MONETARY INCENTIVE AND EMPLOYEE PERFORMANCE IN NON

GOVERNMENT ORGANISATIONS: A CASE STUDY OF

UNITED NATION MISSION IN
SOUTH SUDAN

BY
NAME: .......................................................

REG. NO: ………………………..

A RESEARCH PROOSAL SUBMITTED TO THE FACULTY OF BUSINESS AND

DEVELOPMENT STUDIES IN PARTIAL FULFILLMENT OF
REQUIREMENTS FOR THE AWARD OF BACHELOR’S
DEGREE IN BUSINESS ADMINISTRATION OF
INTERNATIONAL UNIVERSITY
OF EAST AFRICA

MAY, 2018
 TABLE OF CONTENTS
CHAPTER ONE: INTRODUCTION..............................................................................................1
1.0 Introduction................................................................................................................................1
1.1 Background of the Study...........................................................................................................1
1.2 Statement of the Problem...........................................................................................................3
1.3 Purpose of the Study..................................................................................................................4
1.4 Objectives of the Study.............................................................................................................4
1.5 Research Questions..................................................................................................................4
1.6 Scope of the Study....................................................................................................................4
1.6.1 Geographical scope...............................................................................................................4
1.6.2 Content Scope:........................................................................................................................5
1.6.3 Time Scope:............................................................................................................................5
1.7 Significance of the Study...........................................................................................................5
1.8 Conceptual framework...............................................................................................................6

CHAPTER TWO.............................................................................................................................8
LITERATURE REVIEW................................................................................................................8
2.0 Introduction................................................................................................................................8
2.1 Theoretical review.....................................................................................................................8
2.1.1 Rewards and Incentives..........................................................................................................8
2.2 Composition of rewards.............................................................................................................9
2.2.1 Basic pay.................................................................................................................................9
2.3 Importance of an ideal rewards system...................................................................................11
2.4 Theories of Rewards................................................................................................................13
2.4.1 Herzberg Hygiene Motivation Theory..................................................................................13
Reinforcement and Expectancy Theories......................................................................................15
2.4.2 Performance management....................................................................................................16
2.5 Employee performance............................................................................................................17
2.6 Employee Motivation..............................................................................................................18
2.6.1 Employee Motivation and Organizational performance.......................................................19

2
2.7 Rewards in the Public sector....................................................................................................20
2.7.1 Lack of wage policy..............................................................................................................21
2.7.2 Uncompetitive pay................................................................................................................21
2.8 Empirical Review....................................................................................................................23
2.9 Summary..................................................................................................................................24

CHAPTER THREE.......................................................................................................................24
METHODOLOGY........................................................................................................................24
3.0 Introduction..............................................................................................................................24
3.1 Research Design......................................................................................................................24
3.2 Study Population......................................................................................................................25
3.3 Sample Frame and sample size................................................................................................25
3.4 Sampling Technique................................................................................................................25
3.5 Source of Data.........................................................................................................................26
3.5.1 Primary Data.........................................................................................................................26
3.5.2 Secondary Source.................................................................................................................26
3.6 Data Collection Methods.........................................................................................................26
3.6.1 Interviewing..........................................................................................................................26
3.7 Instruments of data collection..................................................................................................27
3.7.1 Questionnaires.......................................................................................................................27
3.7.2 Interview guide.....................................................................................................................27
3.7.3 Documentation/ secondary data............................................................................................27
3.8 Reliability and validity............................................................................................................28
3.9 Research Procedure.................................................................................................................28
3.10 Data Analysis and Management.............................................................................................28
3.11Ethical Consideration..............................................................................................................29
3.12 Limitations of the study..........................................................................................................29
REFERENCES..............................................................................................................................30

3
 CHAPTER ONE: INTRODUCTION

1.0 Introduction
This study seeks to investigate reward system and employee performance in organizations. This
chapter presents the background, definition of key concepts, statement of the problem, objectives
of the study, research questions, and conceptual framework, significance of the study,
justification, and scope of the study, operational definitions and limitations.

1.1 Background of the Study

Increasingly, organizations both in public and private sector are realizing that they have to
establish an equitable balance between the employee’s contribution to the organization and the
organization’s contribution to the employee’s expectations. Establishing this balance is one of
the main reasons of rewarding employees to make them more productive. To achieve and sustain
a competitive advantage that is enhanced through organization performance, it is imperative that
organizations leverage human capital in a desired direction (Boxall & Purcell, 2013) and the key
means of accomplishing this is through the incentive power of rewards (Lawler, 2010).
Consequently, Compensation has a big influence in the recruitment of employees, motivation,
and productivity and employee turnover. The level and magnitude of compensation should be of
concern because the level of compensation will determine the lifestyle and self-esteem of the
employee and the value of the company.

According to Barney (2012), one important way for organizations to attract and retain the best
employees is to offer competitive compensation. Wages and salaries must compare favorably to
the market, and they must also be consistent and fair across the organization. Building a
competitive compensation program can be challenging. The key elements to developing a
successful program, include developing a compensation philosophy, creating salary structures,
researching and analyzing market data and ensuring internal equity.

Rewards which is also known as compensation is an important factor affecting how and why
people choose to work at one organization over others. Employers must be reasonably
competitive with several types of rewards to attract and retain competent employees. Rewards
impacts an employer’s ability to attract applicants, retain employees and ensure optimal levels of
performance from employees in meeting the organization’s strategic objectives. (Puwanenthiren,
2011).

The creative use of Rewards system can work to maximize Human Resource productivity and
contribute significantly to the achievement of Human Resource and organizational objectives. A
Rewards program can reinforce an overall corporate objective of increased productivity, focus on
both individual and team effort and emphasize both short and long term strategies (Kubr, 2012).
An effective compensation program in an organization addresses four objectives; Legal
compliance with all appropriate laws and regulations; Cost effectiveness for the organization-
Employers must balance compensation costs at a level that both ensures organizational
competitiveness and provides sufficient rewards to employees for their knowledge, skills,
abilities, and performance accomplishments; Internal, external, and individual equity for
employees; Performance enhancement for the organization (Armstrong, 2009).

