Patrick Mwangi

THE EFFECT OF COMPENSATION ON EMPLOYEE
MOTIVATION: A CASE STUDY OF CHLORIDE EXIDE
BY
PATRICK K. MWANGI
UNITED STATES INTERNATIONAL UNIVERSITY
SPRING 2014
THE EFFECT OF COMPENSATION ON EMPLOYEE
MOTIVATION: A CASE STUDY OF CHLORIDE EXIDE
BY
PATRICK K. MWANGI
A Project Report Submitted to the Chandaria School of Business in

Partial Fulfillment of the Requirement for the Degree of Masters in
Business Administration (MBA)
UNITED STATES INTERNATIONAL UNIVERSITY
SPRING 2014
STUDENTS DECLARATION
I, the undersigned, declare that this is my original work and has not been submitted to
any other college, institution or university other than the United States International
University in Nairobi for academic credit.
Signed: Date:
Patrick Kihato Mwangi (ID 628678)
This project has been presented for examination with my approval as the appointed
supervisor.
Signed: Date:
Dr. Teresia Kavoo Linge
Signed: Date:
Dean, Chandaria, School of Business
ii
COPYRIGHT
2014 by Patrick Kihato Mwangi
All rights reserved.
No part of this report may be photocopied, recorded or otherwise reproduced, stored

in a retrieval system or transmitted in any form or by any electronic or mechanical
means without prior permission of the owner.
iii
ABSTRACT
The general objective of the study was to determine the effect of compensation on
employee motivation at Chloride Exide group of Companies. This study was guided
by three research objectives namely: to establish the methods used to determine
employees compensation at Chloride Exide, to establish the extent to which direct
financial rewards affect employees motivation at Chloride Exide, and to establish the
extent to which benefits affect employees motivation at Chloride Exide.
The study used descriptive research design. A sample of forty one respondents was
selected out of the population of one hundred and thirty seven employees using
stratified sampling technique. This represented a 30% sample of the whole
population. A structured questionnaire was used to collect data from the respondents.
The data was analyzed using the Statistical Package for Social Sciences (SPSS). It
was interpreted in frequencies, percentages and correlations. The findings were
presented using tables and figures.
The study found that many of the respondents were not very conversant with the
methods used to determine employee compensation at Chloride Exide. In particular
they were not familiar with the compensation plan used in the organization. Only a
small number felt that the existing pay structure ensured internal and external equity.
The respondents however, concurred that their jobs were well defined.
With regard, to the extent to which financial payments affect employees motivation,
the respondents were impressively aware of all entitlements both basic and other
contingent payments. The level of motivation was relatively low and the respondents
felt that their motivation levels would be boosted if their basic pay was to be
increased. The response on pay for performance system, team work and team reward
was positively high. There was however a small percentage of respondents who were
either not sure how the financial payments received affected their motivation.
In relation to the effect of benefits on employees motivation, the study showed that
there was a high level of awareness of benefits entitled to the respondents. The
respondents valued the benefits given and they had a general consensus that the
iv
benefits motivated them. Most respondents also agreed that there was a system that
recognized staff and rewarded performance. This system motivated them.
In conclusion the study demonstrated that a proper compensation plan was lacking
and employees lacked some of the key information in employee compensation
determination. The study also concluded that although the employees were highly
motivated by basic pay and were well aware of their compensation entitlements, the
motivation was not driven by the basic employee motivators. The study also
concluded that most of the employees were knowledgeable of their benefits.
The study recommends that a proper system of compensation plan be developed. The
system should have all the fundamentals of a good compensation plan. The
organization should ensure that key information on staff and compensation is
deliberately communicated to them. Feedback mechanism should also be developed
and staff encouraged to use them. This helps to improve the level of awareness by
staff. Further recommendation is that management should clearly document pay
structures and effectively communicate the same to all. In addition the study
recommends a thorough review of total rewards and a job evaluation exercise. This
exercise should aim at enhancing internal and external equity between the employees.
The management should create forums where employee compensation and motivation
would be discussed and implemented.
v
ACKNOWLEDGEMENT
I humbly acknowledge the great support I have received from various people and for
their contribution to this project, without their support this work would never have
come to completion.
To my supervisor Dr. Teresia Kavoo Linge for her dedication, time and the push to
achieve academic excellence. The entire thesis academic team at USIU for working
tirelessly to ensure that academic excellence is maintained at the highest level.
To all colleagues at Chloride Exide, for the support you have given me throughout
and for time taken off busy schedules to complete the questionnaire. To my prayer
and accountability group members, your continuous prayers and support messages
have been real.
To my family my greatest motivation and reason for waking up every day, thank you
for the support and patience. Lastly but not least; to my God, you are my strength, my
provider and my guidance. Your faithfulness and mercy endures forever.
vi
DEDICATION
To my family: Wife Susan Kihato and Children, Abigail Kihato and Jeremy Kihato
May you be motivated not by things of this world but by the everlasting love to live
and do good.
vii
TABLE OF CONTENTS
STUDENTS DECLARATION ............................................................................................... ii

COPYRIGHT ........................................................................................................................... iii
ABSTRACT .............................................................................................................................. iv
ACKNOWLEDGEMENT ....................................................................................................... vi
DEDICATION ........................................................................................................................ vii
LIST OF TABLES .................................................................................................................... x
CHAPTER ONE ....................................................................................................................... 1
1.0 INTRODUCTION ................................................................................................. 1
1.1 Background of the Study......................................................................................... 1
1.2 Statement of the Problem ........................................................................................ 4
1.3 General Objective ................................................................................................... 4
1.4 Specific Objectives ................................................................................................. 5
1.5 Significance of the Study ........................................................................................ 5
1.6 Scope of Study ........................................................................................................ 6
1.7 Definition of Terms................................................................................................. 6
1.8 Chapter Summary ................................................................................................... 7
CHAPTER TWO ...................................................................................................................... 8
2.0 LITERATURE REVIEW ..................................................................................... 8
2.1 Introduction ............................................................................................................. 8
2.2 Methods Used to Determine Employees Compensation ....................................... 8
2.3 Direct Financial Payments and Employees Motivation ....................................... 12
2.4 Benefits and Employees Motivation .................................................................... 17
2.5 Chapter Summary ................................................................................................. 20
CHAPTER THREE ................................................................................................................ 21
3.0 RESEARCH METHODOLOGY ....................................................................... 21
3.1 Introduction ........................................................................................................... 21
3.2 Research Design.................................................................................................... 21
3.3 Population and Sampling Design .......................................................................... 21
3.4 Data Collection Methods ...................................................................................... 23
3.5 Research Procedures ............................................................................................. 24
3.6 Data Analysis Methods ......................................................................................... 24
3.7 Chapter Summary ................................................................................................. 25
CHAPTER FOUR................................................................................................................... 26
4.0 RESULTS AND FINDINGS............................................................................... 26
4.1 Introduction ........................................................................................................... 26
viii
4.2 General Information .............................................................................................. 26
4.3 Methods Used to Determine Employees Compensation ..................................... 29
4.4 Direct Financial Payments and Employee Motivation.......................................... 34
4.5 Benefits and Employee Motivation....................................................................... 40
4.6 Chapter Summary ................................................................................................. 43
CHAPTER FIVE .................................................................................................................... 45
5.0 DISCUSSION, CONCLUSIONS AND RECOMMENDATIONS .................. 45
5.1 Introduction ........................................................................................................... 45
5.2 Summary ............................................................................................................... 45
5.3 Discussions ........................................................................................................... 46
5.4 Conclusion ............................................................................................................ 51
5.5 Recommendations ................................................................................................. 52
REFERENCES........................................................................................................................ 55
APPENDICES ......................................................................................................................... 59
APPENDIX I: COVER LETTER ......................................................................................... 59
APPENDIX II: QUESTIONNAIRE ..................................................................................... 60
ix
LIST OF TABLES
Table Page
Table 3.1 : Population size 22

Table 3.2 : Sample size . 23
Table 4.1 : Response Rate per Strata 26
Table 4.2 : Gender Distribution 27
Table 4.3 : Age Distribution . 27
Table 4.4 : Education Level Distribution . 27
Table 4.5 : Years of Employment 28
Table 4.6 : Employment Motivation level ... 28
Table 4.7 : Employee Compensation Constitutes a Significant Portion of
the Companys Costs . 29
Table 4.8 : Employees Compensation Plan is Well Formulated 30
Table 4.9 : Pay Structure Meets the Requirement of The Government of
Kenya . 30
Table 4.10 : Pay Structure Ensures Internal Equity ... 31
Table 4.11 : Pay Structure Ensures External Equity .. 31
Table 4.12 : Jobs are Well Defined 32
Table 4.13 : Employees are Adequately Compensated for the Use of Skills
. 32
Table 4.14 : Incentives for Gaining New Skills or Knowledge . 33
Table 4.15 : Employee Compensation Decisions are Centrally Managed .. 33
Table 4.16 : Salary Surveys are Conducted Before Determining New
Salaries 34
Table 4.17 : Basic Pay is Reviewed Periodically 34
Table 4.18 : Basic Pay Variations 35
Table 4.19 : Basic Pay Motivates 35
Table 4.20 : Basic Pay is Well Balanced Compared to Work Done ... 36
Table 4.21 : Basic Pay Well Balanced for All Employees . 36
Table 4.22 : Basic Pay Increase and Motivation 37
Table 4.23 : There Exists a Performance Pay System 37
Table 4.24 : Team Reward Motivates Employees .. 38
Table 4.25 : Team Work was Enhanced by Team Reward 38
x
Table 4.26 : There Exists an Organizational Reward System 39
Table 4.27 : Correlations Between Direct Financial payments and
Employees Motivation 40
Table 4.28 : Importance of Benefits to Employees 41
Table 4.29 : Contribution of Benefits to Staff Motivation 42
Table 4.30 : There Exists a System of Staff Recognition .. 42
Table 4.31 : Recognition System Motivates .. 43
Table 4.32 : Correlations Between Employees Benefits and Employees
Motivation .. 43
xi
CHAPTER ONE
1.0 INTRODUCTION
1.1 Background of the Study
Motivation can be defined as the set of factors that cause people to behave in certain
ways (Schwartz, 2006). Motivation is derived from the term motive which is a reason
for doing something (Amstrong, 2008), the reason can either be internal (intrinsic) or
external (extrinsic) factors (Herzberg et al, 1957). Motivation can be described as
goal-oriented behavior (Amstrong, 2008). Drafke (2002) defines motivation as simply
an incentive to act.
Motivation is among the key concerns of organizations in the modern business

