The effect of compensation on employees motivation: In Jimma University academic staff

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1 Basic Research Journal of Business Management and Accounts ISSN Vol. 3(2) pp February 2014 Available online http// Copyright 2014 Basic Research Journal Full Length Research Paper The effect of compensation on employees motivation: In Jimma University academic staff Rijalu Negash 1, Shimelis Zewude 2, Reta Megersa 2 1 Jimma University, College of agriculture and veterinary medicine, Department of agricultural economics, PO.Box: 307Jimma, Ethiopia. 2 Jimma Universities, College of business and economics, Department of management, PO.Box: 378, Jimma, Ethiopia. *Corresponding author rijalunegash@yahoo.com Accepted 27 February, 2014 Abstract This study investigates the role of compensation and its components such as payment, promotion, recognition, working condition and benefit towards academic staffs work motivation in Jimma University. The population of this study was 1337 academic staff of Jimma University. The researcher stratified the total population of the study based on their college. The samples were selected proportionally and conveniently from the strata. In this study, both primary and secondary sources of data were used. The primary data were gathered through questionnaires from 230 respondents of Jimma university academic staffs. An interview was also conducted with human resource personnel and each college deans of the university. Journals, books, internet, and other references were used as secondary sources of data. Data was analyzed using descriptive statistics such as frequency tables and inferential statistics such as correlations and regression analysis The findings of this study indicated that there is a relationship between compensation and its components and employee work motivation. Keywords: promotin, benefit, recogntion, working condtion, payment and work motivation INTRODUCTION Employee compensations refer to all forms of pay or reward going to employees and arising from their employment. Rewards include direct compensation, indirect compensation and non financial reward. Developing an effective and appropriate compensation system is an important part of the human resource process. An effective and appropriate compensation system can help, attract and retain competent and talented individuals who can help the organization accomplish its mission and goals. (Dessler, 2002). A according to Ivencevich (1998), compensation has been recognized as a major motivator of employees. As the issue of motivation is concerned, employee compensation systems have been found to be the most commonly adopted technique among the organizations. Employee compensation offers a diversity of rewards that may be monetary or non monetary (Calista, 2009). Acording to Robins (2003). Organization compensation can include many different types of rewards and benefits such as salaries, incentive payments and other benefit and services. If an employee believes he/she is underpaid, that employee will likely reduce expended effort by working more slowly and being absent (Byars and Rue, 1997). Motivation is described as an inner force that derives individual to act toward something (Evancevich, 2007). The staffs of higher education institutions are a key resource. Academic staffs, in particular, have a major role

2 Rijalu et al. 18 to play in achieving the objective of the institutions. The performance of academic staff both as a teacher and as a manager, determines, largely, the quality of student experience of higher educations and has a significant impact on student learning and thereby on the contribution that such institution can make to society. Academic staffs manage this learning experience and are the main interface with the students. Consequently, their motivation is crucial in determining the quality of this interface. Exceptionally well motivated academic staffs can, with appropriate support, build a national and international reputation for themselves and the institution in research, publication and professional areas. Motivation is a key in the establishment and development of quality in higher education (Jennifer, 1996).A well designed and functional compensation system is an efficient way to increase employee work motivation (Clalista, 2009). Compensation leads to better performance and keeps workers focused on their jobs. Lack of appropriate compensation is one of the main reasons behind the employee turnover (David, 2002). It is important to know that employee compensation include all forms of pay and reward received by employees for the performance of their job (Stewart et al., 2001).Failure to design appropriate compensation system will have unfavorable impact on productivity and job satisfaction of employees and overall effectiveness of the organization (Neo et al., 2006). This research investigated the role of compensation toward employee motivation in Jimma University academic staffs. Hence, in order to motivate and retain effective and committed staff member, the university must offer competitive level of compensation and must recognize their achievements. The dedicated staffs can maintain the competitive position of the university with other universities. According to some academic staffs and one of human resource department, the compensation system of Jimma University shows that there is a problem in employees, which results from lack of identifying motivational factors and there is low motivation of employees on the job. Jimma University (JU) is a public higher institute established in December 1999 by the amalgamation of Jimma College of Agriculture (founded in 1952) and Jimma institute of Health Science (established in 1983). The university though young for its age, has made remarkable and multifarious progresses in training, research and service provision since its establishment. ( Objective of the study The aim of this study is to investigate the role of compensations toward employee motivation in Jimma University academic staffs. The study specifically aims to examine if there is a relationship between compensation and employee work motivation, factors contribute to employee work motivation and the influence of compensation on employee motivation. MATERIALS AND METHODOLOGIES A descriptive survey involving questionnaire was the research design adopted for this study. In this research project, both primary and secondary sources of data were used. The primary data was collected through questionnaires and interviews. Also, journals, internet, books and other related references were used as secondary data. The population of this study was Jimma University academic staff. The total population of the study is 1337 academic staff. Sample size determination and sampling technique The sampling techniques were stratified and convenience sampling. By taking in to consideration the number of employees in each college, the population was stratified. While determining the sample size the following formula was taken from Kothari (2004) and will be: Where; n=sample size Se=sample error (0.01) Z=standard value (2.58) for 99% reliability P=population proportion (0.5 preferred) N=Total population Based on this equation,, the sample size were 230 academic staffs from the total population. The number of samples was determined proportionally by considering the number of employees in each college of the university. The sample sizes are shown in the following table 1. Analysis of data Statistical package for social science (SPSS) version 16 was used in the study for the purpose of analysis and presentation of the result. The descriptive statistics such as frequency tables was applied to analyze data. This was followed with the presentation of inferential statistics such as correlation and regression analysis regarding the role of compensation towards employee motivation and its components. The multiple regression models have written with five independent variables as: Y=βo+β1x1+ β2x2++ β3x3++ β4x4++ β5x+ei; Where y=dependent variables, x1,x2,x3,x4,x5=independent variables, βo is the intercept,

