achieve its objective.
 With regard to employer’s attitude towards incentive and its impact on their employee’s
response, majority of the employers able to see change in giving service that comes from
salary increment and presence of other kinds of incentive packages. It is also clear that

29
the presence of salary increment and incentive package are the main reasons being
attracted and motivated.
 So long as, majority of the respondents are very interested in receiving reward in terms of
both financial and non-financial incentive because of their high sensitivity of both
financial and non-financial incentives.
The following impacts have been stated:

There are: - There is no motivation to work

- It reduces the work interest

- Carelessness to the actual work

has reached the conclusion that the motivation in financial and non-financial incentives
will be free from Therefore, the study all its negative impacts of payment if the payment
is balanced, adequate and equitable for employer and employee, and finally it can
motivate employees to achieve higher level of performance.

5.3. Recommendation

Based on the study, the researcher would like to recommend, to the bank problem the following
important points, to take steps that enable the organizations to be more effective.

 As clearly indicated in the discussion part, the majority of the employees have no further
opportunity for education to their degree, masters and Ph.Ds. Therefore, there is great
problem in finding better qualified and educated employees in the institution. Hence, the
management of the institution should set and disclose carrier development paths for its
employees. Most of the previous programs have focused on managers, but the institution
should also recognize employees at all level need career planning for further
advancements, and scheduled training.
 In the institution majority of the employees have no job satisfaction because their salary
is low compared to the number of years they served and the experience they have on
particular jobs. Therefore, it is recommended that by taking in to consideration these
mentioned facts, the basic salary that employees get should be improved so that it will be
possible to get satisfied employees.

30
 If commercial bank of Ethiopia has benefit from the existing potential of work experience
of its employees, it should reward employees who achieve better performance level to
stimulate employees towards using his/her accumulated work experience optimally. also
basic salaries should have improved by considering, service year of employees.
 Providing of different incentives such as attractive salary and wage, Bonus, Medical
expense coverage, commission, insurance, vacation leave, child care, health insurance
and so on are very important for any organization, but the finding of the study shows that,
most of the time the institution does not provide those compensations properly to its
employees. Therefore, it is recommended that the institution must provide different kinds
of compensation to its employees properly in order to attract and retain experienced
individuals, to have felling of happiness, satisfaction and can decrease the rate of
absenteeism and turnover.
 Suggested solutions to alleviate the problem of pay system:
o The bank should compensate the employees.
o Paying adequate wage per hour for bank employees who may be assigned in top-
up payment.
o Motivational approaches other than pay such as recognition, clear
communication, accountability to the job, job satisfaction and other related system
should be more encouraged.
 Given that financial incentives plays an important role in an administration of banking
area employees of the institution context and that provision and measurement of its
contribution are so interrelated, the bank should pay attention on creating awareness for
managers the methods provision of financial incentive and evaluation of the
achievements of employees.

31
REFERENCES

Blinder, A. 1990 “paying for productivity” the center on micro –social change.
Daft, R.L (1995) Understanding Management 1st edition the Dryden press Orlando Florid
Desseler, Gary, Human Resource Management
French, W.L (1998). HRM, 4th edition; Houghton Mett Cinco. Boston
Heneman. Schuwab, Fossum, Dyer. Personnel/Human Resourcemanagement 4th ed.
Universal Book Stall, 1998
Ivancevich, JohnM., Human resource management 7th edition.
LioydL Bayars and Hesile W.Rue: Human resource management 5th edition, 1997
Lussier, R.N (1997). R.N (1997). Management Concepts Application skills development,
Wouth Western CollegePublishing, Cincinnati, Ohio
Noel, Hollenbeck, Gerhart, weight HRM, Gaining A competitiveadvantage. 2nd edition.
IRWIN,1997.
Plunkett, Attner, Introduction to management, 5th edition. 1994.
APPENDIX
DILLA UNIVERSITY

COLLEGE OF BUSINESS AND ECONOMICS

DEPARTMENT OF MANAGEMENT

INTRODUCTION:
First of all I would like to express my goodful gratitude thanks for your willingness to provide
answer for the prospective questionnaire. The Questionnaire is designed to help me to gather
appropriate data and I believe that you will kindly collaborate in filling the questionnaire.

The questions may be open or close ended, so you are kindly requested to put

(√ ) mark inside the box for closed ended question and further explain if there is opened ended.

1. Age: a. 15-25 b. 26-45 c. 46-65 d. above 65


2. Sex: Male Female
3. Level of Education:
12 completed Diploma

Certificate Degree above Degree

4. Work Experience: a. o-4yrs b. 5-6yrs c.7-10yrs

d. Above10yrs

5. How much is your Basic Salary

300-600 601 - 1000

1001 – 2000 above 3000

2001 – 3000

6. Are you satisfied with your basic salary?


Yes No
7. Do you get any kind incentive beside your salary? Yes No

3
8. If your answer is yes for number 7, what kind of incentive you get from the commercial
bank of Ethiopia?
Bonus Commission Medical expense coverage

Insurance

Other specify ___________________________________________________________

________________________________________________________________________

9. What is your response on having incentive to your work?


A. Feeling of being motivated
B. Feeling of belongingness
C. Feeling of happiness & satisfaction
D. Feeling of being recognized

10. the rewards you receive are satisfactory for the amount of effort you contribute to the
job?
Strongly agree

agree neutral strongly disagree dis-agree

11. the working condition is satisfactory?


Strongly agree agree neutral strongly disagree dis-agree

12. the reward you receive are fair when compared to organization or employees receive for
the same work?
Strongly agree agree neutral strongly disagree dis-agree

13. The work provides recognition for you ? Strongly agree


agree neutral strongly disagree dis-agree

14. your employer’s consistent with each employee in providing the same reward for equal
work level?
Strongly agree agree neutral strongly disagree dis-agree

15. the work provides a chance for advance for you?


Strongly agree agree neutral strongly disagree dis-agree

16. Which one do you prefer to get from your bank?


A. To be paid well, B. to have job security, C. to improved working condition,

D. good inter personal relationship,


17. Does your work provide opportunity for further promotion?
Yes No

18. Are you satisfied on your current job?


Yes No

19. If the answer for No 18 is yes, from where do you think it comes?
Specify_______________________________________________________________

______________________________________________________________________

20. If no, to number 18, why? Specify ____________________________________


______________________________________________________________________

Thank you.