environment, as it has been identified to be critical in achieving business goals and
objectives. This means giving close attention to how individuals can best be
motivated to achieve objectives set for them (Amstrong, 2008).
Amstrong (2008) continues to say that motivation can be through incentives, rewards,
and positions all aimed at ensuring that the individuals deliver results in accordance
with expectation of management.
Motivation determines how a person will exert his or her effort. It represents the
effort will be exerted (DeNisi and Griffins, 2008). Because of motivation's role in
understand and to structure the work environment to encourage productive behaviors
and discourage those that are unproductive. (Jex and Britts, 2008)
Motivation is important in team-based environments as well as where employees

work independently. Motivation involves aligning employee goals and values with the
organizations mission and vision in order to create and maintain high levels of
performance (Campbell, 2007). Campbell (2007) adds that as the marketplace
becomes increasingly competitive, it is evident that firms must especially appreciate
the role of employees towards establishing a competitive edge and that individuals
motivated are top performers who consistently provide high quality
results; maintain high levels of productivity and overcome challenges and obstacles.
1
Motivation has also been defined as the act of stimulating someone to take desired
course of action (Ghosh, 2000). Clegg and Birch (2002) defines motivation as the
stimulation of action towards a goal, whether the stimulus is conscious or
unconscious.
Motivation theory examines the process of motivation, it explains why people at work
behave in the way they do in terms of their efforts and directions they are taking. The
aim in understanding and applying motivation theory is to obtain added value through
people (Amstrong, 2008), the other key reason is about getting people to move in a
certain desired direction to achieve a result (Amstrong, 2008). Cole (2002) when
discussing motivational theories argues that different people have different view when
it comes to motivation which ranges from rational-economic view, social view, self
actualizing view and complex view. Beardwell et al. (2004) explains that
understanding of motivation is important within the reward and development of
reward strategies for it enables organization to humanize work for employees, make
the jobs more satisfying, and finally it enable the management to control the behavior
of subordinates more effectively
Maintaining highly motivated employees is therefore a strategic move to keep

employees committed to working hard and ultimately contributing their optimal
capability towards achieving the organizations goals (Frey and Osterloh, 2002).
Motivation differs depending on whether you are motivating an individual, a team or
a large group of people (Clegg and Birch, 2002).
On the other hand, according to Amstrong (2008) de-motivated employees exhibit

signs of low morale, this can have destructive implications in the organization.
Amstrong (2008) continues to say that among the more significant warning signals of
de-motivated employees are high rates of absenteeism, tardiness, high levels of
employee turnover, sabotage, low pride in their work, wastage, low job satisfaction,
endless grievances, indiscipline and lack of team spirit (Armstrong, 2008). In order to
curb these and other problems that can escalate into more serious crises in the
organization, de-motivation should be detected early and necessary actions taken,
these may include counseling of de-motivated employees, clearly explaining their
2
roles, responsibilities and rewards and ensuring their expectations match those of the
organization.
Key factors that determine employee motivation are satisfaction, recognition,

appreciation, inspiration and compensation (Bowen, 2000). Organizations that
recognize the importance of motivating employees often implement strategies that
consistently motivate their employees to achieve the organizations objectives. Such
strategies for improving motivation include compensation, employee participation,
feedback and work environment which ensure that employees needs and
requirements are met (Bowen, 2000). Clegg and Birch (2002) argues that the thought
of incentive is in itself motivational, in fact most motivation comes from anticipation
than the delivery of the incentive itself
Compensation is one of the key drivers of motivation because humans are naturally
inclined to perform better when they perceive that they will get sufficient payment or
returns from their efforts. While people exert effort for different reasons, todays
competitive economic environment coupled with the consumer society has made
compensation arguably the most important motivation factor. Most people are
motivated by money at least for their basic needs and wants.
Compensation in any form is the most obvious extrinsic reward; it provides the carrot
that most people want. (Amstrong, 2008). DeNisi and Griffins (2008) defines
compensation as the set of rewards that organizations provide to individuals in return
for their willingness to perform various jobs and tasks within the organization.
Chloride Exide group of companies consists of Chloride Exide (K) Ltd, Chloride
Exide (T) Ltd, Battery Masters (U) Ltd and Chloride Exide (R) Ltd. The company
was first introduced to Kenya in 1963 as part of Chloride group PLC in the UK to
retail and distribute Chloride Exide Batteries. It has since become the largest battery
and solar systems distributor with 17 branches spread across Kenya and three other
fully fledged sister companies in Tanzania, Uganda and Rwanda. The company has its
head offices located in the Industrial Area of Nairobi at Exsan House off Enterprise
road; it has depots in other major towns in Kenya.
3
1.2 Statement of the Problem
While compensation is arguably one of the key drivers of motivation and one of the
most studied areas, doubts have been cast by Herzberg et al. (1957) and Amstrong
(2008) on the effectiveness of compensation. They argued that, while lack of it causes
dissatisfaction, its provision does not result in lasting motivation. The effects of
compensation on motivation vary from organization to organization.
Most people are motivated by money at least for their basic needs and wants (DeNisi
and Griffins, 2008). Employee motivation through compensation can be in several
forms including salary raises, performance bonuses, commissions, profit sharing and
other extra benefits such as vacations, cars and other tangible items that are used as
rewards (Campbell, 2007). These compensation systems can be categorized as direct
financial payment and indirect financial payments (Dessler, 2004).
Nelson and Spitzer (2003) states that in todays work environment, there is more
change and uncertainty, there is increased need for empowered employees, there is
decline in traditional incentives, there is rise of nontraditional incentives and there is
increased use of variable compensation. Studies have also shown that compensation
programs and the methods of administration affect employee motivation (Bowen,
2000). Many researchers have focused on satisfaction, recognition, appreciation and
work environment as employee motivators in different organizations (Kosgei, 2011).
However none has studied employee compensation at Chloride Exide.
It is not clear what methods were used to determine employee compensation, what
direct and indirect financial programs were offered at Chloride Exide and their effects
on employee motivation and lastly the non-financial benefits offered and their effect
on employee motivation. This study sought to address this gap by enquiring on the
effect of compensation on employee motivation at Chloride Exide group of
companies.
1.3 General Objective
The general objective of this study was to enquire on the effect of compensation on
employee motivation at Chloride Exide group of companies.
4
1.4 Specific Objectives
1.4.1 To establish the methods used to determine employees compensation at

Chloride Exide.
1.4.2 To establish the extent to which the direct financial payments affect
employees motivation at Chloride Exide.
1.4.3 To establish the extent to which benefits affect employees motivation at
Chloride Exide.
1.5 Significance of the Study
Having studied Chloride Exide, an entity in the motor vehicle industry and a market
leader in distribution of the automotive batteries and renewable energy solutions, the
study is important to a number of stake holders as follows:-
1.5.1 Chloride Exide Management and Staff

The study will assist the overall management team in the company as it will show the
trade off point between compensation and employee motivation. This is particularly
important to the departmental heads that will need to the knowledge on how to
motivate their staff to achieve the set objectives effectively and efficiently.
Specifically to the Human Resources Manager, the study will help highlight any areas
of concern and strength. This will help in attracting and retaining the staff.
1.5.2 Researchers
Currently the motor vehicle industry is operating under a very highly dynamic
environment, characterized by high competition and fast technological changes. The
study will be of importance to other researchers in future who may be interested in
studying motivation under these very high dynamic conditions and also the dot com
generation.
1.5.3 Government
Chloride Exide is a privately owned regional organization specializing in provision of
renewable energy solutions. The study will be important for the Governments of
Kenya, Uganda, Tanzania and Rwanda, to understand what motivates the staff and
hence contributes to the company growth. It would be important for the government
policy makers to know of areas in which they can provide the company with further
incentive, for such a worthy course of growing the reliance on renewable energy.
5
1.6 Scope of Study
The study examined the employees of Chloride Exide Group of Companies who were
employed on permanent and those on contract in the year 2013. Chloride Exide group
of companies consisted of Chloride Exide (K) Ltd, Chloride Exide (T) Ltd, Battery
Masters (U) Ltd and Chloride Exide (R) Ltd. The company was first introduced to
Kenya in 1963 as part of Chloride group PLC in the UK to retail and distribute its
branded batteries. Chloride Exide is the market leader and the single largest battery
and solar systems distributor with 17 branches spread across Kenya and three other
fully fledged sister companies in Tanzania, Uganda and Rwanda. The companys
head office is located in the Industrial Area of Nairobi at Exsan House off Enterprise
road. It has depot network in other major towns in Kenya and the rest of the Eastern
African countries.
This research project examined the impact of compensation schemes by examining