Organizational objectives are met through the effort of individual employees. If employee
performance is improved, the organization will lift its performance. The evaluation of
organizational and employee performance permits managers to check that strategic business
objectives are valid, are being successfully communicated throughout the organization and are
being achieved (Armstrong, 2009). The key elements of performance management are: the
creation of a shared vision of the organization’s strategic objectives, the establishment of
performance objectives for each function, group and individual to ensure that their performance
is aligned with the needs of the business, the use of a formal review process to evaluate
functional, group and individual progress towards goal achievement and linking of performance
evaluation and employee development and rewards to motivate and reinforce desired behaviour.

World over, the public service plays a central role in any country’s socio-economic development.
The service has however, been affected by globalization, public sector reforms, regional and
international partnerships, climate change, Information, Communication and Technology (ICT)
and Human Resource Management (HRM), among other factors. According to the Economic
Survey (2012), Uganda had about 86,000 people working for state corporations as at the end of
last year out of the total 681,100 public sector workers. The public sector industry is rapidly
transforming. Many reforms take place to anticipate on several challenges. At the moment
several trends can be detected within the public sector. The origin of these trends can be found in
the ongoing introduction of public management methods and tools within the public sector. The
government of the future will be an effective, cost-efficient and accountable government that
delivers high-quality services.

Since Uganda’s independence, the public sector as a whole has not had an explicit and
comprehensive wages and compensation policy. Instead, wages and compensation have been
adjusted on an adhoc basis. More specifically, wages and compensation have been determined by
the special commissions or task forces to review the pay scales of sections of the public service.
The main effect of this has been that the wages have rarely been consistent across the entire
public sector. In this regard, Kubr (2012) asserted that rewards is a better tool to motivate
employees for better performance and further identified three basic rewards components such as
bonuses, basic pay and profit-sharing schemes that influence the performance of employees.

1.2 Statement of the Problem

Employees are a major force behind an organization’s success and they need to be motivated
through means such as incentives. Well designed and implemented incentives can significantly
enhance employee performance for example through improving their morale; provision of job
security, motivation among others (Malt Holtmann 2014). Uganda Electricity Transmission
Company Limited introduced reward system in a bid to improve employee performance. Despite
the above efforts, by Uganda Electricity Transmission Company Limited to introduce incentives,
it has experienced high labour turn over, poor adaptability of monetary to eligibility requirements
for bonus schemes, reduced output from employees and low morale among employees
(Electricity Transmission Company Limited, 2017). Could this be due to failure of provision of
well-implemented reward system by Uganda Electricity Transmission Company Limited to
monetary, resulting to poor employee performance? It is therefor against this background that the
researcher is carrying out a study to establish the relationship between reward system and
employee performance in Organizations.
1.3 Purpose of the Study
The purpose of the study is to establish the relationship between reward system and performance
of employees in Uganda Electricity Transmission Company Limited.

1.4 Objectives of the Study

1. To find out the rewards programs adopted in the Uganda Electricity Transmission Co.
Ltd.

2. To assess employee performance in relation to productivity at Uganda Electricity

Transmission Co. Ltd.

3. To establish the role of rewards on employee performance in the Uganda Electricity

Transmission Co. Ltd.

1.5 Research Questions

The following research question was to help the researcher meet the fore cited objectives.
1. What rewards programs exist in Uganda Electricity Transmission Company Ltd?

2. How is employee performance in relation to productivity rated in Uganda Electricity

Transmission Co. Ltd?

3. What is the role of rewards on employee performance in Uganda Electricity Transmission

Company Ltd?

1.6 Scope of the Study

1.6.1 Geographical scope

The case study research was limited to Uganda Electricity Transmission Company Limited
located in Kampala City.
1.6.2 Content Scope:
The study will be limited to the identify the reward system used to enhance employee
performance in Uganda Electricity Transmission Company Limited, to analyze the level of
efficient and effective of performance among employee of Uganda Electricity Transmission
Company Limited and To establish the relationship between reward system and employee
performance in Uganda Electricity Transmission Company Limited.

1.6.3 Time Scope:

The period under study will be covered using figures 2010 to 2017. This period will be chosen
because the study will create a base that equips management in organization with an overview of
methods and techniques of incentives and reward organizations. Otherwise many organizations
may not be able to achieve set targets if no investigation is conducted into these problems
eroding employee performance.

1.7 Significance of the Study

The proposed study is to be significant in many fronts to various stakeholders that include:
public sector management researchers, future scholars and other stakeholders. Further the
Human Resource Department of Uganda Electricity Transmission Company had expressed
interest in the study and requested the researcher to share the findings with the Department.

Public Sector Management

The study will be important for most Public sector organizations’ like Uganda Electricity
Transmission Company Ltd management as they may find the findings of this study useful in
streamlining the employee rewards and performance to enhance employee motivation and
productivity. As such therefore, this study will also prove useful to policy makers in the
Government and other public sector institutions in developing system for remunerating
employees.

Researchers, Future Scholars and Other Stakeholders

For academic and research institutions, this study is significant to management and business
students since the findings have been drawn from empirical data. On the other hand, for business
students, this study may also serve them as a useful academic reference tool. To other
stakeholders, through this study, they may realize early the importance of developing rewards
system and how this can help them gain a competitive edge through high employee performance
for customer satisfaction.

1.8 Conceptual framework

According to Smyth (2014), conceptualizing is inventing or contravening an idea or explanation.
Conceptual model or design identifies each of the series of the logical steps, variables, and
assumed interactions- bridging the gap from the beginning to the end of the total process by
which the research is dependent upon. In this study the dependent variable employee
performance whereas the independent variable is rewards system.

