IMPACT OF EMPLOYEE COMPENSATION ON ENTERPRENEURIAL PRODUCTIVITY

CHAPTER ONE

INTRODUCTION

1.1.   BACKGROUND OF STUDY

After the Second World War, concern for economic development became all-pervasive. There was a growing concern for economic development and this strengthened interest in entrepreneurship with primary focus on exploring practical measures to augment the supply of entrepreneurs, i.e. persons with competence and aptitude to initiate, nurture and expand industrial enterprises. This resulted in the belief in education and training to inculcate and develop entrepreneurial capabilities in people so that they could set up their own enterprises. Subsequently programmes directed towards this goal were conceptualized. The nineteen century was a fertile time for entrepreneurial activity, as technological advances during the industrial revolution provided the impetus for continued inventions and innovations. Much of the literature in the field of entrepreneurship is from the USA and Europe, and thus is based upon western values and cultures. The study of entrepreneurship continues to grow as a field of enquiry and remains one of the most attractive areas of research in the management field.

Entrepreneurship (small business enterprise) plays a significant role in world economy. Specifically, small business firm constitute majority of the types of businesses in all economies of the world (Hill and McGowan, 1999, Timmons, 1994; Storey, 1994, Culkin and Smith, 2000). Some of the world’s multi-national corporations, which have influenced many world economics, started as small business enterprise. In Nigeria entrepreneurship, (small business enterprise) accounts for substantial part of the total industrial employment, production, and value-added in Nigerian business concerns. Okongwu (2001) explained that small business enterprises generate the industrial wealth of Nigeria in addition to being a major agent in the economic, technological, social and political growth and development of Nigeria, not minding the presence of multinational and other large firms in Nigeria such as Shell, Mobil, NNPC, NITEL, NPA, NPHC, Lever Brothers, Nestle Foods and others. Through small business entrepreneurship, jobs are created not just for the entrepreneurs themselves but also for other people in the Nigerian economy. The aftermath of creation of jobs is reduction in dependence on government to provide everybody with jobs, reduce government expenditure, improve standard of living of Nigerians, reduce social ills in the society, create balanced budget for the economy and invariable leads to higher Gross Domestic Product (GDP).

Entrepreneurs, through efficient and effective entrepreneurship practices and strategies contribute substantially towards economic development by producing and introducing new goods, services and ideas into the market or through new production methods or technologies. Entrepreneurial business organization or individuals are propellers of contemporary world economies. The conceptualization, development, production and commercialization of new goods and services and ideas can revitalize ancient industries or create entirely new ones. Entrepreneurial business companies and individuals are the change agents that accelerate modern societies forward and engender beneficial innovations via continuous improvement, creative destruction of old offerings and process and creative transformation of systems and cultures (Kropp and Zolin 2005). :

Therefore, for Nigeria to be reckoned with in the community of nations economically, there is the important and urgent need to encourage entrepreneurship in small business enterprise in the country. It should be a managerial and governmental policy to note always that entrepreneurship is needed in the Nigerian economy to create jobs, reduce unemployment rate, crime rates, government’s expenditure, poverty, social unrest, create wealth, raise productivity level of the economy, provide certain services conveniently and raise the standard of living of Nigeria. For the Nigerian economy to be strong and stable in the relevant sectors, there is the need to emphasize and practice entrepreneurship in small business enterprises through the enactment of relevant policies, efficient and effective management practices, and provision of the enabling environment in Nigeria. Success or productivity of entrepreneurship is closely related to employee and employee remuneration. The ability to remunerate employee is generally considered an essential management tool in achieving entrepreneurial productivity. Adequate employee remuneration motivate employee towards putting in their best which in turn leads to increased productivity. Employee remuneration is defined as, “the reward or compensation given to the employees for their work performances. It is a method of promoting morale, increasing motivation and foster team cohesion. there two main types of employee remuneration namely Piece Rate method and Time Rate method. the former is compensation based on unit productivity, while the latter is the time an employee spends on a job, such as finishing a project before a deadline.

