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Comsats Institute of Information Technology Islamabad

Effect of Reward on Employee Performance in Insurance Companies in Pakistan

2 Supervisor : Prof. Dr. Mansoor Ahmed

Submitted by:

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Contents

Introduction

Industry/Gap Analysis

Literature Review

Research Model and Hypotheses

Research Design

Analysis and Results

Conclusion and Recommendations

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Introduction

The Behavior and performance of the sale representatives and other employees depends mainly upon their satisfaction and motivation level from their job, Organization’s reward system, training and development, their salary, work environment, Retirement benefits and others (Robbins & Judge, 2003).

A study by (Fu, Weihui & Deshpande, 2014) argued that dissatisfaction of employee’s leads to high turnover rate of employees .

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Introduction Self-determination theory mainly concerned with the

intrinsic motivation and based upon the assumption that peoples can be mainly motivated by internal forces like sense of autonomy, sense of relatedness and sense of competence. (Gagne and Deci, 2014).

They further argued that sense of autonomy is to make the employees sure that they have the power to organize their work in their own way while sense of competent is the feelings of self-confidence of doing something of value in better way. The sense of relatedness is also the inner feelings of employees that they are the special part of the organization. (Gagne and Deci, 2014).

According to Vroom Expectancy theory employees make decisions on the base of expectancy that the certain type of reward will be awarded, which mean that employees are only motivated and work hard in a desired way when they believe that certain output will gain (Nel et al., 2001).

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Introduction to the Study

Problem Statement

What is the impact of different types of rewards (intrinsic and extrinsic) on the performance of employees at the workplace in insurance companies in Pakistan?

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Objectives of Study

To what extent extrinsic rewards affect employee’s performance in insurance sector

To investigate the influence of intrinsic rewards on employee’s performance in insurance sector

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Research Questions

What is the impact of extrinsic rewards on employee’s performance in insurance sector?

What is the influence of intrinsic rewards on employee’s performance in insurance sector?

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Gap Analysis

Overall impact of intrinsic and extrinsic rewards should be investigated in different industries and context. To fill the gap, the study therefore aimed to investigate the effects of reward strategies (Intrinsic and extrinsic rewards) on employee performance in insurance companies in Pakistan located in Rawalpindi and Islamabad region.

Through this study management can design effective reward strategies to get maximum performance from their employees in this sector and will help to increase their firm’s profits.

The findings of the study facilitated the formulation and implementation of an effective reward system that enhanced employee’s performance in insurance companies in Pakistan.

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Literature ReviewYear Author Title Findings

2008 Ripley •employee performance as about encouraging productive discretionary behavior with a goal to achieving human capital advantage.• Every manager, no matter what his or her role, knows that exceptional employee performance is critical in today's world

2007 Malhotra et al.

•all forms of financial return, tangible services and benefits an employee receives as part of an employment relationship

2014 Warneken and Tomasello

Intrinsic rewards are mostly intangible like appreciation, caring attitude of employer, meeting challenges, Sense of achievement, Sense of meaningfulness, sense of competence, sense of choice and sense of progress.

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Literature Review

Year Author Title Findings

2005 Tsai • Extrinsic rewards including monetary rewards or cash rewards are used to cater the expectations of individual employees in order keep them motivated.

2003 Thomson and Rampton

Organizations should reward employees more often. This greatly improves performance compared to having the rewards maybe only once a year. This is because frequent rewards are easily linked to the performance.

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Literature Review

Year Author Title Findings1998 Martocc

hiocompensation denotes both the intrinsic and extrinsic rewards employees receive for performing their jobs. Intrinsic compensation refers to the employee's psychological mindsets that result from performing their jobs. It refers to the enjoyment and the sense of achievement that employees experience as a result of their work. Extrinsic compensation includes both monetary and non-monetary rewards. Nonmonetary reward includes the benefits that employees receive apart from pay.