Independent Variable Dependent Variable

Employee performance:
Increased Productivity
Rewards system: Satisfied Employees
Basic Pay Attaining Targets
Bonus Meeting deadline
Fringe Benefits Improved work environment

Motivation:
Achievement
Recognition
Advancement
Interesting work
Possibility of growth
Responsibility

Intervening Variable

Figure 2.1: Conceptual Framework

Source: Author, (2018)

Rewards system will be taken to include basic salary or pay of an employee, other fringe
benefits, compensation, bonus, commissions, and employee stock option among others.
Motivation on the other hand will consider variables that supplements rewards as the primary
tools for motivating employee to improve the productivity and well as attracting and retaining
them. By and large, defined pay system is essential in improving the performance of a business
by giving an incentive for the effective performance of individual employees. However,
Performance ought to be measured and as such performance review is an essential indicator for
measuring performance to be rewarded.
 CHAPTER TWO

LITERATURE REVIEW

2.0 Introduction
This chapter seeks to review relevant literatures with respect to rewards and employee
performance. This also describes the theoretical background, related concepts that depict the
variable, empirical review and conceptualization of the study variables.

2.1 Theoretical review

2.1.1 Rewards and Incentives

Rewards is traditionally defined as the total income of an individual and may comprise varied of
separate payments determined according to different rules. Maxwell (2008), subsequently
described components of compensation package to be including but not limited to: competitive
wages and salaries, service such as subsidized and free catering services, free medical services,
staff housing scheme, free transportation and pension scheme.
Inga (2009) defines employee rewards as reward or compensation given to the employees for
their work performances. In this respect it can be deduced that rewards provides basic attraction
to an employee to perform a job efficiently and effectively that leads to employee motivation.
Salaries or pay packages affect the employees’ productivity and work performance. Jesen and
Murphy (2014) also adds to the definition of rewards the aspect of appropriate rewards policy
for a particular organization must take note of the tradeoffs that are inevitably involved to
achieve balance and fit with their own organization and people. In summary, Inga (2009), further
attributed the aspects such as amount and method of rewards as very important for both
management and employees rewards systems.
Associated with rewards are incentives. Incentives compared to rewards refer to various
particular forms of payments which are intended to achieve some specific change in behavior
among the workforces as may be desired. Incentives come in various forms depending on
whatever form the organization adopts. Two major types of incentives are identified as
monetary or non-monetary. Examples of monetary incentives include bonus payments for
achieving a set target. Whereas non-monetary incentives include housing, study leave or
enhanced leisure time, paid leave among others (Jesen & Murphy, 2014).
2.2 Composition of rewards

2.2.1 Basic pay

Reward as part of payments presents all the tangible benefits and provisions an employee obtain
as a part of employment relationship. Bratton and Gold (2013) define “basic pay” as all the cash,
payments provided by an organization in return of their contribution. Basic pay usually refers to
the pay received without taking into account any additional benefits or bonuses, such as a car,
medical cover, commissions, clothing, food etc. It also refers to the amount of pay before taking
any deductions such as tax off. Consequently the companies that address individual’s need and
preferences adequately in terms of total pay more likely to attract and retain key workers and by
applying such methods organization anticipates enormous concentration to nonmonetary aspects
of rewards (IDS, 2013). However, with the conception of total rewards much more emphasis has
been put on other components to individual growth and total pay. Beyond the basic pay,
Silverman and Reilly (2013) explained the total pay as the combination of basic salary,
performance- based salary, benefits, and acknowledgment or feedback as key to the development
of motivating rewards modes.

Variable Pay is compensation linked directly to individual, team, or organizational performance.

The most common types of variable pay for most employees take the form of bonuses and
incentive program payments. Executives often receive longer-term rewards such as stock
options. Basic assumptions include: Some jobs contribute more to organizational success than
others; Some people perform better and are more productive than others; Employees who
perform better should receive more compensation; Some of employees’ total compensation
should be tied directly to performance.

2.2.2 Bonus pay

Bonuses are additions to pay that are linked to individual or team performance measured against
targets or objective criteria. Employers introduce bonus payments to reward individuals for
doing well. By definition a 'bonus' payment is an extra and not part of basic pay. There has been
ongoing debate about the effects of bonuses and the role of reward systems in organizations that
still has not led to a unanimous conclusion. Those in favor of bonuses state that applying bonuses
and putting emphasis on monetary rewards increases productivity and organizational
performance, while those against bonuses claim that use of bonuses and monetary rewards leads
to counterproductive results (Sikula, 2011). The proponents of bonuses who state that use of
bonuses and emphasis on monetary rewards increases productivity and organizational
performance. For instance, Yao (2017) studied the impact of profit sharing and bonus payment
on the performance of Chinese state industries and concluded that over half of the value-added
growth of these industries could be explained by bonus incentives.

2.2.3 Fringe Benefits (Indirect Compensation)

Many organizations provide numerous extrinsic rewards in an indirect manner. With indirect
compensation, employees receive the tangible value of the rewards without receiving the actual
cash. A benefit is an indirect reward e.g. health insurance, vacation pay, or retirement pensions
given to an employee or group of employees as part of organizational membership, regardless of
performance (Brown, 2013).

Organizations are in the constant competition and pressure to attract and retain talented
employees because of the competitive labor market that symbolizes most parts of the world. Due
to its importance in employer-employee relationship and its flexibility in terms of determination,
provision and employees preferences; fringe benefits has been shown to be one of the mostly
used strategies by most organizations in attracting and retaining good brains (Hussein, 2011).
Fringe benefits are no longer a considered “fringe” but it as an integral part of employee total
income providing the needed psychological and physical assistances in both good and bad times.
The value of these benefits to both employers and employees however, depends on the
employees’ awareness of this costly part of employees’ total compensations (Danhower & Lust,
2016). Various studies have point out that in spite of the importance of fringe benefits in the
employer-employees relationship; it is the forgotten one in most academic studies of employees’
compensations (Balkin & Griffeth, 2013) .
A good compensation program should be designed to achieve three overall objectives.First,the
program should assist in the attraction and hiring of the most qualified professionals available in
the market. Secondly, the compensation program should direct employee efforts toward
achieving the company’s strategic objectives such as business development, profitability, safety
and work quality. Thirdly, the compensation program should ensure the development and
retention of a qualified workforce (Lawler, 2010).
2.3 Importance of an ideal rewards system
An effective system of rewards is highly significant because several problems relating to
personnel revolve around one element namely, rewards. Many employees for example absent
themselves from work often because they feel they are not paid enough. They look for new and
better prospects because the present emoluments may not be attractive enough to stay on. They
agitate, use foul language, resort to graffiti, turn violent and fall sick, because the rewards paid to
them may not be adequate. Aswathappa (2012)Talks on job satisfaction, loyalty, and
organization before self, altruism and the like may be all right for boardroom discussions and for
delivering lectures in classrooms. The talk may also be relevant in a country like Japan where
people are inspired by a fanatical devotion to work. But in our country Uganda, an average
worker cares only for money. Such being the reality, rewards must fulfil the expectations and
aspirations of employees and exploit theory energies for the benefit of organizations (Kurb,
2012).
Retaining competent individuals for long is difficult than attracting fresh ones. An employee’s
longevity of service in a particular organization depends more on non-financial benefits, but the
role of financial benefits cannot be ruled out, particularly at lower levels of hierarchy. Loyalty
towards an organization also depends on his or her perceptions about rewards (Stone, (2016). It
is common knowledge that an employee feels satisfied or dissatisfied with his or her rewards-not
so much by the total amount he or she receives, but by comparing his or her benefits with those
enjoyed by others. Comparison provides a feeling of equity or inequity. There is a sense of
equity when the employee’s rewards is equal or more than the rewards received by others in the
same category of jobs. If the rewards is lower the employee feels he or she is inequitably treated.
An employee sticks to an organization when he or she is paid equitably. The organization’s pay
structure must, therefore be equitable and consistent (Jensen, & Murphy, 2014).
Consequences of pay dissatisfaction
 Desire for Performance
more pay
Strikes

