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CONTRIBUTIONS OF TRAINING AND COMPENSATION IN FINANCIAL INSTITUTIONS IN TANZANIA: A CASE OF NMB PLC
GIDEON CHRISTIANA DISSERTATION SUBMITTED IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE MASTER’S DEGREE IN HUMAN RESOURCES MANAGEMENT OF THE OPEN UNIVERSITY OF TANZANIA
2013
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CERTIFICATION
I, the undersigned, certify that I have read and hereby recommend for acceptance by the Open University of Tanzania, a dissertation entitled “Contribution of Training and Compensation in Financial Institutions in Tanzania: A Case of NMB PLC” in partial / fulfillment of the requirements for award of the degree of Master of Human Resource Management of the Open University of Tanzania.
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Dr. Chacha Alfred Matoka
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Date
COPYRIGHT
"No part of this dissertation may be reproduced, stored in any retrieval system, or transmitted in any form by any means, electronic, mechanical, photocopying, recording or otherwise without prior written permission of the author or the Open University of
Tanzania in that behalf"
DECLARATION
I, Gideon, Christian, declare that the dissertation entitled “Contribution of Training and Compensation in Financial Institutions in Tanzania: A case of NMB PLC” is my original work carried out by me under the guidance of my supervisor Dr. Chacha Matoka, and is the result of my own independent work/investigation, except where otherwise stated. Other sources are acknowledged by giving references. A reference list is appended. This dissertation had not been presented for award of any academic qualification in any higher learning Institution.
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Signature
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Date
DEDICATION
To my lovely brothers Mtebe and William, and the family of Mr Masatu for their unconditional love and unwavering support in my education achievement, may they live longer and God bless them.
ACKNOWLEDGEMENT
The support, supervision and encouragement of the following individuals are gratefully acknowledged, because without their support this dissertation would not have been successfully completed. Special thanks go to my supervisor Dr. Chacha Alfred Matoka and my associate students for allotment of their knowledge and giving proficient support and assistance. I would like also to convey my gratitude to the management and employees of NMB PLC for giving me the opportunity to conduct this study at their organization.
Indeed, I would like to thank my Wife, family and friends for their support and prayers, especially my wife, for her constant encouragement, assistance and support without to forget lovely parents, my father and my mother who laid the foundation for me to reach this stage in my academic career;
To God Almighty for blessing me with the wisdom, strength, courage and determination to reach for the goals I wish to achieve.
ABSTRACT
This study assessed the contribution of training and compensation in financial institutions in Tanzania. The general purpose of the study was to assess the contribution of training and compensation management in improving employee performance in financial institutions like NMB PLC. Specifically the study aimed to analyze the contribution of training and compensation to employee performance particularly in NMB PLC, to find out the effect of which training and compensation management can be used as a tool for improving organizational performance to both employees’ and employers’ and to determine the relationships between training and organization performance in financial institutions like NMB in Tanzania as a case study The pursuance of the objective of the study, descriptive survey design was adopted. Pearson’s Product Moment Correlation was used to test the significance of the coefficient of correlation at 5% level of significant.
It was found that training and compensation for employees in financial institutions has a significant effect on their performance and that financial compensation received are commensurate with employees’ efforts. The study more found that training and compensation have significant effect in organization performance to both employee and employers. However it found that there is significant relationship between on job-training and organization performance.
Based on these findings, it is recommended that for any financial institution such as NMB PLC to improve the performance of employees’, they should offer training and other forms of compensation that will specifically designed to link it with performance.
