MA in Public Financial Management

Advanced Research Methods

By:
Tsegay Tesfamichael Girgir
ID #: ECSU1903067
Section: IV
Year: I

To:
Ashenafi Haile (PhD)

July, 2020
Addis Ababa Ethiopia

The Effect of Rewards On Employee Motivation

 Table of Contents
Chapter One...................................................................................................................................1
Introduction....................................................................................................................................1
1.1 Background of the study.........................................................................................................1
1.1.1. Background of the Organization………………………………………………..3
1.1.2. Vision……………………………………………………………………………..4
1.1.3. Mission…………………………………………………………………………...4
1.1.4. Values…………………………………………………………………………….4
1.2 Statement of the Problem.......................................................................................................5
1.3 Research Questions/Hypothesis.............................................................................................6
1.4 Objective of the study.............................................................................................................6
1.4.1 General Objective.................................................................................................6

1.4.2 Specific Objective..................................................................................................6

1.5 Significance of the Study........................................................................................................7
1.6 Scope of the study...................................................................................................................7
1.7 Limitation................................................................................................................................7
1.8 Definition of Terms.................................................................................................................8
1.9 Organization of the Paper/Study...........................................................................................8
Chapter Two…………………………………………………………………………………….9
Related Literature Review…………………………….………………………………………..9
Introduction…………………………………………….………………………………………..9
2.1 Theoretical View......................................................................................................................9
2.1.1 Reward......................................................................................................................9
2.1.2 Reward Systems........................................................................................................9
2.1.3 Reward Strategy......................................................................................................10
2.1.4 Reward Management..............................................................................................10
2.1.5 Types of Reward.....................................................................................................11
2.1.5.1 Intrinsic Rewards...........................................................................................11
2.1.5.2 Extrinsic Rewards..........................................................................................11

The Effect of Rewards On Employee Motivation

 2.1.6 Motivation................................................................................................................12
2.1.7 Theories of Motivation...........................................................................................12
2.1.7.1 The Content (Need) Theory of Motivation………………………………..12
2.1.7.2 Cognitive or Process Theory of Motivation……………………………….14
2.1.7.3 Reinforcement Theory of Motivation……………………………………...15
2.2 Empirical View.......................................................................................................................16
2.3 Conceptual View....................................................................................................................17
Chapter Three..............................................................................................................................18
Research Methodology and Approaches...................................................................................18
Introduction……………………………………………………………………………………..18
3.1 Description of the Study Area...............................................................................................18
3.2 Research design......................................................................................................................19
3.3 Target Population..................................................................................................................19
3.4 Unit of Analysis......................................................................................................................19
3.5 Sampling Design.....................................................................................................................20
3.6 Data Type and Sources..........................................................................................................20
3.7 Data Collection Methods.......................................................................................................21
3.8 Data analysis and Interpretation..........................................................................................20
3.9 Variables of the Study...........................................................................................................21
3.10 Ethical Consideration......................................................................................................21
References……………………………………………………………………………..……2

The Effect of Rewards On Employee Motivation

 Chapter One
Introduction
This chapter gives a brief background of the study and introduces the thrust for the research and
the beneficiaries of the study. The chapter also outlines the statement of the problem, the
proposed hypothesis/questions for the study, and states the objectives of the study. The chapter
also provides the significance of the study, scope of the study, limitation, and organization of the
study. In short, it is the foundation upon which the rest of the research is going and guides the
researcher in carrying out the research.

1.10 Background of the study

Wegagen Bank SC plays significant roles in national, regional and global economies and the best
sources of providing products to customers are its staffs. Employees can create a good perception
and long lasting image in the eyes of banks customers by offering excellent service. Petcharak
(2004) stated that motivation of employees has a significant role in attaining maximum level of
satisfaction to bank’s customers.

The Effect of Rewards On Employee Motivation

Currently, we understand technology is growing rapidly in the past decades, it brings huge
impact on every sector including human resource, and however, the contribution of human
resource is very important for an organization. According to Armstrong (2006) People are the
organization’s key resource and organizational performance largely depends on them. The
achievement or failure of an organization is mainly depending on the quality of the people who
work there. Without positive and creative contributions from people, organizations cannot
progress and grow.
The banking industry is one of the most competitive and more globalized sector as the highly use
of information communication technology by banks across the world operating in the sector.
Even though, information technology has become the backbone of all banks in the financial
sector at the global level, human resource is still remains very useful in the highly digital
banking industry, because all the jobs performed by banks cannot be performed exclusively by
electronic devices such as automated teller machines (ATM), point of sale (POS), credit cards,
debit cards, electronic funds transfer (EFT) system, mobile banking, internet banking, computers
or other similar devices. In order to get maximum productivity from the employee the
organization must motivate them by providing different types of rewards. Armstrong and Murlis
(2003) stated organization must reward employee because in return, they are looking from
certain kind of behavior they need competent individuals who agree to contribute high level of
performance and loyalty.
Motivating employees with reward is one of the essential elements to contribute the best in their
organization. Dosenovic (2016) reward is one of the most important elements of modern
organization, since it is the main driving force that compensates, motivates employees for their
work. Reward management deals with strategies, policies, and process required to ensure the
contribution of people to the organization is recognized by both financial and non-financial
means. It is about the design, implementation and maintaining of reward system which aim to
meet the need to the organization and its stakeholders Armstrong (2007).

