Reward System and Employee Performance in Large Commercial Banks in Nairobi County, Kenya

Abstract

The banking industry in Kenya has developed a culture based on performance which form the basis for rewards and compensations. Employers have become more aggressive about restructuring work in ways that push for higher productivity supported by an array of technologies and management practices. Specifically the study sought to determine the relationship between financial reward, fringe benefits, recognition schemes and career progression, moderated by organizational culture on employee performance. Operant conditioning theory on financial rewards, the expectancy theory on fringe benefits, cognitive evaluation theory on recognition schemes, self-efficacy theory on career progression, cognitive consistency theory on organization culture were used to inform the study. The study adopted a descriptive research design. Descriptive statistics were chosen since they utilized data collection and analysis techniques that yield reports concerning the measures of central tendency, variation, and correlation. The combination of its characteristic summary and correlation statistics, along with its focus on specific types of research questions, methods, and outcomes necessitated the choice of this design. The study adopted adopt a positivism philosophy. The target population was employees working in the six selected Commercial Banks in Nairobi County composed of both clerical and Management staff. Primary data was collected using structured questionnaires. Quantitative data were analyzed using Statistical Packages for Social Sciences (SPSS). The study conducted various tests including normality test, multi collinearity, stationarity, heteroscedasticity and autocorrelation tests. Factor analysis was carried out among corresponding questions to allow formation of factors with the highest Eigen values. The study found out that there was a positive and significant relationship between financial reward and employee performance, positive and significant relationship between fringe benefits and employee performance. Lastly, there was a positive and significant relationship between career progression and employee performance. The entire alternative hypotheses were not rejected. Based on the findings, the study concluded that financial reward, fringe benefits, recognition schemes and career progression have a positive and significant effect on employee performance. The study recommended for management to consider the many factors involved in a complex and dynamic situation before making decisions on reward systems that will influence the effectiveness, efficiency and ultimately the sustainability of the financial institutions in the country.