Performance-Based Pay as a Motivational Tool for Achieving Organisational Performance: An Exploratory Case Study Francis Boachie-Men

Topics: Motivation, Incentive, Statistical hypothesis testing Pages: 19 (5421 words) Published: October 20, 2013

International Journal of Business and Management

Vol. 6, No. 12; December 2011

Performance-Based Pay as a Motivational Tool for Achieving
Organisational Performance: An Exploratory Case Study
Francis Boachie-Mensah (Corresponding author)
School of Business, University of Cape Coast
Cape Coast, Ghana
Tel: 233-332-137-870


Ophelia Delali Dogbe
Mount Zion School, Accra, Ghana
Tel: 233-242-965-648


Received: June 3, 2011

Accepted: August 5, 2011

Published: December 1, 2011




The issue of employees’ performance in furtherance of organisational objectives has occupied management attention for long. Differences in levels of performance have been attributed to differences in skills and abilities on the one hand, and to different theories of money on the other. This study examined the issue of performance-based pay as a motivational tool for achieving organisational performance, using the situation in a manufacturing company in Ghana as a case study. The main objective of the study was to assess the impact of performance-related pay on the motivation of employees and, subsequently, on the achievement of organisational goals. In all, one hundred and fifty respondents took part in the survey. The sample comprised 20 managerial staff and 60 non-managerial staff. The main research instrument was the questionnaire. A two-way ANOVA table was used to test the main hypotheses. The result of the study revealed that the effect of performance-based pay on employee performance is minimal; and the motivational effect of merit pay is often blunted by biased performance appraisal. The main limitation of the study is that it could not cover all manufacturing companies within the target population, due to time and financial constraints. In this respect, the interpretation of the results of the study should not be over-generalised. Keywords: Compensation, Motivation, Rewards, Performance pay, Incentives 1. Introduction

Linking pay to performance is something employers increasingly seek to achieve. Jobs with performance related pay (PRP) attract workers of higher ability and induce workers to provide greater effort (Booth and Frank (1999). Much of the academic and policy literature on PRP focuses on its role as an incentive system (Marsden, 2004). In the public policy debate, it has been common to associate the introduction of PRP with the aim of improving incentives and motivation among public employees (Brown and Heywood, 2002). In Africa (Ghana inclusive) in particular, employees have for a long time been awarded financially on the basis of their entry qualifications and the perceived value of their job analysis and evaluation. For example, Fosh (1990), in her studies on attitudes to income inequalities in East Africa, found that differences in paper qualifications were the most cited reason for pay differentials. In addition, the design and operation of payment systems have been based upon custom and practice, as well as collective bargaining and characteristics of the labour market. In recent years, there has been a discernable trend, particularly in the private sector, towards the linkage of rewards to employee performance in an attempt to enhance the achievement of organisational objectives (Mullins, 2005). Compensation is thus tied to performance. In many developed economies there has been a resurgence of interest in PRP, encouraged by governments (Perry, Engbers and Jun, 2009; Booth and Frank, 1999). This is consistent with the new view of organisations as a network of contracts linking incentives to performance (Dun-Icavy and Hood, 1994). As Milkovich and Newman (1996) observe, compensation is viewed from different perspectives by society, employees and managers. Society considers compensation as a measure of equity or justice, hence the...
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