PERFORMANCE MANAGEMENT AS AN IMPERATIVE FOR EFFECTIVE PERFORMANCE IN DELTA STATE OF NIGERIAN PUBLIC OWNED ORGANIZATIONS

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1 PERFORMANCE MANAGEMENT AS AN IMPERATIVE FOR EFFECTIVE PERFORMANCE IN DELTA STATE OF NIGERIAN PUBLIC OWNED ORGANIZATIONS IDEMOBI, Ellis I. 1 and Onyeizugbe, Chinedu 2 1 Department of Business Administration, Anambra State University Igbariam Campus, Nigeria 2 Department of Business and Marketing, Tansian University Oba, Nigeria ABSTRACT Performance management is a tool which focuses on managing the individual and the work environment in such a manner that an individual or team can achieve set organizational goals. The paper gives an empirical perspective of the public sector in Delta state of Nigeria. Guided by Eisenhardt s Agency Theory, the research sought to identify the effects of performance review techniques on employees performance; to ascertain if there is a significant relationship between performance incentives and employees morale. Data were collected using questionnaires administered to 44 respondents selected from five public organizations in Delta state. Data obtained were analyzed using statistical summarization techniques and chi-square at 0.05 level of significance for empirical testing of the two hypotheses that guided the study. Results showed that performance review techniques have significant effect on employees performance and that there is a significant relationship between performance incentives and employees morale. Based on the findings, the study concludes that the absence of performance management system will contribute to the high rate of business failures in the Delta state public sector. The study recommends that organizations in the Delta public sector should establish and adopt incentive systems that will motivate employees to work better after performance management review exercise. Keywords: Management, Public Sector, Eisenhardt s Agency Theory 1. INTRODUCTION Competitive pressures in the global business environment are forcing business organizations to re-engineer in order to become more competitive in the market place. To this end, organizations in the developed economies of Western Europe, North America and Japan have long been placing strong emphasis on performance management review systems (Frigo and Krumwiede 1999). All over the world, governments and businesses have been very concerned about business competitiveness for a number of reasons. Timmons (1992) had opined that competitiveness is a major issue in foreign competition, and if a country s export promotion drive is to yield the desired results, competitiveness in particular must be optimized. He further posited that the declining productivity in business organizations which leads to un-

2 competitiveness is a major cause of monetary problems and inflation, and governments obviously should be interested in the level of competitiveness arising from productivity improvement. Productivity improvement in organizations had been a critical issue ever since early management theoretical propositions. Lohr (1981) had stated that even Abraham Taylor ( ) widely regarded as the father of Scientific Management in his legendary thesis on performance improvement in organizations had recognized the negative influences of groups on performance and sought to break-up informal group activities through spatial and work-flow designs and individual piece rate systems of pay. Taylor had based his management system on production-line time studies. Instead of relying on traditional work methods, he analyzed and timed steelworkers movements on a series of jobs. Using time study as his base, he broke each job down into its components and designed the quickest and best methods of performing each component (Idemobi et al 2010). In this way he established how much workers should be able to do with the equipment and materials at hand. He also encouraged employers to pay more productive workers at a higher rate than others, using a scientifically correct rate that would benefit both company and worker. Thus, workers were urged to surpass their previous performance standards to earn more pay. Taylor called his plan the differential rate system. Rather than quarrel over profits, both management and workers should try to increase production and by so doing, he believed, profits would rise to such an extent that labour and management would no longer have to fight over them. In essence the productivity of an organization is jointly determined by the efficiency with which the organization utilizes several available factors of production which invariably are scarce relative to the demand for them. As it were therefore, one can conceive of an equilibrium condition in productivity terms within given and stated constraints in an organization. Like the price scenario, several factors operate to make it difficult to optimize the use of human and other resources in the organization such that the equilibrium condition is not achieved easily. Ouchi (1981) clearly pointed this out when he addressed the issue of what he labeled the organizational dilemma meaning that the organization s search for rationality (technological determinism) and the human beings search for happiness (as in the Doctrine of Hedonism). Just as Taylor deeply believed that management and labour had a common interest in increasing employees productivity in the organization, evidence in the literature also suggests that 44% of organizations worldwide use performance measurement systems as a mechanism to improve employee performance (Frigo et al 1999). As Watkins (2007) puts it, most public sector business organizations like those in Delta State of Nigeria have not given adequate attention to performance management review as a tool for improving performance even when recent studies suggest that performance reviews benefit organizational performance in both private and public sectors. Performance management has been described as a systematic approach to the management of people, using performance goal measurement, feedback and recognition as a means of motivating them to realize their maximum potentials (Alo, 1999). It embraces all formal methods adopted by an organization and its managers to increase commitment, individual and corporate effectiveness. Public sector business organizations that strive to deliver quality services at competitive prices are those that embrace various performance review practices to assess their employee performance and motivate them with incentives. The success or failure of public sector business organizations hinges on the ability to 47

