EFFECT OF MANAGEMENT BY OBJECTIVE (MBO) ON ORGANIZATIONAL PERFORMANCE

EFFECT OF MANAGEMENT BY OBJECTIVE (MBO) ON ORGANIZATIONAL PERFORMANCE

(A Case Study of United Bank for Africa, Nasarawa Branch)

ABSTRACT

The main aim of this study is to examine the effect of Management by Objectives (MBO) on the  performance of United Bank for Africa, Nasarawa Branch. Management by Objectives is a way of getting improved results in managerial method, whereby the superior and the subordinate managers in an organization identifies major areas of responsibility, in which they will work, set some standards for good or bad performance and the measurement of results against those standards (Derek 2005: 156). The major problem of this study is that management of companies in Nigeria lack sufficient techniques to make them manage effectively. Some of these tools are not used and when used they are not properly utilized. Management by objectives is not only a managerial strategy to achieve a well co-ordinated managerial goals, but it is also a popular management techniques that cut across all human activities namely business areas, education, government, health care and non-profit organization. The major findings of the study were: MBO helps to obtain total commitment of all employees to work together in order to achieve a common goal; that good and prompt salary, promotion as when due, good relationship with management and recognition of achievement improves performance of the workers and by so doing enhances organizational performance when management by objectives is been adopted. The study recommended that managers should consult his subordinates in drawing up unit objectives which goes up the hierarchy from where it is modified, collected, approved and distributed throughout the organisation.

CHAPTER ONE

INTRODUCTION

1.1       Background Of The Study

Management needs a lot of tools to be able to administer effectively in the day to day running of the business. Management by objectives is one of such tools. It is a way of getting improved results in managerial method whereby the superior and the subordinate managers in an organization identifies major areas of responsibility, in which they will work. Set some standards for good or bad performance and the measurement of results against those standards (Derek 2005: 156).

Management by objectives is also called managing by objectives. However, there have been certain individuals who have long placed emphasis on management by objectives and by so doing have management by objectives refers to a structured management technique of setting goals, for any organizational unit. Nwokoye (2018) defines MBO as a system of management whereby the superior and subordinate jointly identify objectives, define individual major areas of responsibility in terms of results expected, and use these objectives and expected results as guides for operating the unit and assessing the contribution of each of its member.

Management by objectives can work in any size of organization if the procedures are understand and managers are patient in letting the system set in first. Management by objective is an effective planning, control and development system.

Management by objectives gives the employee the opportunity to participate in decision making, the limits within these limits. It assumes that the employees has been properly selected and trained, and is informed that the employee will be responsible for achieving the desired results in the organization. Organizations are ubiquitous.

According to Mullins (2005: 256), organizations are designed by people to overcome individual limitations and achieve individually. Hence, organization becomes a means of survival for the people and exerts an important daily influence on the life of the people and the way they live. The major decider for the survival of any organization is the presence of capable men and women with the right technique to combine the organization resources (Man, Machine, materials and Money) to achieve organization goals. It is appropriate to note that management of companies in Nigeria lack sufficient techniques to make them manage effectively. Some of these tools are not used and when used, they are not properly utilized. Management by objective is not only a managerial strategy to achieve a well coordinated managerial goals, but it is also a popular management techniques that cut across for pervade all human activities namely business areas, educational, government, health care and non-profit organization. Most of the techniques, system, tools of management are hardly understood resulting in losses and damages to the organization. Besides it is the wrong use of techniques and unwillingness of top management to utilize the right tool to solve the management problems. It is on these tends that the researcher intends to find out the effect of management by objective on the performance of United Bank for Africa, Nasarawa Branch.

1.2       Statement Of The Problem

It is pertinent to note that management of companies in Nigeria lack sufficient technique to make them manage well. Some of these tools are not used and when used they are not properly utilized e.g. management by objectives. Management by objective if not only a managerial strategy to achieve a well co-ordinate management performance, unfortunately many of the organizations are yet to adopt this technique in enlisting commitment and support of their 6 staff. Those who do, often pay lip services only to the MBO technique. Thus excluding staff in standard/goal setting that involve them. Control and achievement of goals in cases like this suffer.

1.       Objectives Of The Study

The broad objective of the study is to examine the impact of management by objectives on the performance of United Bank for Africa, Nasarawa Branch. The specific objectives of the study include:

1. To determine problems affecting management by objective as an instrument for organizational performance.
2. To find out the level of participation of both managers and employees in the setting of goals to be achieved in the organization.
3. To determine whether employees are given appropriate authority and responsibility for achieving the set objectives.

