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Journal of Business and Tourism Volume 04 Number 02 JulyDecember, 2018 Akram, Khan, Shah & Khan 39 ISSN: 2520 - 0739 The Effect of Training and Compensation on Job Performance; Accessing the Moderating Role of Motivation: A Case Study of Public Sector of Pakistan MUHAMMAD SHAHBAZ AKRAM Riphah International University, Islamabad [email protected] ASAD SARFARAZ KHAN PhD Scholar, Institute of Business Studies and Leadership Abdul Wali Khan University, Mardan [email protected] DR. SYED MOHSIN ALI SHAH Assistant Professor, Institute of Business Studies and Leadership Abdul Wali Khan University, Mardan [email protected] DR. JUNAID ATHAR KHAN Assistant Professor, Institute of Business Studies and Leadership Abdul Wali Khan University, Mardan [email protected] Abstract Compensation, motivation and training play a vital role improving performance of employees, thus considered as integral part of any organization. The objective of the study is to find the impact of training and compensation on job performance along with moderating role of motivation. Survey-based data was collected from 160 individuals from different public sector organizations of Pakistan. Close ended questionnaires were used for this purpose. The study founded that training and compensation positively affect the job performance whereas moderating effect of motivation is not proved. This paper is believed to be the first to examine the effect of training and compensation on job performance with the help of motivation in public sector of Pakistan. Key words: Training, Compensation, Job Performance and Motivation. 1. Introduction Dynamic and growing public sector organizations are inevitable to strengthen any economy as economy and public sector mutually support each other. The public sector is the heart of Pakistan as millions of people are employed in public sector organizations. A lot of energy, money and time that is invested in public sector all over the world can be used more productively to increase the performance of the employees. An organization cannot get optimum performance of employees without any effort e.g. by improving
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Page 1: The Effect of Training and Compensation on Job Performance ... · managerial skills, knowledge, standards, performance appraisals and commitment which are the essential elements to

Journal of Business and Tourism Volume 04 Number 02 July– December, 2018

Akram, Khan, Shah & Khan 39 ISSN: 2520 - 0739

The Effect of Training and Compensation on Job Performance;

Accessing the Moderating Role of Motivation: A Case Study

of Public Sector of Pakistan

MUHAMMAD SHAHBAZ AKRAM

Riphah International University, Islamabad [email protected]

ASAD SARFARAZ KHAN PhD Scholar, Institute of Business Studies and Leadership

Abdul Wali Khan University, Mardan

[email protected]

DR. SYED MOHSIN ALI SHAH

Assistant Professor, Institute of Business Studies and Leadership

Abdul Wali Khan University, Mardan [email protected]

DR. JUNAID ATHAR KHAN Assistant Professor, Institute of Business Studies and Leadership

Abdul Wali Khan University, Mardan

[email protected]

Abstract Compensation, motivation and training play a vital role improving performance of

employees, thus considered as integral part of any organization. The objective of the

study is to find the impact of training and compensation on job performance along with

moderating role of motivation. Survey-based data was collected from 160 individuals from different public sector organizations of Pakistan. Close ended questionnaires were

used for this purpose. The study founded that training and compensation positively affect

the job performance whereas moderating effect of motivation is not proved. This paper is believed to be the first to examine the effect of training and compensation on job

performance with the help of motivation in public sector of Pakistan.

Key words: Training, Compensation, Job Performance and Motivation.

1. Introduction

Dynamic and growing public sector organizations are inevitable to strengthen any economy as economy and public sector mutually support each other. The public sector is

the heart of Pakistan as millions of people are employed in public sector organizations. A

lot of energy, money and time that is invested in public sector all over the world can be used more productively to increase the performance of the employees. An organization

cannot get optimum performance of employees without any effort e.g. by improving

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Journal of Business and Tourism Volume 04 Number 02 July– December, 2018

Akram, Khan, Shah & Khan 40 ISSN: 2520 - 0739

managerial skills, knowledge, standards, performance appraisals and commitment which

are the essential elements to improve employee’s performance (Misbah Nasir Ambreen Bashir, 2012). In industrial organizational psychology the most important variable is job

performance. Job performance is directly associated with the success of any organization.

