Intrinsic Reward Systems and Employees’ Commitment of Deposit Money Banks in Port Harcourt, Rivers State.
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INTRINSIC REWARD SYSTEMS AND EMPLOYEES’ COMMITMENT OF DEPOSIT MONEY BANKS IN PORT HARCOURT, RIVERS STATE.
Barnabas S. Stanfast (PhD)
Department of Management,
Faculty of Management Sciences,
Niger Delta University,
Sonia I. Stanfast
Department of Management,
Faculty of Management Sciences,
University of Port Harcourt,
This study examined the relationship between intrinsic reward systems and employees’ commitment of deposit money banks in Port Harcourt. Cross-sectional survey design was used for the study. The study had a population of 315 respondents’ that cut across 10 selected deposit money banks in Port Harcourt. The study sample was 176 employees of deposit money banks in Port Harcourt derived from the use of systematic sampling technique. The data collected was subjected to analysis using Partial Least Squares (PLS) – Structural Equation Modelling (SEM) with the aid of Smart PLS 3.3.3. The result of the study showed a positive and significant relationship between intrinsic rewards and the measures of employees’ commitment (affective, continuance and normative commitment). The study concluded that rewards system is a driver of employees’ commitment in the Nigerian banking sector as confirmed by the result of the study. Arising from the findings and conclusion of the study, the study recommended that management of deposit money banks should ensure that adequate reward system is put in place to ensure that employees are better committed to their jobs.
Keywords: Intrinsic Reward, Employee Commitment, Affective Commitment, Continuance Commitment, Normative Commitment.
Johnson & et al (2010) outlined the aims of reward system to include: attract, retain and motivate employee, to support the attainment of the organization’s strategic and short-term objectives by helping to ensure that it has the skilled, competent, committed and well-motivated work force it needs, to meet the expectations of employees that they will be treated equitably, fairly and consistently in relation to the work they do and their contribution. Neckermann and Kosfeld (2008) draw a distinction between two basic types of rewards namely: Intrinsic rewards and extrinsic rewards. Intrinsic Rewards: Intrinsic rewards often called non-financial rewards are inherent of an activity and their administration is not dependent upon the presence or actions of any other person or thing. Intrinsic is concerned about the feeling of being recognized, praised for a job well done and participation in whatever we do. Extrinsic rewards do not follow naturally or inherently from the performance of an activity but are administered to a person by some external agents. Extrinsic reward concerns such motivations like money, retirement benefits, health insurance scheme, compensation, salary, bonus, etc.
Roshna and Rohan (2016) observed that rewards include awards, recognition, promotions, reassignment and compensation. Mollahosseini et al (2014)) opined that reward management systems should be designed in a way that it ensures maximum benefits for an organization. Armstrong, Brown and Reilly (2009) cited in Korir and Kipkebut (2016) stated reward management system in competitive firms is designed in ways that make them to have accurate predictions on their current and future expected results. Reward management systems can necessitate positive performance like increase in employee commitment, improvement in job satisfaction and increase in the desire to be good organization ambassador.
On the other hand, if reward system is not in place or properly handled, it can result in dampening of moral, reduced engagement in the organization and increase in the intention to leave the organization. Ajmal et al (2015) noted that employee’s satisfaction and positive attitude towards work are linked back with the intrinsic and extrinsic rewards that make employees to work out of the way. Qureshi et al (2013) however stated that the satisfaction of employees also depends on the practices of human resources management based on the fact that they prefer to have a fair rewarding system, judges, investigation, neutral performance appraisal and that they should be rewarded accordingly. Human resource plays a vital role to affect how intrinsic and extrinsic rewards affect employees’ commitment.