1.       Scope Of The Study

This study focuses on the effect of Management by Objective on the Performance of an organization. But the scope is restricted to the United Bank for Africa, Nasarawa Brach. The time scope covers from 2010 to 2020

1.5       Significance Of The Study

The Firm (United Bank for Africa): The firm will through this study see the need to involve the subordinates in setting objectives as it will elicit higher productivity, profitability growth, sustainability of the organization as well as customer and employee satisfaction.

The Future Researchers: The study will be useful to those who will carry out studies in related areas in future. It will serve as a reference material to them. Even, the findings can provide the bases for further studies.

EFFECT OF COMPENSATION ON EMPLOYEE PERFORMANCE IN ICON INSURANCE COMPANY ABUJA

EFFECT OF COMPENSATION ON EMPLOYEE PERFORMANCE IN ICON INSURANCE COMPANY ABUJA

ABSTRACT

This study seeks to examine the effects of compensation on employee performance in Icon Insurance Company Abuja. The study specifically to evaluate the effects of direct financial compensation on employee performance Icon Insurance Company Abuja, to determine the effects of indirect compensation on employee performance Icon Insurance Company Abuja, to examine the effects of Non-financial compensation on employee performance Icon Insurance Company Abuja. The study  adopted a descriptive research design that enabled the use of questionnaires as research instruments. The target population consisted of one fifty (150) employees of performance Icon Insurance Company Abuja. These will include management staff, support staff and subordinate staff in the establishment. Stratified proportionate random sampling was used to obtain a sample size of 45 respondents. The data will be analyzed using the descriptive statistic through the use of tables and percentage. The findings of the study shows that compensation has significant effects on employee performance in Icon Insurance Company Abuja. Finally the study recommends that the organization should ensures that their employee are compensated using financial and non-financial means so as to ensure optimum performance.

CHAPTER ONE

INTRODUCTION

1. Background of the Study

Globalization requires a person to always keep up with times, starting from thoughts and knowledge to generate some useful new inventions to facilitate human to do some work, especially in a company. Increased business competition due to rapid technological and environmental changes makes a company must have strength competitiveness. The old paradigm of human resources places employees as an asset to company, but now there has been a growing new paradigm that employees are partners for a company. Human resource management has a very strategic position for company sustainability. This is because inadequate basic materials such as performance, motivation, and job satisfaction and productivity will cause disruption to company’s life sustainability.

The main driving factor for company good development is qualified human resources to encourage the company better. Compensation is one factor to affect job satisfaction of an employee. Sirait (2006) defines compensation as something received by an employee, either financial or non money reward for employee’s contribution to organization. Compensation management is a very important activity to make employees quite satisfied in their work.

Compensation is defined as the ability and responsibility of a company to contribute to its employees for their achievement of task and to appreciate their performance. Each organization should strive to improve employee satisfaction by providing a fair and competitive compensation program. High job satisfaction is expected to make employees become more loyal to organization; more motivated in work, feel happy in work, and ultimately will increase productivity.

Performance reflects how well employees meet the requirements of a job. Basically every individual has a different portion of work. It can be seen from individual’s skills and potential that directly affect on their performance. Mangkunegara (2005) explained performance as the work of quality and quantity achieved by an employee in performing their duties in accordance with responsibilities given. The work alone can be divided into two, namely hard work and smart work. Hard work includes people who always exert all their strength to work but the results are less satisfactory, while intelligent work is a work that uses a strategy to minimize the energy to do a job to get better outcome than hard work.

Lai (2011) shows a positive correlation between employee and job satisfaction based on payment, skill-based payments and performance-based payments. In addition, some demographic variables reveal a moderate effect on this relationship. The goal is to study the correlation between compensation system design and overall employee satisfaction. Nawab (2011) explains that employee compensation influenced organizational commitment and job satisfaction. Njoroge et al. (2015) shows a positive correlation between compensation and performance.

However, the performance of an organization is jointly determined by the employees’ capacity and their willingness to put in their best (William, 2016). Willingness and ability are important, since it implies that beyond a certain level, lack of ability cannot be compensated for willingness to high motivation and conversely lack of willingness cannot be compensated for employee’s ability to high level performance. Willingness and ability are necessary components of effective performance in every organization. It is on this note that this study seek to examine the effect of compensation on employee performance in Icon Insurance Company Abuja.