Many organizations ignore the reality that their greatest resource is their staff. Individuals

with high performing capacity receive different kinds of rewards in many shapes. A study conduct by Ramzan, et al. (2014) revealed that there is positive relation between reward

system and job performance. Demanding higher levels of job performance obviously

implies extra work load (Janssen, 2001). In a daily routine, employees often face obstacles when trying to finish their duties and tasks. Managers have to increase

employees’ performance by molding their interest toward task and goal completion. A

careful analysis provides an overview of the abilities and shortcomings of employees and in the light of these results then design of a training programs is developed which also

helps in placement decisions (Oz, 2003). A study by Krueger and Rouse (1998) found

that employees, who attended training shown more job improvement, received awards for

their better performance and shown improved attendance in comparison to those did not participated in the training programs.

To keep employees motivated and loyal is a difficult task, organizations should create a

feel among their staff that they are cared about, so that employees utilize their abilities and skills to achieve organization goal. While recruiting new employees organizations

prefer those candidates whose skills, values and goals match with job requirements

(Chung & Sackett, 2005). It is unquestionable truth that performance of any organization is based on the level of satisfaction and compensation of the employees. The concept of

compensation has received significant consideration for past many years. Meyer and

Smith (1997) presented that compensation improves satisfaction of employees, decrease

the turnover, and increase loyalty among the employees. Rewards given to employees whether in the form of compensation or bonuses have an impact on extrinsic motivation

whereas admiration through verbal means influence the intrinsic motivation (Deci, 1972).

There are several researches on relationship of job performance motivation, training and compensation in different organizations. But the public sector of Pakistan has received

very little attention. Only a few studies are found on public sector of Pakistan (e.g. Nasir

& Bashir, 2012; Raza & Nawaz, 2011) and role of compensation, training and motivation

has not been tested in public sector of Pakistan. As a key sector of economy, it is important to find the impact of training and compensation on the performance of public

sector employees. The moderating role of motivation is also important to look at, as it

provides a path towards better performance. The rationale of this study is to examine the association among job performance, compensation, motivation and training in public

sector of Pakistan.

2. Litrature Review

2.1 Job Performance

Bush et al. (1990) defined job performance as “behavior that has been evaluated in terms

of its contributions to the goals of the organization”. Job performance can be judged from

the perspective of employees that how efficiently they manage their job responsibility and requirements of the position been held (Flaniken, 2009). Performance is something

that people do to achieve an organization’s goals (Campbell, McHenry, & Wise, 1990).

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Some researchers considered job performance as implementation of tasks. Job

performance is now been recognized as a set of more complex and dynamic aspect of organizational activities involved in improving overall growth of the organization (Arvey

and Murphy, 1998). In early years job performance was considered as a mixture of

different elements (Astin, 1964). Modern scholars consider job performance as a

multidimensional concept (Rotundo & Sackett, 2002; Campbell, McHenry, & Wise, 1990). The job performance can be divided into three dimensions (Rotundo & Sackett,

2002). These dimensions are organizational citizenship behavior, task performance and

counterproductive work (Robinson & Bennett, 1995). Recently a new aspect is added to concept of job performance as “creativity”. Nowadays a large number of organizations

consider creativity as a separate standard in performance appraisal activity since

employee’s creativity plays an important role in strengthening the organization’s ability to coupe up with rapidly shifting business environments (Welbourne, Johnson, & Erez,

1998; Johnson, 2005; De Jonge & De Ruyter, 2004).

