ISSN 2090-4304 Journal of Basic and Applied Scientific Research www.textroad.com
Effect of Compensation on Motivating Employees in Public and Private Banks of Peshawar(BOK and UBL) Waqas Khan, Engr. Owais Mufti
MBA Scholar, Institute of Management Sciences Peshawar, Pakistan Phd Scholar, Qurtaba University of Science & IT Peshawar, Pakistan
ABSTRACT The research focuses on the effect of different components of compensation on motivation of employees. Compensation is divided into three basic components, namely Fixed Pay, Flexible Pay and Benefits. Vroom’s Expectancy theory is selected for measuring motivation in this research. Two of the prestigious banks of the country were selected as the target for study namely; United Bank limited and Bank of Khyber Ltd. A 20 item questionnaire was developed for the testification of the hypothesis in the study. One of the objectives of the study was to check what component of Expectancy theory has an effect on the motivation level of employees; be it Effort-Performance, Performance-Outcome or Valence of Outcome and secondly to check what component of Compensation Based Pay is effecting motivation level of employees; Fixed Pay, Flexible Pay or Benefits. Validity of the Questionnaire was tested by using Cronbach’s Alpha. It was calculated to be 0.832, which by convention is greater than 0.7 and hence reliable. Convenient Sampling was used to gather data from both the banks. A total of 95 Questionnaires were collected, 45 from United Bank Limited and 51 from Bank of Khyber. Regression and Chi-Square was applied to check the results. Regression established that there is a strong relationship of compensation with motivation; whereas, ChiSquare was used for individual relationships of each component (variable) with motivation (eg: Flexible pay with Valence). The result showed that employees are not motivated because of believe in their skills neither are they motivated when told that they would be rewarded on the other hand, they get motivated if rewarded by something they value Key words: Compensation, Motivation, Vroom’s Expectancy theory, Fixed Pay, Flexible Pay, Benefits, Expectancy, Performance Outcome, Valence 1. INTRODUCTION
Compensation is one of the primary reasons for employees to seek employment. They are rewarded for their services and efforts that they exert for their organizations. They can be compensated in many ways for example salaries, holidays, bonuses etc. There are two basic compensation models; performance based pay and components based pay. In the former paradigm, employee’s compensation is either tied to the way he performs; if he performs better he would be rewarded accordingly (performance based pay) and on the other hand, non performance based pay; where, employee’s performance is not tied to getting rewards, rather the employee is paid or rewarded even if its performance is not up to the mark e.g fixed pay and salaries etc. (Taylor, F.1911) see diagram-1. The first model works best in factories and production units where labor is cheap and performance is tied to the rewards directly. The second model is used for decades in corporate sector, in this model compensation is divided into three components namely; Fixed Pay, Flexible Pay and Benefits (Beard, 1986). The model that would be used for this research study is Compensation Based Pay. Motivation is the drive of an individual to act and achieve. Psychology gives us different rationales regarding the nature of motivation. For this reason, there are many theories relating to motivation, as to what motivates human beings and how to manipulate that process for organizational needs. Major theories are Process, Content and Reinforcement motivation theories. The theory that is selected for this research is Expectancy motivation theory, which is a subtype of Process theory. The theory is about motivating employees based on three...