previous studies and literature on the issue and by conducting a study on employees at
Chloride Exide. The research data was collected from 37 respondents out of 41
requests. Some of the limitations experienced included distance related in reaching
some of the intended respondents and availability of personal time to fill the
questionnaire. To mitigate the effects of these limitations, the researcher used emails
to reach far respondents and individually telephoned the respondents to explain the
purpose of the study and give assurance that confidentiality would be upheld.
Through this the researcher got a response of 90%.
1.7 Definition of Terms
1.7.1 Motivation
A motive is a reason for doing something; motivation is concerned with factors that
influence people to behave in certain ways. Motivating people is about getting them to
move in the direction you want them to go to achieve results (Armstrong, 2008).
There are two types of motivation as originally identified by Herzberg et al. (1957)
that is, intrinsic motivation (self generated factors for example interest, responsibility)
and extrinsic motivation (from others for example increased pay, praise, punishment,
criticism).
6
1.7.2 Compensation
This is the package of quantifiable rewards an employee receives for his or her labour.
It includes three components: base compensation, pay incentives and indirect
compensation/ benefits. (Gomez et al, 2012).
1.7.3 Productivity
Defined as the individual output; this may be in the form of units per person or
revenue generated per person (Amstrong, 2008).
1.8 Chapter Summary
This chapter presented the background of the study. The statement of the problem was
provided. The chapter stated the general objective and also the specific objectives of
the study. Next the chapter gave the significance and the scope of the study. Finally
the definition of terms and the chapter summary were provided.
The next chapter reviews the literature and other studies carried out in the same area
of employees motivation. This was done in order to form substantial basis for the
analysis of the findings and possible conclusions. Chapter three discusses the
methodology of the study, while chapter four will present the findings of the study.
The last chapter five discusses the findings, conclusions and recommendations.
7
CHAPTER TWO
2.0 LITERATURE REVIEW
2.1 Introduction
This chapter will review the critical literature of current knowledge including
substantive findings, theoretical and methodological contributions to the area of
employees compensation and the effect on employees motivation. The review will
address three research objectives namely; to establish the methods used to determine
employees compensation, to establish the extent to which direct financial payments
affect employees motivation and finally to establish the extent to which benefits
affect employees motivation.
2.2 Methods Used to Determine Employees Compensation
According to Gomez et al. (2012), employees compensation is the single most

important cost in most firms, in some manufacturing organizations it accounts for
60% of the total cost. However, this is even higher in some service organizations and
this means that the effectiveness with which compensation is allocated can make a
significant difference in gaining or losing the competitive edge. The same is echoed
by Dessler (2008) who says that developing a good employee compensation plan is
important for any organization and its employees. He continues to say that improperly
developed compensation plan may result to a wage rate that is too high hence
unnecessary expenses; while paying less may guarantee inferior employee quality and
high employee turnover. At the same time internally inequitable wage rates reduce
employee morale and cause endless complains from the employees.
The most important aspect of any compensation plan is the relationship that exists
between performance and reward (Nelson and Spitzer, 2003). For that reason,
administration of compensation in any organization involves designing a cost
effective pay structure that will attract, motivate and retain competitive employees
(Decenzo et al, 2007). Amstrong (2008) also notes that one of the aims of reward
management is to motivate people and obtain their commitment and engagement.
8
According to Dessler (2008) there are several factors that affect the design of any
compensation plan, these include, legal considerations, union influences, company
policies and competitive strategic objective and lastly internal and external equity. To
fully understand how any organizations determine its employee compensation plan
one need to look at how employee compensation plans are categorized, the factors
used to determine the compensation plans and the process of developing the
compensation plans.
2.2.1 Categorization of Employees Compensation
According to Dessler (2008) there are two broad ways of categorizing compensation,
namely; Job-based approach and Skill-based approach. The Job-based approach is the
most traditional and widely used type of compensation plan. According to Gomez et
al. (2012) the plan assumes that jobs are very well defined and titled, for example a
cashier, a matron or a chef. The works in these jobs is done by people who are paid to
perform them well. In this plan since all jobs are not equally important to the firm, the
labour market puts greater value on some jobs than on others with the most important
jobs paying the most. DeNisi and Griffin (2008) refers to this as pay-for-knowledge,
which they describe as compensating employees for learning specific information.
Milkovich et al. (2013) defines job-based approach, as paying an individual for the
jobs they are assigned irrespective of skills they possess.
The skill-based approach on the other hand assumes that workers should not be paid
for the jobs they hold but for how capable they are at performing the task or multiple
tasks (Gomez et al, 2012). The greater the variety of job-related skills one possesses
the more they are paid. DeNisi and Griffin (2008) defines skill-based pay as rewards
to employees for acquiring skills. Milkovich et al. (2013) defines skill-based approach
as paying an individual for all the skills they have been certified regardless of whether
the work they are doing requires all or just a few of those particular skills.
From the definitions given by DeNisi and Griffins (2008), Gomez et al. (2012), and
Milkovich et al. (2013), and in conjunction with an article by Neil Kokemuller of
Demand Media in the Houston chronicles extracted from Compensation & Benefit
review of September 1994, we can see that some of the advantages of Job-based pay,
include simplicity of understanding and administration. This offers employees a more
9
predictable method of pay, making it easier to budget and plan for raises each year.
The approach rewards employees who stay with the employer for a long time and
there is less room for unfairness within job titles since pay is structured by the job.
This reduces the potential for discriminatory pay practices. On the other had Job-
based pay offers little room for upward pay mobility for employees who have no
desire for promotion; there is little incentive to gain new skills, some people also get
frustrated when they perform at a higher level and see colleagues get similar pay. In
some organizations, senior employees struggle for motivation because they are at the
high end of the pay schedule and can go no further regardless of performance. This
system also contributes to sometimes controversial office politics because employees
feel the only way to get ahead is to work their way up the corporate ladder.
Skill-based approach on the other hand rewards those employees who learn new skills
and acquire new knowledge. Ambitious, self-motivated employees typically prefer
this approach because it gives them a reason to focus on career development. It also
provides a mechanism to reward employees who want to perform at a higher level.
When companies pay for knowledge and skill development, they contribute to a
systemic rising of the bar for performance across all jobs. On the negative side of the
approach, the competitiveness within job ranks may cause conflict among colleagues
and co-workers. Colleagues may feel slighted or bitter toward one another especially
where one makes more money performing similar tasks. One may also feel underpaid
and undervalued if they are not paid the same as someone doing the same job at a
competing company. The approach may also cost the individual and organization
more in terms of time and cost additional training to develop skills in the bid to make
more money.
2.2.2 Factors Determining a Compensation Plan
Whether an organization uses job-based or skill-based compensation plan, the main

aim of the plan is to enable the organization achieve its strategic objectives (Gomez et
al, 2012) and attract, motivate and retain competent employees (Decenzo et al, 2007).
It is for these reasons that the plan is developed to fit the organizations unique
characteristic and environment (Gomez et al, 2012).
10
According to Gomez et al. (2012), the key factors to be considered when determining
a compensation plan in any organization are;- Internal versus external equity. This
refers to the perception of the plan to be fair within the company and relative to what
other employers are paying, flexibility of the pay; whether the pay is fixed or variable,
employee performance consideration in the plan; whether the plan pays for
performance or for membership, value placed on the job versus individual skill,
employee differentiation; whether all employee are treated the same (Egalitarianism)
or treated differently (Elitism), motivation method; whether the plan motivates with
monetary or non-monetary awards, employee compensation information accessibility
to employees and finally the decision making process in the organization whether it is
centralized or decentralized.
2.2.3 Compensation Plan Determination Process
Determining a well-balanced employees compensation plan comprises of five steps