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Theoretical Framework

Independent Variable: Reward (Intrinsic Reward/Extrinsic Reward)

Dependent Variable:Employee Performance

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Conceptual Framework

Intrinsic Reward

Job Satisfaction

IV DV

Extrinsic Reward

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Research Design

Type of Study

Descriptive, Correlation study

Unit of Analysis

Individuals of Rawalpindi and Islamabad working at Insurance

companies/houses

Population

Rawalpindi and Islamabad

Sample Selection Strategy

Convenient sampling technique was used

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Research Design

Sample Size

255

Data Collection Instrument

Questionnaire

Statistical Tools

Correlation, Multiple Regression

Software

Statistical Package for the Social Sciences (SPSS)

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Research Design - Instrument

Variables Items Reference

Extrinsic Reward 10 (Mansor, 2012)Instrinsic Reward 18 (Mansor, 2012) , (Nawab,

2011)Employee Performance 12 (Rodwell, 1998).

Scale for Study :Adapted

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Discussion

Hypothesis Relationship Accepted/

Rejected

H1 Extrinsic Reward Employee Performance Accepted

H2 Intrinsic Reward Employee Performance Accepted

Discussion19

The purpose of this study was to investigate the effect of rewards (Extrinsic and Intrinsic rewards) on employee performance in insurance industry of Pakistan. In today’s competitive Business environment it is very important for every type of Organizations to maintain loyal customers as it will not only enhance the revenue but also play a vital role in cost reduction, competitive edge, profitability and the overall wealth of the shareholders. (Ahsan, 2015)

It depends on various things like Company’s product, brand name, pre and after sale services, and especially the behavior of the sale representatives of the company with the customers. The Behavior and performance of the sale representatives and other employees depends mainly upon their satisfaction and motivation level from their job, Organization’s reward system, training and development, their salary, work environment, Retirement benefits and others (Robbins, 2003).

Discussion20

The correlation coefficient for the hypothesized relationship was r=.631**and the coefficient of the parameter estimate in the regression model was also B= 633**. The results of both the tools are significant at both 1 % and 5%level of significance. The results of this paper are also consistent with the previous studies done in this area (Rehman et al., 2010: Khalizani, Hanisah and Loke, 2011).

The correlation coefficient for the hypothesized relationship was r=.431**and the coefficient of the parameter estimate in the regression model was also B= 0.433. The results of both the tools are significant at both 1 % and 5%level of significance. The results of this paper are also consistent with the previous studies done in this area (Ryan & Deci, 2000; Rehman et al., 2010).

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Discussion

As stated by Luthans in 2000 , “that there are two types of rewards, financial and non-financial and both can be used to enhance the performance of employees, financial rewards mean pay for performance such as performance bonus, tips gifts, commission, and gratuities etc. while non-financial rewards are non-cash/non-monetary rewards and it’s a social recognition such as appreciation acknowledgement, and certificate etc. ” Presence of such rewards cause increase in employee performance while working with such organizations, leading to the acceptance of the H1 & H2.

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Implications of the Study

The study will help the scholars in Pakistani’s context and may be in other

developing countries about the effect of different types of rewards on

employee's performance.

This study investigated the impact of rewards on employee's performance in

insurance industry of Pakistan located in Rawalpindi and Islamabad region.

Human capital is one of the most important assets for any type of an

organization. Therefore to polish, retain and improve the worth of this asset

this paper sets the guidelines for top management and corporate governance

especially in insurance industry of Pakistan to develop and refine regularly

their rewards strategies according to the needs of their employees.

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Limitations

Two Cities ( Rawalpindi, Islamabad ) This study only cater insurance sector of Pakistan

therefore this research can be used to examine the same relationship of variables in other sectors of Pakistan

The results of this study may vary in different contextual framework that is developing and developed countries. Therefore this is recommended to undertake the same study in different study setting.

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Future Direction

Future research can be conducted using diverse sample from different areas in Pakistan

The data collection method can be upgraded and personal interviews can also be included in order to get an in depth analysis of the research.

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Conclusion

There is direct correlation between Intrinsic Reward and Employee performance.

There is direct correlation between Extrinsic Reward and Employee performance.

Arrangement of such Rewards directly effects emotions and feelings of the employees.

Presence of such Rewards directly affects intellectual and mental and creative abilities of the employees.

It makes the employees comfortable that develops the level of job satisfaction Employee Performance.

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