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Effects of Rewards on Employee Performance in the Hospitality Industry


The purpose of this study was to establish effects of rewards on employee performance PDF. The first research question of the study examined intrinsic and employee performance; the second research question examined extrinsic rewards and employee performance, while the third research question examined other factors that influence employee performance.

This study adopted a descriptive survey design. The study had a population of 467, a target population of 100 and a sample size of 80. The Researcher used a stratified sampling technique, which yielded a response rate of 65%. Descriptive statistics were analyzed for frequencies and the mean, while inferential statistics were analyzed for correlations, and regressions. Data from the study findings is presented using tables and figures.

The first research question focused on intrinsic rewards and employee performance. The study found that there exists a significant relationship between intrinsic rewards and employee performance. Intrinsic rewards examined in this study included employee’s ability, trust, recognition, and achievement.

The second research question focused on extrinsic rewards and employee performance. The study found the existence of a significant relationship between extrinsic rewards and employee performance. Extrinsic rewards in this study included salaries and wages, paid vacations, paid leave, travel allowances and bonuses.

The third research question focused on other factors that influence employee performance.  The study revealed the existence of a significant relationship between other factors and employee performance. Other factors that were examined by this study include employees work environment, management support, and the organizations leadership.

The study concludes that employees’ ability, managers’ trust in employees, recognition, and employees’ view of achievement significantly enhances employees’ performance. This is because intrinsic rewards address employees at the core of their needs, and as a result, form sufficient base that influences and motivates the employees to higher standards of performance. The study concluded that salaries and wages, paid vacations, paid leave, travel allowances and bonuses are essential components of extrinsic rewards that enhance employee performance. When managers take time to invest in extrinsic rewards, employees feel valued by their organization thus working extra hard to enhance their performance, so they can be rewarded even more. This study concludes that factors such as conducive work environment, employee-managers’ relationship, organizational leadership, and supervisors’ guidance are critical components in enhancing employee performance

This study recommends that management at Marvis Hotel should invest more into building employees’ professional capacity and capabilities, enhance and build trust in their employees’ ability to perform their duties, in addition to providing sufficient recognition towards employees for work well done. This will not only motivate the employees, but will also establish a sense of achievement that will further enhance performance. This study recommends that management at Marvis Hotel should enhance their extrinsic reward mechanisms by investing more in salaries and wages that show management commitment to rewarding work in an equitable manner; enhance paid vacations not only for managers, but also employees based on set performance criteria, and also invest in paid leave and bonuses as a way of motivation. This study recommends that Marvis Hotel should develop measures that render the work environment more conducive and train managers on how to develop and nurture relationship with employees as well. There is also need to train managers and supervisors on effective ways of coaching and mentoring employees for improved performance.



1.1       Background of the Problem

The dynamic state of global business greatly influences how organizations position themselves for performance and profitability. An organization’s success is highly dependent on the performance of its employees. Poor employee performance is detrimental to any organization while effective employee performance is a great source of organizational success. Paying employees for productivity has been the cornerstone of industrial and business development for centuries. Financial reward has always been important in managing employee’s performance, but over the last 25 years other elements of compensation have developed to provide employers with more scope to reward, and thus, motivate employees. Performance management influences performance by helping people to understand what good performance means and by providing the information needed to improve it. Reward management influences performance by recognising and rewarding good performance and by providing incentives to improve it”.

In most organizations, rewards are directly linked to employee performance (Zaman, 2011). Dewhurst et al (2010), defines rewards as both financial and non-financial benefits that are given to employees for good performance at work, or for accomplishing assigned duties, as stipulated in an organizational structure, strategies, policies, and processes.  Zaini, Nilufar, and Syed (2009) define employee rewards as tangible financial benefits and services, and other non-tangible benefits given to employees for playing their part in an organization. Richard, Ryan and Deci (2010) say that organizational rewards significantly influence employee performance in organizations.