2.2 Compensation and Job performance relationship

For organizational employees the fair and reasonable remuneration in return to their contribution to achieve organizational objectives, this remuneration is called

compensation (Armstrong & brown 2001). The term compensation refers to any form of

rewards of payment given to staff for their services which are arose from employment (Dessler, 2005). As any other organization, growth of financial service providers relies on

satisfaction and motivation of company’s employees. Banks are the largest financial

service institutes of a nation. Employees are the most important part of any organization that can be stimulated by financial and non-financial benefits. Compensation is a reward

which the employer offer to employee in order to get the job done (Ramzan, Zubair, Ali,

& Arslan, 2014). Better compensation can motivate employees to generate good results

by giving new ideas and innovation. Mohrman & Odden (1996) observed that compensation can positively affect employee’s job performance and health. They also

observed that low compensation can lead employees to start their own business or

switching the job. Quartey & Attiogbe (2013) observed that the compensation packages for staff of the

Police Force have enhanced their work quality. The compensation and rewards also

enhanced employee’s performance by 43.8%, this is an evidence of a positive and strong

relationship between compensation packages and employee’s performance in their respective jobs. In another study Yamoah (2013) observed 80% participant accepted the

fact that they had a will take on additional duties because of better reward in the form of

compensation and about 87% of the participants agreed that compensation bundles affected their productivity levels positively. On the basis of previous studies it is

hypnotized that:

H1: Compensation will have positive effect on job performance.

2.3 Training and Job Performance

“Training is a systematic process to enhance employee’s skill, knowledge and

competency, necessary to perform effectively on job” (Elnaga & Imran, 2013). Employee

training is a program that offers workers with new skill set, information related to job related techniques and opportunities of professional development (Elnaga & Imran 2013).

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In many developing countries both public and private sectors still do not recognize the

importance of training. Training has a prime importance in companies seeking to gain an advantage over competitors (Brum, 2007). Employees who attend different training

programs can better survive in this ever changing world. From Krueger and Rouse (1998)

study it is found that employees with proper training shown further job upgrades received

more awards for their performance and had improved attendance comparing to those who did not participated in the trainings. The training programs provide employees the

opportunity to use and apply the theoretical abilities, skills and knowledge learned during

training session in their routine jobs. Training is a key to survival of any organizations. Importance of training has been

highlighted by number of studies. The American Society of Development found that the

average expenditure per employee on training was $955 in 2005 which was $135 in 2004. Similarly training hours was also increased from 26 to 32 in 2005 (astd.com, 2005).

Employees can become more productive and efficient if they have proper training.

Organizations can improve the quality of work of their employees by giving them

necessary training. The concept of training is not just to raise profit but it also motivate employees by letting them know how important that how important is the information

they received for accomplishing their task (Anonymous, 1998). Research of Sultana,

Irum, Ahmed & Mehmood (2012) indicates 1% change in training can change performance up to 58.2% in telecommunication sector of Pakistan. Another study showed

that 83 respondents representing 69.2% agreed that training has good effect on their work

(Nassazi, 2013). H2: Training will positively affect the job performance.

2.3 Motivation and Job Performance

The interest of an employee or individual to get a specific goal or task done is called

motivation. The motivation is the inner enthusiasm to do task and due to this or external benefits that offered for job performance (Dennis & Randall, 2004). “The willingness to

exert high levels of effort toward organizational goals, conditioned by the effort, ability

to satisfy some individual needs (Ramlall, 2004).” It is motivation that set employees into action and it also improves state of employees efficiency. It guides employees to

complete organizational goals and can construct friendly relationship among all staff of

organization (Afful-Broni, 2012). Motivation is comprised of two main types of e.g.

intrinsic motivation and extrinsic motivation. Intrinsic motivation is the internal motivation to complete work or task. The external factors which mobilize individuals to

perform a task are extrinsic motivation.

These two types of motivation affect the performance of individuals. Rewards offered in the shape of bonuses and compensation influence extrinsic motivation whereas intrinsic

motivation is affected by verbal appreciation (Deci, 1972). Lack of motivation can cause

morale issues, poor productivity, turnover and employee performance problems in the organization. Motivation is an effective tool to improve performance of employees. So it

is considered that highly motivated employees perform better in different situations

(Rizal, Idrus, Djumahir, & Mintarti, 2014). Research by Nawab, Samina, Bhatti & Shafi

(2011) showed motivation has significantly affected employee performance. A research effect of motivation on staff performance of universities in Nigeria found that motivation

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significantly affect the performance of academic staff (Abdulsalam, & Mawoli, 2012).