Grievances

Pay dissatisfaction
Search for higher paying jobs absenteeism

turnover

Psychological withdrawal
Lower attractiveness of job Job dissatisfaction

Visits to the doctor

Absenteeism

Poor mental
health

Figure 2.2: Consequences of pay dissatisfaction

Source: Werther & Davis,(1983)

Employees get motivated to perform better when their past performance is rewarded adequately
Stone (2016). Employees set expectations about rewards and compensation to be received, if
certain levels of performance are achieved. These expectations determine goals or levels of
performance for the future. Employees achieving the desired level of performance expect a
certain level of compensation. At some point the management evaluates and rewards the
employees performance.Examples of such rewards includes merit pay increases, promotions, and
non-financial rewards such as recognition and increased status. Employees consider the
relationship between performance and then the fairness of the relationship. The final step in the
process will be the employee setting new goals and expectations based on past experience within
the organization( Lawler, 2010).
2.4 Theories of Rewards

2.4.1 Herzberg Hygiene Motivation Theory

The two-factor theory (also known as Herzberg's motivation-hygiene theory and dual-factor
theory) states that there are certain factors in the work place that cause job satisfaction, while a
separate set of factors cause dissatisfaction. It was developed by Frederick Herzberg, a
psychologist, who theorized that job satisfaction and job dissatisfaction act independently of
each other. Herzberg (2013), hygiene motivation theory explains different needs a human need to
fulfill in order to be motivated at what they are doing at work place. Herzberg made distinctions
between hygiene factors and motivation factors. He further classified hygiene factors as those
circumstances and conditions in the working surrounding that needs to be fulfilled otherwise the
person will be unhappy with his or her job. According to Aswathappa (2012), hygiene factors are
those job factors which are essential for existence of motivation at workplace. These do not lead
to positive satisfaction for long-term. But if these factors are absent or if these factors are non-
existent at workplace, then they lead to dissatisfaction. In other words, hygiene factors are those
factors which when adequate/reasonable in a job, pacify the employees and do not make them
dissatisfied. These factors are extrinsic to work. Hygiene factors are also called as dissatisfiers or
maintenance factors as they are required to avoid dissatisfaction. These factors describe the job
environment/scenario. The hygiene factors symbolized the physiological needs which the
individuals wanted and expected to be fulfilled. According to Herzberg (2013) Hygiene factors
include:

Pay - The pay or salary structure should be appropriate and reasonable. It must be equal and
competitive to those in the same industry in the same domain. Company Policies and
administrative policies - The company policies should not be too rigid. They should be fair and
clear. It should include flexible working hours, dress code, breaks, vacation. Fringe benefits -
The employees should be offered health care plans (medical cover), benefits for the family
members, employee help programmes. Physical Working conditions - The working conditions
should be safe, clean and hygienic. The work equipment’s should be updated and well-
maintained. Status - The employees’ status within the organization should be familiar and
retained. Interpersonal relations - The relationship of the employees with his peers, superiors and
subordinates should be appropriate and acceptable. There should be no conflict or humiliation
element present. Job Security - The organization must provide job security to the employees.

According to Barney (2012), motivation factors on the other hand are related to the assignment
one is doing as his or her job. He further asserted that, not until both these two factors have been
fulfilled, an employee can be fully motivated and perform at his or her best. Hence, it is not
enough to only fulfill one the motivational factors yield positive satisfaction. These factors are
inherent to work. These factors motivate the employees for a superior performance. These
factors are called satisfiers. These are factors involved in performing the job. Employees find
these factors intrinsically rewarding. The motivators symbolized the psychological needs that
were perceived as an additional benefit. Barney (2012) states that motivational factors include:

Recognition - The employees should be praised and recognized for their accomplishments by the
managers.

Sense of achievement - The employees must have a sense of achievement. This depends on the
job. There must be a fruit of some sort in the job.

Growth and promotional opportunities - There must be growth and advancement opportunities in
an organization to motivate the employees to perform well.

Responsibility - The employees must hold themselves responsible for the work. The managers
should give them ownership of the work. They should minimize control but retain accountability.

Meaningfulness of the work - The work itself should be meaningful, interesting and challenging
for the employee to perform and to get motivated.

Based on Herzberg’s theory, employees would highly seek to satisfy their higher-level needs (on
the psychological level). Examples of this are 1) recognition, 2) increase in responsibility and 3)
advancement or development and 4) the nature of the work being done.
 Reinforcement and Expectancy Theories

Reinforcement theory of motivation was proposed by Skinner and his associates (1958). It states
that individual’s behaviour is a function of its consequences. It is based on “law of effect”, i.e.,
individual’s behaviour with positive consequences tends to be repeated, but individual’s
behaviour with negative consequences tends not to be repeated
(www.managementstudyguide.com, (2010). Reinforcement theory states that a response
followed by a reward is more likely to recur in the future. The implication for compensation
management is that high employee performance followed by a monetary reward will make future
high performance more likely. By the same token, high performance not followed by a reward
will make it less likely in the future. The theory emphasizes the importance of a person actually
experiencing the reward.