3 β1measures of change in y with respect to x1, holding other factor fixed, β2 measures of change in y with 19. Basic Res. J. Bus. Manag. A/cc. Table 1.S ample Size Determination Colleges Number of academic staffs Number of samples College of Agriculture and Veterinary Medicine College of Public Health and Medical Science College of Business and Economics College of Natural Science College of Social Science and Law College of Engineering and Technology Total Table 2.Reliability and validity of the instrument Motivational factors Cronbach s Alpha Number of items Payment Promotion Recognition Working condition Benefit respect to x2, holding other factor fixed, β3 measures of change in y with respect to x3, holding other factor fixed, β4 measures of change in y with respect to x4, holding other factor fixed, β5 measures of change in y with respect to x5, holding other factor fixed and ei is error term Reliability and validity of the instrument Reliability refers to the consistency or dependability of the measuring instrument. In order to test the reliability of the instrument the Cronbach s Alpha was applied. This model is used to measure internal consistency of the tools employed to get necessary data from respondents (see table 2). As indicated in table 2, the result shows that the reliability of the instrument which employed for academic staff is ranging from 0.64 to This implies that the reliability of the instrument is more than the acceptable standard in social science research. Validity, on the other hand, refers to the extent to which the measurement measures what is intended to measure. The instrument was designed by taking in to consideration the basic questions and all items included in the questionnaires are directly derived from it and consistent with the objective of the study. RESULTS OF THE STUDY Demographic characteristics of respondents The demographic characteristics of the respondents are shown below in terms of age, gender, length of service in this university and highest level of education completed. As indicated in table 3, the majority of the sample (178) or 83.2 % was male, while the remaining 16.8 % (36) was female respondents. Table As indicated in table 11 above, the mean value of the two variables was towards negative response, i, e, 2.51 and 2.21 for the two variables respectively. As indicated in table 12, the staffs work motivation was assessed with respect to the dimension of compensation. It indicates that, the mean value for payment, promotion, recognition, working conditions and benefit ranged from 2.34 to This implies that, the mean value for payment, benefit and recognition were the lowest than promotion and working condition. These mean value indicate the area that academic staffs were most likely de-motivated and dissatisfied. Respondents ranking order of motivational factors from most preferred to the least In this part, respondents were asked to rank the compensation components such as payment, promotion, recognition, working condition and benefit as they preferred to enhance their motivation on the job. The results of the ranking order were shown in table 13. The well designed compensation system can greatly enhance morale, improve overall performance and contribute to the organization. According to the ranking

4 order of respondents, recognition appears to take precedence over the other motivational factors. It reveals that recognition in the form of appreciation of performance, expressing of gratitude for extra effort done Rijalu et al. 20 Table 3. Background information of respondents Demographic variables Frequency Percent 1.sex Male Female Total Age category Total <1year Serviceofrespondents 1-3years years in the university 7-9years >9year Total Bachelor Educational Masters degree level Doctoral degree Total Table 4. Summary of items that measure opinion of respondents about of payment Level agreement of The salary is satisfactory in relation to the job I am doing The basis of payment is fair Money that the I get from the university motivate me percent percent percent percent Employees earn the same as other people in similar job in other organization Strongly 23.8% 34.1% 24.8% 18.2% disagree Disagree Neither agree nor disagree Agree Strongly agree Total Mean Std. Deviation