Several studies have been carried out on ways to improve employees’ commitment and performance using rewards systems and other constructs. Al-Smadi (2020) examined the impact of intrinsic and extrinsic rewards on employee performance and determining role of human resource practices. Ogbu, Ewelike and Udeh (2020), conducted a study on the effect of reward management on employee performance. In another study, Ajmal, Bashir, Abrar, Khan, and Saqib, (2015) examined the effect of intrinsic and extrinsic rewards on employee attitudes with the mediating role of perceived organization support. Obicci (2015) also examined the influence of extrinsic and intrinsic rewards on employee engagement in the public sector of Uganda. Orajaka (2021) carried out another study on reward of management practices for employee retention and variable payment to public institutions. Noorazem, Sabri, and Nazir (2021) also examined the effects of reward system on employees’ performance. Azeez, Fapohunda and Jayeoba (2017) studied work-life balance and organizational commitment from the perspective of postgraduate students. In a related study, Phamthi, Ngo, Duong and Pham (2021) examined the influence of organizational culture on employees’ satisfaction and commitment in SMEs in Vietnam. Tamunimiebi (2019) examined organizational climate and employee commitment of telecommunication companies in Port Harcourt, Nigeria. Nalugya (2018) also carried out a study on reward management and employee commitment in commercial banks in Uganda.
A lot of research has been conducted focusing on reward and incentives to employee Gohari et al. 2013, Syed, and Yan, 2012). The level of staff turnover in the banking industry has also been on the increase which comes as a result of employees seeking greener pastures. This is likely to be attributed to poor reward policy which has led to de-motivation and job dissatisfaction. However, reward systems are likely to be an influencing factor in enhancing the level of employee performance in the banking sector. Several instances of long lines to the cash counters and poor attitude of staff while serving clients have been reported in most banks in Nigeria. Despite the various empirical studies above, there is still dearth of studies on how intrinsic reward systems relate with the level of employee commitment in the deposit money banks in Port Harcourt, Rivers State.
The study seeks to provide answers to the following questions:
- What is the relationship between intrinsic reward and affective commitment of deposit money banks in Port Harcourt, Rivers State?
- What is the relationship between intrinsic reward and continuous commitment of deposit money banks in Port Harcourt, Rivers State?
- What is the relationship between intrinsic reward and normative commitment of deposit money banks in Port Harcourt, Rivers State?
The following hypotheses were formulated and tested:
- There is no significant relationship between intrinsic reward and affective commitment of deposit money banks in Port Harcourt, Rivers State.
- There is no significant relationship between intrinsic reward and continuous commitment of deposit money banks in Port Harcourt, Rivers State
- There is no significant relationship between intrinsic reward and normative commitment of deposit money banks in Port Harcourt, Rivers State?
Intrinsic rewards are those rewards which are given in non-financial terms. They include recognition, training and development, job advancement, career advancement etc. According to Ajmal et al (2015), intrinsic rewards can be seen as those forms of rewards which are non-monetary in nature. In the view of Alen, Shore and Gritteth (2004), intrinsic rewards are more psychological in nature and they provide internal satisfaction to employees through satisfaction which comes from the inside. Such feeling of self-esteem, citizenship behaviours and other positive attitudes emanating from intrinsic and non-monetary rewards will always give rise to employee performance which can manifest itself in the form of quality output, leading to organizational efficiency and effectiveness. Employees do not only care about the cash they receive for overall work done, they care about those other motivational elements that boost their sense of belongingness and these often come in psychological forms.
Intrinsic motivation refers to the motivation that comes from inside an individual. This type of motivation usually comes with the satisfaction employee gets after the work being done or in some cases during the working process. Intrinsic motivation can be influenced by several factors which are responsibility, freedom to act, scope to use and develop skills and abilities, interesting work and opportunities for advancement. These motivators are used to have a long-term effect as they come from the individual and not from the surrounding environment (Armstrong, 2013).
Torrington and associates (2009) used a different term for non-cash rewards i.e. non-material rewards and concluded non-cash rewards tend to increase the job satisfaction in employees particularly employees that show high productivity as compared to other employees. The study, conducted by the researchers, explains that when an employee is satisfied with monetary rewards, he/she starts searching for something different as cash benefits cannot satisfy the needs and can-not motivate in the same way. The study also emphasized the fact that intrinsic and extrinsic rewards should coexist in a reward system as only a balanced system may adequately meet motivation needs of employees and ultimately lead to optimization of commitment, motivation, and job satisfaction of employees. As a result, the researcher can conclude the third hypothesis which states that intrinsic rewards used in Normet Ltd. have positive impact on the performance of the employees.