The Effect of Rewards On Employee Motivation

According to Tyson & York (2000) the starting point for the manager is to design reward system
that take in to account relativities and that represent the philosophy of management and
organization strategy that the organization has decided to adopt. Lawler (2003) stated a truly
motivational reward system must be designed with a few parameters in mind. motivate
employees to perform through valued and truly sufficient rewards, provide them with a clear line
of sight, give them the power to influence their performance, and deliver on its promise and the
magnitude of rewards must satisfy the basic human needs of survival and security.
Lawler (2003) also states organizations must choose relevant rewards over which they have the
potential capability to provide to their employees. The distribution of rewards must be perceived
as being done in a fair and equitable manner. Organizational members must perceive a link or
contingency between their job performance and the rewards they receive. Therefore, the rewards
used by an organization must be valued by the individual members of that organization
Rewards need to be contingent on achieving desired performance levels rather than on merely
doing certain tasks. It should be meaningful and valuable to the individual based on objective
and goals. Rewards are not based on competitive struggles within the workplace, between
conditions in the workplace and fulfillment of individual needs. However, a reward system needs
to have a positive impact on behavior. Rahim & Daud (2012).
Rewards are grouped in to extrinsic or intrinsic. Extrinsic rewards are tangible reward that an
employee receives from the employer and this includes salary/pay, incentive, bonus, stock
options, promotions, job security, flextime, etc. Intrinsic rewards are intangible or psychological
reward that employees get from the work itself. These are self-initiated rewards such as pride in
one work, a feeling of accomplishment, appreciation, meeting new challenges, positive and
caring attitude from employer, participate in decision making or being a part of a team. Satiullah
(2014).

The Effect of Rewards On Employee Motivation

Motivation can be defined as the drive or energy that compels people to act, with energy and
persistence, towards some goal. When people have motivation, they work with energy,
enthusiasm and initiation Berman, Bowman, and Jonathan, (2010). Jehanzeb et al. (2010) state
that, in the existing vibrant environment the extremely motivated employees provide their
service as a synergy for achievement of organization goals, business strategy, high proficiency
growth and performance, on the other hand when they lack motivation, they accomplish less and
seem to need more supervision to do even a basic amount of work and overcome modest
challenge.
1.1.5. Background of the Organization
Wegagen Bank SC was established on the 11 th of June 1997 E.C. It came to life as a result of the
entrepreneurial wit of sixteen (16) founding members who recognized the critical role that
financial institutions would play toward creating a sustained economic development and were
able to put in an initial paid-up capital of Birr thirty million (Birr 30 Million).
Established under the banking proclamation of Licensing and Supervision, Proclamation No.
84/1994, the Bank was registered with the National Bank of Ethiopia on April 30, 1997. The
Memorandum and Articles of Association of the Bank were signed on April 15th, 1997 and
registered with the Addis Ababa Bureau of Trade, Industry and Tourism on April 15, 1997,
Registration Number 1/34/4/89. The Bank, as it started back then, operated through its head
office located in Gofa Sefer, Addis Ababa before it moved to its current headquarters on the
Wegagen Tower, Ras Mekonen St, Addis Ababa.
Wegagen Bank has a network of 285 branches of which 114 are in Addis Ababa and the
remaining 171 are located in other cities and towns of the country. To expand its service
coverage, the Bank keeps on opening additional branches both in Addis Ababa and regional
towns.
Wegagen Bank is a pioneer to introduce a core banking system as of July 2000, thereby
managing to network the head office & all branches. Through its versatile ISO standard core
banking system, the bank is now delivering more efficient services to its customers. The system
has also enabled the bank to provide technology-based banking services such as card payment
services (through ATM & POS), internet banking as well as mobile banking services.

The Effect of Rewards On Employee Motivation

Wegagen Bank is governed by the board of directors consisting of a chairperson, a vice
chairperson and seven directors. The overall management is entrusted to the management team
which comprises the president/chief executive officer, who is appointed by the board of
directors, four Vice-Presidents and sixteen directors as well as manager of engineering service.
As at March 31, 2019, the number of employees of the bank stood at 4524.
The bank provides various banking products and service in Ethiopia. It offers deposit products
include savings, demand, and special savings. The company also provides term loan, overdraft
services, and advance facilities (export pre-shipment) to various sector and issues domestic letter
of guarantees, bonds etc. as well as payment instruments, such as cash payment orders, demand
draft, etc, in addition it offers import and export services. WB is now the most profitable private
bank in Ethiopia.
1.1.6. Vision

 To be one of the ten most reputable and competent banks in Africa in the year 2025.
1.1.7. Mission

 The Bank mission is to optimize the stockholder value through sustainable growth and
profitability, provide wide range of innovative and customer focused banking products
and services, boost operational excellence by employing state of the art information
technology, and being the employer of choice by creating conducive working
environment where in employees achieve their career aspiration. .
1.1.8. Values

 The values are honesty, integrity and loyalty, service excellence, professionalism, equal
employment opportunity, learning & innovation, social responsiveness, respect and
dignity, and good corporate governance.