Thus it is predicted that H3: There will be a positive relationship between motivation and job performance.

2.4 Moderating Role of Motivation

To achieve goals and stay motivated needs self-discipline. The needs and wants motivate employees and drive them to work until these are satisfied. Employees who think their

performance is going in right direction are actually performing less well, which is

supported by (Beyhan, 2008). Similarly in comparison to less motivated employees highly motivated employees are more likely to view learning as a tool to enhance their

performance (Kluger & DeNisi, 1996). It is motivation that set employee into action and

it also improves stages of employee’s efficiency. It guides employees to complete organizational goals and can construct friendly relationship among all staff of

organization (Afful-Broni, 2012). MacDuffie (1995) argued that it is obligatory for an

organization’s HR department to motivate employees to learn and relate their skills to

improve the job performance. Individual performance is found by three factors e.g. motivation, work environment and ability (Davidoff, 1987). But according to Fisher

(2005) and Newstron (1993) money is the key motivator for employees. So it can be

assumed that well paid and well trained employees will exhibit improved performance when combined with the motivation to work hard. Thus it is predicted that:

H4: Motivation will moderate the effect of training on job performance positively.

H5: Motivation will moderate the effect of compensation on job performance positively.

Compensation

Training

Motivation

Job Performance

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3. Methodology

3.1 Sample and Population The Convenient Sampling technique was adopted to collect data from 6 public sector

organizations of Pakistan including 2 large manufacturing factories, 2 universities, 1

telecom provider and 1 bank. About 200 questionnaires were distributed in total from

which 170 were collected back, 10 of which were not usable. That provided a response rate of 80%. In addition, an assurance for confidentiality and anonymity of responses was

provided to the respondents. All participants took part in this study on voluntary basis.

A major portion of the participant was single (61.3%), males (78.1%) with average ages of 21 to 30 years (25%). Majority of respondents were working on non-managerial

positions (62.5%) from which most of them were working with the organization from 1

to 10 years (32.5%). Their average education was Master (48%). Data collected from the survey was analyzed by using SPSS software.

3.2Scales/ Measures Used

Training, Performance and Motivation were measured using 5 point Likert scale ranging

from 1 to 5. The numeric 1 stand for Strongly Agree and Strongly Disagree was represented by the 5. A 5 point Likert sacle was adopted to measure Compensation

where 1 indicated Not Satisfied and 5 Highly Satisfied.

3.3 Job Performance Job performance of participants was measured using 4 item scale developed by Teseema

& Soeters (2006). Sample of the items is “My performance is better than that of my

colleagues with similar qualifications?” The alpha reliability of the scale was found to be 0.894.

3.4 Compensation

Compensation was measured using a scale with 10 items developed by Murphy (2000).

Sample items included “Base salary?” The Cronbach reliability of this scale was 0.793.

3.5 Training

A 4 item scale used by Chiaburu and Tekleab (2005), was adopted to measure the

training. Sample items included “My company frequently arranges training programs for the employees.The Cronbach alpha reliability was found to be 0.984.

3.6Motivation

Cameron and Pierce (1994) 6 item scale was used to measure the motivation. Sample

items included “My job is meaningful.” Cronbach alpha of this scale was 0.818.

3.7 Control Variables No significant effect of demographical variables was found on other variables of the

study.

4. Results

Means, standard deviation and correlation matrix are presented in table 1.

