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Abstract
The study examined compensation strategies and sales performance of manufacturing firms in Port Harcourt. In this study, the survey design was employed. The population of this study constitutes all manufacturing firms in Port Harcourt. The population of the study was unknown. The sample size of this study is judgmental sample of 80 respondents which comprise of both the senior and junior staffs of Berger Paints, Emmppek Autos Limited, and Hidoz Group Limited, in Port Harcourt, Rivers State. In this study both the primary and secondary data were used. A self-designed questionnaire on compensation strategies and sales performance was used and administered for the collection of data from the respondents. The data collected were processed electronically using Statistical Packages for Social Sciences (SPSS Version 22). The statistical test used in the testing of the hypotheses was Pearson Product Moment Correlation Coefficient. The study found a significant relationship between salary, benefits, recognition and sales performance of manufacturing organizations in Port Harcourt. Based on the findings of the study, we recommended that company should continue providing security benefits to all employees their position not withstanding as it will positively influence employee productivity and raise overall performance in the manufacturing sector and the study also recommends that the company should continue providing health protection benefits to its employees since it will help them create a sense of loyalty and encourage their productivity in the company. The study further recommend that the company should review the current retirement package since a good retirement package will attract and retain employees in the company and also improve their productivity which will translate to optimum performance.
Table of Contents
Title Page i
Cover Page ii
Declaration iii
Certification iv
Dedication v
Acknowledgement vi
Abstract vii
Table of Contents viii
CHAPTER 1 1
INTRODUCTION 1
1.1 Background of the Study 1
1.2 Statement of the Problem 3
1.3 Objective of the Study 4
1.4 Research Questions 4
1.5 Research Hypotheses 5
1.6 Significance of the Study 5
1.7 Scope of the Study 6
1.8 Limitation of the Study 6
1.9 Definition of Terms 7
CHAPTER 2 8
REVIEW OF RELATED LITERATURES 8
INTRODUCTION 8
2.1 Conceptual Review 8
2.2.1 Compensation Strategies 8
2.1.2 Dimensions of Compensation Strategies 11
2.1.3 Concept of Sales Performance 15
2.1.4 Measures of Sales Performance 16
2.1.5 Concept of Compensation Strategy and Sales performance 20
2.2 Theoretical Framework 21
2.2.1 Herzberg’s Two Factor Theory 21
2.2.2 The Total Reward Model 22
2.3 Review of Related Empirical Studies 22
2.4 Summary of Review of Related Literatures 25
CHAPTER 3 26
RESEARCH METHODOLOGY 26
3.1 Research Design: 26
3.2 Population of the Study 26
3.3 Sampling Techniques Used 26
3.4 Sample Size 26
3.5 Sources of Data 27
3.5.1 Primary Source (s) of Data 27
3.5.2 Secondary Sources of Data 27
3.6 Research Instrument for Data Collection 27
3.7 Validity and Reliability of Instrument 28
3.8 Techniques for Data Analysis/Test of hypotheses 28
CHAPTER 4 30
DATA PRESENTATION ANALYSIS AND INTERPRETATION 30
4.1 Questionnaire Distribution and Retrieval 30
Table 4.1: Questionnaire Administration and Retrieval 30
4.2 Data Analysis and Presentation 31
4.3 Hypotheses Testing 34
4.5 Discussion of Findings: 36
CHAPTER 5 39
SUMMARY, CONCLUSIONS AND RECOMMENDATIONS 39
5.1 Summary 39
5.2 Conclusions 39
5.3 Recommendations 40
References 42
Appendix I 48
Appendix II 49
CHAPTER 1
INTRODUCTION
1.1 Background of the Study
To attract good salespeople, companies must have an appealing compensationplan. Ideally sales persons should be paid in such a way that what theywant to do for personal interest and gain is in the company’s interest too.Most companies focus on financial motivation, but public recognition, salescontests and simple personal recognition for a job well done can be highlyeffective in encouraging greater sales effort.