The Effect of Rewards On Employee Motivation

1.11 Statement of the Problem
The problem to be discuses here is current as well as relevant for any organization. As
employees, they are the main resource/asset for any organization and these rewards directly have
an impact on them. Motivation is an intangible and subjective term while reward systems are
objective and clearly well defined and attempting to relate one subjective concept to an objective
one is a discouraging task.
Employees of an organization are one of the most valuable assets. Motivated staffs are loyal to
their organization and keeping motivated staff builds an organization and reduces the cost of
recruitment and training. Mullins (2006), one of the major responsibilities of managements in
any organization is motivating their staffs effectively. According to Omolon (2015, p.88), “the
loss of employees represent a loss of skills, knowledge and experiences which can create a
significant economic impact and cost to corporations as well as impacting the needs of
customers. Managers who can motivate employees assist the organization by improving
employee retention.” Anthony Kusi (2014), as employees is not motivated adequately they will
quit their organization and inversely as they motivated adequately in a consistent manner they
become loyal to their organization.
While reward is arguably one of the key drivers of motivation and one of the most studied areas,
doubts have been cast by Herzberg et al. (1957) and Armstrong (2008) on the effectiveness of
rewards. They argued that, while lack of it causes dissatisfaction, its provision does not result in
lasting motivation. The effects of reward on motivation vary from organization to organization.
Most people are motivated by money at least for their basic needs and wants (DeNisi and
Griffins, 2008). Employee motivation through reward can be in several forms including salary
raises, performance bonuses, and other extra benefits such as vacations, cars and other tangible
items that are used as rewards (Campbell, 2007).
Many researchers have focused on benefit, recognition, and work environment as employee
motivators in different organizations (Kosgei, 2011). However, none has studied employee
reward at Wegagen Bank SC.
Usually reward system was designed by top management. The problem here is that maybe they
design the reward system without consulting with the employee and thus the designed may not
be able to satisfy employees need and expectation. So we can say this reward system is not well
structured and because of that it cannot really fully motivate the employee. In case the reward is

The Effect of Rewards On Employee Motivation

something that does not have any good for the employee then it may not be enough to motivate
the employee. As a result, the performance of the company will be affected due to this problem.
Good performance of a company can really help organizations maintain their recognized so that
these appear as positive consequences for showing the desired behavior to motivation among
employees.
Therefore, this study intends to investigate the gap by enquiring on the effect of reward on
employee motivation at Wegagen Bank SC. by assuming independent variable as reward and
dependent variable as employee motivation.

1.12 Research Questions/Hypothesis

Based on the above discussions the paper attempts to address the following research questions.
 What is the relationship between reward and employee motivation in Wegagen Bank?
 To examine the effect of working environment on employee motivation?
 What is the employees’ perception towards reward management practice of the Bank?
 To evaluate the effect of different benefits (car & house loan, promotion, and
recognition) on employee motivation?
 What is the effect of extrinsic reward on employee motivation?
 What is the effect of intrinsic reward on employee motivation?

1.13 Objective of the study

1.13.1 General Objective

The main objective of this study is to look at the effect of reward on employee motivation in the
case of Wegagen Bank SC (WB).

1.13.2 Specific Objective

Specifically the purpose of this study is to:
 Assess the reward practice of Wegagen bank;
 Examine the relationship between reward and employee motivation;
 Examine the effect of extrinsic rewards on motivation in Wegagen Bank;
 Investigate the effect of intrinsic rewards on employee motivation in Wegagen bank; and
 Evaluate the effect of different benefits on employee motivation.

The Effect of Rewards On Employee Motivation

1.14 Significance of the Study
The study shall provide basic information on the effects of extrinsic and intrinsic rewards on
employee motivation in Wegagen Bank SC. The result of the study will be important in
providing insights for the organization and its branches in particular and for the management of
the bank in general as it will help them to focus more on having motivated workforce. At the
same, the study will benefit the individual employees as well for their self development.
Finally it will be used as a central and initial point for further research work to be carried out in
this line.

1.15 Scope of the study

The effect of reward on employee motivation is not only the case of Wegagen Bank SC. But, for
simplifying the study selects WB SC as representative of other commercial banks. The study
focuses on the employee of Wegagen bank SC who are working in the head office. Furthermore,
the scope was set on the theories used to analyze the level of motivation with the reward system.
The scope also includes independent variable divided into two, extrinsic and intrinsic reward.
Also for dependent variable which is employee motivation.

1.16 Limitation
Practically, the study geographically limited to employees of head office only because
it is obvious it will be very difficult to conduct throughout the bank’s branches stretched across
Ethiopia. It would be more generalized if the study took samples from the total populations of
the company. Moreover, the outcome of the study entirely depends on responses of the
respondents included in the study. The study only includes reward system items extrinsic and
intrinsic rewards while extrinsic rewards listed as payment, benefit, promotion, working
condition and Supervision that the employee receives as part of their job. On the other hand an
intrinsic reward associated with the satisfaction that comes from actually performing challenging
and interesting job, recognition and self- empowerment or autonomy.