Table1: Descriptive Statistics Means, Standard Deviations, Correlations, and Reliabilities

Mean SD 1 2 3 4 5 6 7 8 9

1 Gender 1.218 .414

2 Age 2.781 .929 -.316**

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3 Position 1.693 .549 .185* -.317

**

4 Tenure 2.443 1.032 -.199* .449

** -.358

**

5 Qualification 1.987 .846 .044 .132 -.198* .107

6 Training 3.114 1.048 .000 .132 -.067 .027 .019 (.894)

7 Compensation 3.483 .832 -.057 .088 -.038 .058 -.033 .624**

(.793)

8 Job Performance 3.035 .994 -.012 .044 -.032 .085 -.106 .458**

.702**

(.984)

9 Motivation 2.983 1.075 .006 .046 .007 .096 -.110 .412**

.666**

.970**

(.818)

N = 160; Cronbach’s alpha is presented in parenthesis

**. Correlation is significant at the 0.01 level (2-tailed). *. Correlation is significant at the 0.05 level (2-tailed)

The table 1 indicates that training has a significant and positive correlation with job

performance (0.458, p<0.01). Similarly, compensation was found to be notably correlated

to job performance (0.702, p<0.01). Motivation also shows a strong level of association with job performance (0.970, p< 0.01). Thus we found initial support for all of our

variables.

4.2 Regression Analysis To test the moderation and the main effect of the study variable the multiple regression

analysis was used. The results achieved through the analysis are shown in table number 2.

The results indicate that training has a positive but insignificant effect on job performance (β = 0.037, p=ns), therefore Hypothesis 1 is rejected. The relationship of

compensation with job performance was found to be significant (β = 0.077, p<0.001),

hence hypothesis 2 is accepted. Results further indicated that motivation has a significant

and positive effect on job performance (β = 0.904, p<0.001), therefore hypothesis 3 is accepted. The results of moderated regression analysis show that motivation does not

moderate the relation of training and job performance (β = -0.002, p=ns), in consequence

hypothesis 4 is rejected. The moderation outcome of motivation on the relationship of compensation and job performance was found to be insignificant (β = -0.072, p=ns)

therefore hypothesis 5 is also rejected.

Table 2: Coefficients

Results for Main Effects and Moderated Regression Analyses

Predictors

Job Performance

β R2 ΔR

2

Step 1

Training .037 (ns)

Compensation .077*** .494***

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Akram, Khan, Shah & Khan 46 ISSN: 2520 - 0739

Motivation .904*** .948*** 454***

Step 2

TR x MOT -0.002ns

CMP x MOT -0.072ns .949ns .001ns

n = 160. JR =Training; CMP = Compensation; MOT = Motivation, ns= not significant

*p < .05. **p < .01. ***p < .001.

5. Discussion We found the support from the previous literature for our results that compensation has a

considerably positive effect on job performance. Which is in line with the study of

Mohrman & Odden (1996) which observed that good compensation has good effect on employee’s job performance and also on employee’s health. Similarly Quartey &

Attiogbe (2013) observed that the compensation packages for staff of the Police

Department have enhanced their quality of work in Ghana. Results signified that training

has a significant effect on Job performance which is same as hypothesized. We found support for our findings from Krueger and Rouse (1998) study which found that

employees, who attended training showed increased upgrades in the job, received more

awards on their performance and managed to improve job attendance in comparison to non-participants. Another study showed that 83 respondents representing 69.2% agreed

that training has good effect on their work (Nassazi, 2013).

From the statistical data analysis it was observed that employee’s level of motivation has significant positive effect on job performance. It is also found that motivation guides

employees to complete organizational goals and can construct friendly relationship

among all staff of organization (Afful-Broni, 2012). Individual performance is found by

three factors which are motivation, work environment and ability (Davidoff, 1987). Motivation can be a source of positive employee behavioral outcomes like persistence,

performance and productivity (Grant, 2008). From the data analysis it was found that

motivation has insignificant effect on job performance and compensation. And also motivation has insignificant impact on association between job performance training.

These results were opposite of our prediction. It can be argued that good compensation

and proper training is good enough to motivate employees to perform better. So

motivation itself may not be enough to encourage employees to perform outstandingly. In a study Ryan and Deci (2000) argued that highly motivated employees have tendency to

be self-driven and they like to make their own rules to perform the tasks. Driving support

from this finding it is assumed that motivation may serve well independently but does not buffer or magnify the effect of any other benefit.