Pollack (2004) states that several intrinsic rewards such as great autonomy, recognition, flexibility in the work schedule can be used extensively by organizations to motivate employees. Consequently, Yukl (2009) asserts that recognition of employees’ performance can be in the form of praise, awards or through ceremonies. Recognition of employees’ efforts and performance has positive impacts on the employees’ commitment, job satisfaction and organizational involvement (Romzek, 1985).
On the other hand, Thomas (2009) defines intrinsic rewards as non-formal rewards, nonmonetary/non-cash which can be in form of social recognition, praise and genuine appreciation. He observes that recognition is to acknowledge someone before their peers for desired behaviour or even for accomplishment. Appreciation, on the other hand, centers on showing gratitude to an employee for his/her action. Such rewards enable the employees to gauge themselves and their performance to know whether they are doing well or not (Sarvadi, 2010). Edirisooriyaa (2014) defines intrinsic rewards as the psychological reward that is experienced directly by an employee. He opines that intrinsic rewards steer up the willingness of the employees to use their creativity, abilities and know how in favour of their organizations to achieve optimal performance.
In contrast, intrinsic motivation refers to the motivation that comes from inside an individual. This type of motivation usually comes with the satisfaction employee gets after the work being done or in some cases during the working process. Intrinsic motivation can be influenced by several factors which are responsibility, freedom to act, scope to use and develop skills and abilities, interesting work and opportunities for advancement. These motivators are used to have a long-term effect as they come from the individual and not from the surrounding environment (Armstrong, 2013).
Torrington and associates (2009) used a different term for non-cash rewards i.e. non-material rewards and concluded non-cash rewards tend to increase the job satisfaction in employees particularly employees that show high productivity as compared to other employees. The study, conducted by the researchers, explains that when an employee is satisfied with monetary rewards, he/she starts searching for something different as cash benefits cannot satisfy the needs and can-not motivate in the same way. The study also emphasized the fact that intrinsic and extrinsic rewards should coexist in a reward system as only a balanced system may adequately meet motivation needs of employees and ultimately lead to optimization of commitment, motivation, and job satisfaction of employees (Emelianova, 2019).
Intrinsic rewards are those that exist in the job itself. Examples are achievement, variety, challenge, autonomy, responsibility, and personal and professional growth. They also include status, recognition, praise from superiors and co-workers, personal satisfaction, and feelings of self-esteem (Mottaz, 1985). Intrinsic rewards increase feelings of self-esteem and accomplishment (Honig-Haftel and Martin 1993). Intrinsic rewards are derived from the content of the task itself and include such factors as interesting and challenging work, self-direction and responsibility, variety, creativity, opportunities to use one’s skills and abilities, and sufficient feedback regarding the effectiveness of one’s efforts (Mottaz 1985). Employees are thought to be motivated to work hard to produce quality results when they have pride in their work, they believe their efforts are important to the success of the team, and their jobs are fun, challenging, and rewarding (Mahaney and Lederer 2006).
Intrinsic rewards refer to those incentives that have been given to the employees of an organization. An intrinsic reward is an internal reward that employees achieve from completing their tasks or projects successfully. These rewards are mostly psychological and are based on the effort and abilities of a person (Manzoor, Wei & Asif, 2021). Intrinsic rewards elicit a positive emotional reaction and work to motivate employees to continue to improve as well as make lasting behavioral changes when needed (Ryan and Deci, 2020). For example, when someone completes a task successfully, they will often experience a sense of satisfaction and achievement. This intrinsic reward then motivates the employee to continue to complete that task successfully in the future to further experience those positive emotions. Examples of intrinsic rewards in the workplace include pride in your work, feelings of respect from supervisors and/or other employees, personal growth, gaining more trust from managers, doing work that is enjoyable, feelings of accomplishment, learning something new or expanding competence in a particular area, allowing employees to choose which projects they work on, and being part of a team. The prior studies are in favor of the positive consequence of a reward system on the performance of the employees. Devaro et al. (2017) conducted their research in California, and they examined the relationship between training and internal motivation in organizations (profit and non-profit). The study concluded that training has a high frequency in nonprofit organizations, and these non-profit organizations have lower base wages as compared with for-profit organizations.
