Performance Based Pay: A Study of 2 Nigerian Financial Institutions

Abstract

Purpose: To critically investigate the effect/impact the implementation of both team and individual based pay in 2 Nigerian financial institutions when responses are measured in terms of teamwork, performance and culture.

Design/Methodology/Approach: The study presents the first empirical case-study research carried out in Nigeria. The data are based on 2 Nigerian financial. The analysis addresses the impact of the introduction of PRP and team pay within these institutions. Questionnaires were sent out to the 226 employees. Interviews were also carried out with both managers and employees across both organisations.

Findings: The findings indicate the importance of valence for monetary incentives, the instrumentality of performance for the monetary incentives and clear individual and group objectives for improving performance. On the basis of the analysis of the data from employees covered by the scheme, the results suggests that there are clear indications that employees prefer working with individual performance related pay than in teams, but would not mind working in teams if it is linked to a reward. The results also indicate that individual performance related pay has damaged the concept of team working and that the introduction of PRP brought about a culture change and enhanced employee performance. The findings highlighted a positive link between PRP, improved individual and organisational performance and change in culture and that PRP had a positive effect with employees on higher grade levels; this result support other results from a number of earlier UK studies.

Research Limitations: As this study utilises data from Nigerian financial institutions only, its results cannot be generalised to other sectors and countries characterised by different cultures and contexts. However, what is critical though is that the approach used to finding these results can be applied in a wide variety of situations, thus enabling the examination of external validity.

Originality/Value: This study is one of the first to explore the effect/impact of the introduction of individual and team performance related pay in Nigerian financial institutions and reflecting on the historic cultural context of gift giving and culture within organisations and the impact this has on the success or failure of PRP schemes. The results supports an interpretation of incentive pay as motivated by expectancy theory.  Its implications should be of interest to human resource managers when designing reward strategies for their organisations.