The Effect of Rewards On Employee Motivation

1.17 Definition of Terms
Motivation: defined as the complex of forces inspiring a person at work in an organization to
intensify his desire and willingness to use his potentialities for achievement of organizational
objectives Singh, N. (2000).
Reward: is all the monetary, non-monetary and psychological payment that an organization
provides for its employees in exchange for the work they perform Bratton, J. & Gold, J. (2007).
Extrinsic rewards: are the physical benefits provided by the organization such as pay,
bonus, fringe benefits and career development opportunities Jehanzeb, J. et.al. (2012).
Intrinsic rewards: refer to the rewards that come from the content of the job itself, and
encompass motivational characteristics of the job such as autonomy, role clarity and training
Jehanzeb, J. (2012).

1.18 Organization of the Paper/Study

This study encompasses three main chapters. Chapter one contain background of the study,
statement of the problem, research questions/hypothesis, research objectives, significance of the
study, scope of the study, limitation of the study and definition of terms.
The second chapter deeply discusses about the related literature review, which is reviewed from
scholarly sources in order to show previous related works for the statement of the problem. This
includes theoretical & empirical review, and conceptual framework.
Chapter three presents description of the study area, research design, and target population,
sampling design, type and source of data, method of data collection, and method of data analysis.

The Effect of Rewards On Employee Motivation

 Chapter Two
Related Literature Review
Introduction
This chapter reviews related theoretical and empirical literature, on the subject matter. The
relevant literature would be reviewed under the following outline: provides an insight about
reward, reward systems, reward strategy, reward management, types of reward, definition of
motivation, and different theories of motivation, and conceptual framework.

The Effect of Rewards On Employee Motivation

2.4 Theoretical View

2.4.1 Reward
According to Bratton & Gold (2007) reward refers to all the monetary, non-monetary and
psychological payment that an organization provides for its employees in exchange for the work
they perform.

The word reward state the benefits that workers receive from their jobs and significant elements
of employee job attitudes such as organizational commitment, motivation and job satisfaction
(Kalleberg1977, Mottaz1988) as cited in Vijauakumar & Subah, (2013).

Reward is the compensation and/or benefit where by an employee receives from an organization
for his or her good service. Reward is not simply offering direct currencies and other forms that
can be converting to currency. It also involves the provision of good working environment,
favorable interpersonal relationship inside the organization, allowing involving in decision
making processes, facing and feeling sense of achievement, with preferable growth opportunities
(Jiang, Z. 2009).

Rewards are important to engage employees and perform effectively and efficiently in the
organization. When employees develop interest, they are more dedicated to maintain high level
of performance. Jehanzeb, et al. (2012).

2.4.2 Reward Systems

Dosenovic (2016) states that, the main role of the reward system is to align individual employee
interests and strategic objective of the company by attracting and retaining skilled people,
encouraging and supporting employees to develop their skills and knowledge, motivating
employees and creating a culture where employees care about the success of companies in which
they work.

A reward system consists of the integrated policies, processes and practices and administrative
procedure for implementing the system within the framework of the human resources (HR)
strategy and the total organizational system. Bratton & Gold (2007).

2.4.3 Reward Strategy

The Effect of Rewards On Employee Motivation

Velnampy (2009), reward strategy is the deliberate utilization of the pay system as an essential
integrating mechanism through which the efforts of various sub units and individuals are directed
towards the achievement of an organization strategic objective, subject to internal or external
constraints. Velnampy (2009) also states that modern compensation administration frequently
embraces a strategic approach where the mix and level of direct pay and benefits are chosen to
reinforce the organization’s overall strategic objectives (Integration among four basis policy
decisions is required in the design of a consistent compensation system. These decisions involve
the comparison of jobs within an organization(internal equity/internal consistency, setting pay
levels relative to competitors (External equity/External competitiveness),adjusting pay for
individual employees (pay for performance, rewards systems, skill based pay design), and the
administration of the compensation function (benefits administration, and benefits
communication).

2.4.4 Reward Management

Velnampy (2009) state that the purpose of managing the system of rewards within the
organization is to attract and retain the human resources the organization needs to achieve its
objectives. To retain the services of employees and maintain a high level of performance, it is
necessary to increase their motivation and commitment. In effect the organization is aiming to
bring about an alignment of organizational and individual objectives when the spotlight is on
reward management.

2.4.5 Types of Reward

There are two major types of rewards which employees receive from their work. These are
extrinsic and intrinsic reward.

2.4.5.1 Intrinsic Rewards: Behaviour performed for its own sake.

Motivation comes from performing the work, and

Stemming directly from job performance itself.

The Effect of Rewards On Employee Motivation

Intrinsic rewards are related to the worker’s perception of the job and, hence, are affected by job
design; intrinsic rewards may be called as non-financial/non-monetary rewards Velnampy
(2009).
According to Ajimal et al (2015) intrinsic rewards have the great importance to integrate the
commitment in employees. Organization provided the opportunities to employees by their
performance for the recognition and acknowledgement as rewards and in result the employee
emotionally attached with organization due to being recognized. The intrinsic rewards are more
helpful for employers to develop and construct the emotional attachment among employees
towards organization goals and objectives.