Like reinforcement theory, expectancy theory (Vroom, 1964) focuses on the link between
rewards and behaviors (instrumentality perceptions), although it emphasizes expected (rather
than experienced) rewards (i.e., incentives). Motivation is also a function of two other factors:
expectancy, the perceived link between effort and performance, and valence, the expected value
of outcomes (e.g., rewards). Compensation systems differ according to their impact on these
motivational components. Generally speaking, pay systems differ most in their impact on
instrumentality: the perceived link between behaviors and pay, also referred to in the pay
literature as "line of sight." Valence of pay outcomes should remain the same under different pay
systems. Expectancy perceptions often have more to do with job design and training than pay
systems.
Sloof and Praag (2015) identified and maintained that in the expectancy theory motivation is
affected by fundamental factors. The first of them being that, expectancy is concerned with the
individual’s perception that effort is positively and directly correlated with performance. The
second factor being instrumentality, where an individual’s expectation is the reward which is
closely tied to his performance; and the third is called valence and is a measure of the degree to
which an individual values a particular reward itself. Although expectancy theory has been
criticized for being based exclusively on extrinsic rewards, ignoring the role played by other
intrinsic incentives in motivating factors of individuals, it is noted with great concern that the
theory indicates that money can act as a primary motivator only if it is perceived as a means of
achieving goals in the presence of a clear link between effort and reward.

2.4.2 Performance management

Globalization, liberalization and deregulation have led to sustained pressure from the citizenry
for better services from the public sector enterprises, thereby forcing governments to initiate
public sector reforms especially in developing countries. Whereas performance contracting has
been successful in the private and public sectors in most developed countries, experiences within
the public sector in developing countries have been marked with mixed results. This has been
due to country and industry specific environments. In Uganda, performance contracting is part of
the broad public sector reform agenda Ugandan Parastatals are the Government's State
corporations and Boards that enjoy the Government's shareholding and support. Ugandan
Parastatals have all been subjected’ to performance contracts with the Government.
(www.erepository.uonbi.ac.ke)
Whether in private, public , profit making or not for profit making, organization management
often expects their employees take more initiative such as supervising themselves, continue to
learn new skills and techniques, and be responsive to business needs. In response, the employee
at minimum expects their organization to provide fair pay, safe working conditions and fair
treatment as they contribute to the growth of the organization (Puwanenthiren, 2011). To
enhance performance (Burke & Terry, 2014) contends that, the use of various economic concepts
relating to variable pay schemes enhances individual and firm’s performance. As such therefore,
human resource professional and managements always strive to pursue excellence with their
selection, reward and compensation systems, and other human resource management
interventions to increasingly promote employee performance which is an important element of
organization performance to demonstrate that their modes add value to the organization and
stakeholders.
According to Moulli (2013), the basic and commonly used definition of performance
measurement as the process of quantifying the efficiency and effectiveness of past actions
through acquisition, analysis, interpretation and dissemination of appropriate data. However,
this definition has not captured what the nature of the data collected as either financial or non-
financial. In addition, the definition seems to be concerned most with the process of measuring
financial performance field rather than its purpose of management restricted to quantitative
measures rather than qualitative ones. As such therefore, performance measurement in terms of
its purpose emphasizing the assessment of how well organizations are managed and the value
they deliver for stakeholders is more holistic in assessment of an organization’s performance.
Over and above all, (Citizen-Driven Government Performance, 2014) asserts that the three
fundamentals of performance measurement should include; components of productivity that
quantifies the outputs and inputs of an organization, the efficiency and effectiveness that
determines the relationship of an organization’s outputs to and its intended to accomplishments,
aspects of quality which indicates attributes such as accuracy and time factor involved in
producing an appropriate output.
In terms of measuring performance (Kaplan & Norton, 2014), in their initial development of
balanced scored related to the performance management with financial attributions. This
culminated to score card linkage that resulted to high-level strategy to actions that occurs when
companies link individuals' reward modes to the Balanced Scorecard. The emphasis of this
linkage is to: focus employees' attention on strategic priorities to perform and to provide intrinsic
as well as extrinsic motivation of rewarding employees to achieve more in a performance related
pay (PRP) system which has been widely introduced especially in the public sector.

2.5 Employee performance

Job performance is influenced by many factors. According to Kreitner and Kinicki (2016),
performance management is a “continuous cycle of improving job performance with goal setting,
feedback and coaching, and rewards and positive reinforcement” pg 22. In this study the focus
was given to compensation scheme. An investigation was conducted at PT. Telkom Malang
Regional Office to see how such factors of compensation scheme affect job performance of the
employees. The question that prompted the current investigation was "What degrees at which the
salary, incentives, benefits, promotion, self-development, and work environment collectively or
individually have influence on employee performance?"(pg33.)
Robbins (2013: 78)– (83) emphasizes the importance of employee job satisfaction as a factor
influencing, amongst others, employee work performance. He argues that “happy workers aren’t
necessarily productive workers”. This argument is in line with Poisat’s deduction (2014: 26)
“that satisfied employees are not necessarily productive employees” ( pg 84. )Robbins (2013:
80), however, suggests that the opposite might be more accurate – that productivity will probably
lead to satisfaction. Studies comparing job satisfaction in2015 to that of 2010 have shown a
decrease in Satisfaction over the 5 years, despite an increase in economic prosperity (Robbins,
2013:79). Robbins claims that this drop in job satisfaction might be because of organizations
trying to increase productivity by increasing employee workloads and tightening deadlines. This
theory can be expanded to include the constant increase in growth expectation of shareholders
and subsequently the bottom line. In addition, there has been an increase in employees reporting
the feeling that they have less control over their work (2013).
Spreitzer and Quinn (2011) touches on the feeling employees have of losing control over their
work when they argue that it has become a challenge for organizations to create an
organizational culture where all employees would want to work to their full potential, where they
can take initiative and act as an owner of the firm. They claim that organizations that can create
such a culture will attract and keep the best and the brightest employees, and hence generate an
important competitive advantage.
Schaufeli, Salanova, Gonzalez-Roma and Bakker (2012), stressed on the importance of rewards
in order to combat burnout, which is typically experienced by most employees on the job.
Individuals, who experience burnout in their work, typically do not feel fulfilled. They also tend
to have negative outlooks, and they also approach the tasks at hand with less vigor and
dedication.