TABLE OF CONTENTS
CERTIFICATION ii
COPYRIGHT iii
DECLARATION iv
DEDICATION v
ACKNOWLEDGEMENT vi
ABSTRACT vii
LIST OF TABLE xi
LIST OF FIGURES xii
LIST OF APPENCIES xiii
CHAPTER ONE 1
1.0 INTRODUCTION 1
1.1 Background of the Problem 1
1.2 Statement of the Problem 4
1.3 General Objective of the Study 5
1.4 Specific Objectives 6
1.5 Research Questions 6
1.6 Significance of the study 6
CHAPTER TWO 8
2.0 LITERATURE REVIEW 8
2.1 Definition of Concepts 8
2.1.1 Training 8
2.1.2 Compensation 9
2.1.3 Performance 10
2.2.1 Theories of compensation 10
2.2.2 Compensation Strategy 13
2.2.3 Understanding Training and Compensation 14
2.3.1 Effect of Training on Employee Performance 16
2.3.2 Career Compensation 18
2.4 Empirical Study 21
2.5 Research Gap 23
2.6 Conceptual Framework 24
CHAPTER THREE 25
3.0 RESEARCH METHODOLOGY 25
3.1 Research Paradigm 25
3.2 Research Design 25
3.2.2 Study Population 26
3.2.3 Sample and Sampling Techniques 27
3.2.4 Sample Size 27
3.3 Data Collection 28
3.3.1 Types of Data (Primary and Secondary) 28
3.3.1.1 Primary data collection 28
3.3.1.2 Secondary Data Collection 29
3.3.2 Data collection Methods 29
3.4 Data Analysis 30
3.4.1 Descriptive Statistics 30
3.4.2 Inferential Statistics 31
3.5 Validity of Data 32
3.6 Reliability of data 33
3.7 Ethical Issues 33
CHAPTER FOUR 34
4.0 RESULTS AND DISCUSSION 34
4.1 Background Characteristics of Respondents 34
4.1.1 Gender of Respondent 34
4.1.2 Age of respondents 35
4.1.3 Marital Status of respondent 35
4.1.4 Educational Background of respondents 36
4.1.5 Years in services 37
4.2 Contribution of Training and Compensation in Financial Institutions 38
4.3 Effect of training and compensation to both employees and employers 39
4.4 Relationship between Training and Organization Performance 40
CHAPTER FIVE 42
5.0 CONCLUSSIONS AND RECOMMENDATION 42
5.1 Summary of Findings 42
5.2.1 Contribution of training and compensation on employees performance in financial institutions 42
5.2.2 The contribution of training on employees’ work performance in financial institutions 42
5.2.3 Relationship between training and organization performance 43
5.3 Conclusions 43
5.3.1 Recommendation 44
5.3.2 Implication of the results 44
5.3.3 Areas for further research 45
REFERENCES 47
APPENDIXES 53
QUESTIONAIRE 55
LIST OF TABLES
Table 3.1: Study Population 26
Table 3.2: Sample Size 28
Table 3. 3 : Descriptive Statistics 31
Table 3.4 Correlation Coefficient 32
Table 4.5 : Age Distribution of Respondents 35
Table 4.6 :Years in Services 37
Table 4.7 : Employee of Training and Compensation 39
Table 4.8 : Overall Responses on Effect of Training and Compensation 40
Table 4.9 : Training and Organization Performance 41
LIST OF FIGURES
Figure 2.1 : Conceptual Framework 24
Figure 4. 2 : Gender of Respondent 34
Figure 4.3 : Marital Status of Respondents 36
Figure 4.4 : Educational Level of Respondents 37
LIST OF APPENCIES
Appendix 1: RESEARCH TIMELINE OF ACTIVITIES 53
Appendix 2 : RESEARCH BUDGET AND SOURCE OF FUND 54
Appendix 3 : TOOLS FOR DATA COLLECTIONS 55
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CHAPTER ONE
1.0 INTRODUCTION
1.1 Background of the Problem
In any profit-oriented organization, employment relationship is seen as an exchange process where employees provide inputs in terms of skills and expertise in return for various compensations from the employer (Markova and Ford, 2011). Indeed, from the standpoint of the employee, pay has an important influence on standard of living, status and security. Less direct forms of compensation such as health care, pensions and other benefits also have an important impact on employees' well-being (Lotta, 2012). However, Rizwan and Ali, (2010) argued from the employer’s point of view that compensation is both a major cost of doing business that needs to be controlled, and an investment that must generate adequate returns in terms of employee attitudes, skills, behaviors and organization performance.
Besides, employees are the engine of organization vehicles while compensation, training or reward is the fuel. No organization can achieve its stated objectives without its employees (Sajuyigbe, 2009). Moreover, the decisive aim of every training and compensation program is to add value to human resources. Any training and compensation program that would not add value should be abandoned. Organizations should therefore make training and compensation of their employees a continuous activity. Arnoff, (2009) observed that training and compensation foster the initiative and creativity of employees and help to prevent manpower obsolescence, which may be due to age, attitude or the inability of a person to adapt him or herself to technological changes. Entwistle (2007) has of the view that if an employee performs successfully, it leads to organizational rewards (training and compensation) and as a result motivational factor of employees lies in their performance. The highly motivated employees serve as the competitive advantage for any company because their performance leads an organization to well accomplishment of its goals (Rizwan and Ali, 2010).