Examples of Intrinsic rewards are recognition, and empowerment.

2.4.5.2 Extrinsic Rewards: Behavior performed to acquire rewards.

Motivation source is the consequence of an action/given by others, and

Part of job situation.

Extrinsic rewards are the physical benefits provided by the organization that satisfy an
employee's basic need for survival and security and drive from factors associated with the
job context. This include financial payments such as pay, bonus, fringe benefits and nonfinancial
such as working condition and managerial behavior. Bratton & Gold (2007) and Vijauakumar &
Subah, (2013). Their common thread is that they are external to the job and come from an
outside source, mainly management.

Examples of extrinsic rewards are working conditions, leadership, payment, promotion and
benefit.

The Effect of Rewards On Employee Motivation

 2.4.6 Motivation
According to Robbins and Judge (2018), motivation is an intensity, direction, and persistence of
an employee’s effort in order to accomplish goal.” Intensity is about how strongly an individual
attempts. Majority of us concentrate on intensity when we think about motivation but high
intensity not assure best output unless it is through with the right direction that consistent with
the firm objective and benefits the firm. The persistence dimension is about how long an
individual keep up its attempts. Motivated staffs staying on the job long enough to attain their
objectives.

Armstrong (2009) defines a motive is a reason for doing something. Motivation is concerned
with the strength and direction of behavior and the factors that influence people to behave in
certain ways. The term ‘motivation’ can refer variously to the goals individuals have, the ways in
which individuals chose their goals and the ways in which others try to change their behavior.

Motivation at work can takes place in two ways. First, people can motivate themselves by
seeking, finding and carrying out work that satisfies their needs or at least lead them to expect
that their goals will be achieved. Secondly people can be motivated by management through
each method as pay, promotion, praises etc Armstrong (2006).

2.4.7 Theories of Motivation

A central aspect for all organizations is to motivate their employees. From an organizational
perspective, the motivation is important due to the fact that it can empower high-performing
employees to stay within the organization. Additionally, the employees can through a higher
degree of motivation develop their overall skills in their specific job task and be more engaged to
perform at a higher level. Alvesson & Sveningson, (2008).

There are many theories that trying to elaborate the nature of motivation. Mullins, et al. (2006),
classified those theories in to three broad categories Content or need theories, Cognitive or
Process theories and reinforcement theory.

2.4.7.1 The Content (Need) Theory of Motivation

Content theories are trying to elaborate those specific issues which really motivate an employee
at work. Theories under this category are deals with identifying employee’s needs and their
comparative ability, and the objectives they pursue to satisfy these needs.

The Effect of Rewards On Employee Motivation

Generally, content theories focus on the nature of needs and the factors what motivates. Theories
that are included under content theories are:

Hierarchy needs theory (Maslow’s hierarchy of needs),

Abraham Maslow’s hierarchy of needs theory is the most popular content (need) theory of
motivation (Kinicki et al. 2014). He listed out that each person has a hierarchy of five needs:

 Physiological needs: the needs for food, shelter, clothe, and other basic needs.

 Safety needs: the needs for security and protection.

 Social needs: the need for affection, acceptance, belongingness, and friendship.

 Esteem needs: the need for internal esteem and esteem of others, internal esteem
includes self-respect, confidence, independence, strength, achievement and esteem of
others includes reputation, status, recognition, attention and appreciation.

 Self-actualization need: the need for achieving one’s potential, and self-fulfilment,
becoming what one is capable of becoming

ERG theory,
According to Alderfer basic human needs classified in to three groups namely Existence,
Relatedness, and Growth. The existence group is about basic material necessity which what
listed in physiological and safety needs of Maslow. The relatedness is about the needs for
developing relevant interpersonal relationships and its related with social need and esteem of
others need of Maslow’s. The growth is about intrinsic desire for personal development and
aligns with Maslow’s need for internal esteem and self-actualization need. According to
Alderfer’s ERG theory in addition to replacing five needs to three, two needs may go
simultaneously

Herzberg Two Factor Theory

The Effect of Rewards On Employee Motivation

According to Mullins et al.(2006),The hygiene factors are organizational policy, work
conditions and external to the job itself and become reason to dissatisfaction if not present and if
present no dissatisfaction but not satisfaction. The motivating factors are those factors if present
used to motivate employees to enhance performance which are accomplishment, recognition,
accountability, work itself and intrinsic to the job itself and become reason to satisfaction if
present however, if absent cause to no satisfaction but not dissatisfaction.

According to Hertzberg, specific emphasis should be put on tasks that the employees associate
with the job task, or the results from these tasks. The organization should to a greater extent put
effort on personal development and recognition for a well-done work or through the use of
promotion, which are more intrinsic motivational aspect that to a greater extent should be
emphasized on. (Robbins et al, 2010)

Acquired needs theory (McClelland’s/Learned need theory).

It is also named as Learned Need Theory or the Three-Need Theory. Kinicki et al. (2014), as the
name indicate the three-need theory emphasis on three needs namely achievement, power, and
affiliation.