3 attract, develop, retain, empower and reward a diverse array of appropriately skilled people and is the key to improving organizational performance (Robert and Angelo, 2001). The explanation therefore is that human resource managers in the public sector business concerns should embark on periodic performance management reviews of their employees in order to re-position their business organizations though owned by government for better performance and improved competitiveness. 1.1 STATEMENT OF THE PROBLEM Most public sector businesses failed in Delta State of Nigeria because of ineffective and inefficient performance management system (Esu and Inyang, 2009). In Delta State Delta State of Nigeria public sector, the performance of staff of executing agencies or public enterprises is limited to budget monitoring and annual performance evaluation. However, experts are of the view that there is no link between employee performance and financial data (Pollitt and Bouckaert 2004). These organizations are required to give adequate attention to performance management reviews to enhance productivity. Records also show that only a few organizations in the Delta State of Nigeria public sector are making efforts to embark on a performance management review with the commensurate reward system. Some informed authorities blame this on managers who do not have adequate information on performance review techniques that could have significant impact on employees performance for greater organizational effectiveness (Esu and Inyang, 2009). The problem of this paper therefore is to examine the benefits of instituting an effective performance management in the Nigerian Public Sector business organizations and the consequences of not doing so. 1.2 OBJECTIVES OF THE STUDY The main objective of this study is to empirically assess performance management as a tool for improving performance in public sector corporations with the Delta State Public Sector organizations as a focus. The driving force is to what extent do performance review techniques affect employees performance in Delta State public sector organizations and again what is the significant relationship between performance incentives and employees morale in Delta State Public Sector? 1.3 STATEMENT OF THE HYPOTHESES The following hypotheses are formulated to guide this study; H0: Performance review techniques do not affect employees performance. H1: Performance review techniques affect employees performance. H0: There is no significant relationship between performance incentives and employees morale H1: There is a significant relationship between performance incentives and employees morale. 48

4 2. REVIEW OF SELECTED LITERATURE The concept of performance management has been one of the most and positive developments in the sphere of human resources management in recent years. The phrase was first coined by Beer and Ruh in 1976 but it did not become recognized as a distinctive approach until the mid-1980 s, growing out of the realization that a more continuous and integrated approach was needed to manage and reward performance. Armstrong and Baron (1998) described performance management as a strategic and integrated approach to delivering sustained success to organization by improving the performance of the people who work in them and by developing the capability of teams and individual contributions. Acute (2003) considers it as a systematic and holistic process of work planning, monitoring and measurement aimed at continuously improving the teams and individual employee s contribution to the achievement of organizational goals. Oladimeji (1999) defines performance management as a means of getting better result from the organization, teams and individuals by understanding and managing performance within agreed framework of planned goals, objectives and standard. The three definitions show that performance management has the following characteristics, strategic; (concerned with the broader issues facing the business), systematic and holistic. It is integrated in four ways; vertically by aligning business teams and individual objectives; fundamentally integrated, human resource integration and integration of individual needs. To further increase our understanding of performance management, we draw from the definition of the word performance by Brumbach (1998) that performance means both behavior and results. Behavior emanates from the performer and transforms performance from abstraction to action. As instruments for result, behaviors are also outcomes in their own right. It is the product of mental and physical efforts applied to tasks and can be judged apart from the results. Performance management is broader than performance appraisal according to Fajama (2002) as appraisal focuses on the extent to which an individual is carrying out assigned duties as well as joint actions that can be taken by the supervisor and the subordinate to manage observed variances between set standards and actual performance while performance management deals with the process and activities of the organization that enhance the design, development, implementation of performance technologies. Performance management is therefore proactive. 3. PUBLIC SERVICE ORGANIZATIONS IN DELTA STATE Delta State Public Service which the researchers examined originated from old Mid- Western Region and Old Bendel State. The public service is a product of colonialism, established as an instrument of the British colonialist, from the 19th century (Inyang, 2008). According to Tokunboh (1990), the system of state enterprises began in 1898 when the British colonial administration undertook the railway transport project from Iddo in the capital city of Lagos to the hinterland. This was followed by coal mining, electricity and marine ports. All these enterprises were established primarily as administrative organs for facilitating trade and commercial activities of the colonial government. In 1949, the Fitzegarald Commission into the 49

