Effects of reward strategies on employee performance in

Nairobi County, Kenya.

CHAPTER ONE

1. BACKGROUND OF THE STUDY

Most employers have tried to reward their employees appropriately for the services they
provide. However, remuneration varies widely from country to country in terms of content
and size, which partly explains why there are discrepancies between management and staff
in some countries. As Armstrong and Brown wrote (2009): "Reward management is about
preparing and implementing policies and strategies aimed at aligning with corporate values
channeled toward a fair reward system that is fair, equitable, and consistent with reliability."
Maintaining reward practices and different designs, and implementing them, makes it
possible to verify motivation by assessing the performance of each employee and how they
help an organization improve its position. As a result, reward management focuses on
strategies to promote salary growth, the management of pay and its structure, and the
benefits assigned to employees as a method of recognition.
Reward is recompense for a service provided, an action taken to strengthen recognised
behaviour, and tantamount to performance. There are financial rewards that cover the basic
need for survival, a sense of stability and constancy and recognition. These are the essentials
of Maslov's hierarchy of needs; these are lower-level needs. However, in most cases, in-kind
benefits are individual in nature, and psychological reward for self-effectiveness and
competence. They are related to the feeling of joy after successfully completing a demanding
task, to social interactions, and even to joy in the workplace, and are regarded as overriding
needs in the hierarchy of needs (Bratton. et al. 2007). Organising policies and practices based
on employee rewards support motivation and thus contribute to employee loyalty, which is an
added benefit for the company. However, when employees are not constantly rewarded they
tend to become demotivated, which can have a major impact on employee retention rates and
performance in the workplace. From a wide perspective, performance is the end point of
different elements within the work environment. Performance is, therefore, a multi-faceted
aspect that involves a close interplay of various factors, such as working conditions, input
factors of supervision, remuneration, employee satisfaction, and status. In this respect,
achievement is a result, not necessarily the cause itself.
Pierce's (2000) view is that performance is a function of both motivation and ability.
Motivation encompasses what motivates employees to perform their duties with ease, and
rewards played a significant role. Today, companies are implementing strategic business
management with the aim of improving performance across other departments such as
Sales, Accounting, Finance and Marketing. In a world in which change cannot be avoided,
organisations must be flexible in order to be able to react to any change. However, a growing
disadvantage for all employers is the necessity to find and recruit the best employees,
including offering competitive wages. According to Bishop, (1987) a reward system that is
implemented within an organization is substantially influenced by the pay that also influences
employee performance, but all of this depends on the structure and size of the organization.
Because of the competitive character of the work environment, organizations strive for a
sustainable balance of employee performance, loyalty, and commitment. Reward aims to
provide a flexible and cost-effective means of fair rewards between good and bad service
providers. On the same issue, there have been controversies based on the subjectivity
involved in assessing the performance of individual employees.
Armstrong's (2007) distinguishes between two kinds of rewards, nonmonetary and monetary.
In his view, bonuses are a financial reward that motivates employees to continuously work for
the organization in order to meet their day-to-day needs. Allowances: These are the benefits
from which employees benefit for their employer. This is achieved if you work; benefits can
include housing benefit, car allowance and sick pay. Therefore, an employee is compensated
by an employer in the short term as an appreciation of improved performance and the
achievement of organisational goals. Salary increase: On the other hand this can be
systematically done after a certain period, improved academic skills, attaining new skills from
education or promotion, and is therefore linked to the recognition of hard work of employees.
Therefore, monetary rewards are important to motivate staff to develop their skills and
competences, as they help the organisation to improve the performance of its employees.
Nonmonetary rewards include the benefits a company could offer its employees in order to
affect their good performance in the workplace. Cosby said in 2001 that people don't work for
money. They go out to work, but once their salary is paid, it's about appreciation. Non-
monetary reward is a good tool to motivate employees; it helps to build respect and loyalty
among employees and employers, and to keep good employees. Non-monetary measures
include training staff in the organisation in relation to the new technology in order to fulfil their
duties. Career development that the organization can offer to train employees to perform
better within the organization. Also by recognising employees who have performed well in the
organisation. Rewards may be strong motivators and important interventions to enhance
employee performance and happiness (Armstrong 2010). The purpose of rewarding practices
and measures for employees is to attract and encourage highly skilled people. Mistakes can
have a negative impact on employees "performance, commitment, and morale. Employers'
rewarding of employees through increased performance can provide an incentive for
employees to perform better, and become more productive. A good system of rewards
improves attendance, and can also lead to no-shows in the workplace. Improving retention,