 Achievement need: The force to succeed, to attain the plan.

 Power need: The need to influence others in order to behave in attaining organizational
goal.
 Affiliation need: The need for good friendly interpersonal relationship.

2.4.7.2 Cognitive or Process Theory of Motivation

Cognitive theory is a group of theories that explain how employees select behaviors with which
to meet their needs and determine whether their choices were successful.

The cognitive theory tries to identify the relationship between the dynamic variables which
increase motivation. These theories are interested more with how behavior is begin, directed and
maintained. Process theories focus on the real process of motivation. The theories under process
theories are:

Expectancy theory (by Victor H. Vroom): a process theory about work motivation that
focuses on how workers make choices among alternative behaviors and levels of effort.

The Effect of Rewards On Employee Motivation

According to DuBrin (1978), how hard an employees do their job actually depends on what they
anticipate to benefit in achieving organizational goal to satisfy their personal goal is the basic
assumption of expectancy theory.

Equity theory (J. Stacy Adams): focuses on individuals’ perceptions of how fairly they
are treated compared with others.
According to Mullins et al. (2006), Equity theory emphasis on employee’s feelings of how fairly
they treated in an evaluation of relative to the treatment others received for the same type of job
and performance of job.

Goal theory (Edwin Locke): Focus worker’s inputs in the direction of high performance
& achievement of organizational goals.
It is one of the basic functions of the management to support the employees in order to achieve
their goals and to give the required guidance and/or assistance in order to ensure that the
employee’s goals are compatible with the organizational goals (kinicki, et al. 2014).

According to Locke and Latham (2002) goals are mainly serving four different mechanisms.
Firstly, the goals serves as a distinct directive function, which allows the employee to, at a
greater extent, focus on goal-oriented activities, instead of focusing on activities that is beyond
the goals. This mechanism provides the fact that the firm can align the employees with the
organization’s overall targets, when well-designed goals are used. The second aspect that Locke
and Latham points out is that goals allow employees to take on greater effort and is functioned as
a stimulating function. If the organization had tougher goals, the employees would to a larger
extent put more effort in comparison with low-setting goals, which provide less effort by the
employees. Thirdly, goals are providing persistence affection to the employees, which imply that
employees that control their own time to reach the goal increase their effort in the task. Finally,
the authors describe that goals are encouraging employees to use their overall knowledge and
expertise to solve the task.

2.4.7.3 Reinforcement Theory of Motivation

The Effect of Rewards On Employee Motivation

Reinforcement theory focuses on the impact of external environmental consequences on
behavior. Behavior theory of motivation that holds that behavior is a function of its
consequences (rewards and punishment). Reinforcement theories focus on employee learning of
desired work behaviors.

2.5 Empirical View

Empirical literature review is to discuss different previous researches in relation to this study.
Related literature on the effect of reward on employee motivation has occupied the interest of
several authors particularly the attention in understanding of the variables liable to the employee
motivation.

A research conducted by Smith, Joubert & Karodia (2015) with the title “The impact of intrinsic
and extrinsic rewards on employee motivation at a medical devices company in south Africa”
show that although employees rated annual salary increases (extrinsic rewards), as being the
most motivating, the overall results of their study revealed that employees in the organization
appear to be more motivated by intrinsic rewards. Autonomy, growth and development,
competence, and a sense of significant contribution and accomplishment were perceived as
highly motivating.

Vijahkumar & Subha (2009) conducted a research and examined there is direct and positive
relationship between reward and motivation and work satisfaction, hence if rewards offered to
employees to be altered, then there would be a corresponding change in work motivation and
satisfaction and they conclude on their research if rewards improved could have a positive effect
on motivation and satisfaction.

The Effect of Rewards On Employee Motivation

The finding of the Ajimal et al. (2015) that intrinsic and extrinsic rewards show significant
influence on the employee’s satisfaction and motivation level. Intrinsic and extrinsic rewards are
essential for employee motivation and satisfaction, if employees are rewarded appropriately with
salaries, bonuses and increment for their hard work then they will be motivated greatly towards
achievement of their representative objectives and in the same way if employees are
acknowledged properly against their efforts then they will be more satisfied and happier towards
their official objectives.

2.6 Conceptual View

A conceptual framework is a specific exploration of an aspect of the theoretical framework. In
other words, the conceptual framework is used to arrive at a hypothesis. A conceptual framework
refers to the extent a researcher conceptualizes to be the relationship between contextual
variables in the study and shows the relationship graphically or diagrammatically Mugenda &
Mugenda, (2003). The relationship describes the association between the independent variables
and Intrinsic
the dependent variables.
Reward

Recognition
Fig. Conceptual framework
Empowerment
Independent Variables
Autonomy
Extrinsic Reward

Benefit
promotion
payment
working condition

Dependent Variable

Motivation

The Effect of Rewards On Employee Motivation

Source: Developed by the researcher based on the ideas in the literature.

Since the study focus on the effects of reward on employee motivation, different extrinsic and
intrinsic rewards are considered and these extrinsic and intrinsic rewards are taken as
independent variable, and motivation as a dependent variable. The above diagram shows the
relationship between independent and dependent variables.