According to the study by Tymon Jr et al. (2010), the intrinsic rewards experienced are a critical element in employee retention, satisfaction with the organization, and career success. Stumpf et al. (2013) focused on reducing employee dissatisfaction and withdrawal in major, consultant designed, change programs by increasing intrinsic rewards. The findings of their study showed that intrinsic rewards related positively with satisfaction with the organization and intentions to stay at both time periods, with programs supportive of employee innovation further enhancing employee satisfaction and retention more strongly during the change effort.
Furthermore, Mosquera et al. (2020) evaluated the role of satisfaction with intrinsic rewards in the three largest real estate agencies in Portugal. The results of their study indicated that intrinsic rewards have a positive and significant impact on the job satisfaction of the employee. Bassett-Jones and Lloyd (2005) explained that intrinsic motivation and appreciation play a vital role in the satisfaction of employees rather than money and bonuses. Yang (2008) examined the individual performance and outcomes of his study and indicated that we cannot verify individual performance. Even so, he also claimed that if the performance of the employees is observable, then organizations can use direct bonuses or relational contracts to motivate them based on their performance.
Ajila and Abiola (2004) explained that intrinsic rewards have a positive and significant influence on the performance of the employee in an organization. The results further indicate that intrinsic rewards such as career development, responsibility, recognition, and learning opportunities are less influential on the job performance of an employee as compared to extrinsic rewards like pay, bonuses, promotion, and benefits. The employees prefer to get immediate monetary benefits as compared to the recognition of their works. Barber et al. (1992) determined that flexible benefits have a positive association with the performance of employees and satisfaction. Berdud et al. (2016) conducted their study in the healthcare sector of Spain and investigated the connection between incentives and internal motivation of the employees. They have collected the information with the help of interviews. The study concluded that doctors were intrinsically motivated due to two dimensions which included medical practice and pro-social dimension.
Khan, (2010) investigated the impact of employee commitment (Affective commitment, Continuance commitment and Normative commitment) on employee job performance from a sample of 153 public and private and public sector employees of oil and gas sector in Pakistan. The results revealed a positive relationship between employee commitment and employees’ job performance. Therefore, job performance emerged as a determinant of employee commitment. Thus, Khan, (2010) advised managers to pay special attention to antecedents of employee commitment and all the factors which foster employee commitment so as to increased employee performance and subsequently increase organizational productivity.
Habib, (2010) investigated the interdependency of job satisfaction and job performance, effect of employee commitment and attitude towards work on performance using a survey data collected from 310 employees of 15 advertising agencies of Islamabad (Pakistan). They found that employees having greater employee commitment perform well and employees having good attitude towards work are highly satisfied as compared to employees who are less inclined towards their work. Ali, (2010) found that there is positive relationship between corporate social responsibility and employee commitment as well as between employee commitment and organizational performance. They therefore concluded that organizations can improve their performance through employees’ commitment by engaging in social activities since such activities also include the welfare of employees and their families.
The affective commitment is referred to an employee’s emotional attachment, involvement, and identification with the organization and its goals. The affective commitment involves in three aspects like the formation of emotional attachment, identification and desire to maintain organizational membership in an organization. The identification and commitment will arise based on employees‟ own willingness to stay in the organization, Allen & Meyer; Meyer et al, (2004). The affective commitment is an emotional affiliation of the employees with the organization and it consist of three factors like beliefs, willingness and desire towards the organizational goal, Porter (1974). A study conducted by Mowday (1982), categorized the affective commitment with personal and structural characteristics, job and work experience.
