Performance and Rewards Impact on Employees’ Loyalty

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Introduction

With increased competition among companies in the present day, a company needs to pursue new strategies in order to remain successful and strong in the business market. This can be achieved by way of raising the degree of loyalty among the employees which enhances a feeling of belonging towards the organization, hence increasing their level of productivity. This brings us to the conclusion that, together with the advancement of technology, it is the intellectual mind (human resource) that is the basis of a successful organization.

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Human resource management (HRM) is at the heart of any organization and should be given the highest consideration within the organization. HRM plays a major role in the success and development of the organization as well as other strategies (Mathis & Jackson, 2007, p. 45). This indicates that, the labor force has a direct effect on the organization’s performance. Human resources can be categorized into four classes: employment and recruitment; human resource development; performance appraisal and incentives; and relationship with management staff. Each of these sections plays a very important role in building and improving the staff capabilities (Rothwell & Kazanas, 2003, p.138). In my view, performance evaluation and incentives are some of the most important posts in the Department of Human Resources, even though they can be either frustrating or stimulating (Bratton & Gold, 2001, p. 78).Through performance evaluation and incentives, an organization benefits from increased efficiency and loyalty from the employees, which in turn improves the rate and consistency of production within the organization. Ongoing evaluation leads to constant correction, and thus to improved channeling of the organization (Wiersma, 1992, p.67). Evaluation helps to identify employees’ strengths and weaknesses, which can help to make the best use of this resource.

Based on the above, performance evaluation and incentives are important means to the development of employee performance within the organization. Assessment of performance needs to follow established procedures that aim at stimulating and evaluating the organization. In reality, from my personal experience of the business market in Saudi Arabia, I have noticed that a large proportion of companies neglect the aspect of evaluation. Most companies are looking for profit only; that might be achieved, but more could be achieved through planning and giving full consideration o the various aspects of the organization. (Ballon, 1993, p.89). The role of human resources, which includes performance assessment, should be given more emphasis. This research will attempt to study the Banking sector in Saudi Arabia for the reason that it is an emerging sector that plays a significant role in developing the country. I will also explain the meaning of human resources and performance evaluation, as well as incentives (Wiersma, 1992, p.67). In addition, I will be looking at the impacts of performance appraisal and incentives on various organizations in Saudi Arabia.

Research questions

The research will review the following questions:

  1. What is the meaning of human resources management?
  2. What are the roles of human resources management?
  3. What is the meaning of performance appraisal and incentives?
  4. What are the grounds and rules of performance appraisal in Saudi Arabia?
  5. What kind of incentive has the greatest impact on the employee?
  6. How does performance evaluation impact the performance of an organization?

Aims & objectives

This study will particularly focus on companies in Saudi Arabia, with the objective of improving and enriching performance appraisal, by means of a searching assessment and its impacts on organizational performance in Saudi Arabia. It will also explore the methods of evaluation and incentives in Saudi Arabia, as well as identifying the role of human resources management, and competence in general, in Saudi Arabian companies. Saudi Arabia is a developed country whose systems are starting to mature. The research will try to show how performance evaluation can be used as a tool to develop the country’s economy. I will also try to explore the impacts of the evaluation on various organizations in the market, either positive or negative.

Rationale / justification

Assessment of the performance of companies in Saudi Arabia has been largely neglected, which has led to low achievement of these organizations. I hope that I can in this research show the importance of performance evaluation. Companies in Saudi Arabia have started to pay more attention to HRM but only as of the name of one department among all other company departments, without realizing the importance of this administration and its branches in the development of the performance of the organization as a whole. I will try to clarify how performance appraisal and incentives are important in changing the performance of organizations (DuBrin, 2008, p.112). Banking sector in Saudi Arabia is chosen because it constitutes one of the most important for any economy. As a growing economy, a strong banking sector can help Saudi Arabia achieve its development goals easily. National Bank of Pakistani (NBP) is chosen as a case study since it has emerged as a strong bank that has opened branches in several countries. The bank has opened branches in Saudi Arabia.

Research methods

I chose the National Bank of Pakistani (NBP) because it is the strong bank in the banking sector. The bank has a wide network in Pakistani but also has branches in foreign countries. With the largest reserve in the country, the bank has a strong authority in banking sector in the country as well as the strongest brand position. Banking is service-oriented and depends highly on human resources. The attitude of workers towards their duties, their motivation and royalty is core to a bank’s performance. The case study will seek to find out the relationship between human resource appraisal and workers’ morale and royalty in National Bank of Pakistani.

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The data in this research will be from a sample study so as to cut costs and research time. I chose to conduct unstructured interviews with a sample of workers in National Bank of Pakistani. Open-ended questions will be used in the interview to allow detailed information. The sample of workers will be obtained from the banks’ branches in Saudi Arabia. A sample of twenty participants will be used. Four of the participants will be branch managers. Sixteen other employees in the branches will also be interviewed. Since compensation and appraisals in the bank are similar, information from the chosen region will be sufficient. This research will focus on a particular group of people, about which extensive information is not required.