Chapter Three
Research Methodology and Approaches
Introduction
This chapter describes the methodology that will be used for the study. The main issues
discussed here are description of the study area, research design, target population, sampling
design, type and source of data, method of data collection and method of data analysis. In this
part, the research design and methodology of the research is described as follows:

3.11 Description of the Study Area

Wegagen Bank SC was established on the 11 th of June 1997 E.C. It came to life as a result of the
entrepreneurial wit of sixteen (16) founding members who recognized the critical role that
financial institutions would play toward creating a sustained economic development and were
able to put in an initial paid-up capital of Birr thirty million (Birr 30 Million). Established under
the banking proclamation of Licensing and Supervision, Proclamation No. 84/1994, the Bank
was registered with the National Bank of Ethiopia on April 30, 1997. The Memorandum and
Articles of Association of the Bank were signed on April 15 th, 1997 and registered with the
Addis Ababa Bureau of Trade, Industry and Tourism on April 15, 1997, Registration Number
1/34/4/89.
Over the years Wegagen Bank SC built itself into a progressive and modern banking institution,
endowed with a strong financial structure and strong management, as well as a large and ever-

The Effect of Rewards On Employee Motivation

increasing customers and correspondent base. Today, Wegagen Bank SC is a full service Bank
that offers its customers a wide range of commercial banking services with a network of 285
branches of which 114 are in Addis Ababa and the remaining 171 are located in other cities and
towns of the country. As at March 31, 2019, the number of employees of the Bank stood at 4524.
This study area is assessing the effects of rewards on employee motivation in Wegagen Bank SC.
It is mainly focus on examining the employee motivation with both intrinsic and extrinsic
rewards.

3.12 Research design

Research design is a general plan for the collection and analysis of data (Robert & Richard,
2008). It is the blueprint for satisfying research objectives and answering research questions
(John, 2007). It assures that the research is pertinent to the problem and that it uses economical
procedures. The research design for this study is both exploratory research design and
explanatory research design to evaluate the effect of rewards on employee motivation. The
reason behind using exploratory research design is to investigate a problem which is not clearly
defined. It is conducted to have a better understanding of the existing problem, but will not
provide conclusive results. For such a research, a researcher starts with a general idea and uses
this research as a medium to identify issues that can be the focus for future research. An
important aspect here is that the researcher should be willing to change his/her direction subject
to the revelation of new data or insight. Such a research is usually carried out when the problem
is at a preliminary stage. It is often referred to as grounded theory approach or interpretive
research as it used to answer questions like what, why and how. This study will also use
explanatory research design, to explain, understand, predict and control the cause and effect
relationships between variables.

The Effect of Rewards On Employee Motivation

3.13 Target Population
The study population refers to the total collection of elements which one would like to study or
make inferences. The population aspect however, refers to the individual participant or object on
which the measurement is taken Cooper and Schindler, (2011). The target population of the
study will probably be selected randomly among employees and managers to sum up the total
staff workers of Wegagen Bank SC.

3.14 Unit of Analysis

One of the most important ideas in a research project is the unit of analysis. The unit of analysis
is the major entity that you are analyzing in your study. For instance, any of the following could
be a unit of analysis in a study: individuals, groups, artifacts (books, photos, and newspapers),
geographical units (town, census tract, state), social interactions (dyadic relations, divorces,
arrests). However, for different analyses in the same study you may have different units of
analysis. In this study the units of analysis are individuals (employee and managers of the bank).

3.15 Sampling Design

For this research study the student researcher has planned to use probability sampling simple
random sampling out of a sample size of total staff members found in the bank. The researcher
thinks to use a simplified formula to calculate sample sizes. The sample size of this study will be
determined by using the formula developed by Taro Yamane (1967) to determine the minimum
required sample size as 95% confidence level, degree of variability 0.5 and level of precision (e)-
9%. Here the researcher considers variables such as benefit, promotion, and working condition of
the bank as independent variable and other variables such as motivation as dependent.

Where,

n is the sample size

N is the population size,

E is the level of precision or sampling error = (0.05)

The Effect of Rewards On Employee Motivation

3.16 Data Type and Sources
The researcher will use both primary and secondary source of data for its successful
accomplishment of the study. Primary data refers information’s collected by the researcher
himself and is collected for the first time. These include the actual information received from
individuals directly concerning the problem of the study. Hence the primary data will be
collected from sample respondents by using self administered questionnaire. Moreover, the study
will also use semi-structured interview to collect relevant information.
The secondary data source of the study will be published and unpublished, personal and public
documents. Accordingly the secondary data that will be use includes human resource strategy of
the bank, websites, business magazines, academic journals and books. Generally primary data
sources of this research are questionnaire survey and semi-structured interviews, whereas
secondary data sources are reviews of documents, literatures and internet.

3.17 Data Collection Methods

Data will be collected through the delivery of a questionnaire to sample population at the head
office of the bank.