increasing employee engagement and improving attitudes towards the company.
Appleby wrote in 1994 that promotions offer an employee an improved status. If the ascent is
accomplished from the inside, it can probably lead to a good performance. Internal promotion,
attaches great importance to the significance of the organisation for the employees and, if
carried out correctly, will strengthen the morale of the employees. In most cases, promotion
is associated with higher social benefits, which could lead to a higher social status and
privileges and, as such, motivate the worker. Employment opportunities are assessed not
necessarily by employees based on pay, but also taking into account other potential
advantages of cooperation with the company, such as career opportunities, promotion, and
professional growth. Considering that different organizations design their reward system in
their own way, ensuring that an organization has the best rewards system becomes a critical
activity. This is important if we are not to be overtaken in today's world of competition when it
comes to attracting the very best people to improve performance.
Performance-oriented reward schemes are always seen as the most effective for increasing
productivity, but they are also fraught with challenges, as performance is largely relative and
defined performance standards do not always match people's skills. Performance is
influenced by the reward the employee receives. In a situation in which rewards are available
and are given according to the employee, there is a chance that the performance improvement
is very effective compared to a situation in which an employee receives little or no reward. The
rewards package varies from organization to organization depending on your level or even
your organization's activities. For example, organisations involved in sales and marketing will
probably include commissions among their benefits, while those who are involved in
production tend to opt out of commissions in their remuneration packages (Armstrong 2007).
Profitability is one of the goals of the organization. The success of an organisation depends
on the performance of the employee. One of the most efficient ways of increasing business
performance and profit is to increase performance from the lowest levels of the staff in the
organisation to the highest levels of management, by creating a rounded reward system for
all staff (Al Ahmadi, 2009). Puttrif et al. (1995) explained that employee performance was
defined by focusing directly on employee performance by evaluating the number of acceptable
quality units produced by a worker in the manufacturing environment over a specified period
of time. Rewards for employee achievement are an important tool to motivate employees by
influencing their behavior and attitudes. In addition, monetary as well as non-monetary
advantages play an essential role when it comes to attracting new employees and keeping
high-quality employees in the organization. It is plausible for management to incorporate
bonuses linked to different performance measures, to recognise high-performing staff, to
assign them a higher status, and to assign more responsibility to employees (Armstrong
2010). If the employee benefits and rewards system is effectively managed, the goals,
missions and strategic plans of the organization will ultimately align with the goals of each
employee. In addition, by using results, behaviours and measures identified during
performance evaluation, the organisation will be better able to set clear expectations and
targets.
2. STATEMENT OF THE PROBLEM
The ability to provide fair remuneration is crucial for management if it is to attract and motivate
good employees and retain them, and to encourage high performance. Local studies of
rewards, like Njagi, in 2003, who conducted a study on the application of rewards management
principles to the Kenyan commercial banking industry, and Olale-njenga, in 2008, who
conducted a study of rewards management practices in Kenya's municipal sector, have
actually linked rewards to employee performance. In particular, it was found that nonmonetary
rewards led to workers "motivation and efficiency, while nonmonetary rewards largely
contributed to job happiness. However, the studies did not examine in detail the circumstances
of the reward system or the strategies for combating it. In addition, the impact of reward
strategies on employee performance was not investigated in the studies. In the Nairobi district,
there is a suspicion that the operation of a differentiated reward system, in which employees
are subjected to different reward programmes, leads to poor performance by employees. In
programs where reward schemes were better, employees were reportedly more motivated,
leading to good performance. On the contrary: employees in low-wage programs seemed
unmotivated and under-performing. In order to improve overall performance, Nairobi district
management replaced differentiated reward policies with a centralized reward system in which
employees were uniformly rewarded. However, the outcome of this new strategy is not well
documented, so it was unclear if the centralised remuneration system had any impact on
 employee performance. This led the study to investigate the impact of reward strategies on
employee achievement, with a focus on the Kenyan district of Nairobi.
3. OBJECTIVES OF THE STUDY
The overall aim of the study, therefore, was to investigate the impact of reward policies on
employee performance in the Nairobi County, Kenya.
In order to achieve this objective, the specific objectives of this study include:
i. Investigation of the impact of different monetary rewards on the performance of
employees in the Nairobi district
ii. Evaluation of the impact of the employee evaluation on the performance of employees
in the Nairobi district
iii. Assessment of the impact of transport measures on the output of workers in the Nairobi
district
iv. Assessment of the impact of recognition on performance of workers in the Nairobi
district
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