5 colliery trouble articulated the idea of public corporations. This concept was borrowed from the British Labour Party realization of British coal in 1947, electricity in 1949 (Tokunboh, 1990). Subsequently in Nigeria, the Nigerian Coal Corporation, Electricity Corporation, Nigeria Cement Company, Nkalagu, Nigeria Railway Corporation and Nigeria Ports Authority were established. All these corporations were managed by Boards. Since then more corporations have been established based on national and local interests. Since the creation of Delta State in1991, many public corporations have also been established to actualize its development interests. 4. THEORETICAL FRAMEWORK This study is based on Eisenhardt s Agency Theory. The theory suggests that through the alignment of agents (employees) and principals (employers) interests, employment relations and system can be streamlined. The agency model of the firm suggests that the principal invests in a production process under the control of an agent. The agent is privately informed as to the firm s capital productivity. The agents can report to the principal on the productivity realization and can divert some of the principals investment from production to personal consumption (Baiman, 1990). According to this theory, employees can exert only as much effort as is required to ensure continued employment. Because the employer compensates the employee at the same rate, regardless of the employee s level, this transfers all the risk of employment to the employer who (like the employee) is risk averse. To reduce the risk and ensure that the employee exerts the desired amount of effort, the employer (principal) must be able to monitor employee (agent) effort. 5. METHODOLOGY The study is limited to five (5) public sector business organizations in Delta State of Nigeria. The selected organizations include Delta State Water Board, Delta State Environmental Protection Agency, Delta State University, Delta State Broadcasting Service and Delta State Rural Electrification Board. The research design used for this study is the descriptive survey involving the questionnaire administration. Data for the study were sourced from selected public sector business organizations in Delta State namely: Delta State Waste Management Board, Delta State Environmental Protection Agency, Delta State Broadcasting service, Delta State University and Delta State Rural Electrification Board. Questionnaires were administered to 44 respondents selected from each of the five organizations using a simple random sampling technique. Data obtained were analyzed using statistical summation technique and chi-square was used at 0.05 level of significance to empirically test the two hypotheses that guided the study. 50

6 5.1 DATA The study identified from the research review the following variables of interest, which formed the basis of analysis and these include performance review techniques; employees performance; performance incentives and employees morale. The first objective is to identify the effects of performance review techniques on employees performance. The study addressed this through questionnaire items that bothered on the link between performances review techniques and employees performance. Table 1: Employee Performance Options Total percentage Agree Disagree Source: Field Survey, 2011 The results revealed that there is a link between performance review techniques and employee s performance, while about 23% of respondents were of contrary view. 5.2 TESTING OF HYPOTHESIS HYPOTHESIS 1: H0: Performance review techniques do not affect the employees performance. H1: Performance review techniques affect the employees performance. Table 2: Observed and Expected frequency table for performance review techniques and employees performance Responses Observed (0) Expected (e) 0-e F (0-e) 2 False True Total Sources: Field Survey, 2011 The calculated chi- square (xc 2 ) is given by x 2 = = 13.0 The Chi square table value (xt 2 ) at 0.05 level of significance and degree of freedom is Since the calculated value (xc 2 ) is greater than the table value (xt 2 ), we reject the null hypothesis and accept the alternate hypothesis that the performance review techniques affect employees performance. The second objective is to ascertain if there is a significant relationship between performance incentives and employees morale. The results obtained are presented in Table 3. 51