1.2    STATEMENT OF PROBLEMS

Employees in most private organizations in Nigeria are not well remunerated in the work place and this has been brought about low entrepreneurial productivity. Management seems to ignore the factors that create conducive environment for compensation such as good working environment, appropriate and adequate remuneration, promotion, training and manpower development. Research has shown that in private sectors, little or no attention is paid on employee remuneration and motivation. More emphasis is placed on more productivity and increased productivity. In today’s competitive world, management needs to continuously emulate practices that will attract and retain a highly qualified and skilled workforce. Dissatisfied employees may be forced to work due to unemployment or insecurity, but this is not in the interests of the long-term success of the organization. Inadequate employee remuneration brings about dissatisfaction which in turn brings about low entrepreneurial productivity. Dissatisfaction may be expressed in other forms like internal conflicts, poor interpersonal relations, low trust, stress leading to workplace conflict, and violence. It is generally recognized that employees currently in the work force are more concerned than their predecessors with the quality of their working life and with the associated psychological reward. It is doubtful however, whether many of them would continue working if it were not for remuneration. This further brings to lime light the relevance of remuneration in an organization.

1.3.   OBJECTIVE OF STUDY

The most visible reward for work is monetary. Not surprising therefore, that employees place great emphasis on matters relating to their remuneration. The main objective of the research study is to identify the impact of employee compensation on entrepreneurial productivity. Other objective of the study include the follow:

i.  To highlight the need for adequate remuneration especially in the private sector.

ii. To enumerate the effect of inadequate remuneration on entrepreneurial productivity

iii. To examine the correlation between remuneration and employee performance.

iv. To evaluate the problems inhibiting the performance of employees and acknowledge them in terms of improving employee remuneration and training/development.

v.  To address the increasing issue of job dissatisfaction which account for major reasons for low entrepreneurial productivity.

vi. To highlight the need for employee promotion in relation to entrepreneurial productivity .

vii To bring to bare, the causes of high labour turnover and seek ways to address it.

viii. To highlight the role of compensation in attracting and retaining right caliber of employee.

ix. To further emphasize on the need for employee utmost participation in achievement of organizational goal.

1.4    RESEARCH QUESTION

To address the research problem empirically, it is necessary to build a conceptual and prepositional foundation that will help to appreciate the relative importance and possible inter-relationship between employees’ compensation and entrepreneurial productivity.

Below are some of the research questions of the study.

i. To what extent does employee remuneration affect entrepreneurial productivity?

ii. Does employee training and development have any impact on entrepreneurial productivity?

iii. Does staff incentive have any impact on entrepreneurial productivity?

iv. To what extent does promotion affect employee performance?

1.5    RESEARCH HYPOTHESIS

To provide systematic answers to the research questions. Attempt will be made to explore the relationship among variables highlighted in the study.

The following hypothesis will be tested:

Hypothesis 1

H1: Employee remuneration does not affect entrepreneurial productivity.

Hypothesis 2

H2: Employee training and development do not have any impact on entrepreneurial productivity.

Hypothesis 3

H3: Staff Incentive does not have any impact on entrepreneurial productivity.

Hypothesis 4

H4: Promotion does not affect employee performance.

1.6    SIGNIFICANCE OF THE STUDY

The study will be of immense importance to many sectors such as students, employees and management especially human resources managers who will adopt the findings of this research for better compensation scheme for their workers. The research, when completed, will create a corrective measures which if put into use will enhance further efficiency. Finally, it is hoped that this research will be of tremendous help as well as a source of reference for further research.

1.7    SCOPE AND LIMITATION OF STUDY

This study covers the extent to which employees remuneration affect or improve entrepreneurial productivity. Employee remuneration however, is not the only factor that influences entrepreneurial productivity but, due to financial and time constraints, this study shall be limited to the impact of employees’ compensation on entrepreneurial productivity; the scope and area of coverage will however, be limited to Flying Eagle Shipping Limited, a private firm engaged in international logistics with head office located at Surulere, Lagos State.