2.6 Employee Motivation

Carnegie (2014) categorized motivation of employee into two broad categories as either intrinsic
or extrinsic. The author further asserted that an intrinsically motivated individual is committed to
his/her work to the extent to which the job inherently contains tasks that are rewarding to him or
her. And that an extrinsically motivated person to work is committed to the extent that he can
gainor receives external rewards for his or her job. The author further mentioned an individual is
motivated in a work situation where he or she is in need for which the individual would have to
perceive a possibility of satisfaction through some reward that can either be financial or non-
financial. As such therefore, proper rewards has been found over the years to be one of the
policies the organizations adopt to increase their workers performance and thereby increase the
overall organizations productivity.
2.6.1 Employee Motivation and Organizational performance
Kanfer (2010) states that employees are constantly involved in a social exchange process
wherein they contribute efforts in exchange for rewards. They also compare the effort or
contribution that they put in towards accomplishing a certain task and acquiring rewards in
exchange for the former. Deutsch (1975), considers the concept of equality to refer to the
rewards that employees receive regardless of the amount of contribution that they provide
towards their company. In addition, members of an organisation should also receive rewards that
are in accordance with their personal need. For instance, employees who have more children may
need more holidays tospend time with their family, or more benefits, such as health insurance
and discounts or free education for their children.
Finally, the concept of seniority refers to the company’s ability to allocate specific rewards for
older members of the organisation, who have proved their value by being loyal to the company
that they work for. According to Babakus,Yavas, Karatepe and Avci (2013), the perceptions that
employees have with regards to their reward climate influences their attitudes towards their
employees. In addition, the commitment of managers towards their organisation is also shown by
how the manager rewards his/her employees. Gouldner (1960) mentions the norm of reciprocity,
which focuses on the ability of organisation to accommodate the needs of their employees, and
reward them for their efforts. In exchange for the rewards provided to them, employees should
reciprocate by increasing their commitment towards their organisation and their work, in
addition to increasing their ‘socioemotional bonds’ with their company and their colleagues.
According to a study conducted by Ahmad ,Ali, Rehman, Khan and Waseemullah
(2010) ,employees are highly likelyto feel ‘rewarded’ and ‘motivated’ when they know that they
are able to get fair pay with regards to the amount of work that they do. In the study, the
researchers stated that employees are particularly concerned about discrimination with regards to
fair pay, and this may hamper their motivation levels to do their job well. In addition, employees
are also driven to work for their chosen organisation over a longer period of time if they are paid
fairly. For some employees, job security is also very important, and for some, this can already
serve as a reward. What with the current economic situation, employees are concerned with
keeping their respective jobs.
According to Shore and Shore (2015), employees who are able to experience and receive
recognition for their work are also able to have a better perception of their work, their workplace
and the people they work for. Thus, there is a need for the employer to really make an effort in
showing the employee that his or her wellbeing is of concern to the organisation and the
management and that the contribution of the employee towards the organisation is highly valued.
This idea is further reiterated by Buchanan (1974) who adds that the recognition of contributions
towards the organisation has a positive relationship towards increasing the commitment of
theemployee towards the organisation and its objectives.
A study conducted by Hinkin and Schriesheim (2014),concluded that there exists a positive
relationship between the rewards provided by the management of a company, and the job
satisfaction felt by the workers, and the effectiveness of the work produced. Removing rewards
that are ‘specific to particular organisational performance’ may give way towards a reduction in
the effectiveness of the employee with regards to his/her work, job dissatisfaction and ‘a lack of
role clarity’(pg 33).

2.7 Rewards in the Public sector

The wage structure adopted by the public sector is important because it has specific
macroeconomic effects. First is that the public sector is the largest single employer in Uganda
hence the size of the wage that it pays is expected to correlate directly with the fiscal. Secondly,
the rewards structure that the public sector employs through its departments and institutions
affects the caliber and turnover of the staff that it would expect. This is because for some
categories of workers, the public sector may have to compete with other private sector employers
to attract and retain personnel. In such instances, the level of public sector compensation would
be a major indicator of the trend in wage growth and distribution of workers. Thirdly, the public
sector has recently experienced increased wage demands due to the rise in the trade union
activity (Pay policy for the Public Service, 2014).
Without a proper means for negotiating in this new environment, the public sector may be faced
with intermittent demands for increased wages. A fourth factor comes from the general public
reluctance to countenance reductions in the size of the public sector because of the existence of
high unemployment rates in the country. Again, this constrains the ability of the government to
make the adjustments in the size of the civil service in spite of the adverse effects that it may
have on the wage bill. Public sector wage determination in the country therefore remains a big
problem since public expectations are sometimes inconsistent with the required approaches to
creating efficiency and paying competitive wages (Economic Survey, 2015).

2.7.1 Lack of wage policy

The government has been undertaking reforms in the public sector to improve efficiency and the
quality of service. These public sector reforms have often involved the assessment of the real
labour needs that is required to ensure optimum performance. Since Uganda’s independence, the
public sector as a whole has not had an explicit and comprehensive wages and compensation
policy. Instead, wages and compensation have been adjusted on an ad hoc basis. More
specifically, wages and compensation have been determined by the special commissions or task
forces to review the pay scales of sections of the public service. The main effect of this has been
that the wages have rarely been consistent across the entire public sector (Pay policy for the
Public Service, 2014).