In continuance commitment, the employees consider the disadvantages of leaving the organization and avoid quitting. Moreover, the continuance commitment represents not a negative situation, though it is considered as a negative commitment type by the organizations. The continuance commitment is low when compared with affective commitment in the organization, Meyer & Allen (1997).
The Normative commitment is referred to a gratified feeling of an employee towards organization, and it is a value of loyalty and responsibility of an employee regarding his commitment to the organization, Meyer & Allen (1997). The normative commitment is natural, and it arises from the society due to other commitments like marriage, family, religion, etc. these commitments urge the employees to feel the ethical obligation in the organization, Meyer et al, (2004).
According to Madi, et al (2012) normative commitment refers to an employee’s feeling of obligation to remain with the organization where it based on the employee having internalized the values and goals of the organization. Normative commitment is said to reflect a sense of obligation on the part of the employee to maintain membership in the organization (Meyer & Smith, 2000; Bal, Sullivan, & Harper, 2014). It has also been conceived that the potential antecedents for normative commitment include co-worker commitment where it includes affective and normative dimensions as well as commitment behaviour, organizational dependability and participatory management. And that coworkers’ commitment is expected to provide normative signals that influence the development of normative commitment. It is worthy to mention that organizational dependability and participatory management are key issues that will foster and install a sense of moral obligation to reciprocate to the organization. Normative commitment is said to reflect a sense of obligation instilled in the employee to sustain membership in the organization (Bal, et al, 2014).
The target population consists of the 24 deposit money banks in Port Harcourt, Rivers state. Out of the 24 deposit money banks, 10 deposit money banks were selected for the study due to easy accessibility. However, the accessible population of this study covers 315 employees drawn from the ten (10) selected deposit money banks Port Harcourt. In determining the sample size for this study, the Yamane’s (1968) formula for sample size determination was used to arrive at a sample size of 176.
Hypothesis One: There is no significant relationship between Intrinsic reward and Affective commitment.
Figure 1 revealed that there is a significant relationship between Intrinsic reward and Affective commitment (p = .000 and β =0.654) hence we find that Intrinsic reward is positively associated with Affective commitment. This means that, an increase in Intrinsic reward will lead to a corresponding increase in Affective commitment and vice versa. Based on the decision rule of p < 0.05 for null rejection; we therefore reject the null hypothesis and restate that there is a significant relationship between Intrinsic reward and Affective commitment.
Hypothesis two: There is no significant relationship between Intrinsic reward and Continuance commitment.
Figure 1 revealed that there is a significant relationship between Intrinsic reward and Continuance commitment (p = .000 and β =0.773) hence we find that Intrinsic reward is positively associated with Continuance commitment and based on the decision rule of p < 0.05 for null rejection; we therefore reject the null hypothesis and accept the alternate: there is a significant relationship between Intrinsic reward and Continuance commitment.
Hypothesis three: There is no significant relationship between Intrinsic reward and Normative commitment.
Figure 1 revealed that there is a significant relationship between Intrinsic reward and Normative commitment (p = .000 and β =0.814) hence we find that Intrinsic reward is associated with Normative commitment and the association is positive. This means that, an increase in Intrinsic reward will lead to a corresponding increase in Normative commitment vice versa. Based on the decision rule of p < 0.05 for null rejection; we therefore reject the null hypothesis and restate that there is a significant relationship between Intrinsic reward and Normative commitment.
Discussion of Findings
Relationship between Intrinsic reward and Affective commitment
The bivariate hypotheses between Intrinsic reward and Affective commitment reveal a noteworthy relationship between the two variables. The Path Coefficient reveals β = 0.654, p = 0.000 which implies that Intrinsic reward has a significant relationship with Affective commitment. Thus, the null hypothesis was rejected and the alternate hypothesis was accepted. The result of the Path Coefficient (β) is 0.654. This thus reveals that there is a strong positive significant relationship between Intrinsic reward and Affective commitment. Thus, enhancing Intrinsic reward will help enhance Affective commitment. Thus, the first objective of the study which sought to examine if Intrinsic reward relates with Affective commitment was achieved. This finding agrees with that of Al-Smadi (2020) who asserted that intrinsic rewards has a positive and statistically significant impact on the employee’s affective commitment. Shahzadi and Farooqi (2014) came up in their study that a good reward and better working conditions have significant impact on employee’s commitment.