Employee rewards have been used for decades to recognize, and appreciate employees as a way of enhancing their performance. In early studies of employee rewards, motivation and performance, Taylor (1911) conducted a study on motivation levels of employees who received a piece-rate-pay based on production hours and units. In his study, he concluded that employees are fully motivated by pay. Further, he concluded that employees are inspired to perform better, and produce higher number of production units, when they know the monetary rewards associated with the performance.  However, Taylor’s conclusion was later criticized by Mayo (1940), who argued that monetary rewards are not sufficient to inspire performance since employees tend to get bored with job assignments that are routine, thus reducing performance regardless of monetary rewards.

Reward is clearly central to the employment relationship. While there are plenty of people who enjoy working and who claim they would not stop working even if they were to win a big cash prize in a lottery, most of us work in large part because it is our only means of earning the money we need to sustain us and our families. How much we are paid and in what form is therefore an issue which matters hugely to us (Torrington et al., 2011, p.514). The rewards that we apply to both individual and team performance are therefore critical in determining how affective our reward strategy will be. Wilson (2003, p.128) describes rewards and their purpose as including systems, programmes and practices that influence the actions of people. The purpose of reward systems is to provide a systematic way to deliver positive consequences. Fundamental purpose is to provide positive consequences for contributions to desired performance.

In Europe and America, reward systems started as early as 1950’s with Skinner’s (1953) reinforcement theory that argued that employees’ performance tends to increase with positive performance. In other words, when employees are rewarded well for their work, they tend to reinforce the positive performance that elicited the rewards. Maslow (1943) developed Maslow’s hierarchy of needs that postulated that employees’ performance is enhanced when their needs are met. One of the ways to meet employees’ needs is through rewards systems. When employees’ feel sufficiently motivated through rewards, they tend to perform much better than those who are not.

In Asian countries, rewards have been used for decades to enhance employee performance (Thomas, 2009). Long before multinationals started venturing in Asia, countries like Malaysia, Japan, and Singapore were using reward systems to enhance employee performance. A study conducted by Ali, and Ahmad (2009) on effects of rewards on employee performance in Malaysian hospitality industry established the existence of a relationship between rewards, motivation, job satisfaction, and performance. The study found that financial rewards were directly related to employee performance as well. Further, they noted that organizations in the hospitality sector should design evaluation systems for rewards that are able to uncover employees’ weaknesses and strengths in a specific job, and reward factors that motivate employees towards enhanced performance.

Africa as a continent has used rewards systems from pre-colonial days. However, Africa’s pre-colonial employee rewards were not as advanced as the monetary extrinsic systems used in Europe (Dewhurst, Guthridge & Mohr, 2010).  Employees who worked in farms received higher rewards when the harvest was bountiful as a way of showing appreciation and recognition. In the Hospitality industry context, since the early 1950’s multinational hotels like Hilton started establishing foot on the African continent and since then as established by Ali, and Ahmad (2009), rewards have been used in the African hospitality industry as a way of enhancing employee performance, and organizational competitive advantage. A study conducted in South Africa on the hospitality industry revealed that employee reward systems have been one of the key contributors to sustained employee performance in the sector. Rewards offered in South Africa were both financial and non-financial. Most organizations in the hospitality sector in South Africa have performance goals and objectives that are used to measure employees’ performance and determine the corresponding rewards.

1.2        Statement of the Problem

In hospitality industry and specifically hotels, it is very important for organizations to stay focused on employee performance and seek ways to enhance it. While employees are assets in any organization, the importance of an employee in hospitality industry is more significant because the industry is by nature manpower intensive. Most of the employee activity and behavior in the hospitality industry involves direct contact with guests. Performance is a major multi-dimensional construct aimed at achieving results. It has strong links to an organization’s strategic goals. Employee performance encompasses the activities related to a job and how well these activities are executed by employees. Every employee behavior or activity does not result in performance. If the activities or behavior have nothing to do with the organization’s objective such as increasing the sales of the organization and making profit, it is unlikely to contribute to the organization’s performance (Mwita, 2002).