As I mentioned earlier, the sample will be from the banking sector in Saudi Arabia. National Bank of Pakistani will be the case study.

Research structure

The research will be structured into six chapters.

Chapter 1: Offers an overview of human resource management in Saudi Arabia and focuses on the importance of performances assessment and reward to economic growth and development. The chapter will also give an overview of National Bank of Pakistani and how human resource management affect its operations. The research problems, questions, and objectives will be included in this chapter as an introduction to the research. In addition, the chapter will include methodology used in the research as well as problems and limitation to the research.

Chapter 2: This chapter offers the hypothetical structure and circumstances to the research problem. The chapter will also focus on theories in human resource management, and how they influence performance evaluation and reward. Hypothetical relationship between reward and workers’ royalty will be review. In addition, the chapter will review compensation and reward as related to human resource management in Saudi Arabia.

Chapter 3: This chapter focuses on research methodology. The objectives of the research, justification for conducting the research, design of the research, and data collection Focuses on the methodology of the research, objectives, justification, design, collection will constitute the chapter. The chapter will also look into validity of data collection and research, values and ethical issues encountered and limitations and problems faced in the research.

Chapter 4: This chapter offer analysis of data collected in the research. The analysis is based on conceptual structure and literature review.

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Chapter 5: This chapter is about the conclusion of the research. The chapter will summarize the findings from the conducted research, compare the finding with theories and conceptual framework and give a stand.

Chapter 6: This chapter constitutes of recommendation from the research. The chapter will apply the findings and conclusion to human resource management in Saudi Arabia. The chapter will offer a way forward towards implementing performance evaluation and rewards and how they can be used to improve employee royalty.

Plan of the study

The proposed timetable for completing this research is as follows:

  • Revise literature review and proposal. Write the referendum, which will be distributed (March)
  • Collect information personally. May be required to go to Saudi Arabia for the distribution and collection of the referendum (June)
  • Analysis of data (July)
  • Write the draft and deliver it to the supervisor (August)
  • Submit the ultimate draft (September)

Literature Review

Introduction

Human resources are one of the most important resources to an organization. It is a fact human resource management has great influence on performance of an organization. Various scholars have addressed human resource management strategies and how the strategies can be applied in various aspects of management. Various points of view provide great insight into human resource management.

Highly competitive business environment has called for highly creative business strategies. In this competitive environment, human resources management is viewed as one way for gaining competitive advantage over other competitors (Skinner, 1953, p 278). According to Huselid, competitive business environment has made organizations explore progressive human resource management strategies. From the author, progressive human resource practices such as employee participation, job redesign, employee empowerment, training and good employee evaluation and compensation are being used to improve organizations’ performance. According to Delaney and Huselid, human resource management has great direct influence on overall productivity of an organization. From them, if proper human resource management practices are used, the organization is assured of high performance and has a higher likelihood of meeting its goals. Among human resource management practices that they identify include job analysis, training, good employee appraisal and compensation (Ichniowski, Shaw & Prennushi, 1997, p.21).

Employees attitude

Attitude is a major issue in employees’ performance. Individuals’ attitude has been studied over a long period of time and there is a variety of literature on the subject (Ajezen, 2001, p. 29). There are various definitions of attitude but Ajezen’s definition is the most popular. According to him, attitude is the inclination to react in either favorable or unfavorable way towards an object of attitude (Ajezen, 1982, p. 4). From literature, it is evident that attitude plays a big role in determining the social behavior of an individual (Podsakoff & organ, 1986, p.533). Poor attitude towards something leads an individual to react unfavourable while a good attitude motivates an individual to respond in a favorable way. The literature shows that attitudes in workplaces are manifested in various forms. According to Liberman and Chaiken, employees could show different attitudes towards various aspects of the workplace. Some of the aspects where employees show different attitudes, according to Liberman and Chaiken include benefits received, work itself, supervision, hindrance to their work and other aspects (Liberman & Chaiken, 1996). According to Tosi and Mero, the attitude toward various aspects in workplace may have great influence on the overall performance of a company (Tosi and Mero, 2003, p.37). According to them, attitude in workplace can be classified into two categories: attitude towards work and attitude towards barriers to work. Attitude towards work constitutes the level of workers’ motivation, satisfaction, involvement and commitment to work. On the other hand, attitude toward impediment of work constitutes attitude towards the barrier that results from a workplace (Tosi and Mero, 2003, p.37).

