THE EFFECT OF COMPENSATION AND REWARD

MANAGEMENT PRACTICE ON EMPLOYEES’

PERFORMANCE:
The Case Study of Metehara Sugar Factory

Submitted By : Abel Feleke Ketema

Advisor Name: Dr. Nuru Mohammed(Ph.)
1.Background of the study

• Firms today face an increasingly competitive and rapidly changing

environment characterized by a diverse labor market, advancement in
information technologies, globalization, deregulation, and continuous customer
demands.

• To be successful, a firm must be able to improve performance by reducing

costs, creating new products and processes, enhancing quality and productivity,
and increasing speed to market .

• Global competition is very essential to identify and retaining efficient,

competent, and knowledgeable employees in the organization by developing
and maintaining an effective compensation program for getting the best job
performance from the employee
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Background of the study…. Con’t

• “Mayson and Barret (2016)” found that a firm's ability to attract, motivate and
retain employees by offering competitive salaries and appropriate rewards is
linked to firm performance and growth. In today’s competitive environment if
an organization wants to get success then its employees must be well-paid and
motivated.

• The research has geographic, time and conceptual delimitation.

• On the geographic delimitation, the case company operates in oromia region

specifically in fentale woreda.

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 Con’t

• The study encompasses to explore the effect of compensation and

reward management on employee productivity satisfaction and
retention.
• The study will be conducted in 2023 fiscal year.
• Metahara Sugar factory is one of the renowned manufacturing
organizations where success has relied mainly on the performance
of its employees.
• Hence, in this study, the researcher will be try to explore the effect
of compensation and reward management practice on employees
'performance in the Metahara sugar factory
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2.Statement of the Problem

• In the unpredictable business environment and intense business

competition, companies are needed to achieve ways by improving
their performance to become a winner overall to their competitors
and become successful.
• Human resources are considered the most important resource to
affect job performance in organizations.
• The review of the literature showed that most of the research
conducted in Ethiopia focused on the effect of compensation and
reward management practice on employees’ in the service industry.

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Statement of the Problem ..cont’d

• Based on the literature available and to the best knowledge of the

researcher, there are only a few studies conducted in the
manufacturing sector regarding the effect of compensation and
reward management practice on employees 'performance of
manufacturing companies.

• So this research aims to assess the effect of compensation and

reward management practice on employees performance of
manufacturing companies in the case of Metahara Sugar Factory.

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3.Research questions

• This research studies the current compensation and reward

management practice in Metehara Sugar Factory and tries to see
the effect of the organization's compensation and reward
management practice on employees’ performance.
• To determine the relationship between compensation and reward
and with the performance of employees, the study attempts to
answer the following research questions.
1. What is the effect compensation and rewards affect the
performance of employees at Metehara Sugar Factory?
2. To what extent does the compensation and reward management
practice influence employee performance?
3. What are the relationship between compensation and reward
management practice with employee performance?
4. What is the effect of compensation and reward management
practice motivate employees to perform their best?
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4. Objective of the Study

4.1 General Objective

• The general objective of this study is to assess the effect of

compensation and reward management practice in
manufacturing companies in the case of Metehara sugar
factory in Ethiopia.

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cont’d

4.2 Specific Objectives

1. To explore the availability of compensation and reward

management practice in Metahara sugar factory

2. To identify the factors that affect employee compensation and

reward management practice in Metahara sugar factory

3. To explore the relationship between compensation and reward

management practice with employee performance.

4. To assess the effect of compensation and reward management

practice motivate employees to perform their best.
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5. Scope of the Study

• This study focused only on the compensation and reward

management practice that Metehara Sugar Factory provides to
its employees.
• Additionally, the contents of compensation, reward, and
performance are a wide theory and the researcher has not
covered all aspects of these issues because of time and limited
finance.
• Moreover, the title of this research was limited to the effect of
compensation and reward management practice on employees.
• Thus, it will be consider the effect of compensation and reward
management practice on employees performance in the
company’s productivity, development, organizational
performance, employee motivation, etc.

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6. Significance of the Study

• Although the primary purpose of this study is for academic use it is expected that findings

from this study will be important to the management and members of Metehara Sugar

Factory.

• As well as to other organizations in the same industry to understand the relationship

between compensation and reward, and employee performance.