5 21. Basic Res. J. Bus. Manag. A/cc. Table 5. Summary of items that measure opinion of respondents about promotion Levels agreement of The career advancemen t in the university is I am promoted in fair and honest way There is opportunity to improve job related skills and knowledge promotion in the university is Assignment of responsibili ty is fair There is performance based promotion in the university Strongly disagree percent percent percent percent percent percent Disagree Neither agree nor disagree Agree Strongly agree Total Mean Std.Dev Table 6. Summary of items that measure opinion of respondents towards sub dimension of recognition and work motivation Levels of There is I am There is There is I am agreement provision of praised appreciati opportunity to recognized recognition for regularly on of participate in for the extra good for my employees professional effort I am performer work on the job development put at work percent percent percent percent percent Strongly disagree Disagree Neither agree nor disagree Agree Strongly agree Total Mean Std. Deviation Table 7. Summary of items that measure opinions of respondents about getting credit and feedback on the work Levels of agreement There is credit for the job I am doing in the university percent percent Strongly disagree Disagree Neither agree nor disagree Agree Strongly agree Total Mean Std. Deviation There is feedback for my work

6 The mean value of the two variables was towards negative response, i.e and 2.56 for the two variables respectively. Rijalu et al. 22 Table 8. Summary of items that measure opinion of respondents towards sub dimension of working condition and work motivation Levels of The supporting The working There is participation Effectiveness agreement equipment that environment of employees in of helps my jobs is is attractive decision making of communicatio enough and compensation system n in work is percent percent percent percent Strongly disagree Disagree Neither agree nor disagree Agree Strongly agree Total Mean Std. Deviation Table 9. Summary of items that measure opinion of respondents toward autonomy at work place and flexible working hours Levels of agreement There is I am motivated in flexible autonomy at work working hours of the place university percent Percent Strongly disagree Disagree Neither agree nor disagree Agree Strongly agree Total Mean Std. Deviation The mean values of the two variables were towards negative response, i, e, 2.6, and 2.94 for the two variables respectively. Table 10. Summary of items that measure opinion of respondents towards sub dimension of benefit and work motivation Levels of agreement Benefit packages are Retirement benefits are The medical schemes are satisfactory package percent Percent percent percent Strongly disagree Disagree Neither agree nor disagree Agree Strongly agree Total Mean Std. Deviation Employees understand the available benefit

7 23. Basic Res. J. Bus. Manag. A/cc. Table 11. Summary of items that measure opinion of respondents towards housing allowance, and recreational benefit and work motivation Levels of agreement Housing allowance is me Recreational benefits satisfactory Percent percent Strongly disagree Disagree Neither agree nor disagree Agree Strongly agree Total Mean Std. Deviation are Table 12. Descriptive statistics for compensation and employee work motivation Variable Mean St. Deviation Payment Promotion Recognition Working condition Benefit Table 13. Respondents ranking order of motivational factors from most preferred to the least Rank payment promotion recognition Working Benefit condition percent percent percent percent percent Valid 1st nd rd th th Total Note: The lowest total weight is the first rank Total Weight: payment=523, promotion=652, Working condition =744, recognition =504, benefit=791 by employees, acknowledgement of successful completion of organizational goals is the most preferred motivational factors to the Jimma university academic staffs. As indicated above, the weight average shown that after recognition, the next most preferred compensation is noted to be payment. Its value indicates to understand in terms of the different needs the employee have. With respect to the hierarchy of needs theory, pay is an important reward because it provides employees with the means to purchase items which satisfy their physiological needs. The next to payment, promotion and working conditions were ranked as the third and the fourth preferred motivational tools respectively. Finally, benefits are ranked as fifth less factors Relationship between elements of compensation and employee work motivation Correlation analysis of Compensation components and work motivation The Correlation coefficient was computed for identifying the relationship of different dimension of compensation such as payment, promotion, recognition, working condition, benefit, and employee work motivation