namely, salary survey, job evaluation, grouping similar jobs into pay grades, pricing
each pay grade and fine-tuning pay rates (Amstrong, 2008). Salary survey is the
conducting a survey of what other employers are offering for comparable jobs, this
helps ensure there is external equity (Dessler, 2008). This is also called benchmarking
and is the process of identifying the rates of pay in the labour market for comparable
jobs to inform decisions on level of pay within the organization (Amstrong, 2008). A
good salary survey provides specific wage rates for specific jobs and a salary survey
can be done formally (written questionnaire) or informally by use of telephone,
internet check or newspaper adverts. Salary surveys published by consulting firms,
professional associations or government agents can also help.
Job evaluation is a systematic process of defining the relative worth or size of jobs
within an organization in order to establish internal relativities and provide the basis
for designing an equitable grade structure, grading jobs and managing job and pay
relativities (Amstrong, 2008). The process involves comparing, the effort required,
responsibility, and skills and this helps ensure there is internal equity. The process
eventually results to a wage or salary hierarchy as the jobs that require greater
qualifications, more responsibilities and more complex jobs are paid more highly than
jobs with lesser requirements (Dessler, 2008). Job evaluation does not determine the
11
level of pay directly and it is based on the analysis of jobs or roles, which leads to the
production of job descriptions or role profiles (Amstrong, 2008).
Job-grouping entails grouping similar jobs into pay grades; it is the process of turning
job evaluation results to pay grades. A pay grades comprises of jobs of approximately
equal difficulty or importance as established by job evaluation (Dessler, 2008).
Pricing each grade is also referred to as the process of forming a wage curve. A wage
curve shows the relationship between the value of a job and the wage paid for the job
(Dessler, 2008). Fine-tuning pay rates, this involves developing pay ranges and
correcting out-of-lines rates (Dessler, 2008). Pay range is a series of steps or levels
within a pay grade, usually based upon years of service.
According to Amstrong (2008), pay grades and pay structures are important part of a
reward plan and if well designed and maintained they provide a logically designed
framework within which an organizations pay policy can be implemented. They
enable the organization to determine where jobs should be placed in a hierarchy,
define pay levels and the scope for pay progression, and they provide the basis upon
which relativities can be managed, pay equality achieved and lastly they show how
the process of monitoring and controlling the implementation of pay practice can take
place. A grade structure can also serve as a medium through which the organization
communicates career and pay opportunities available to employees.
2.3 Direct Financial Payments and Employees Motivation
Financial payments are rewards that enhance employees financial well being directly
or indirectly (Decenzo et al, 2007). According to Dessler (2008) the direct financial
rewards refers to payment to employees which when done they enhances employees
financial position directly. Direct financial rewards come in form of wages, salaries,
incentives, commissions and bonuses (Dessler, 2008). Bowen (2000) also notes that
financial rewards mean those direct and indirect payments that enhance an employee's
well being, they make employee financially sound so that he/she can fulfill his/her
material desire. There are two main categories of direct financial rewards namely:-
Base/Basic pay and Contingent pay. Dessler (2008) reckons that financial payments
are determined on the basis of equity which he defines as the fair treatment of
employees. This may be internal equity where employees are paid according to
12
relative value of their jobs within same organization or external equity where
organizations employees are paid comparably to workers who perform similar jobs in
other firms.
2.3.1 Base/ Basic Pay
Base/ Basic pay also known as membership based reward, refers to the amount of pay
that constitutes the rate for the job, it may be varied according to the grade of the job
or for manual workers, the level of skill required (Amstrong, 2008). Several factors
influence the base pay; these include legal (government regulations), union (staff
labour relations), company policy (company strategic aims) and equity (internal and
external/market comparisons) (Dessler, 2004). Chruden and Sherman (1980) indicate
that other additional factors include worth of the job and individual bargaining power.
According to Amstrong (2008) the basic pay is normally expressed in form of normal
rate and allowances. The normal rate may be hourly, weekly, monthly or annually
while the allowances may be overtime, shift working or increased cost of living
adjustment. DeNisi and Griffin (2008) differentiates between salary and wage by
defining salary as income paid to an individual on the basis of performance or
position held while wages refers to hourly compensation paid to operating employees
on the basis of time worked.
Basic pays as the name suggests, are just base pays and though their absence de-
motivates employees, their presence may not necessary motivate the employees as
they expect to get it anyway for the work done, time worked or for them being there.
According to Amstrong, (2008) some of the key determinant of an individual basic
pay include; organization policies, labour market, the job content and finally the
employees themselves. It is however important that base pay helps achieve the
internal and external equity to avoid de-motivation (Dessler, 2008). Drafke (2002)
emphasis this point by pointing out that money can increase performance but this is
often limited to short term increase. On the other hand DeNisi and Griffin (2008)
argues that in general higher levels of pay and more attractive benefits tend to result
in greater satisfaction, a point that is affirmed by Bretz and Thomas (1992) who stated
that pay dissatisfaction reduce performance and morale. Clegg and Birch (2002)
argues that pay peanuts and you will get monkeys, and in addition to that they said
13
that if you show that you value people by paying a reasonable wage then they
appreciate it.
2.3.2 Contingent Pay
Contingent pay on the other hand refers to additional financial rewards that may be
provided and are related to performance, competence, contribution, skill or experience
(Amstrong, 2008). They may come inform of incentives, commissions, bonuses and
merit pays (Decenzo et al, 2007). Dransfield, (2000) states that automatic increases
within the fixed pay bands have largely disappeared and the trend is toward
performance-related-pay as the preferred method. Dessler (2008) defines financial
incentives as financial rewards paid to workers whose production exceeds some
predetermined standard. Bowen (2000) adds to the definitions that performance based
rewards are such benefits which are provided on the basis of an employee's job
performance ability. The reward depends upon the performance of an individual in the
actual work floor. These rewards are exemplified by the use of commissions, piece
work pay plans, incentive systems, group bonuses or other forms of merit pay plans.
Many people see contingent pay as the best way to motivate people, but it is simplistic
to assume that it is the only extrinsic motivator in the form of pay that creates long-
term motivation (Amstrong, 2008).
Gomez et al. (2012) states that most employees believe that they should be rewarded
to recognize their performance, they defined pay-for-performance or incentive system
as a system that rewards employees on the assumptions that individual employees and
work teams differ in how much they contribute to the firm and that the firms over-all
performance depends to a large extent on the individuals and groups within the firm.
They also argued that for a firm to attract, retain and motivate employees, the firm
needs to reward employees on the basis of their relative performance. Lazear (2000),
Paarsh and shearer (2000) and Parent (1999) recons that use pay performance
schemes has been shown to increase employee morale. Brown and Session (2003)
confirmed the same by stating that employees prefer environment where productivity
is rewarded and that this increases employee morale.
Amstrong (2008) says that there are different incentives and recognition programs
applicable to different people in a firm, they include incentives for individual
employees, sales people related, team or group based, organization wide and
14
executive incentives. He continues to argue that the individual employee incentive
and recognition programs are incentive plans particularly suited for use with
individual employees and examples include; Piece work plan, merit pay as an
incentive, merit pay options and incentives for professional. According to Bowen,
(2000) the incentive plan can be designed on individual, group or organization wise
performance. An individual incentive refers to incentives given to individual
employees for their additional contribution towards organizational objectives, while
group incentives applies when the output of the individual employees is not
measurable due to interdependency with other employees tasks. An organization
incentive occurs when the incentives are provided to all employees of the
organization.
Dessler (2008), defined some of the incentives such as piece work plan, which refers
to a system of pay based on a number of items processed by individual worker in a
unit of time. Merit pay as an incentive,(also known as merit raise) is a salary increase
to an individual for better performance, it goes toward increasing ones base salary.
Merit pay options are one off short term bonuses, given to individuals as recognition
of better performance without raising the base pay of the individual.
Decenzo et al. (2007) refers to incentives for professional employees like system
analysts and programmers, engineers, doctors, economists whose work involves use
of learned knowledge to provide solutions, to as competency-based compensation
plan. Professional employees are also incentivized by used of recognition-based
awards, these are non-financial incentives such as employee-of-the-year award, job
well done card, star award card which are meant to give performance feedback
(Decenzo et al, 2007).
Incentives for sales people come in the form of sales commissions, straight salaries or
combination of both, this is with aim of ensuring the top line numbers or turnover
(Dessler, 2008). Amstrong, (2008) expounded the above points by giving the
applicability of the different forms like salary only, salary plus commission and salary
plus bonus. He argued that the salary only option is applicable in a company where
direct selling is more important than sales volume; hence need to encourage its
customer service rather than high pressure selling. This may however attract under
achievers while salary plus commission is more appropriate when its believed that
15
sales can go up if a commission is given, however, a base salary is needed to attract
people as it provides a direct motivation for performance. This may result to people
concentrating on easier to sell product and not those generating high margins. Finally
the salary plus bonus operates well when flexibility in providing reward is important
and sales staffs need to be motivated to focus on certain aspects of their work other
than simply maximizing sales volume, thus ensure that other goals like high margins
are achieved. The latter may however be complex to administer and understand.
Commission only works well when sales performance depends on ability to sell and
staff is not involved in non-selling activities. This provides a direct financial
incentive, attracts high performing sales staff and ensure selling cost vary directly
with volume. Finally, additional non-cash rewards for example recognition and
opportunity to grow, is better applied when it is believed that other methods of
payments need to be enhanced to provide additional motivation to the sales person.
Team or group incentives plans are plans in which production standard is set for a
specific work group and its members are paid incentives if the group exceeds the
standard (Dessler, 2008). While team incentives may foster a sense of cooperation and
unanimity, the main disadvantage of plans is that one may not get paid
proportionately to the personal effort put to the work, which may de-motivate top
workers (Dessler, 2008). In addition, Gomez et al. (2012) also adds that although
team based approach may aid in performance measurement, the system may allow
free-riding effects and social pressure may limit performance.
Organization-wide incentive plans, also called variable pay plan are plans in which all
or most employees enjoy rewards as a result a performance of over-all companywide
nature (Dessler, 2008). Examples include profit sharing, employee stock ownership
(ESOP) and gain sharing plans. According to Bowen (2000), these organization-wide
rewards are also called Membership based rewards. They are those rewards that are
paid on the basis of being a member of an organization. It means, the basis of
allocating rewards is employee's organizational membership. Hence, the reward goes
to all employees irrespective of their performance. Incentives for managers and
executives are rewards meant for recognizing the crucial roles that managers play in
the divisional and companywide profitability (Dessler, 2008). They may be inform of
short-term incentives like, annual bonus or long-term incentives like stock options.
16
2.4 Benefits and Employees Motivation
According to Amstrong, (2008), there is more to rewarding people than throwing

money at them, a point that is also echoed by Clegg and Birch (2002) that reward is
not all about money. Decenzo et al. (2007), states that todays workers expect more
than just a salary or wage, they want additional considerations that will enrich their
lives. They described non-financial rewards as the desirable extras in the organization
which do not directly increase the employees financial position, but rather add
attraction to life on the job. Examples of such rewards may include things like,
preferred office furnishing, assigned parking space, business cards, own secretary and
recognition and amongst other things.
Dessler (2008) defines benefits as indirect financial and non-financial payments