To build a competitive sales force a company must pay at least the goingmarket wage for different types of sales people. To be sure it can afford aspecific type of salesperson, the company should estimate when the jobdescription is written how valuable such a sales person will be. If a jobrequires extensive travel, aggressive pioneering, or contacts with difficultcustomers the pay may have to be higher. But the salesperson’scompensation level should compare at least roughly, with the pay scale of therest of the firm.
Compensation plans typically rely heavily on incentives in the form ofsales commission. However some salespeople get straight salaries and mostreceive a combination of salary and commissions. Some firms paysalespeople fixed salaries (perhaps with occasional incentives in the form ofbonuses, sales contest prices and the like). Straight salaries particularly makesense when main task involves prospecting (finding new clients) or when itmostly involves account servicing (such as executing product trainingprogrammes for a customer’s sales force or participating in trade shows).Straight commission plans pay sales people for results. Under these plans,salespeople have the greatest incentive. Compensation is made up of several elements – a fixed amount, a variableamount, expenses, and fringe benefits. The fixed amount, usually salary,gives the sales person some stable income. The variable amount, which mightbe commissions or bonuses on sales performance, rewards the salesperson forgreater effort and success. Expense allowances which repay salespeople forjob related expenses, let salespeople undertake needed and desirable sellingefforts. Fringe benefits provide job security and satisfaction (Kotler andArmstrong 2006; Perreault and Mc McCarthy, 2006).
Management must decide what mix of these compensation elements makesthe most sense for each sales job. Different combinations of fixed andvariable compensation give rise to four basic types of compensation plansstraight salary, straight commission, salary plus bonus and salary pluscommission. A study of sales force compensation plans showed that 70percent of all companies surveyed use a combination of base salary andincentives. The average plan consisted of about 60 percent salary and 40 percent incentive pay (Galea, 2004).
Rewards bridge the gap between organizational objectives and individualexpectations and aspirations. To be effective, organizational rewards systems should provide four things: a sufficient level of rewards to fulfill basic needs,equity with the external labour market, equity within the organization andtreatment of each member of the organization in terms of his or herindividual needs (Milkovich and Newman, 2005). Pay systems are designedto attract, retain and motivate employees. The most important objective ofany pay system is fairness or equity. Equity can be assessed on at least threedimensions; Internal Equity, External Equity and Individual Equity (Cascio,2006).
High performance requires much more than motivation. Ability, adequateequipment, good physical working conditions, effective leadershipmanagement, health, safety and other conditions all help raise performancelevels. But employees’ motivation to work harder and better is obviously animportant factor. A number of studies indicated that if pay is tied to performance, the employee produce a higher quality and quantity of work(Lawler 2000). Evidence indicates that incentives work (Banker, Lee, Potter,and Srinivasan, 1996). A quantitative review of 39 studies containing 47relationships revealed that financial incentives were not related toperformance quality, but were related fairly strongly to performance quantity(Jenkins, Mitra, Gupta and Shaw, 1998).
1.2 Statement of the Problem
In today‟s work environment, there is more change and uncertainty, there is increased need forempowered sales people, there is decline in traditional incentives, there is rise of nontraditional incentivesand there is increased use of variable compensation. Many studies carried such as Kipkorir, Basweti andNyaoga (2014) found out that there is a non-significant relationship between compensation strategies andsales performance. Ngui, Mukulu and Gachunga (2014) study established that financial and non-financial rewardscan combine to enhance firm performance. As evidenced the studies had mixed results an indication oflimited information on compensation strategies andsales performance of manufacturing firmsPort Harcourt.
Again in manufacturing firms, it is clear what methods are used to determine salesforcecompensation, what direct andindirect financial programs are offered at themanufacturing companies and their effects on sales performance andalso the non-financial benefits offered and their effect on sales performance. At the company,compensation is usually narrowed to cash and as a result, employers only have a tunneled vision when itcomes to the issues of compensation for their salesmen. The company has also attempted to giveattention to employee compensation strategies. However, employees themselves have failed to recognizethe fact that their compensation is a package and not only related to cash. The byproduct of the aboveunderstanding of compensation strategy is that it is managed to a moderate extent and most of the timesales performance could be affected and vice versa. The study therefore sought to address this gap byexamining the relationship between compensation strategy and sales performance of manufacturing firms in Port Harcourt.