2.7.2 Uncompetitive pay

Compared to the periodic rises in the cost of living, it is clear that the rewards of most public
sector workers has not kept pace. Therefore, the purchasing power of the civil servants at the
lowest rewards scales has been eroded over time. As a result, this has affected staff morale and
motivation for continued service in the public service. Related to the matter of uncompetitive
wages paid to the majority of employees in the public sector is the matter of other incentives for
proper performance (Bulletin of the Institute of Economic Affairs, 2014).
There being no mechanism for assessment and evaluation of individual or departmental
performance, individual employees bear little cost when their respective departments perform
poorly. Essentially therefore, rewards losses its ability to act as a mechanism for encouraging
efficiency and personal initiative. The reason for this being that there is hardly any advantage for
employees at the lower cadres of service to exceed expectations. Indeed, the setting of specific
targets in performance contracts have been introduced within the last two years only. Still, the
use of performance contracts to determine further rewards or promotions is confined to chief
executive officers of state corporations and senior level officers in the central government
(Ministry of Finance, 2014).
2.6.3 Motivation and performance model

Feedback to employees

Rewards considers equity of performance rewa

Employee
Employee sets expectations and goals Performance
Is rewarded
Are given

Employee sets new goals and expectations based on prior experiences

Figure 2.3: Motivation and performance model

Source:Carrell & Danhower,(2016).
If employees see that hard work and superior performance are recognized and rewarded by the
organization they will expect such relationships to continue in the future. Therefore, they will set
higher levels of performance for themselves, expecting higher levels of rewards. Of course if
employees see little relationship between performance and rewards then they may set minimum
goals in order to retain their jobs but will not see the need to excel in their positions. In this
regard, Babakus et al. (2013), stated that the perceptions employees have with regards to their
reward is influenced by their attitudes towards their employers. Inaddition, the commitment of
employers towards theorganisation is also shown byhow the manager rewards their employees.
There is a close relationship between performance appraisal and rewards. This is particularly true
in cases where payment by results schemes exist. Incentives payments depend on the employee
performance which needs to be carefully assessed. It needs no particular emphasis that union
management relation largely depends upon employee rewards. Industrial conflicts between
employees and employers take place on rewards system. Such a system for example helps the
organization obtain and retain employees at a reasonable cost. In the absence of a rational
payment system, employees are likely to be overpaid or underpaid. There are a number of
Labour Acts which need to be complied with by an organization. On compliance of any
provision makes the organization guilty and punishable. A properly designed wage and salary
system helps the company avoid such possibilities (Jensen & Murphy, 2014).
Finally the primary goal of a wage policy in any country should be the promotion of economic
development .If economic development has been meagre and all round development is stunted
one of the reasons might well be the failure of the wage policy to contribute adequately to the
process of economic development.

2.8 Empirical Review

APEC Human Resources Development Working Group (2008) that is Labor and Social
Protection Network carried out a study on Impact of Performance Based Rewards Systems on
Productivity Performance of Local Industries in Korea, Malaysia, The Philippines and Chinese
Taipei. The major findings of the study show that the impact of implementing performance-
based rewards systems was positive. From the analysis of the findings, the companies selected
had indicated performance improvement in terms of their profit margins, productivity, and
improved attendance of staff, staff morale and motivation due to improved rewards systems that
were performance based.
Metawie and Gilman (2015) presented a paper to the 3rd Conference on Performance
Measurements and Management Control in UK on the problems with the implementation of
performance measurement systems in the public sector where performance is linked to pay. The
study showed that there is lack of research on performance management systems linked to
rewards to strength of such link. The findings further demonstrated that the link between
rewards and performance management, leads to neglecting the problems inherent in measuring
the performance of the public sector and the difficulties in finding unproblematic performance
measures. The study also noted that extensive portion of the literature on performance
management has been concerned with the economic benefits of the application of such systems
as strategic control systems to increase productivity through monitoring employees’ activities
and influencing their behaviours of employees.
Puwanenthiren (2011) most recently carried out research on reward system and its impact on
employee motivation in commercial bank of Sri Lanka. The study found out that there is an
increase in organizations realizing that they have to establish an equitable balance between the
employee’s contribution to the organization and the organization’s contribution to the employee.
The study also found out that most organizations follow a strategic approach to creating this
balance focusing on the three main components of a reward system as, compensation, benefits
and recognition.

2.9 Summary
Chapter two reviewed literature as presented by different scholars and researchers on the subject
of the study. It started with a theoretical review of rewards and incentives where it reviewed the
concepts of basic pay, bonus pay and fringe benefits. It also reviewed the importance of ideal
rewards to an organization. The chapter then presented the different theories on which the study
was build including Herzberg Hygiene Motivation Theory and the Reinforcement and
Expectancy Theories. Performance management followed the employee performance and how it
is affected. Employee motivation and how it relates with organizational performance and general
rewards in the public sector. The chapter then presented the empirical review and conceptual
framework.

CHAPTER THREE

METHODOLOGY

3.0 Introduction
This chapter will be to present the methodology that was used in the study; it gives a description
of the study area and the methods that was used to collect data from the field. It gives a summary
of the research design, sample population and size, data collection instruments, data type, data
processing and presentation and the problems encountered during the process of data collection
and analysis.

3.1 Research Design

A case study will be chosen as the most appropriate research design. Both qualitative and
quantitative research design will be used. The qualitative research design will be descriptive in
nature and this enabled the researcher to meet the objectives of the study. A statement will be
used to assign variables that will not adequately measure using numbers and statistics. The
quantitative research design will be used in form of mathematical numbers and statistics assigned
to variables that may not be easily measured using statements or theme. The qualitative research
design will be descriptive in nature and this enabled the researcher to meet the objectives of the
study. A statement will be used to assign variables that were not adequately measure using
numbers and statistics. The quantitative research design will be used in form of mathematical
numbers and statistics assigned to variables that may not be easily measured using statements or
theme.

3.2 Study Population

The study population will comprised of 100 representatives of Uganda Electricity Transmission
Company Limited, including manager & top administrators, officers, account& finance
department and human resource. These were chosen because these are the people who offer,
receive and manage the services respectively.

3.3 Sample Frame and sample size

Key participants of the study will comprised of respondents from the manager & organisation top
administrators, officers, account& finance department and HRM officesr. These will be selected
using both stratified and purposive sampling techniques. Using the purposive sampling
technique, the researcher selected 100 key informants who included Uganda Electricity
Transmission Company Limited.