There is ambiguity in understanding of attitude in different areas. The definitions of attitude differ significantly in psychology, entrepreneurship, marketing and innovation. Despite the differences, there is agreement that attitude is an important factor in performance. According to O’Driscoll and Randall, employees who have positive attitude toward their work are more likely to involve themselves in their work (O’Driscoll & Randall, 1999, p. 611). According to Randall, such workers are also more likely to commit themselves to their jobs. Attitude toward work is also closely related to attitude towards an organization. According to Armeli and Lynch, attitude towards a job (Eisenberger & Rhoades, 2001, p.731) or a particular aspect of a company affects the general attitude toward the whole institution (Eisenberger, Cummings, Armeli & Lynch, 1997, p813).

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Human needs

Human beings have variety of needs that need to be fulfilled. In an article, Lyndsay Swinton reviews how Maslow’s hierarchy of needs compares to Herbergez’s theory. Maslow’s theory offers a hierarchy of needs that each individual seeks to fulfill in their lives. The hierarchy includes the psychological needs at the base of the hierarchy, need for security, social, esteem and need for self-actualization. According to Lindsey, workers’ motivation and satisfaction can be fulfilled through Herbergz’s hygiene factors in workers whose need falls below esteem needs (Swinton, 2006, par 5). Herbergez hygiene factors include benefits, salary, job security and company policy among other basic factors. According to her, dealing with employees whose needs are above esteem requires other factors, which she refers to as motivators. According to her the motivators includes employee achievement, recognition and growth program (Swinton, 2006, par 7). Employees at self-actualization hierarchy of needs cannot be satisfied by basic compensation and rewards such as salary but require other motivation that gives them a sense of self-worth. The relationship between these two major theories of management gives an important foundation for managing human resources and other operations in an organization. According to Ajezen, close examination of the needs in an organization is important for creating a reward system that is effective on employees (Ajezen, 2001, p. 31).

Managing human resources in banking sector

In a research on managing knowledge in banking sector, Kridad and Goulding give the importance of managing knowledge in baking sector. The proper management of knowledge can assist banking institutions to be more competitive. They give the importance of a performance evaluation and reward system that take into consideration, not only the psychological needs of banking employees but also their higher needs. According to Kridad and Goulding, human resources are central to banking institutions and should be given a lot of attention (Kridad & Goulding, 2006, p.17). They state that good knowledge management can help to improve decision-making in an organization, improve relationships between employees and customers, improve value to customers, and motivate innovations that can improve value of services.

Banking is service-based. As service-based the interaction of banking employees with customer form the foundation of the service. Poor motivation in employees can lower services and, in consequence, have negative effects on a banking institution. According to Sureshchandar, Amantharaman, Rajendaran and Charadrasekharan, a research into banking sector in India, give insight into factors that affect quality of services in banking institutions (Rajendaran & Sureshchandar, 2002, p.185). According to them, there is a big difference in how different banks apply quality systems. According to them, banks in India can be divided into three groups depending on how they perceive total quality service in their operations.

Although human resources are among the most important resource for success of any organization, it is frequently not accorded the importance it requires. According to Barney and Wright, decision by some organizations often contradicts the fact that human resources are important asset to an organization (Barney & Wright, 1997, p.19). As an important asset to organizations, human resources should be managed in a way that brings about benefits to an organization. According to Barney and Wright, giving human resources the attention that they require can help to increase competitive advantage of an organization. According to them, organizations should manage human resources with equal importance as given to other resources. Applications of various human resource management practices increase competitive advantage of an organization. Huselid emphasizes the importance of using high-performance work practice in an organization (Huselid, 1995, p 639). According to him, high-performance work practices such as incentive compensation, comprehensive employee recruitment, performance management, involvements programs and training helps to increase employees’ competence. Apart from this, these practices help to increase employee motivation and royalty. According to Husein, the result of applying high-performance work practices is high employee retention as well as reducing low-performing employees (Huseid, 1996, p.951).

Employees Compensation and Reward

Employee appraisal, compensation and rewards have great influence on employee motivation. In an article on compensation motivation, Thomas Catanzaro gives various effects of compensation on workers’ motivation. He asserts that compensation has great influence over motivation in employees (Catanzaro, 2004, par 2). He discusses the role of various aspects of compensation to motivation in employees. He considers both the intrinsic and extrinsic compensation over workers’ motivation and royalty. According to him the kind of compensation can have either positive or negative effects on an organization. According to him, the monetary value should not be the only motivator but non-monetary motivators should be considered. Accordingly, compensation differs in different countries. According to Chiu, base salary, year-end bonus, cash allowance, merit pay, profit sharing and mortgage loan were the major motivator in Hong Kong (Chiu, Luk, & Tang, 2002, p. 78). According to Tang, the major motivator in China was base salary, year-end bonus, cash allowance, overtime allowance, merit pay and individual bonus.