1.3 Objective of the Study
The purpose of the study is to examine the relationship between compensation strategiesand sales performance of manufacturing firms in Port Harcourt. The specific objectives are as follows;
1. To examine the relationship between salary and sales performance of manufacturing firms in Port Harcourt.
2. To examine the relationship between benefits (allowances and bonuses) andsales performanceof manufacturing firms in Port Harcourt.
3. To examine the relationship between recognition and sales performance of manufacturing firms in Port Harcourt.
1.4 Research Questions
1. To what extent does salary influence sales performance of manufacturing firms in Port Harcourt?
2. To what extent does benefits (allowance and bonuses) influences sales performance of manufacturing firms in Port Harcourt?
3. To what extent does recognition influence sales performance of manufacturing firms in Port Harcourt?
1.5 Research Hypotheses
H01:There is no significance relationship between salary and sales performance of manufacturing firms in Port Harcourt.
H02:There is no significance relationship between benefits (allowances and bonuses) andsales performance of manufacturing firms in Port Harcourt.
H03:There is no significance relationship between recognition and sales performance of manufacturing firms in Port Harcourt.
1.6 Significance of the Study
The importance of the choice of compensation strategies to manufacturing firms especially in the mid of contemporary competitive and global business world cannot be over emphasized. More so, that some studieshave submitted that no relationship exist between executive strategies and sales performance. The study exposes the determinants of compensation strategies that may lead to better performance. The findings from this study will be useful to business managers/executives, academics and research students working on related subject matter and expand the frontiers of knowledge in this area. Results of this study may also have important public policy implication considering the extensive studies in this area. The reason being that executive compensation packages is a general issue that cut across both private and public sphere. Thus, it is hoped that this empirically conducted study will fill the gap identified in the literature which necessitate this study.
1.7 Scope of the Study
The study is delimited under the following heading: content scope, geographical scope and unit of analysis.
Content Scope: The content scope of this study involves an investigation to examine the relationship between compensation strategiesand sales performance of manufacturing firms in Port Harcourt. The dependent variable is sales performance; measured by profitability, market share and sales volume, while independent variable is compensation strategiesmeasured by salary, benefits and recognition.
Geographical Scope:This study is delimited to Port Harcourt with reference to selected manufacturing organizations which includes Berger Paints, 70, Ordinance Road, Trans-Amadi Industrial Layout, Port Harcourt, Rivers State, Emmppek Autos Limited, 3 Harmony Close, Off Omachi, Rumuodomaya Port Harcourt, Rivers State Nigeria and Hidoz Group Limited, Plot 41A, Birabi Street, G.R.A, Phase 1, Port Harcourt, Rivers State Nigeria.
Unit of Analysis: The unit of analysis in this research involves both senior and Junior staff of the selected manufacturing firms at the time of the study.
1.8 Limitation of the Study
In course of carrying out this research, the researcher met with a lot of constraints. Among these constraints were: The time frame which this research was expected to be completed which was too short.
Secondly, the cost in carrying out this research work acted as a barrier and the researcher was not financially buoyant to cope with all the cost
Finally, assembling the relevant materials needed for this work was a problem. It was difficult due to the fact that some of the respondents were not willing to give us the required coorperation.
1.9 Definition of Terms
Customer Retention: Itrefers to the ability of a company or product to retain its customers over some specified period.
Market Share: It isthe portion of a market controlled by a particular company or product.
Sales Growth: It is the amount by which the average sales volume of a company’s products or services has grown, typically from year to year.
Salary: It is a fixed periodical payment for non-manual employees usually expressed in annual terms, paid per month with generally no additions for productivity.
Benefit: It is an indirect financial and non-financial payment employees receive for continuing their employment with the company.
Recognition: It is an intrinsic reward is defined as ratification, confirmation or an acknowledgment that something done by another person in one’s name and one’s authority.
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