Relationship between Intrinsic reward and Continuous commitment
The bivariate hypotheses between Intrinsic reward and Continuous commitment reveal a noteworthy relationship between the two variables. The Path Coefficient reveals that β = 0.773, p = 0.000, which implies that Intrinsic reward has a significant relationship with Continuous commitment. Thus, the null hypothesis was rejected and the alternate hypothesis was accepted. The result of the Path Coefficient (β) is 0.773. This thus reveals that there is a significant relationship between Intrinsic reward and Continuous commitment. Thus, enhancing Intrinsic reward will help enhance Continuous commitment. Thus, the second objective of the study which sought to examine if Intrinsic reward relates with Continuous commitment was achieved. This finding agrees with that of Obicci (2015) who revealed that both external reward and intrinsic reward has a positive and significant influence on employee continuance commitment. Shahzadi and Farooqi (2014) found out that factors like employees’ relationship with their supervisors, training process, opportunities for improvement can greatly influence the performance of employees
Relationship between Intrinsic reward and Normative commitment
The bivariate hypotheses between Intrinsic reward and Normative commitment reveal a noteworthy relationship between the two variables. The Path Coefficient reveals that β = 0.814, p = 0.000, which implies that Intrinsic reward has a significant relationship with Normative commitment. Thus, the null hypothesis was rejected and the alternate hypothesis was accepted. The result of the Path Coefficient (β) is 0.814. This thus reveals that there is a significant relationship between Intrinsic reward and Normative commitment. Thus, enhancing Intrinsic reward will help enhance Normative commitment. Thus, the second objective of the study which sought to examine if Intrinsic reward relates with Normative commitment was achieved. This finding agrees with that of Mbah, Mgbemena and Ejike (2015) who opined that such factors as employee recognition, conducive work environment and staff development were seen as having bearing with employees’ normative commitment.
Intrinsic reward in form of trainings, recognition and other non-financial rewards have a positive and significant relationship with the level of employee commitment to the organization. This goes to show that when organizations are interested in the personal development of the employees, it will aid their commitment to the growth and development of the organization. It also indicates that when organization put in place proper intrinsic rewards, it will enhance the commitment of the employees thereby increasing the employee retention rate while reducing the employees’ intention to leave.
Based on the findings and conclusion of this study, the following recommendations are hereby proffered.
- Management should ensure that recognition is given where needed for outstanding performance in order to ensure that the commitment of the employees is at a highest level.
- Management of deposit money banks should engage employees in training programmes that are geared towards their personal and career development as it will enhance their skills thereby ensuring that they are committed to the organization.
- The use of contract staff which tends not to give job security should be discouraged while permanent employment should be given to employees to make sure that they feel secured about their jobs in the banks.
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Figure 1: Intrinsic reward and Measures of Employee Commitment
Source: SmartPLS 3.3.3 Output on Research Data, 2023
Table 1: Summary of the Result and Decision Making
|Hypotheses||Path Coefficient (β)||P Values (p)||Predictive Accuracy (R2)||Decision on Hypothesis|
|HO1||There is no significant relationship between Intrinsic reward and Affective commitment.||0.654||0.000||0.427||Reject Null Hypothesis|
|HO2||There is no significant relationship between Intrinsic reward and Continuance commitment.||0.773||0.000||0.567||Reject Null Hypothesis|
|HO3||There is no significant relationship between Intrinsic reward and Normative commitment.||0.814||0.000||0.662||Reject Null Hypothesis|
Source: SmartPLS 3.3.3 Data Output, 2023