3.18 Data analysis and Interpretation

The data collected will be analyzed and presented as tabular form for simplicity and ease of
analysis, the result will be analyzed by using experimental methods of linear regression through
SPSS Software version 21 and that of dispersion and it will be interpreted based on the results
found.

3.19 Variables of the Study

The research will have dependent and independent variables which will be collected from the
bank. Here the researcher considers variables such as the intrinsic reward and extrinsic reward
of the bank as independent variable and other variables such as employee motivation by the bank
as a dependent variable.

3.20 Ethical Consideration

This research project will be conducted with full compliance of research ethics and norms. The
research will involve human participants, commencing with a face-to-face/door-to-door
questionnaire of the respondents of the bank’s staffs. In the meantime I would like to assure that
the information collected will be used only for academic qualifications. The information and

The Effect of Rewards On Employee Motivation

names of the respondents will be confidential and kept secret. As principal researcher I will take
more responsibility to explain, in appropriate detail, what the research is about to participants.
Every research participant will be given a one-page 'project information sheet' that outlines the
purpose of the study, which is undertaking and financing the study, and how it will be
disseminated and used.

Plans of Research Undertaking

The following work plan and budgets are compiled to carry out the whole processes of the
research.
1. Work plan/Time-line

The work plan of this paper is as the following.

Work plan 2020/21 2021/2022

July-Dec Jan-Mar Apr-Jun Jul-Sept
Proposal submission 
Collection of literature 
Collection of Data 
Proposal organization  
Meeting with advisor  
Submission of paper 
Presentation of paper 

2. Budget
NO. Particulars Amount in Ethiopian (Birr)
1 Stationary materials 1,000.00
2 Secretarial Science 1,000.00
3 Transportation and Related cost 2,500.00
4 Reference materials 1,000.00
5 Other Miscellaneous expense 800.00

The Effect of Rewards On Employee Motivation

 6 copying, printing, binding and 1,000.00
edition
7 Distribution of questionnaire and 2,500.00
related materials
Total 9,800.00

References
Ajmal, A. Bashir, M.; Abrar, M.;Mahroof, M. Khan and Saqub, S. (2015) The Effects of intrinsic
And extrinsic rewards on employee attitudes: Mediating role of perceived organizational
Support, Journal of Service Science and Management, Vol.8 pp.461-470
Alvesson, M., Sveningsson, S. (2008) Organisationer, lending ouch processer, Student literature,
Pozkal, Pol
Anthony, K (2014). Effects of motivation on job performance of local government workers in
Ghana. Available @ https://www.researchgate.net/publication/
Armstrong, M. (2006) A Hand book of Human Resource Management 10th ed. London and
Philadelphia: Kogan Page.
Armstrong, M. (2009) a handbook of human resource management Practice, 11th ed., London &
Philadelphia: Kogan Page
Armstrong, M.; Mursil, H. (2003) Reward Management: a Hand Book of Remuneration Strategy
And Practice; 3rd ed. London: Kogan page.
Berman, E.M., Bowman, J. and Jonathan, P. (2010) Human Resource Management in Public
Service: Paradox, process and problems, 3rded. Sage publication.
Bratton, J. and Gold, J.(2007) Human Resource management: theory and Practice, 4th ed., New
York: Pal
DeNisi A. S. & Griffins R. W. (2008). Human Resources Management. Houghton Miffling
Company. Boston New York
Dosenovic, D (2016) Employee Reward Systems in Organizations, Journal of Economics, and
Education limited.
Jehanzeb, J., Rasheed, M.F, Rasheed, A. and Aamir, A.(2012).Impact of Rewards on Motivation

The Effect of Rewards On Employee Motivation

 On Jobs Satisfaction in Banking Sector of Saudi Arabia, International Journal of Business
And Social Science, Vo1.3. (21) pp.272-278
Jiang, Z. (2009) Total Reward Strategy: a Human Resource Management Strategy going with the
Trend of times, International journal of Business and managementvol.4, no 11.pp 177-183
Kinicki, A., Cole, N., Digby, V., and Natash (2014), Organizational Behavior, Prentice Hall
Lawler, E. E. (2003). Treat people right. San Francisco: Jossey-Bass Inc.
Mullins, L. J. (2006). Essentials of Organizational Behavior, Prentice Hall

Rahim, M. A & Wan, W.N (2012): Proposed Conceptual Framework for Rewards and
Motivation among Administrators of Higher Educational Provider in Malaysia.
International Journal of Business and Commerce Vol. 1, No. 9: [67-78] .pp 1-14
Robbins, S. P, Judge, T.A, Campbell, T. (2010). Organizational Behavior, Pearson Education
Limit.
Robbins, S., & Judge, T. (2018). Essentials of Organizational Behavior (14th Ed.).
Satiullah, A.B., (2014) Impact of Rewards on Employee Motivation of Telecommunication
Industry of Bangladesh: An Empirical study .Journal of Business and management, p 22-30
Tyson, S.and York, A. (2000) Essential of Human Resource Management, 4thed. Butterworth-
Heinemann Publication.

Wegagen Bank Annual Report 2017/18

http://www.Wegagenbank.com

The Effect of Rewards On Employee Motivation

The Effect of Rewards On Employee Motivation