employees receive for continuing their employment with the company. Gomez et al.
(2012) also says that benefits are sometimes called indirect compensation as they are
given to employees in form of plan rather than cash; they provide security for
employees and their family members. Decenzo et al. (2007) too defines employees
benefits as non-financial rewards offered to attract and keep employees, he adds that
they have grown in importance and variety as employers have realized that such
benefits affects the discretion of applicants when accepting or declining employment
offers. DeNisi and Griffins (2008) defines benefits as the various rewards, incentives
and other things of value that an organization provides to its employees beyond their
wages, salaries and other forms of direct financial compensation. Bernardin (2003)
defines benefits as indirect forms of compensation that are intended to maintain or
improve the quality of life for employees. Indirect financial rewards come in form of
subsidized benefits such as retirement plans, paid sick leaves and purchase discounts
(Decenzo et al, 2007). Dessler (2008) classifies other payments like employer-paid
insurance and vacations as forms of financial benefits.
2.4.1 Benefits Classifications
Employee benefits have been classified widely according to different authors and the
context of circumstance. Dessler (2008) for example classifies benefits into four basic
types, namely; Supplemental pay benefits, Insurance benefits, Retirement benefits and
Personal Service and family-friendly benefits. Supplemental pay benefits provide for
17
time not worked, they include unemployment insurance, vacation and holiday pay,
severance pay and supplemental unemployment benefits. Insurance benefits includes,
workers compensation, group hospitalization, accident and disability insurance; and
group life insurance. Retirement benefits include social security and pension plans.
Personal service and family-friendly benefits include food services, recreational and
child and child-care opportunities, legal advice, credit unions, educational subsidies
and counseling. These may also be referred to as voluntary benefits.
Decenzo et al. (2007) on the other hand classifies the benefits into seven categories,
Legally required benefits such as social security, Unemployment insurance, Voluntary
benefits, Retirement benefits, Survivor benefits, Paid time offs, Insurance plans and
Health insurance. Cole (2002) classifies employee benefits into three key categories,
security benefits like pension and life insurance, work related benefits like subsidized
meals and special training opportunities and finally status-related benefits like
prestige car and entertainment allowance. DeNisi and Griffin (2008) argues that
although most of the above named benefits are designed for all the employees in an
organization (with varying levels) some organizations have developed a cafeteria-
style benefit plans which allows the employees to choose the benefits that fits them.
2.4.2 Recognition Benefits
The irony of benefits however is though they attract and retain good workers; they do
not directly affect workers performance. According to Decenzo et al. (2007) they are
membership based offered regardless of performance levels as their absence
contributes to employees dissatisfaction and increased absenteeism and turnover.
According to Nelson and Spitzer (2003) there is revolution going on in todays
workplace, workers want respect and they want it now, they want to be trusted to do a
good job, they want autonomy to decide how best to do it, they want support even if
they make mistake and they want to be appreciated when they do a good job. Cascio
(2010) adds that employee benefits do not enhance productivity but are rather
powerful tools of attracting and retaining talent, and for improving the quality of life
of employees and their dependents.
Recognition and performance are closely linked (Nelson and Spitzer, 2003), this is
because recognition helps one motivate employees more and it helps in providing
18
practical feedback. A genuine and effective recognition system exhibit the following
characteristics of being based on contingency, being timely, frequency, informal and
spontaneous, the right setting and context (personal touch), significance of provider
and value to the recipient. Nelson in his study also found out that low use of
recognition as a tool for motivation was attributed to six main excuses described as
follows; I dont know how best to do it, I dont feel it is important, I dont have time, I
might leave somebody out, others dont value the recognition I give, the organization
does not facilitate or support the initiative. Clegg and Birch (2002) indicates that a
simple recognition for success, whether its a simple pat on the back or Nobel prize
can be very useful. As a matter of facts a simple comment can have totally
disproportionate effect on motivation. It is hard to believe but extra cash in the pocket
does not motivate as much as genuine recognition argues, Clegg and Birch (2002).
Clegg and Birch 2002 adds that the effect of recognition becomes weaker as the
numbers get larger. The more personal the better and it is also important that the
person giving recognition is respected by the recipient.
2.4.3 Other Benefits
Nelson and Spitzer (2003) also gave the following list of item as the prime non-
financial motivators which if more are present the more the employees are motivated.
These are action, fun, variety, input, stake sharing, choice, responsibility, leadership
opportunity, social interaction, teamwork, using strength, learning, error tolerance,
measurement, goals, improvement, challenges, encouragement, appreciation and
significance. Robert (1999) in his hand book, Dealing With People concurs with
Nelson & Spitzers list. Expounding on the motivators, Nelson and Spitzer, (2003),
and Robert Heller (1999) explained action as being actively engaged in productive
work while fun is a work environment that includes enjoyable activities not just hard
work. Input on the other hand represents feeling that ones opinion matters while
stake sharing is the feeling of ownership in the organization. Choice is about being
empowered to make discretionary decisions while responsibility is taking a role in
whole task rather than piecework. A leadership opportunity is a chance to manage a
team, meeting or event. Social interaction is the freedom to interact with others freely
while team work is about being a member of a productive team. Using strength is
being encouraged to do the things that one does well and learning is enhancing one
19
capabilities. Error tolerance is being allowed to fail without punishment and being
helped to learn from experience. Measurement is being encouraged to keep ones own
score rather than being micromanaged while goals is being encouraged to set ones
targets rather than having them imposed by others. Improvement is being in an
environment that enables people to become little better every day while challenge is
about giving appropriately difficult tasks that cause one to stretch without feeling
anxious. Encouragement is being in an environment which others believe in people
while appreciation is about receiving acknowledgment of contributions and lastly
significance is feeling part of a mission that matters.
DeNisi and Griffin (2008) adds to the above list by noting that some organizations
have resulted to different type of benefits known as wellness programs. These
concentrate on keeping employees from becoming sick rather than paying expenses
when they become sick. Others forms include child care and Eldercare. Pilbeam and
Corbridge (2006) reckon that a diverse workforce has diverse benefit needs. Flexible
benefits provide an opportunity to respond to this diversity in the workforce and to
increase the potency of the benefits offer within the total reward value proposition
while checking on cost. Cheatle (2001) also adds that with increasing competition for
scarce skills in the market place, many employers are looking to develop innovative
packages to recruit and retain key staff. Cole (2002) closes on employee benefits by
saying that in deciding on a benefits policy to adopt an organization need to consider
several things such as, the main purpose of the benefit policy, the range of benefit to
be provided, the recipients of the benefits, the estimated cost of the benefits
programme, the effect of the programme in the industry, and finally the expected
results of such programme internally.
2.5 Chapter Summary
The chapter reviewed relevant literature on the three research questions. In this
regards literature was reviewed on the methods used to determine employees
compensation. Next literature was reviewed on direct financial payments and finally
literature was reviewed on the employee benefits. The next chapter presents the
methodology used to conduct the study.
20
CHAPTER THREE
3.0 RESEARCH METHODOLOGY
3.1 Introduction
This chapter discusses the methodology of the study, it describe the research design,
the population and sample size, the sampling design, the instruments and the process
of data collection and finally the chapter concludes by describing the statistical
procedures used to analyze the data so as to achieve the objective of the study.
3.2 Research Design

DeVos and Fouche (1998) defines a research design as the blue print or detailed plan
of how a research study is to be conducted, this is of crucial importance because it
determines the success or failure of the research, it guides with the logical
arrangements for the collection and analysis of data so that conclusions may be
drawn. In this study, the researcher employed descriptive research design approach;
Kothari (2007) defines descriptive research studies as those which are concerned with
describing the characteristics of a particular individual or of a group. This approach
was appropriate for this study since the research sought to describe the characteristics
of employees at Chloride Exide. A survey was administered to a selected sample from
the bigger and specific population identified by the researcher in Chloride Exide. A
survey is used to collect original data for describing a population too large to observe
directly (Mouton, 1996). A survey obtains information from a sample by means of
self report, that it people responds to a series of questions posed by the investigator
(Polit and Hungler, 1993). The dependant variable was employees motivation while
the independent were employees compensation methods and types.
3.3 Population and Sampling Design

3.3.1 Population
Burns and Grove (1993) define population as all the elements (individuals, objects
and events) that meet the sample criteria for inclusion in a study. The population of
this study consisted of all employees of Chloride Exide who are on permanent or
contract basis. For the study we refer to permanent employees as those whose letter of
appointment does not specify the duration of employment while contract employees
21
as those whose letters specifies the beginning and the expected last day of
employment. The Chloride Exide group had a total 137 employees who are permanent
and contract spread in the company establishments in various towns in Kenya,
Rwanda, Tanzania and Uganda. Table 3.1 shows the population size and distribution.
Table 3.1: Population size
Category Population Percentage

Sales people 94 69%
Finance and Administration 25 18%
Technical staff 18 13%
Total 137 100%
3.3.2 Sample Design

3.3.2.1 Sampling Frame
A sampling frame consists of a list of all items from which the sample is drawn
(Kothari 2007). The sampling frame for this study was a list of all employees of
Chloride Exide, a total of 137 employees as provided by the Human resources office
of the organization.
3.3.2.2 Sampling Technique
Kothari (2007) defines sampling design/technique as a definite plan for obtaining a

sample from the sampling frame. A stratified sampling technique was used. This
method was considered to give the best, due to the fact that employees in Chloride
Exide are classified either into departments or pay levels. The pay level classification
was two tiers only; for junior payroll and senior payroll, which would not give a very
good representation of the company employees. The departmental classification was
able to attain a good level of homogeneity within any single department hence the
sample picked from the different departments would give a better representation of
the population. Stratified sampling technique also helped reduce bias on any one
given area as departments with higher population had more respondents. The
researcher divided the sample into, sales people, finance and administration and
technical department staffs and the sample was picked randomly from the list of staff
per department.
22
3.3.2.3 Sample Size
Sample size represents the number of items selected from the population (Kothari,
2007). According to Mason and Marchal (2002) a good sample size depends on three
key factors namely; the level of confidence desired, the margin of error and the
variability of the population. Denscombe (2003) confirmed the same by stating that
the adequacy of a sample depends on a number of factors connected with the research
as weighed by the researcher in the process of reaching decision on sample size.
Mugenda and Mugenda (2003) stated that even a sample size of 10% could be
sufficient. A 30% was deemed to be a sufficient sample and a good representation of
the whole population on the basis of two main reasons. The first reason was
minimizing cost due to the diverse spread of sales team across all the four East
African countries. The second reason was a case for supporting homogeneity of basic
pay within any single department. Table 3.2 below shows the sample size distribution
of respondents across the departments.
Table 3.2: Sample size
Category Population Percentage Sample size

Sales people 94 30% 28
Finance and Administration 25 30% 8
Technical staff 18 30% 5
Total 137 30% 41
3.4 Data Collection Methods

The study used primary data and the main data collection technique used was
structured questionnaires. The questionnaire was divided into four main parts, Part I,
II, III and IV. Part I of the questionnaire consisted of five questions seeking general
information about the respondent, these included the age, the gender, the level of
education, category of employment, the number of years they have worked at
Chloride Exide and finally the general feeling of staff motivation in the organization.
Part II of the questionnaire sought to establish the methods used to determine the
employees compensation. It had ten questions. Part III had ten questions and it
sought to establish the extent to which direct financial compensations affect
23
employees motivation. Finally part IV consisted of five questions seeking to establish
the extent to which benefits affect employees motivation. Part II, III and IV consisted
of questions on a 5 point likert scale asking the respondents to give their opinions by
ticking option 1 for Strongly Agree to 5 for Strongly Disagree.
3.5 Research Procedures