There are two dimensions of employee behavior and activities in employee performance, task performance and contextual performance (Kahya, 2009). Task performance is employee behaviour and activities that directly involve the transformation of raw materials to goods and services which are specific to the job or the core technical skill. Contextual performance concerns aspects of an individual’s performance which maintains and enhances an organisation’s social network and the psychological climate that supports technical tasks. Task performance is further split into two.

On the one hand we have activities that transform raw materials into the goods and services. Examples of such activities include operating a production machine in a manufacturing plant or selling merchandise in a retail store. On the other hand, we have activities that service and maintain the organization’s technical core by replenishing its supply of raw materials or distributing its finished products (Kahya, 2009).

Over the last four years, the hospitality sector in Nigeria has experienced an array of challenges. Some of these challenges have been brought about by the credit crunch that happened in Europe and America in 2008 that affected the influx of tourism into the sector (Okech, 2010). As a result, several hotels were severely affected and were forced to cut employees’ benefits to mitigate financial challenges occasioned by lack of foreign clients.

In response to the challenges facing the hospitality sector has had to cut on payroll expenses. One way has been the withdrawal of some of the staff benefits. This has had some adverse effect on employees’ morale, and consequently, performance. There has also been increased expression of job dissatisfaction significantly impacting employee performance.

A study conducted by Beardwell and Claydon, (2010) indicated that numerous other factors besides rewards influence employee performance. These include employee working conditions, employees’ relationships with their employer, job security, training and development, and the policies that guide rewards for employees. Various researchers such as Pratheepkanth, (2011); Qureshi et al, (2010); and Armstrong, Reilly and Brown, (2011) all argue that organizations’ reward systems have both positive and negative effects on employee performance. However, these studies were not conducted in the hospitality sector.

A study by Asudi, (2013) looked at challenges in the tourism sector, but did not focus on effects of rewards on performance from the hospitality industry perspective. Therefore, this study will establish the effects of rewards on employee performance in the hospitality industry, by examining the extent to which intrinsic rewards influence employee performance, the extent to which extrinsic rewards influence employee performance and the extent to which rewards are aligned to employee performance.

1.3  Purpose of the Study

The purpose of this study was to establish effects of rewards on employee performance in the hospitality industry.

1.4             Research Questions

This research study was guided by the following research questions

1.4.1 To what extent do intrinsic rewards influence employee performance?

1.4.2 To whet extent do extrinsic rewards influence employee performance?

1.4.3 To what extent do other factors influence employee performance?

1.5 Significance of the Study

This study will be of significance to the hospitality industry in Nigeria by providing ideas on how to deal with the effects of rewards on employee performance.

1.5.4 Hospitality Industry Human Resources Practitioners

This study will be used by human resources practitioners to make decisions regarding reward options of reward systems that they should consider for their respective organizations.

The government of Nigeria will benefit from this study because it will be a source of statistics that will help policy makers develop sector rewards policies that are in line not only with sector objectives, but that are also cognizant of the prevailing circumstances in the sector.

This study will add value and knowledge to the body of researchers and academicians. Researchers can utilize these findings as a basis for testing hypothesis, or conducting further research, while academicians can utilize it for literature review, conducting further studies, or confirming findings through study hypothesis on the same.


1.6    Definition of Terms

Employee Performance

Employee performance is defined as the successful completion of tasks, responsibilities or assignments by a selected employee or group of employees based on set performance objectives and indicators of efficiency and effective utilization of available resources (Dewhurst et al., 2010).

Intrinsic Rewards

Richard, Ryan and Deci (2010) define intrinsic rewards are those rewards that are inherent within a job and are available in job for example employees’ ability, receiving appreciation, recognition, challenges and achievement, and behavior that shows understanding and concern as to enhance awareness, ability and confidence in the person being mentored.

Extrinsic Rewards

Farooqui and Nagendra (2014) define extrinsic rewards as the fringe and pay advantages employees get from an organization. This includes promotion opportunity, career advancement and conducive workplace environment.

Performance Evaluation

Kumari and Malhotra (2012) define performance evaluation as the appraisal of an employee’s work against the expected deliverables within a given timeframe. This is done by examining actual performance versus set key performance indicators of tasks, effort and quality with specification.

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