7 Table 3: Performance Incentives and Employees Morale Options Total Percentage Agree Disagree Source: Field Survey, 2011 Table 3 shows that 38 respondents representing 84.6% of 44 sampled were of the view that there is a significant relationship between performance incentives and employees morale, while 6 respondents disagreed. HYPOTHESIS 2: H0: There is no significant relationship between performance incentives and employees morale H1: There is significant relationship between performance incentives and employees morale Table 4: Observed and expected frequency Table for performance incentives and employees morale Responses Observed (0) Expect (e) o-e (o-e)2 No Yes Total Source: Field Survey, 2011 The calculated chi-square (xc 2 ) is given by x 2 = 512 = The chi-square table value (xt 2 ) at 0.05 level of significance and degree of freedom is Since the calculated value (xc 2 ) is greater than the table value (xt 2 ), we reject the null hypothesis and accept the alternate hypothesis that there is a significant relationship between performance incentives and employees morale in the selected organizations. 6. SUMMARY OF THE FINDINGS The finding of the test of the first hypothesis shows that the performance review techniques significantly affect employees performance. This is in line with the position of Armstrong and Baron (1998) that performance management is the strategic and integrated approach to delivering sustained success to organizations by improving the performance of the people who work in them and by developing the capability of teams and individual contributors. This finding also supports the view of Akata (2003) who considers performance management as a systematic and holistic process of work planning, monitoring and measurements aimed at continuously improving the teams and individual employees contributions to achievement of organizational goals. The second hypothesis reveals that there is a significant relationship between performance incentives and employees morale. The implication is when an employee is given commensurate rewards for the efforts he put in, the morale will be boosted and more efforts will 52

8 be exerted. This finding is supported by Banjo (1998) that performance incentives are payments made to an employee or a group of employees based on the amount of output or result achieved or payment made for the purpose of motivating employees performance towards a particular target. 7. CONCLUSION This study has shown that performance management is a comprehensive approach to planning and sustaining improvements in the performance of employees so as to meet the standards. The absence of performance management system will contribute to the high rate of business failures in the Delta State Public Sector organizations. 8. RECOMMENDATIONS Based on the results of the finding, the following are recommended: That the managers of human resources department in the Delta State Public Sector should apply strategic and integrative approach to performance management. That the managers should communicate and involve the employees during the performance management reviews. This will create a climate in which a continuing dialogue between managers and members of their teams takes place to define expectations and share information, mission, values and objectives. After performance reviews, the employees should be rewarded with incentives that will be commensurate with their efforts. This will go a long way in boosting the morale of the employees. If all these recommendations are put in place by corporations in the Delta State Public Service and indeed other public sector corporations and public enterprises, this has a great capacity to turn around the fortunes of these corporations and public enterprises. It would also enable them to achieve the goals for which they were set up as well as remain influential instruments of public service delivery and development in Delta State in particular and elsewhere in Nigeria and across the world. REFERENCES Agha, N. and Onyeizugbe, C. (2011); Reward Management and Organizational Performance, Nigerian Journal of Business, 5(1) Akata, G.O. (2003); Strategic Performance Management: Your key to Business Success; Ibadan Spectrum Books Limited. ALO, O. (1999); Human Resource Management in Nigeria: Lagos Business and Institutional Support Associates Limited. Armstrong, M. (2004); Handbook of Human Resources Management Practice (9 th Edition) London: Kogan page. Armstrong M. and Baron, A. (1998); Performance Management: The New realities. London: IPD Baiman, S. (1990); Agency Research in Managerial Accounting: Accounting Organization and Society, 15:

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