The researcher started by writing an introductory letter for the questionnaire. The
letter described what the research was all about, how the respondent answers were to
be used and the letter also assured the respondents that confidentiality would be
observed strictly. The information of time span expected with the questionnaire was
also provided. The main purpose of writing the letter was to make the respondent
understand the reason for the study; this made them more willing to participate.
The questionnaires designed by the researcher were first administered to 5

respondents as a pilot study, these respondents were not included in the sample, this
was to enable the researcher fine tune the questionnaire for efficiency and objectivity.
Once the researcher was satisfied, the questionnaire was then administered by means
of hand delivery to all respondent, the questionnaire was estimated to take 20 minutes
to complete, the researcher completed the questionnaire for those who could not read
or write. Personal hand delivery, self explaining of the purpose and assisting manually
to fill questionnaire done to all respondents helped to ensure a high rate of response.
3.6 Data Analysis Methods

The questionnaires were collected and sorted to eliminate those with errors and the
incomplete ones. Data was then analyzed using descriptive statistics like percentages
and frequencies. Descriptive statistics are methods used for describing the basic
features of the data in a study (Trochim, 2006).
The tools used for the analysis were first by use of Microsoft excel and further by use
of computer assisted programme called Statistical Package for Social Sciences
(SPSS). This was done to explore the relationship between dependent and
independent variables. The data was then presented using tables and figures.
24
3.7 Chapter Summary
This chapter introduced and discussed the choice of the methodology used in the
study. It described the population, sample, sampling frame and technique and data
collection instruments. The chapter further detailed the strategies used to ensure
validity and reliability of the study. The following chapter addresses the findings of
the study and discusses them in detail in relation to the research questions.
25
CHAPTER FOUR
4.0 RESULTS AND FINDINGS
4.1 Introduction
This chapter presents the results and findings of the study based on the three research
questions. Part one gives the general information of the respondents. Part two covers
findings on research objective one which was to establish the methods used to
determine compensations at Chloride Exide. Part three focuses on the second research
objective which was to establish the extent to which direct financial rewards affect
employees motivations. Part four addresses the findings of the third research
objective which was to establish the extent to which benefits affect the employees
motivation at Chloride Exide. A summary of the chapter is also given. Out of the
targeted forty one respondents, thirty seven responded to the questionnaire, this
represented a 90% response rate. Table 4.1 shows the response rate per department.
Table 4.1: Response Rate per Strata
Category Sample size Response Percentage

Sales people 28 24 86%
Finance and Administration 8 8 100%
Technical staff 5 5 100%
Total 41 37 90%
4.2 General Information
This part had five questions touching on Gender, Age, Education level, Employment
duration and the general feeling on motivation in the organization.
4.2.1 Gender of Respondents
The findings showed that 8 of the respondents were female and 29 were male. This
shows a 22% and 78% representation of female and male respectively. This implies
that the population of male is higher than female as shown in Table 4.2.
26
Table 4.2: Gender Distribution
Gender Distribution
Frequency Percentage
Female 8 22%
Male 29 78%
Total 37 100%
4.2.2 Age of Respondents
From the findings 14% of the respondents were aged between 20-30 years old. Fifty
one percent of the respondents were the middle aged group of between 30-40 years
old. Lastly 35% were between 40-50 years. This implies that the company has over
50% of its population at a youthful age of 30-40 years old. The data is as presented in
the Table 4.3.
Table 4.3: Age Distribution
Age Bracket Distribution

20 30 years 5 14%
30 40 years 19 51%
40 50 years 13 35%
Total 37 100%
4.2.3 Education Level
Table 4.4 shows education level representation. The respondents who had a college
certificate were 16%, while those who had diploma training were 32%. The first
degree and masters degree were represented by 35% and 16% respectively.
Table 4.4: Education Level Distribution
Education Level Distribution

Certificate 6 16%
Diploma 12 32%
Degree 13 35%
Masters 6 16%
Total 37 100%
27
4.2.4 Years in Employment
The findings showed that 49% of the respondents had been in employment for less
than five years. A 27% had worked for between 5-10 years, 8% between 10-15 years,
11% were between 15 20 years. Another 5% of the respondents had over 20 years
working in the company. This is illustrated in the Table 4.5.
Table 4.5: Years in Employment
Level Distribution
Less than 5 years 18 49%
5 10 years 10 27%
10 15 years 3 8%
15 20 years 4 11%
Over 20 years 2 5%
Total 37 100%
4.2.5 Employee Motivation Level
When asked about the general feeling of motivation in the organization, 11% of the
respondents felt that the motivation levels were high. A 62% of the respondents said it
was moderately high. 16% were not quite sure and 11% felt that levels were
moderately low. This is illustrated in Table 4.6.
Table 4.6: Employee Motivation Level
Level Distribution
High 4 11%
Moderately high 23 62%
Not sure 6 16%
Moderately Low 4 11%
Low 0 0%
37 100%
28
4.3 Methods Used to Determine Employees Compensation
Part II of the questionnaire had ten items which sought to establish the methods used
to determine employees compensation at Chloride Exide. The respondents were
required to give their opinions on a likert scale by ticking option 1 for Strongly Agree
to 5 for Strongly Disagree.
4.3.1 Employee Compensation Constitutes a Significant Portion of the

Companys Costs
The employees were asked if employees compensation constituted a significant

portion of the organization cost. The findings showed that 11% of the respondents
strongly agreed that employee compensation is of significant importance, 62% agreed,
24% were not sure, 3% disagreed and none strongly disagreed as illustrated in Table
4.7.
Table 4.7: Employee Compensation Constitutes a Significant Portion of the

Companys Costs
Level Distribution
Strongly Agree 4 11%
Agree 23 62%
Not sure 9 24%
Disagree 1 3%
Strongly Disagree 0 0%
Total 37 100%
4.3.2 Employees Compensation Plan is Well Formulated
The respondents were asked if they believed that compensation plan in the company
was well formulated to cover all aspects of employee compensation. The findings
captured in Table 4.8 showed that 5% of the respondents strongly agreed that
employee compensation plan is well formulated, 41% agreed, 27% were not sure,
24% disagreed and 3% strongly disagreed.
29
Table 4.8: Employees Compensation Plan is Well Formulated
Level Distribution
Strongly Agree 2 5%
Agree 15 41%
Not sure 10 27%
Disagree 9 24%
Total 37 100%
4.3.3 Pay Structure Meets the Requirement of The Government of Kenya
When asked whether employees believed that the pay structure in the company met
the requirement of the government of Kenya. Nineteen percent of the respondents
strongly agreed that the pay structure met government requirement, 49% agreed so,
24% were not sure, 8% disagreed and none strongly disagreed. Table 4.9 presents the
results of responses.
Table 4.9: Pay Structure Meets the Requirement of The Government of Kenya
Level Distribution
Agree 18 49%
Not sure 9 24%
Disagree 3 8%
Total 37 100%
4.3.4 Pay Structure Ensures Internal Equity
The respondents were asked whether they believed that the pay structure in the
company ensured there was internal equity between employees in the organization.
Only a 3% of the respondents strongly agreed that the pay structure ensures there was
internal equity. Twenty two percent agreed and 43% were not sure. Those who
disagreed and strongly disagreed were 27% and 5% respectively. This is presented in
Table 4.10.
30
Table 4.10: Pay Structure Ensures Internal Equity
Level Distribution
Strongly Agree 1 3%
Agree 8 22%
Not sure 16 43%
Disagree 10 27%
Total 37 100%
4.3.5 Pay Structure Ensures External Equity
When asked whether employees believed that the pay structure in the company
ensured there was external equity between employees in the organization and other
employees in other organizations. The findings indicated that only 3% of the
respondents strongly agreed while 27% agreed. Forty one percent of the respondents
were not sure. A response of 24% and 5% was received for disagreeing and strongly
disagreeing respectively. This is shown in Table 4.11.
Table 4.11: Pay Structure Ensures External Equity
Level Distribution
Strongly Agree 1 3%
Agree 10 27%
Not sure 15 41%
Disagree 9 24%
Total 37 100%
4.3.6 Jobs are Well Defined
The respondents were asked if they believed that their jobs were well defined. A 22%
of the respondents strongly agreed that their jobs were well defined, 70% agreed, 5%
were not sure, 3% disagreed and none strongly disagreed as illustrated in Table 4.12.
31
Table 4.12: Jobs are Well Defined
Level Distribution
Agree 26 70%
Not sure 2 5%
Disagree 1 3%
Total 37 100%
4.3.7 Employees are Adequately Compensated for the Use of Skills
When asked if they believed that they were adequately compensated for use skills in
their jobs. There was no response for strongly agreeing and strongly disagreeing.
However a 62% agreed while 8% were not sure. Those who disagreed were 30%. This
is illustrated in table 4.13
Table 4.13: Employees are Adequately Compensated for the Use of Skills
Level Distribution
Strongly Agree 0 0%
Agree 23 62%
Not sure 3 8%
Disagree 11 30%
Total 37 100%
4.3.8 Incentives for Gaining New Skills or Knowledge
When asked whether the respondents believed that their Jobs offered incentive for
gaining new skills or knowledge. Three percent of the respondents strongly agreed
and 16% agreed. 8% of the respondents were not sure. Those who disagreed and
strongly disagreed were 49% and 24 % respectively. This is presented in Table 4.14.
32
Table 4.14: Incentives for Gaining New Skills or Knowledge
Level Distribution
Strongly Agree 1 3%
Agree 6 16%
Not sure 3 8%
Disagree 18 49%
Total 37 100%
4.3.9 Employee Compensation Decisions are Centrally Managed
The respondents were asked to confirm that all decisions relating to their
compensations were centrally managed. Table 4.15 presents the findings. Twenty
seven percent of the respondents strongly agreed while 38% agreed, 14% were not
sure, 19% disagreed and 3% strongly disagreed.
Table 4.15: Employee Compensation Decisions are Centrally Managed
Level Distribution
Agree 14 38%
Not sure 5 14%
Disagree 7 19%
Total 37 100%
4.3.10 Salary Surveys are Conducted Before Determining New Salaries
This question sought to establish if a thorough survey of salaries was conducted