• This study will have practical significance to Metehara Sugar Factory. in understanding

the effect of compensation and reward management practice on employees performance

and their intended impact on organizational achievements.

• The general finding of the study will reflect the employee’s point of view towards

compensation, rewards, motivation, and performance at Metehara Sugar Factory

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7. Limitation of the Study

• The research sample population of this study is taken from employees who
work in Metehara Sugar Factory area.
• This might affect the generalization of the research findings to the whole
Metehara Sugar Factory employees since the total population of MSF is large
as conducting and taking a sample from the whole population is not possible
because of money and time constraints at this level.
• Some of the employees were not willing to fill out the questionnaires
distributed.
• The researcher has not employed a qualitative research method since the
willingness of the top managers to give interviews is poor due to the work
overload they have and they fear they have compromised the confidentiality
of the MSF. This might affect the results of the study.
• Another limitation is that the study included the main compensation and 11
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8. Conceptual Framework

• The framework below summarizes the factors that the

researcher employed in the study that sought to analyze
variables of compensation and employee productivity.

• These factors are: The independent variables (Compensation

and reward) i.e. (Financial and Non-Financial) and the
dependent variables employee performance .

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9. Conceptual Framework

Independent variables Dependent variable

Salary

Financial Financial Reward

Compensation

Bonus/Incentive
Employee
Performance
Non-Financial

Non- financial Recognition

Appreciation

Figure 2.1. Research model

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10. Methodology of the Study

• This research work is designed to the effect of compensation and

reward management practice on employees in manufacturing
companies in the case of Metahara Sugar Factory, Ethiopia.

• The Research design is used to guide the researcher on methods

and procedures used in collecting and analyzing measures of the
variables. So the research design used in this study is a
descriptive type of research design

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6.1 Research Design and Approach

• the research design used in this study is a descriptive type of research

design.

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 6.2 Data Sources and Method of Collection

• The study employed both primary and secondary sources of data

collection.
• Primary Sources to realize the target, the study used a well-designed
Interviews, surveys, and fieldwork as the best instrument. This is
completed by employees of the selected organization (MSF).
• Secondary Sources of data from files and manual in the organization
and also external source of published books, the internet (web
pages), and magazines of the organization. These all used to provide
additional information were reviewed to make the research fruitful

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 6.3 Sampling Design

• The study adopted the stratified sampling technique where employees were
categorized into the existing departments at the Metahara sugar factory.
• The sample size of the study was 50% of the entire working population at
Metahara Sugar factory department.
• 50% will be chosen because of the reason that it‘s not possible to assess each
top and middle-level manager at Metahara Sugar factory because of time
limitations.

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 Sampling Design..cont’d

Total Number of Sample (50% of

top and middle level
No Department managers population)

1 Agriculture operation 66 32

2 Factory operation 40 20

3 Supply and facility 40 20

management
4 Human resource 27 14

5 Finance 27 14

Total 200 100

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 6.4 Methods of Data Collection and
Procedures

• Interviews, surveys, and fieldwork is a set of questions that is filled

with characters and signs so that the respondents can tick the
suitable clue of his/her view or write short answers.
• The questionnaires were made up of both closed and open
questions. Concerning the closed-ended questions, choices were
given or provided for respondents to choose from.
• In the case of the opened questions, the respondents had the
opportunity or chance to express their views and suggest ways and
indicate opinions and challenges.
• Questionnaires were made up of various items that were written in
simple and clear language to enable respondents to have an easy
understanding

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 6.5 Mathematical model

• Regression model
• regression analysis will be use to investigate the effect of independent
variables (compensation and reward) which comprised of Financial &
Non-financial.

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 6.6 Methods of Data Processing and Analysis

• Data will be collect from questionnaires are analyzed by using SPSS

20.0 version.
• To achieve the objective of the study, the descriptive method has
been used to describe and interpret the details of the effect of
employee productivity depending on the type and nature of data
gathered from the structured questionnaires.
• In the analysis is the data, the information will be grouped into
qualitative and quantitative.
• The data gained through questionnaire will be analyzed using
regression analysis and correlation.
• Every theme will be taken from research questions and thematic
analysis and inductive analysis will be used.
• The data result has been organized and summarized in tables,
frequency, and percentage. So that a meaningful interpretation of the
result is made to draw conclusions and recommendations.
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Thank You