(+234)07060722008 
sales@graciousnaija.com
Contingent Pay and Employee Performance
in the Banking Industry
Abstract
This study sets out to examine the
impact of contingent pay on employee performance in the banking industry.
Probabilistic sampling technique has been used for the study. Four research
questions and three hypotheses were formulated to guide the study. To achieve
this, data were collected through a well-structured questionnaire from five
banks in Onitsha Metropolis. The data were presented in frequency tables and
analyzed using chi-square test statistics. The result of the analysis showed
that, there is a significant relationship between contingent pay and employee
performance, that contingent pay has impact on the employee performance.
Employee performance has greatly improved since the introduction of
performance-based pay. The main recommendation of the study is that
organizations should introduce performance-based pay in order to reduce their
staff cost instead of mass retrenchment. They should also seek the input of the
employee in setting performance standards.
Chapter One
Introduction
1.1. Background of the Study
In the 80s, there were great
similarities between banking job and civil service. Bankers were not given
targets and can stay in the office, drink coffee and attain to their customers.
Staff rarely go out prospecting except few occasions they are mandated to
recover bad loan. Customer on their own accord went to bank to open accounts.
Grades were determined by the year of experience and qualifications. Salary was
based on grade and everybody in the same grade received the same salary
irrespective of one’s competence, skill, knowledge, and contribution. Nepotism
was the order of the day. The banking environment was not really challenging.
Once the people have confidence in the bank, the bank would have all business.
Competition was not fierce as it is now and the cost of doing business was not
so high. There was no need to invest huge funds in software and other security
gadgets. The sophisticated crimes and fraud witnessed today in banking industry
were not so then. The challenging investment opportunities were not there. But
a lot have change in 21st century. The business environment has become
turbulent and complex. For managing in turbulent environment, there is a
requisite variety imperative, which states that the complexity and subtlety of
the firm’s response must match the complexity and subtlety of the environment
(Roy Ashby, 1956). The requisite variety theory can be seen as a contingent
theory (Onwuchekwa, 2000)
In order to survive in such
unpredictable, turbulent and complex business environment, banks have adopted
measure for survival. Hence the introduction of contingent pay packages. Every
business organization is in business to either maximize profit or minimize
cost. It is a fact that all employees do not have the same education,
experience, strength, skills, competence, motivation, passion or attitude. Some
organization could no longer bear the wage bill but still understand the
importance of having a satisfied /motivated workforce.
Banks and some other organizations in a
strategic move for survival, have embarked on a search for motivational tools
that have the capacity to sustain high performance, reward performers, punish
non-performers and reduce staff cost. Hence this has informed the choice of the
title of this study.
1.2.
THEORETICAL FRAMEWORK:
The equity theory of motivation forms
the theoretical framework for this study. This theory was propounded by Adam
Stacy J 1963 It states that a major input into job performances and
satisfaction is the degree of equity (or inequity) that people perceive in
their work situation. It is based on the assumption that a major factor in job
motivation is the individual’s evaluation of the equity or fairness of the
reward received. Equity can be defined as a ratio between the individual’s job
inputs such as effort or skill and job reward such as pay or promotion (Stoner,
Freeman and Gilbert, 2005). Most discussions and research on equity theory
focus on money as the most significant reward in the work place. People compare
what they are being paid for their efforts with what others in similar
situations receive for theirs. When they feel inequity exist, a state of
tension develops within them which they try to resolve by appropriately
adjusting their behaviour (Robins, 2000). This research is based on this theory
since every staff in the bank is rewarded based on their skill, knowledge,
effort, education, experience competence and performance.
1.3.
STATEMENT OF PROBLEM
Banks are not charitable organizations
and every staff must add value and must earn his/her pay. They must justify
their continuous stay with the bank. Employees’ experience, education, skill
and competence are not the same and they should not be rewarded equally. The
cost of doing banking business in Nigeria is so high and banks have observed
that greater percentage of their cost is staff cost. The bank cannot afford to
spend their hard earned profits on who are contributing little or nothing to
their profit. In recent times, a bank in Nigeria announced that most of its
business offices are making loss and can no longer bear their current wage
bill. As a result, a lot of staff were retrenched. Right sizing could
demoralize other staff; expose bank’s technology and security software to
competition and fraudsters. It could affect the bank’s image. Most banks have resorted to a system of
contingent pay. A payment structure that is based on performance, contribution
and competence. Work is not inherently distasteful. People who contribute
meaningfully to the accomplishment of the bank objectives should be fairly
rewarded. Staff who are lazy, who avoid responsibilities and lack passion,
ambition or creativity should be made to rewrite their scripts.
Contingent Pay and Employee Performance in the Banking Industry
NB: The Complete Masters Project Topics in Business Administration Thesis is well written and ready to use.