3.4 Sampling Technique

The study will use both random and purposive sampling methods.
Random sampling methods will be involved selecting respondents from the study population by
chance. In this way every respondent had an equal chance of being included in the sample. This
method will be used to select customer respondents from Uganda Electricity Transmission
Company Limited.

Purposive sampling will be involved selecting a certain number of respondents based on the
nature of the office. This method is appropriate because it enables selection of informed persons
who possessed vital data that is comprehensive enough to allow gaining a better insight into
problem. In the study respondents will be contacted in person, as the researcher wants first hand
information from them and the study was keenly inquires respondents’ views on the subject
under study.

3.5 Source of Data

3.5.1 Primary Data

Primary data will be gathered from respondents at Uganda Electricity Transmission Company
Limited who will be assumed to give first hand information on the subject under study.

3.5.2 Secondary Source

Secondary data will be got from sources like; Annual reports, Journal articles, internet,
magazines, newspapers and books related to the subject of the study and these will be consulted
at length to extract the information required to support the findings from the study respondents.

3.6 Data Collection Methods

The study will incorporate the use of various methods in the process of data collection in a bid to
come up with sound, concrete and credible research findings. The researcher therefore will
amalgamate the use of questionnaire, interviews and documentary analysis in the process of
collecting primary data.

3.6.1 Interviewing
The researcher will use a formal interviewing as a method of data collection and the interviews
offered a chance to explore topics in depth and allowed interaction between the researcher and
the respondents such that any misunderstanding of the questions and answers provided could
easily be corrected. The researcher interviewed the respondent of the Uganda Electricity
Transmission Company Limited using the interview guide. This was used to tap the vital
information that would not be collected using the questionnaires from the manager & top
administrators, officers, account& finance department and HRM.

3.7 Instruments of data collection

The study will employ three methods during the process of data collection and these were as
follows;

3.7.1 Questionnaires
Questionnaires titled “to establish the relationship between reward system and performance of
employees in Uganda Electricity Transmission Company Limited.” will be used in the process of
collecting data. The researcher administered questionnaires to be selected of manager & top
administrators, officers, account& finance department. The relevance of this was that the
questionnaires were convenient and less time consuming. With management monetary who
would not have time for an appointment, an email of the questionnaire was sent to them which
would easily be filled. The questionnaire will be piloted as recommended by Saunder et al
(2013) who writes that, piloting helps ensure validity and reliability and also said that piloting
helps to refine the questionnaire so that respondents have no problem in answering the questions
and there would be no problems in recording the data.

3.7.2 Interview guide

An interview guide will also be drafted with a set of questions that the researcher asked during
an interview and these were structured (close ended) in nature. The researcher personally
recorded the provided responses as per the study respondents during the process of carrying out
an interview. This tool was used to collect information from respondents selected from

3.7.3 Documentation/ secondary data: Secondary data will also be used in this study as; the
researcher was collect secondary information from different sources like; text books, internet,
news paper, magazines, journals among other sources. This information will be reviewed by
visiting places like libraries and internet cafes.
3.8 Reliability and validity
Validity of an instrument used in this study was consistent with the definition provided by Miles
and Huberman (2014), as the” extent to which the items in the instrument measure what they are
set out to measure.” The validity of the instruments was established by the supervisor.
Reliability, according to Miles and Huberman (2014), has to do with the extent to which the
items in an instrument generate consistent responses over several trials with different audiences
in the same setting or circumstances”. The reliability of the instruments and data was established
following a pre-test procedure of the instruments before their use with actual research
respondents.

3.9 Research Procedure

The study will observe all those procedures followed in research. Using the letter of introduction
obtained from the Faculty, the researcher was introduced to every respondent reached at, fully
explaining the purpose of research. After getting their consent, he conducted the research. The
researchers also built the confidence of the respondents by assuring them that their views were
confidential and were used only for academic purposes.

3.10 Data Analysis and Management

Data analysis is the process of bring order, structure and meaning to the mass of information
gathered. The instruments that will yield both qualitative and quantitative data (Mugenda &
Mugenda, 2013).After collecting all the necessary data, these data will be coded and edited,
analyzed and rephrased to eliminate errors and ensure consistency. It involved categorizing,
discussing, classifying and summarizing of the responses to each question in coding frames,
basing on the various responses. This was intended to ease the tabulation work. It also helped to
remove unwanted responses which would be considered insignificant. Data collected from the
field with the use of study instruments will be classified into meaningful categories. This enabled
the researcher to bring out essential patterns from the data that would organize the presentation.
Data was entered into a computer and analyzed with the use of statistical packages for social
scientists (SPSS), which will help to summarize the coded data and this was facilitate quick
interpretation. Finally, a research report was written from the analyzed data in which conclusions
and recommendations were made.
3.11Ethical Consideration
Before commencing the research, introductory letters from the University will be sought and the
purpose of the study explained to the authorities to avoid inconveniences and misunderstandings
about the purpose. The information collected was kept highly confidential.

3.12 Limitations of the study

The study will involve the following constraints;
The time allowed to do this research is not enough to allow exhaustive study and obtain all the
essential information for much more suitable conclusions. The problem will be minimized by
putting much effort on this research so as to meet the deadline.

The Researcher is limited by financial resources such as the transport costs and stationery to
carry out her research effectively. In an effort to mitigate this shortcoming, the researchers will
source for funds from a few sponsors.

Slow or non- response: Since the researcher does not know the kind of respondents to deal with,
some of them might fail to respond or delay to do so. The researchers will make convenient
appointments with the respondents and encourage them to respond and give true information in
time.

Due to the sensitivity of the study, the respondents might refuse to give some data to the
researcher citing the reasons behind the study. The researcher will however overcome this by
showing an introductory letter acquired from the faculty fully explaining the purpose of the
research. The researcher will also assure respondents that their ideas will be treated with utmost
confidentiality.

Bureaucracy delays the study. From all the procedures, getting data from management take time.
However, the researcher will take time and appeal to the bureaucrats for data.
Time and resources constraints might restrict the scope of the research. Despite the researcher
effort to expand the scope of the research by getting into more in-depth study of cash
management, it may not materialize due to the practical difficulties faced during the work.

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