ch 2

Chapter 1

Introduction

1.0   INTRODUCTION

In a country like Pakistan, the idea of reward and its implementation is still very vague and absurd. As, most of these policies made are not clearly defined and well-communicated. "Reward" is one of them. Although many private sector of Pakistan is providing certain rewards for their employees but they are also not properly communicated to them. Organizations made these policies but didn't spend time to communicate it to the employees and the employees remained unaware from most of them. Although “rewards on employee performance” made for employees  but employee didn't get any reward from it because still a lot more improvement is needed to give awareness of reward and need to communicate this to employees that how they can be awarded by showing their performance. The Banking sector is an integral part of the country’s financial services industry. The sector witnessed a phenomenal growth in 2001-03 where deposits rose by almost 100%. There are 39 scheduled banks (including 11 foreign banks) operating in Pakistan. Competition is relatively high, especially after the challenging capital adequacy benchmarks set by the State Bank of Pakistan to nourish a stable banking system. Attracting foreign investment and winning profitable customers are the only options left to banks for survival. Opportunities for foreign banks, especially in consumer and retail banking, are greater than ever before. In the financial year of 2004-05, the banking sector experienced growth rates of 21% and 36% in its deposit and advances portfolio respectively, which in turn, has increased the banks’ stability as compared to the preceding year. A significant shift of focus from industrial lending to consumer products has allowed the banks to enjoy enormous spreads. However, the manufacturing sector is still enjoying the highest share in credit facilities extended by the banking industry. The industry is passing through a transitional period from long established patterns and norms to the unknown land of threats and opportunities. And what will demarcate the banking organizations that will turn every change into an opportunity, taking the bull by the horns using the art of change management successfully from the losers. These are some of the daunting questions which will pose a challenge to the potential future banking brains but flowing are a few areas of banking industry where the wind of change is presently quite visible. Many organizations working in Pakistan are still in the developmental phase of making these policies for employees working in their organizations. The problem is the same between the Organizations and employees. As, organizations are providing certain rewards for the employees on their performance. But these are not well-made, well defined, and also not well-communicated within the organization and outside the organization that’s why employees cannot focus on it properly. As, in this dynamic world every employee wants more than a salary from the employer. They want more than that are provided and in that race they become unsatisfied and that is what the employer fears. As in today's world the most important job of the employer to attract new competent employees and keep the experienced ones within the organization. But if the employees become unsatisfied with their jobs then the problem of retention arises. The turnover rate increases and question about employee loyalty also arises.

According to Lawler (2003), there are at least two factors that determine the attractiveness of a reward; one is how much of the reward is being offered and the second is how much the individual values the type of reward that is being offered. He argues that the more the individual values the type of reward and the more of it is being offered, the greater the motivational potential.

Beer et al. (1984, p. 117) succinctly argue that “Organizations must reward employees because, in return, they are looking for certain kinds of behavior they need competent individuals who agree to work with a high level of performance and loyalty. Individual employees, in exchange for their commitment, expect certain extrinsic rewards in the form of promotions, salary, fringe benefits, bonuses, or stock options. Individuals also seek intrinsic rewards such as feelings of competence, achievement, responsibility, significance, influence, personal growth, and meaningful contribution. Employees will judge the adequacy of their exchange with the organisation by assessing both sets of rewards.”

Deeprose (1994, p. 26) posits the view that effective reward management can help an organization to achieve its business objectives by attracting and retaining competent people. Reward management is defined as:

“the process of developing and implementing strategies, policies and systems which help the organization to achieve its objectives by obtaining and keeping the people it needs, and by increasing their motivation and commitment.”  It is concerned with intrinsic as well as extrinsic motivation, the non-financial as well as the financial rewards (Armstrong & Murlis, 1991). The reward management system can therefore be seen as a set of relationships between the various reward management processes and the corporate strategy. Reward management strategy and policy is thus driven by corporate and human resource management strategies, such as Employer of Choice (Armstrong & Murlis, 1991).