8 The result of table 14 shows the relationship between payment, promotion, recognition, working condition, benefit and employee work motivation. The result shows positive relationship between payment (r=0.165, p<0.05), promotion (r=0.150, p<0.05), benefit (r=0.160, p<0.05), Rijalu et al. 24 Table 14. Correlation of Compensation components and employee work motivation variables Employees work motivation Pearson Correlation.p-value Payment.165 *.015 Promotion.150 *.028 Recognition.782 **.000 Working.273 **.000 condition Benefit.160 *.019 *. Correlation is significant at the 0.05 level (2 tailed). **. Correlation is significant at the 0.01 level (2-tailed). Table 15. Regression analysis of compensation and work motivation Models 1 (Constant) Payment Unstandardized Coefficients Standardized Coefficients β Std. Error Beta (β) t-value Sign Promotion Recognition Working conditions Benefit Multiple regressions(r) = R square (R 2 )=0.632,Adjusted R 2 = working condition (r=0.273, p<0.01), recognition (r=0.78, p<0.01) and independent variable (employee work motivation). The result shows all different variables of compensation namely payment, promotion, recognition, working condition and benefits are significantly related to employee work motivation. This implies that if the compensation offered to the employees were altered, there would be a change in employee work motivation. Regression analysis of compensation and work motivation In this section stepwise multiple regression analysis was computed at significant level of (p=0.05) in order to examine which compensation components could be the most determinant factor to academic staffs work motivation in Jimma university. Table 15. The result shown in table 15, indicate that a relatively high percentage of the variation in the work motivation can be explained by the variables, R-square=63.2%, R- square adjusted (R 2 ) =62.7%. Thus, 63.2% in work motivation can be explained by payment, promotion, recognition, working conditions and benefit. This finding implies that other unexplained variables could account for other variance in work motivations. The result also indicates the relationship between payments, promotion, recognition, working condition, benefit and work motivation at significant level of (p=0.05). As it is indicated in the table 15, p-value is less than the significant level for all variables. This implies that there is significant association between independent and dependent variables. However, there is weak positive relationship between payment (β=0.165), promotion (β=0.150), benefit (β=0.273), and the dependent variable (work motivation). The coefficient between these factors and employee work motivation is very small, but the result of this study shows that there is strong positive (β =0.782) relationship between recognition and employee work motivation. Therefore, recognition was determinant factors to employee work motivation. DISCUSSION For each selected sample, the close-ended and openended questionnaires were delivered at their office. A

9 total 230 questionnaires were distributed. Among these 214 questionnaires were completed and returned with the 93% required information. The responses of employees towards payment and its sub dimensions; promotion, recognition and working conditions, benefits and employee work motivation in the university were ananlyzed. Responses were measured on five point Likert scale with 1=strongly disagree; 2= disagree; 25. Basic Res. J. Bus. Manag. A/cc. Opinion of respondents towards dimension of recognition and work motivation Recognition is appreciation of performance by the organizations of an act done by the team or team members. It is an approach of expressing gratitude for 3=neither agree nor disagree; 4= agree; 5= strongly agree. Opinion of employees towards dimension of payment Pay equity concerns whether employees believe they are being fairly paid. A major determinant of employee productivity and satisfaction arises from the degree of fairness (equity) or unfairness (inequity) that an employees in the work place in comparing with others. Pay dissatisfaction can influence employees feeling about their job. It can increase the desire for more money and it can lower the attractiveness of the job To see correlation between salary and basis of payment Spearman's correlation coefficient was applied and the result shown a significant correlation (.447) between the two variables. This implies those who disagreed that salary is satisfactory in relation to the job and disagreed about the fairness of basis of payment. In this regard, human resource personnel and colleges deans of the university were interviewed whether they think that, the payments for the employees of academic staff are fair and equitable. Their response shows that, Payment for overload, extensions and summers are not fair due to high tax rate and what they earn was not match to their effort. Opinion of respondents toward the dimension of promotion and work motivation Promotions are advancement into position with greater responsibility and more authority than the previous job. Promotion usually includes pay increase. Because of psychological and tangible rewards of promotion (such as increased feeling of self worth, a salary and status in the organization), employees are more motivated to accept promotion. Promotion and growth in the organization and interesting work are important factors that motivate people to do their work. Interviews were conducted with human resource personnel and deans of the colleges of the university; how academic staffs are promoted? The response shows that, promotion to the academic staffs are largely determined based on years of service to the university and the criteria are similar to all staffs. Even if there is performance, appraisals in the university it is not much considered and its contribution for promotion is not such significant. extra effort done by the employees within an organization. It is essential to encourage the employees or teams to repeat or continue the behavior and to encourage other employees to do the same. Recognition is either informal (oral) or formal (written remarks). Motivator has a positive power to satisfy and produce high performance and includes recognition. The respondents were asked their opinion from the dimension of recognition and work motivation such as provision of recognition, praise, appreciation, and if there is participation in professional or career development training and their responses are summarized in table 6. From this, one can infer that good performer employees were not appreciated and praised for their work. Opinion of respondents about credit and feed back on their job To see the correlation between the two variables, spearman s correlation coefficient was applied. The result shows a significant correlation exists between the two variables with the correlation coefficient of.686 indicating that those respondents who were disagree about getting credit for the work done also either disagree or strongly disagree about feedback provided for the employees on the work. These implies that, the respondents were lacks of feedback and acknowledgement Opinions of respondents towards dimension of working condition and work motivation Job satisfaction and motivation is a positive emotional state resulting from evaluating working conditions. If an employee expect clean safe working conditions on the job, then the employee is likely to be dissatisfied if the work place is not clean and attractive. From table 8 one can infer that, the supporting equipment which helps employees on the job were enough and. However, the communication between the employees and the management as well as the participation in decision making was not satisfactory. Opinion of respondents towards autonomy at work and working hour s flexibility