before determining new salaries. The findings indicated that 11% of the respondents
strongly agreed that a thorough survey is conducted, 5% agreed, 46% were not sure,
24% disagreed and 14% strongly disagreed as illustrated in Table 4.16.
33
Table 4.16: Salary Surveys are Conducted Before Determining New Salaries
Level Distribution
Agree 2 5%
Not sure 17 46%
Disagree 9 24%
Total 37 100%
4.4 Direct Financial Payments and Employee Motivation
Part III of the questionnaire had Ten items which sought to establish the extent to
which direct financial payments affect employee motivation at Chloride Exide. The
respondents were required to tick their opinions on a 1 to 5 Likert scale, 1 being
Strongly Agree and 5 being Strongly Disagree.
4.4.1 Basic Pay is Reviewed Periodically
The respondents were asked if the basic pay was reviewed periodically. The findings
showed that 35% of the respondents strongly agreed, 60% agreed and 5% of the
respondents disagreed. There were 0% responses for not sure and strongly disagreed.
This is as shown in Table 4.17.
Table 4.17: Basic Pay is Reviewed Periodically
Level Distribution
Agree 22 60%
Not sure 0 0%
Disagree 2 5%
Total 37 100%
4.4.2 Basic Pay Variations
When asked if their basic pay varied from other employees. Table 4.18 shows that
27% of the respondents strongly agreed that their basic was different from other
34
employees in other levels, 49% agreed, 21% were not sure, 3% disagreed and 0%
strongly disagreed.
Table 4.18: Basic Pay Variations
Level Distribution
Agree 18 49%
Not sure 8 21%
Disagree 1 3%
Total 37 100%
4.4.3 Basic Pay Motivates
The respondents were asked if the basic pay motivated them. Table 4.19shows the
response on the same. Only 3% of the respondents strongly agreed. 54% agreed, 8%
were not sure, 32% disagreed and 3% strongly disagreed.
Table 4.19: Basic Pay Motivates
Level Distribution
Strongly Agree 1 3%
Agree 20 54%
Not sure 3 8%
Disagree 12 32%
Total 37 100%
4.4.4 Basic Pay is Well Balanced Compared to Work Done
When asked if their basic pay was well balanced compared to the work done. There
was none who strongly agreed. A 36% agreed, 24% were not sure, 32% disagreed and
8% strongly disagreed. Table 4.20 presents the same.
35
Table 4.20: Basic Pay is Well Balanced Compared to Work Done
Level Distribution
Strongly Agree 0 0%
Agree 13 36%
Not sure 9 24%
Disagree 12 32%
Total 37 100%
4.4.5 Basic Pay is Well Balanced for All Employees
The respondents were asked if their basic pay was well balanced compared to other
employees. Table 4.21 shows the findings. 11% of the respondents agreed, 57% were
not sure, 27% disagreed and 5% strongly disagreed.
Table 4.21: Basic Pay Well Balanced for All Employees
Level Distribution
Strongly Agree 0 0%
Agree 4 11%
Not sure 21 57%
Disagree 10 27%
Total 37 100%
4.4.6 Basic Pay Increase and Motivation
When asked if an increase in the basic pay would motivate them. A 38% of the
respondents strongly agreed and 46% agreed. 3% were not sure and 13% disagreed.
There was nil response for strongly disagreed. This is shown in Table 4.22.
36
Table 4.22: Basic Pay Increase and Motivation
Level Distribution
Agree 17 46%
Not sure 1 3%
Disagree 5 13%
Total 37 100%
4.4.7 There Exists a Performance Pay System
The respondents were asked if they received a performance pays on attaining their set
targets. Table 4.23 shows the responses. Fifty one percent of the respondents strongly
agreed, 43% agreed, 3% were not sure, and 3% strongly disagreed.
Table 4.23: There Exists a Performance Pay System
Level Distribution
Agree 16 43%
Not sure 1 3%
Disagree 0 0%
Total 37 100%
4.4.8 Team Reward Motivates Employees
The respondents were asked if employees were motivated for being rewarded for what
they had achieved as a team. The findings were as illustrated in Table 4.24. Twenty
four percent of the respondents strongly agreed, 41% agreed, 16% were not sure, 16%
disagreed and 3% strongly disagreed.
37
Table 4.24: Team Reward Motivates Employees
Level Distribution
Agree 15 41%
Not sure 6 16%
Disagree 6 16%
Total 37 100%
4.4.9 Team Work was Enhanced by Team Reward
When asked if team work was enhanced by the team reward. Nineteen percent of the
respondents strongly agreed, 68% agreed, 5% were not sure, 8% disagreed while none
strongly disagreed as shown in Table 4.25.
Table 4.25: Team Work was Enhanced by Team Reward
Level Distribution
Agree 25 68%
Not sure 2 5%
Disagree 3 8%
Total 37 100%
4.4.10 There Exists an Organizational Reward System
The respondents were if they received an organizational reward if the whole

organization achieved its target. Table 4.26 shows the findings. Thirty percent of the
respondents strongly agreed so, 59% agreed, 0% was not sure, 11% disagreed and 0%
strongly disagreed.
38
Table 4.26: There Exists an Organizational Reward System
Level Distribution
Agree 22 59%
Not sure 0 0%
Disagree 4 11%
Total 37 100%
4.4.11 Correlations Between Direct Financial Payments and Employees

Motivation
A Pearsons correlation test between direct financial payments and employees

motivation showed different correlations levels for the various areas tested. The
results show that there is a relatively strong correlation between basic pay and
employee motivation (r=.403, p<0.05). This is illustrated in Table 4.27.
39
Table 4.27: Correlations Between Direct Financial payments and Employees
Motivation
Employees Motivation
My basic pay is reviewed Pearson Correlation .403(*)
periodically Sig. (2-tailed) .013
My basic pay varies from Pearson Correlation .309
others Sig. (2-tailed) .063
My basic pay motivates me to Pearson Correlation -.028
do my work well Sig. (2-tailed) .869
My basic pay is well balanced Pearson Correlation .263
with what I do Sig. (2-tailed) .116
My basic pay is well balanced Pearson Correlation .203
compared to Other staff Sig. (2-tailed) .229
An increase in basic pay will Pearson Correlation .064
motivate me more Sig. (2-tailed) .708
Staff are compensated for Pearson Correlation .175
achieving set targets Sig. (2-tailed) .299
Team rewards motivates Pearson Correlation .273
Sig. (2-tailed) .102
There exist good team work Pearson Correlation .214
Sig. (2-tailed) .203
Staff are entitled to Pearson Correlation .153
organization reward Sig. (2-tailed) .367
* Correlation is significant at the 0.05 level (2-tailed).** Correlation is significant at

the 0.01 level (2-tailed).
4.5 Benefits and Employee Motivation
Part IV of the questionnaire had five items which sought to establish the extent to
which benefits affect employee motivation at Chloride Exide. Question one required
the respondents to give their opinions on whether they receive the listed benefits. On
questions two to five the respondents were required to give their opinions on a 1 to 5
Likert scale, 1 being strongly Agree and 5 being strongly disagree.
4.5.1 List of Benefits Entitled
When asked if they were entitled to a list of sampled benefits namely, medical,
pension, paid leave, insurance, car loans, free meals, child care and severance. The
40
findings showed that on medical benefits all the 37 respondents agreed so, on pension
only 31 affirmed, Paid leave 33, insurance 32, car loan 16, Meals 35, Child care 14,
and severance pay had 23 affirmations. The findings are as illustrated in Figure 4.1.
40 37 35
31 33 32
30
22 23
20 16 18 14 12 Yes
10 6 4 4 No
0 2
0
Medical Pension Paid Leave Insurance Car Loan Meals Child Care Severence
pay
. Figure 4.1: List of Benefits Entitled
4.5.2 Importance of Benefits to Employees
The respondents were asked if benefits were of importance to them. Table 4.27 shows
the findings. A 16% of the respondents strongly agreed so and 46% agreed. Eight
percent were not sure, 30% disagreed and 0% strongly disagreed.
Table 4.28: Importance of Benefits to Employees
Level Distribution
Agree 17 46%
Not sure 3 8%
Disagree 11 30%
Total 37 100%
4.5.3 Contribution of Benefits to Staff Motivation
The respondents were asked whether they felt motivated by the benefits they received,
19% of the respondents strongly agreed that they were motivated by the benefits they
received, 62% agreed, 5% were not sure, 14% disagreed and none strongly disagreed
as illustrated in Table 4.29.
41
Table 4.29: Contribution of Benefits to Staff Motivation
Level Distribution
Agree 23 62%
Not sure 2 5%
Disagree 5 14%
Total 37 100%
4.5.4 There Exists a System of Staff Recognition
When asked if there existed a system of staff recognition in the organization. The
findings showed that 22% of the respondents strongly agreed so, 54% agreed, 11%
were not sure, 11% disagreed and 3% strongly disagreed. Table 4.30 illustrates the
findings,
Table 4.30: There Exists a System of Staff Recognition
Level Distribution
Agree 20 54%
Not sure 4 11%
Disagree 4 11%
Total 37 100%
4.5.5 Recognition System Motivates
The respondents were asked if they were motivated by the system of recognition
when they have exceptionally performed. The findings are as presented in Table 4.31.
A 22% of the respondents strongly agreed that they were motivated, 49% agreed, 8%
were not sure, 16% disagreed and 5% strongly disagreed.
42
Table 4.31: Recognition System Motivates
Level Distribution
Agree 18 49%
Not sure 3 8%
Disagree 6 16%
Total 37 100%
4.5.6 Correlations Between Employees Benefits and Employees Motivation
A Pearsons correlation test between employees benefits and employees motivation

showed different levels correlations on the areas tested. The results show that there
were no significant correlations between employee benefits and their motivation.
Table 4.32 shows the findings.
Table 4.32: Correlations Between Employees Benefits and Employees