1. Statement of the Problem

The current era is highly competitive and organizations regardless of size, technology and market focus are facing employee retention challenges. Workers’ performance could be of low standard, in condition of inadequate compensation and motivation. Most employees leave there place of work, because of insufficient compensation. Some are willing to stay, because they know that what they benefit in terms of welfare packages (salaries, bonuses, free expense paid trips and some other tips) are not often available somewhere else. The major problem is how to compensate employees to achieving higher performance in Icon Insurance Company Abuja. Thus the need to increase productivity and efficiency in the work place or any organization has led to increasing academic interest in the area of compensation over the years. Scholars have been keenly  interested in knowing what factors are responsible for stimulating the will to work. Thus compensation has become an issue of concern for both scholars and practitioners of personnel management. Employees in both public and private sector organization are becoming increasingly aware that compensation increases productivity. Lack of proper motivation may result in losses which may eventually lead to low staff turnover, poor attitude towards work, low output level and low profitability. It is in the light of these that the study intends to examine the effect of compensation on employee performance in Icon Insurance Company Abuja.

1.3       Objectives of the study

The general objective of this study is to establish the effects of compensation on employee performance in Icon insurance Company Abuja.

1.3.1    Specific Objectives

1. To examine the effects of direct financial compensation on employee performance in Icon Insurance Abuja.
2. To assess the effects of indirect financial compensation on employee performance in Icon Insurance Company Abuja.
3. To establish the effects of non-financial compensation on employee performance in Icon Insurance Company Abuja.
   1.        Research Questions
4. What is the effect of direct compensation on employee performance in Icon Insurance Company Abuja?
5. What is the effect of indirect compensation on employee performance in Icon Insurance Company Abuja?  
6. What is the effect of non-financial compensation on employee performance in Icon Insurance Company Abuja?
   1.       Statement of Hypothesis

H0: Compensation has no significant effects on employee performance in Icon Insurance Company Abuja

H0: Compensation has  significant effects on employee performance in Icon Insurance Company Abuja

1.6       Significant of the Study

The management of Icon Insurance Company Abuja

The findings of this study will assist Icon Insurance Company Abuja to formulate better and acceptable compensation strategies in order to enhance an affirmative outlook among employees and motivate them toward doing their work hence a better service quality and a high productivity.

Other Researchers

This study will be of significance to other researchers by assisting them have a better understanding of the subject under study for relevant resources in the future. This can be done through identification of gaps in knowledge and offer recommendations for further studies.

1.7       Scope of the study

The study will explore the effects of compensation on employee performance, a case study of Icon Insurance Company Abuja. The population targeted will be 150 employees that will include the Management Staff, Support Staff and the customers of the organization.

1.8       Limitation of the Study

Notwithstanding the areas covered by this research work, the study was greatly affected by certain constraints. The following limitations were inherent in the study.

Time Factor: This research was constrained by time limit. Time posed a threat to the successful coverage intended in the course of this study.

Cost Constraint: It is not unusual to state that the prevailing economic predicament posed a limitation to the researcher in procuring the whole material information and other relevant data needed to make this research a thorough work.

Confidentiality: The frequent rescheduling of interviews by management staff and their unwillingness to disclose some relevant information on staff motivation and training which they consider very confidential to the organization constitute one of the major limitations to this study.

1.9       Operational Definition of Terms

Compensation: Financial compensation refers to the act of providing a person with money or other things of economic value in exchange for their goods, labor, or to provide for the costs of injuries that they have incurred.

Incentive: Incentive is an act or promise for greater action; it means additional remuneration or benefit to an employee in recognition of achievement or better work. Incentives provide a spur or zeal in the employees for better performance. It is a natural thing that nobody acts without a purpose behind.

Performance: This indicates how well or satisfactory a person is fulfilling the requirement of his position on the basis of result achieved and his/her action on the job. The researcher looked at performance as the assessment of output in a giver task or work with a view of achieving result.

Productivity: Melli(2017) defined productivity as the measure of how well resources are brought together in an organization and utilized for accomplishing a set of result. The researcher sees productivity as reaching the highest level of performance with less expenditure of resources.

Job Satisfaction: According to Locke (2016) defined Job satisfaction as a situation in which a worker’s job fulfills what he values.

Intrinsic Motivation: According to Fritz Heider (2015) said intrinsic motivation comes from rewards inherent to a task or activity itself. Hertzberg (1959) “said” intrinsic motivation, develop internally and comes from, something the workers want to do.

Extrinsic Motivation: Fritz Heider(2011) said that this motivation comes from outside of the performers money is the most obvious example but coercion and threat of punishment are common extrinsic motivation.

Salaries / Wages: These are refers to as financial compensation for work done. Salaries are financial compensation for work done by standing professional or clerical personnel whose salaries are paid monthly.

Incentive and Fringe Benefits: These are defines as additional incomes that accrue to a worker in addition to his salaries and wages. They are used to induce people to contribute their efforts towards achieving organizational goals.