Reward and recognition can be a major factor in motivating employees, and improve performance and royalty to an organization (Chiu, Luk, & Tang, 2002, p. 81). According to Milne, team-based incentives can be used to influences employee motivation and performance (Milne, 2007, p. 156). In addition, according to the author, promotion and wages influence employee motivation positively when properly used. Fair promotion and wages, according to a comparison of strength and weakness, is a major factor in employee motivation and royalty. According to the comparison, fair compensation and promotions improve performance than a levered compensation (Milne, 2007, p. 157).The role of fair promotion and compensation in employee motivation was discussed with reference to unique career system in Japanese companies. According to Takahashi, motivating elements of employees should be considered before considering using rewards (Takahashi, 2006, p. 79). According to the comparison, motivational preference of employees varies over time. According to Wiley, monetary rewards to employees create the message that an organization appreciates contributions from employees (Wiley, 1997, p. 138).

Conclusion

From the literature review, it is clear that human resource management is one of the major determinants of an organization’s performance. Human resources management techniques such as recruitment, training, evaluation, compensation and rewards have direct influence on organization performance. Ability to apply these techniques for the benefit of an organization constitutes a good human resource management.

Reference

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Ajezen, I. 2001. “Nature and operation of attitude”. Annual Review Psychology, 52: 27-58.

Ballon, R. 1993. “Employee performance in Japan: evaluation and reward”. Sophia University, Oxford.

Barney & Wright, P. 1997. “On a becoming a strategic partner: The role of human resources in gaining competitive advantage”

Bratton, J. & Gold, J. 2001. “Humans Resource Management: Theory and Practice”. Routledge, New York.

Catanzaro, T. 2004. “Create a strategy for effective employee compensation” Web.

Chiu, R., Luk, V., & Tang, T. 2002. “Retaining and motivating employees: Compensation preference in Hong Kong and China”, Personnel Review. Vol. 31. No. 4.

DuBrin, A. 2008. “Essentials of Management”. Cengage Learning, New York.

Eisenberger, R., & Rhoades, L. 2001. “Incremental effects reward on creativity”. Journal of Personality and social Psychology, 81(4): 728-741.

Eisenberger, R., Cummings, J., Armeli, S., & Lynch, P. 1997. “Perceived organisation support, discretionary treatment, and job satisfaction. Journal of Applied Psychology, 82(5): 812-820.

Huseid, D. 1996. “The impact of Humans Resource Management Practices of perception of organisation performance” Academic of management journal, Vol. 39, No. 4, 949-969.

Huselid, M. 1995. “The impact of Humans Resource Management Practices on Turnover, productivity, and corporate financial performance”. The Academy of Management journal, Vol. 38. No. 3, 635-672.

Ichniowski, C., Shaw, K. & Prennushi, G. 1997. “The effects of Human Resource Management Practices on Productivity: A Study of Steel Finishing Lines” The American Economic Review.

Kridad, A. & Goulding, S. 2006. “A case study on knowledge management implementation in the banking sector”.

Liberman, A. & Chaiken, S. 1996. The direct effect of personal relevance on attitudes. Personality and Social psychology Bulletin, 22: 269-279.

Mathis, R. & Jackson, J. 2007. “Human Resource Management”. Cengage Learning, New York.

Milne, P. 2007. “Motivation, incentives and Organisational culture”. Journal of Knowledge management, Vol. 11. No. 6.

O’Driscoll, M., & Randall, D. 1999. “Perceived organizational support, satisfaction with rewards, and employee involvement and organization commitment. Applied Psychology: An international Review, 48(3): 607-634.

Podsakoff, P. & organ, D. 1986. “Self-report in Organizational Research: problems and Prospects. Journal of management. Vol. 12. No. 4, 531-544.

Rajendaran, K. & Sureshchandar, A. 2002. “ Management’s perception of total quality service in the banking sector of a developing economy- A critical analysis” International journal of Bank Marketing, Vol. 20, No. 4, 181-196.

Rothwell, W. & Kazanas, H. 2003. “Planning and managing human resource: strategic planning for human resources management “. Human Resource Development, London.

Skinner, B. 1953. “Science and human behaviour”. MacMillan, New York.

Swinton, L.2006. “How to increase your work and life satisfaction: Put Abraham Maslow Theory into Practice. Web.

Takahashi, K. 2006. “Effects of wage and promotion incentives on the motivation levels of Japanese employees” Career Development International, Vol. 11, and No.3.

Tosi, H. & Mero, N. 2003. The fundamentals of organizational behaviour: What managers need to know? Brackwell Publishing.

Wiersma, U. 1992. “The effect of intrinsic reward in intrinsic motivation: A meta-analysis”. Journal of Occupation and Organisational Psychology. Vol. 2. No. 2, 101-114

Wiley, C. 1997. “What motivates employees according to over 40 years of motivation surveys” International journal of Manpower’ vol. 18. No. 3.

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