10 All staffs need to have autonomy over their own time management, hours, and the relationship they establish with students and other staffs. One of the main reason why staffs select higher education as career is from the opportunity for this level of personal autonomy. To see the correlation between the two variables, spearman s correlation coefficient was applied. The result shows a significant correlation exists between the two variables with the correlation coefficient of.390 indicating that the university and fairness promotion. The respondents were feeling negatively for all items in this category. From this result, it is possible to conclude that the promotion criteria and its fairness were not motivated and satisfy employees to put their effort on the job. Appreciation at work is one of the factors causing work motivation and satisfaction. To the dimensions of recognition respondents were perceived negatively to all items. Staffs were responded towards disagreement for Rijalu et al. 26 those respondents who were disagree about autonomy at work place also either disagree or strongly disagree about the flexible working hours of the university. Opinion of employees towards dimension of benefits and work motivation Benefits include insurance payment and retirement plan, payment for time not worked, extra cash payment other than bonus based on performance, and cost of service like subsidized cafeteria and so on. Unlike pay for performance, most benefits are available to workers as long as they are employed by an organization regardless of seniority or performance. In this section, respondents were asked about benefit packages of the university whether there is attractive benefit packages, retirement benefits are, the medical schemes are satisfactory, employees understand the available benefit and their responses are summarized in table 10. The majority of respondent s responded negatively. In this regard, interviews were conducted to know if there is there medical benefit for academic staffs? Their response shows that; there is half coverage of medical costs for the academic staffs and their families. However, there is no awareness of its availability for the staffs. CONCLUSION Based on the findings of the study, the following conclusion forwarded. It is evident from the study that payment, promotion, recognition, working conditions, and payment influence work motivation. There is also significant and positive relationship between compensation and work motivation. The study has shown that respondents were not motivated and satisfied in payment system of the university. Respondents replied for all items of payment towards the range of disagreement. From this, one can conclude that payment for the employees such as over loud, extension and summers were not fair and motivate the employees. Moreover, money they earn from their job was not satisfactory. Respondents replied that, the promotion criteria were inappropriate and not based on performance. Moreover, staffs dissatisfied with the assignment of responsibility in the item there is appreciation at work place. Moreover, staffs were responded towards negative response for the item I am praised regularly for my work and there is feedback for what I am doing. From this one can conclude that the academic staffs were not motivated with the currently available recognition programs. Respondents are negatively responded to the attractiveness of internal working environment. The perception of respondents to the item effectiveness of communication channels in work place was negative. Respondents were also responded towards disagreement to the item participation in decision making on compensation system and negative response to the item I am motivated in autonomy at working place. Respondents were positive, for the item the supporting equipment that helps the job of employees are sufficient and. From this result it is possible to conclude that the working materials are motivates and satisfy the academic staffs. However, the remaining items under this part were towards negative response, and de-motivate academic staffs. Respondents are responded negatively to item benefit packages of the university is. Also respondents were disagree and strongly disagree to all items in this category and particularly to item my medical benefits are satisfactory and. The respondents responded that, the housing allowance was insufficient. Also respondents are unaware about the available benefit packages of the university. Therefore, it is possible to conclude that the benefit packages of the university were unable to motivate the staffs to higher performance. The respondents of this study ranked compensation components as the factor that motivate them on their job: recognition, payment, promotion, working condition and benefit. These factors reflect the current affairs in terms of employee needs and imply that compensation may use to reinforce and to motivate employees. Recognition was generally valued by large number of respondents as the first most preference. After recognition, the next most preferred compensation was payment. Promotion and working conditions were ranked as the third and fourth preference of academic staffs. Benefits were ranked as the fifth as least factors. From this result one can conclude that the academic staffs were preferred recognition as the most factors and benefit as the least factors.

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