According to Obisi, (2001) training is a process through which the skills, talent and knowledge of an employee is enhanced and increased. He argues that training should take place only when the need and objectives for such training have been identified Scott, Clothier and Spriegel (2000) agreed that training is the corner-stone of sound management, for it makes employees more effective and productive. They argue that training is actively and intimately connected with all the personnel and managerial activities. It would be difficult for a new employee to grow on the job and become a manager without adequate training and compensation (Walter, 2007).
Mamoria, (2005) asserted that training in any organization is a practical and vital necessity because; it enables employees to develop and rise within the organization and increase their market value, earning power and job security. He explained that training helps to mould employees’ attitudes and help them to contribute meaningfully to the organization. The organization benefits because of enhanced performance of employees. He further states that a well trained employee would make a better and economic use of materials and equipment which would go a long way to minimize wastages.
Again, Hassan et al., (2010) contended that stability of employee as the result of training and compensation in the financial institutions an imperative part of the compensation, steadiness, and employee performance and economy of the country. Based on the preceding debate on motivation, job satisfaction and managing employee performance, it should have become apparent that motivating employees through trainings and compensation within an organizational setting requires a multi-facetted model. One of the factors to be considered is the management of compensation/rewards/incentives within an institution (Meyer and Kirsten, 2005).
Financial institutions in Tanzania have played the major role in bringing the foreign currency to the country’s economic system. Banking sectors accounts for 12% of Tanzania’s gross domestic product (BBC News, 2006). As the financial industry creates lots of reimbursement to the country each year empowered by the Tanzania government to establish various supporting policies to develop financial institutions through partnership continuously, but the contribution of training and compensation to employee performance and competences is the debate of the day (Ronra, 2009).
The contributions of training and compensation to the employees’ performance and competences in financial institutions are the hottest and current issue that always discusses by the government and academicians. Some have developed the hypothesis to securitize the relationship between training and compensation to employee’s performance, competences and institutional outcome as well. Since the sector have confronted with the global economic crisis on 2008 and 2009 there are immense of free labour movement in financial institutions. The crisis of economic and free labour movement is directly affects to the corporation, especially the production line and financial companies. The unexpected crisis and the prevailing political situations may reduce in the employee performance and competences if training and compensation could not be observed as critical issues to the employee and organizations’ prosperity (Ronra;, 2009 and Hassan et al, 2010).
However, the proceed knowledge likes the significant of the compensation and benefits package toward the employee and the preference of employees toward the different types of the compensation and benefits package are necessary to implant and infuse to all the employers in order to retain their quality workers (William, 2007). There are some factors which directly influenced to the employee performance and performance on the other in the real working environment. The employers would enjoy the benefits if they manage to retain their employees or maximize the employee performance by implementing the felicitously trainings, compensation and benefits package (Amlan, 2008).
Again, the contribution of training and compensation to the employee in financial institutions is one of the key issues in organization prosperity and sector’s hospitality. Globally researches have suggested that employee training and compensation is the stepping stone to their stability and competences. Studies have shown that the training and compensations increases the employee performance (Gautam, 2005). According to Ohabunwa, (2000) if organizations train their employees very well, managers and supervisors would have the confidence to delegate authority to their subordinates but when subordinates are not properly trained, it would be difficult for authority to be delegated to them by their superiors. We strongly believe that the compensation and training ways might be able to maximize the employee performance in the working place. This research paper tempted to evaluate the contribution of training and compensation in financial institutions in Tanzania on employee’s performance with special reference to NMB PCL in Dar es Salaam city.
1.2 Statement of the Problem
Every organization concern strives to make profit within the targeted period. The recognition of this objective involves the preplanning and co-coordinating of all aspects of the business enterprise both human and materials (Ali, 2010). Opkara, (2006) pointed out that numerous studies have examined the factors influencing employee performance and competences and came up with the findings that good working conditions, training and compensation are most critical factors for employees’ protection. Currently one of the most serious problems confronting organizations is refusal of most of them to take the right decision to expend money for training and compensating their employees. This singular decision followed by the act of implementing, could solve the problem of employee non-performance, (Gatahwa, 2011).