5.1 Managerial Implications

Supportive environment should be provided to employee by public sector so that they can perform better. There should be training need analysis to highlight the benefits of

training. Regularly training workshops and conferences should be held for employee to

increase their performance. Manager should use performance review analysis and TNA to

identify the core training areas that will help in improving employees performance.

5.2 Limitations and Future Research

It is recommended that the future researchers should carry out same study in other

division of the society. This study has a sample size of 160 participants selected by

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Akram, Khan, Shah & Khan 47 ISSN: 2520 - 0739

convenient sampling method. For potential researchers it is recommended that to use

larger size of sample. To evade common method bias future research should collect data from different source and use longitudinal technique for data collection. The current

study observed the effect of two variables on job performance. Researchers are suggested

to consider the effect others variables like job satisfaction, job commitment, Islamic work

ethics and other on job performance with other moderators.

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Akram, Khan, Shah & Khan 50 ISSN: 2520 - 0739

Annexure A

DEMOGRAPHICS

Gender: Male Female

Age: 20 to 30 30 to 40 40 to 50 51 and above

Position: Manager Non manager

Job Tenure: Less than 1 year 1 - 10 years 11 - 20 years 21 years and above

Qualification: Matric Intermediate Bachelors Master MS/PhD

Part- 1

NOTE: Please refer to the following scale while answering the following questions.

Strongly

Disagree

Disagree Neutral Agree Strongly Agree

1 2 3 4 5

Please indicate how much you agree with each of the following statements keeping your

organization in view?

1 My company provides me the opportunity to improve my skills.

1 2 3 4 5

2 There is lot of chance to learn new

things in this company.

1 2 3 4 5

3 My company frequently arranges training programs for the employees.

1 2 3 4 5

4 Doing job in this company will benefit

to me.

1 2 3 4 5

Part- 2

NOTE: Please refer to the following scale while answering the following questions.

Not

Satisfied

Slightly Satisfied Moderately

Satisfied

Satisfied

Highly

Satisfied

1 2 3 4 5

NOTE: please indicate the level of satisfaction of each of the following elements keeping your job

conditions in view?

1. My base salary? 1 2 3 4 5

2. Community association/ location? 1 2 3 4 5

3. Job Autonomy 1 2 3 4 5

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Akram, Khan, Shah & Khan 51 ISSN: 2520 - 0739

4. Job responsibility 1 2 3 4 5

5. Medical or life insurance 1 2 3 4 5

6. Ownership stake/ equity interest 1 2 3 4 5

7. Performance bonus 1 2 3 4 5

8. Quality of working conditions 1 2 3 4 5

9. Retirement plan 1 2 3 4 5

10. Deferred compensation/ end of contract

cash out

1 2 3 4 5

Part- 3

NOTE: Please refer to the following scale while answering the following questions.

Strongly

Disagree

Disagree Neutral Agree Strongly Agree

1 2 3 4 5

Please indicate the level of agreeableness of each of the following statements keeping your current

job in view?

1. My performance is better than that of my colleagues with similar qualifications.

1 2 3 4 5

2. I am satisfied with my performance because it is mostly good. 1 2 3 4 5

3. My performance is better than other employee with similar

qualifications in other banks

1 2 3 4 5

4. The performance of my bank is better that of other banks. 1 2 3 4 5

Part-4

NOTE: Please refer to the following scale while answering the following questions.

Strongly

Disagree

Disagree Neutral Agree Strongly Agree

1 2 3 4 5

Please indicate the level of agreeableness of each of the following statements

keeping your current job in view?

1. The tasks that I do at work are enjoyable

1 2 3 4 5

2. My job is so interesting that it is a

motivation in itself

1 2 3 4 5

3. The tasks that I do at work are themselves representing a driving

power in my job

1 2 3 4 5

4. My job is meaningful 1 2 3 4 5

5. I feel lucky being paid for a job I like

this much

1 2 3 4 5

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Akram, Khan, Shah & Khan 52 ISSN: 2520 - 0739

6. The job is like a hobby to me 1 2 3 4 5