Armstrong and Murlis (1991) suggest four main areas that should be addressed in a reward management system. These are pay structures, which by combining the results of market surveys and job evaluation; define the levels of pay in the organization. Employee benefits that satisfy the needs of employees for personal security and provide remuneration in forms other than pay. Non-financial rewards which satisfy employees’ needs for variety, challenge, responsibility, influence in decision-making, recognition and career opportunities and Performance management that provides the basis for continuing as well as formal reviews of performance against targets and standards. A performance management system usually leads to the development of training and development programmers’ that meet the need for growth and achievement. It also leads to the design of performance-related pay systems that has an impact on bonus and incentive payments. Loyal employees are very important for any organization, because they stay longer, resist competitive job offers, do not actively look for others employment and recommend the company to others as a good place to work. The longer the companies keep their employees, the longer they can avoid having to pay to replace them. Banking sector of Pakistan is one of the most developed and still growing sectors of Pakistan. It is related to the service industry. So it is very important for the development of this sector to have competent and knowledgeable employees in this sector. As banking sector provides services to customers through the employees of bank, it is important for banks to retain right people and one way is to provide them what an employee wants in addition to its pay. Rewards are an important way to attract employees and also to retain them. Rewards should be very good on that behalf and that is what that needs attention as Pakistani banks provides so  now the question arises that "whether employees in Pakistani banks feel that they are fairly given the reward and compensations on their performance?" and that one question arises many others like if there is no reward not than what is the future of theses employees in that sector, level of job satisfaction, employee loyalty with the organization and the performance of employee in the long run. Employee Reward covers how people are rewarded in accordance with their value to an organisation. It is about both financial and non-financial rewards and embraces the strategies, policies, structures and processes used to develop and maintain reward systems. The ways in which people are valued can make a considerable impact on the effectiveness of the organisation and is at the heart of the employment relationship. The aim of employee reward policies and practices is to help attract, retain and motivate high-quality people. Getting it wrong can have a significant negative effect on the motivation, commitment and morale of employees. Obviously, there is an absence of positive consequence or reward to the performer in each of these instances. But many managers would say that getting paid for doing those things is the reward. Unfortunately, it doesn't work that way. According to human behavior research, the weekly paycheck does not qualify as a reward that influences people's productivity. Psychologists once observed, "People don't come to work to get paid, they come to work so the pay doesn't stop." Additionally, in most business organizations, an employee can perform badly for a long period of time before the pay stops. Getting a weekly paycheck is like breathing; it only becomes important when it stops. Human behavior research indicates that people do things for which they are rewarded and, conversely, do not do those things for which they are not rewarded. In other words, performance that is rewarded will increase in its frequency; the reward reinforces the good performance. Rewards can be separated into two categories, those externally delivered from someone else and those internally delivered by the person performing. The external rewards can be further separated as either tangible, such as jelly beans, a trophy, or money, or intangible, such as a verbal compliment, an expression of appreciation, or even a smile. All internal rewards are intangible, in that people talk to themselves about achieving a symbolic goal or status. Personnel and development professionals will be involved frequently in reward issues, whether they are generalists or specialise in people resourcing, learning and development or employee relations. An integrated approach to human resource management means that all these aspects have to be considered together so that a mutually reinforcing and interrelated set of personnel policies and practices can be developed. Personnel and development practitioners are expected to play their part alongside line managers in maximising the contribution of people to the achievement of corporate purposes. They must understand the business context and the importance of adopting a strategic viewpoint when meeting business needs in partnership with theircolleagues. Praising the performance of the employee creates motivation and in this result performance of employee effect in positive way. People want their reward for their performance. Banking sector in Pakistan is the most growing private organization in the country and from last ten years its play a vital role to stable the economy and also create a great competition in this sector among different banks. Every bank success depends on its employee performance and the performance only come from by rewarding the employees . Banking sector in Pakistan rewarding the employee in better way and this is the main reason why people selecting banking sector for their career and growth. Rewarding the employees is the key for making the performance better to achieve the desired goals. Employee get motivated if organization rewarding him in better way in return of his performance. If there is no good reward in any organization then employee get de-motivated and his performance go down. And also commitment and satisfaction play a vital role in organization to compete its competitors in the market. By rewarding the employee is very important way to increase their performance. This study also has been conduct to find out the relation between reward and employee performance. If the employee is motivated then there must will be positive effect on his performance. Banks in Pakistan have good reward system for their employees and this is reason people take a great interest in last ten years in banking sector in Pakistan.  We have attempted to probe deeply into the matter to look for the reasons of such issues that employees are motivated or not and we want to study from our research that what is the impact of reward on employee performance in this sector.

1.1   PURPOSE STATEMENT

This study is an attempt to elaborate and clarify the link between Reward and employee performance in the banking sector of Pakistan. I have collect the data from different banks of Lahore to find out that  Is there any impact of reward on employee performance or not.

1.2   OBJECTIVE

The overall objective of this study is to investigate the impact of Reward on the employee performance in banking sector of Pakistan.

1.3 SIGNIFICANCE

The present study will study the impact of the Reward on the employee’s performance. The Reward is considered as an important element of the today’s dynamic business world. Every organization facing the tough competition so to be in the market, the organizations have to focus on its overall performance. Employees are considered as the most important asset of an organization and they contribute towards the success or failure of their organization. So all need of the time is to focus on employee performance to get the advantage over the other organizations. And employee performance can be increase by rewarded them on their performance.

If employee getting the reward on his performance than there should be some motivation create in his behavior and he’ll work hard better than before to get more and more reward. The present study will provide a guideline which helps to understand concept of Reward and its importance. This study will contribute towards understanding the core outcomes of reward on employee performance in banking sector of Pakistan.

1.4 RESEARCH HYPOTHESIS

Ho: there is no significance impact of Reward on employee performance.

H_1: there is significant impact of Reward on employee performance.