1.8    OPERATIONALIZATION

Operationalization simply put is the difference or disparity between the independent and the dependent variable of a research work. The independent variable as the name implies is the main variable used in the research and can be manipulated by the researcher. The dependent variable is dependent on the independent variable and also manipulated by the independent variable. This research work tries to highlight the impact of the independent variables on the dependent variable. For the purpose of this research work, the independent variable are expressed below

Y = f(X}

Where                   Y = Dependent Variable

X = Independent Variable

f = Function

i.e  EP = f(EC)

Where,

EP = Entrepreneurial Productivity

EC = Employee Compensation

EP consist of the following

Y = EP = (Y1. y2, y3, y4 ……………..Yn)

Y1 = Increased Performance

Y2 = Increased Output

Y3 = Increased Profitability

Y4 = Increased Market Share

X = EC = (X1,X2,X3,X4…………………………Xn)

EC consist of the following

X1 = Remuneration

X2 = Incentive

X3 = Training and Development

X4 = Promotion

This research study only covers the analysis between the variable of productivity construct (increased performance, increased output, increased profitability and increased market share) and the variable of employee compensation construct (remuneration, promotion, training and development and incentive).

1.9    PROFILE OF FLYING EAGLE SHIPPING LIMITED

FLYING EAGLE SHIPPING LIMITED is an International Freight Forwarder, Relocation, Removal and Storage Company designed to render highly professional and personalized service in the areas of International Freight Forwarding, Clearing of Consignment from the Sea and Air Ports with services covering International Freight Forwarding, International Removal & Relocation of household goods and general cargo, Custom Clearance, Door to Door Services, Local and International Removal, Haulage, Warehousing and Project Handling. Flying Eagle Shipping Limited has its Head Office located at 2 Okanlawon Ajayi Street, Surulere, Lagos and Branch Offices at Abuja, Port Harcourt, Calabar, Warri. Also have full fledged offices in Abidjan, Mali and Ghana. The company is custom licensed and incorporated in 2001 under the Company and Allied Matters Decree of 1990. Flying Eagle Shipping Limited provides international moving services of the highest quality. She has a team of efficient professionals who guarantee sound international Move. Removal services are carried out in the most professional way by a team of highly trained and well-equipped personnel.

1.10 SCOPE OF SERVICES RENDERED BY FLYING EAGLES SHIPPING LIMITED

– Customs Clearance at all Nigerian Air & Sea Ports viz. Lagos – Apapa & Tin Can Island Ports, Lagos; Port Harcourt – Area 1 & Onne (FOT & FLT); Calabar Port; Lagos – Murtala Mohammed International Airport, Lagos; FCT, Abuja – Nnamdi Azikwe International Airport, Abuja; Port Harcourt – Port Harcourt International Airport, Omagwa; and Kano – Aminu Kano International Airport, Kano.

– Export Processing and Forwarding of Commercial Cargoes and Personal Effects to Worldwide destinations through at all Nigerian Air and Sea Ports listed above.

– Repairs and Return of Equipment, Machinery and Tools to and from over 700 worldwide destinations in partnership with Flying Eagles Shipping Limited.

– Door to door and door to port handling of inbound I outbound commercial cargoes and personal effects from over 700 worldwide destinations. Our constant and frequent usage of various trade routes in the world accounts for our strength, stability and ability. This has qualified us for discount facilities from major Airlines. With effective use of high level information equipments and a team of top-of-the-line professionals, we lift cargo from any part of the world and deliver to customers door step (irrespective of volume).

– Local and International removals and relocation of Household Goods & Personal Effects.

– Industrial relocation including dismantling, removal, transportation and reinstallation of Machinery and office structure.

–  Handling of diplomatic cargoes on door to door and door to port basis.

–  Heavy Duty Haulage and Transportation within Nigeria.

1.11 DEFINITION OF TERMS

PRODUCTIVITY

This is defined as multiplicative function of motivation and ability. It is an overall measure of the ability to produce a good or service. More specifically, productivity, is the measure of how specified resources are managed to accomplish timely objectives as stated in terms of quantity and quality.

MOTIVATION

This refers to an inner drive that compels and moves an individual to act or behave in a certain way I manner. Tannehill (1970) defined motivation as an influence, a force that gives rise to behavior. He went further to say that motivation is something that makes people to move in a given direction, not with a threat or force but some promise of reward.

ORGANIZA TIONAL EFFECTIVENESS

According to the Merriam Webster Dictionary, organizational effectiveness can be defined as an organization that produces a desired effect. Likewise, organizational efficiency can be described as an organization that is productive without waste. The desired effect will depend on the goals of the organization. In a nut shell, it refers to the extent to which output is in line with organizational objectives.

MANAGEMENT