Motivation
Employees Motivation
Benefits are very Pearson Correlation .153
important Sig. (2-tailed) .365
Benefits I receive Pearson Correlation .259
motivates me Sig. (2-tailed) .122
I am recognized for what Pearson Correlation .316
I do Sig. (2-tailed) .057
The recognition system Pearson Correlation .253
motivates me Sig. (2-tailed) .131
** Correlation is significant at the 0.01 level (2-tailed).* Correlation is significant at

the 0.05 level (2-tailed).
4.6 Chapter Summary
This Chapter presented the findings of the study. First there were the findings on the
respondents general information. This was then followed by the findings on the
methods used to determine compensation. The findings on the direct financial
payments and staff benefits were also presented followed by the Pearsons correlation
43
matrix. The next chapter discusses the findings of the research and interprets them in
view of earlier literature reviewed. Conclusions and recommendations are also given.
44
CHAPTER FIVE
5.0 DISCUSSION, CONCLUSIONS AND RECOMMENDATIONS
5.1 Introduction
This chapter discusses the findings of the study as detailed in chapter 4, concludes and
gives recommendations as deemed fit on the effect of employee compensation on
motivation at Chloride Exide.
5.2 Summary
The general objective of the study was to determine the effect of compensation on
employees motivation at Chloride Exide group of Companies. The study was guided
by the following three research objectives: to establish the methods used to determine
employee compensation at Chloride Exide, to establish extent to which direct
financial rewards affected employees motivation at Chloride Exide, and to establish
extent to which benefits affected employees motivation at Chloride Exide. The study
used descriptive research design. A sample of forty one respondents was selected out
of the population of one hundred and thirty seven employees using stratified sampling
technique. This represented a 30% sample of the whole population. A structured
questionnaire was used to collect data from the respondents. The data was analyzed
using the Statistical Package for Social Sciences (SPSS). It was interpreted in
frequencies, percentages and correlations. The findings were presented using tables
and figures.
From the findings, over half of the respondents were not clear on the compensation
plan of the organization. A majority of respondent disagreed or was not sure that there
was internal and external equity with the existing pay structure. Many respondents
were of the opinion that their jobs did not incentivize gaining of new skills or
knowledge and finally a high response of almost half of the respondents was not sure
if salary survey were conducted before determining new salaries while a significant
number disagreed. Only a small portion agreed to salary surveys being conducted.
The findings on whether the respondents were motivated by their current basic pay,
slightly above half of the respondents felt so and over one thirds of the responses was
45
negative. There was an almost equal response in agreement and in disagreement that
the current basic pay was well balanced with the work done by the respondents. An
overwhelmingly high positive response was received that the respondents would be
motivated if their basic pay was to be increased. An even higher positive response
came when the respondents were asked if they received additional pay for their
performance against the set targets. A good percentage of the respondents also
consummated to the fact that they felt motivated for being rewarded for what they
achieved as a team.
Summary of the findings on employees benefits showed that all respondents received
at least a benefit and that majority of the respondents received one or the other form
of benefit in the organization. A good response of slightly less than two thirds was
received on whether the respondents valued the benefits given; there was even a
stronger response on the question of benefits motivates. Over three quarter of the
respondents also agreed to there being a system that recognizes and rewards
performance and over two thirds of the respondents believed that this system
motivated them well.
5.3 Discussions
5.3.1 The Method of Determining Employees Compensation
The study found out that, majority of the respondents agreed that compensation
constituted a significant component of the organization cost. Gomez et al. (2012),
states that employee compensation is the single most important cost in most firms and
that in some manufacturing organizations it accounts for 60% of the total cost. This is
higher in some service organizations and hence this meant that the effectiveness with
which compensation is allocated can make a significant difference in gaining or losing
a competitive edge. Dessler (2008) added that improperly developed compensation
plan may result to a wage rate that is too high hence unnecessary expenses. This
shows that the findings agree with those of Gomez et al. (2012), and Dessler (2008).
Arguably one of the factors that affect the design of any compensation plan is
government requirement and a good compensation plan must meet the minimum
government requirement (Dessler, 2008). The findings showed that a more than half
46
of the respondents believed that the compensation plan met the government
requirement, a quarter were not sure while less than one tenth disapproved. Gomez et
al. (2012) indicates internal and external equity as one of the key factors that must be
considered when determining a compensation plan. The study showed that on the
internal equity only a small group of about a quarter believed that the pay structure
achieved internal equity. Almost half of the respondents were not sure while another
one third felt that the structure did not achieve internal equity. The findings on
external equity showed an almost similar response with only a third agreeing that the
system achieved external equity.
Amstrong (2008) and Dessler (2008) describe the steps in ensuring a well balanced
employee compensation to include job definitions, job evaluation and salary surveys
amongst others. Although a majority of the respondents at 92% agreed that their jobs
were well defined, An almost half of the respondents felt that process of
compensation determination especially the salary survey was not adequately
conducted before determining new salaries. DeNisi and Griffins (2008), Dessler
(2008) and Milkovich et al. (2013) points out to the two main broad ways of
categorizing compensation as skills-based and job-based approach. A job based
approach assumes that jobs are very well defined and titled for example a cashier, a
matron or a chef. The works in these jobs is done by people who are paid to perform
them well. In this plan since all jobs are not equally important to the firm, the labour
market puts greater value on some jobs than on others with the most important jobs
paying the most. Skills based approach on the other hand assumes that workers should
not be paid for the jobs they hold but for how capable they are at performing the task
or multiple tasks (Gomez et al, 2012). The greater the variety of job-related skills one
possesses the more they are paid. DeNisi and Griffin (2008) defines skill-based pay as
rewards to employees for acquiring skills. From the study a two thirds majority of the
respondents felt that at Chloride Exide employees were compensated for the use of
their skills. The study also showed that less than a quarter of the respondents felt that
employees were incentivized to gain new skills. Over two thirds of the respondent
disagreed that there were incentives for gaining new skills or knowledge.
47
5.3.2 Direct Financial Rewards and Employees Motivation
The researcher found out that almost all of the respondents agreed to their basic pay
was reviewed periodically to adjust for the cost of living. On question of pay variation
for different levels a majority agreed that there was variation in the organization. This
finding was in line with the expectations of the different authors, Amstrong (2008),
Decenzo et al. (2007) and Dessler, (2008). They defined basic pay as membership
based reward that constitute rate for the job, this is reviewed regularly and may be
varied according to the grade of the job or the level of skills. Further findings from the
study showed that half of the respondents were motivated by their current pay and a
third were not motivated at all. This was in line with Dessler (2008) view that basic
pays as the name suggests, are just base pays and though their absence de-motivates
employees, their presence may not necessary motivate the employees as they expect
to get it anyway for the work done, time worked or for them being there. It is however
important that base pay helps achieve the internal and external equity to avoid de-
motivation.
The number of respondents, who agreed to their pay matching the work they do netted
to about a third while those who disagreed were almost half. A whole quarter of the
respondents were not sure. This tied to the above findings on respondent view that the
processes of compensation determination were not followed, in this case the job
evaluation. Job evaluation is a systematic process of defining the relative worth or
size of jobs within an organization in order to establish internal relativities and
provide the basis for designing an equitable grade structure, grading jobs and
managing job and pay relativities (Amstrong, 2008). The same was also evidenced
with the findings on basic pay being balanced as compared to other employees where
only a small percentage of the respondents agreed.
In the finding on the fact that basic pay would motivate more, an 84% response was
received in favour of agreeing. This was in agreement to the argument by Drafke
(2002) who pointed out that money can increase performance but only in the short
time, DeNisi and Griffins (2008) on the other hand argued that higher level of pay
tend to increase satisfaction greatly, the study findings was in agreement with DeNisi
and Griffins view. It was however not clear whether it was only for short term or for
48
long term. The researcher also found out that almost all of the respondents improved
their performance on receiving a pay for performance, according to Gomez et al.
(2012), Lazear (2000), Paarsh and shearer (2000) and Parent (1999) use of pay for
performance schemes has been shown to increase employee morale. Brown and
Session (2003) confirmed the same by stating that employees prefer environment
where productivity is rewarded and that this increases employee morale.
The Findings on team rewards and organizational rewards were that over two thirds of
the respondents agreed that they received additional pay for their performance against
the set targets and that they felt motivated for being rewarded for what they achieved
as a team; and as a result of the whole organization achieving its set objectives, this
was in line with the above views of Gomez et al. (2012), Lazear (2000), Paarsh and
shearer (2000) and Parent (1999). Finally a Pearsons correlation test on direct
financial payments and employees motivation showed a positive correlation on all
areas tested except for one. The correlation between current basic pay and motivation
was negative. This was as expected as per the views of authors like Drafke, (2002),
DeNisi and Griffins (2008), Bretz and Thomas (1992) and Clegg and Birch (2002).
5.3.3 Benefits and Employees Motivation
The study found out that all the respondents were entitled to a number of benefits as
sampled. The highest response was on medical benefits with all the 37 respondents
confirming that they were entitled. The lowest response was in child care support with
only 12 respondents confirming entitlement. Dessler (2008) defines benefits as
indirect financial and non-financial payments employees receive for continuing their
employment with the company. Gomez et al. (2012) also says that benefits are
sometimes called indirect compensation as they are given to employees in form of
plan rather than cash; they provide security for employees and their family members.
Decenzo et al. (2007) too defines employees benefits as non-financial rewards offered
to attract and keep employees, he adds that they have grown in importance and variety
as employers have realized that such benefits affects the discretion of applicants when
accepting or declining employment offers. DeNisi and Griffins (2008) defines
benefits as the various rewards, incentives and other things of value that an
organization provides to its employees beyond their wages, salaries and other forms
49
of direct financial compensation. Bernardin (2003) defines benefits as indirect forms
of compensation that are intended to maintain or improve the quality of life for
employees.
The study also found out that two thirds majority of the respondents was in agreement
that benefits were important. As regards to the fact that the presence of benefits
motivates employees, the researcher found out that a great percentage of the
respondents felt motivated. Only a small percentage felt otherwise. These findings
were in accordance to the views of Amstrong, (2008), Clegg and Birch (2002), and
Decenzo et al. (2007). The authors said that there was more to rewarding people than
throwing money at them, reward is not all about money and that todays workers
expect more than just a salary or wage, they want additional considerations that will
enrich their lives, they described non-financial rewards as the desirable extras in the
organization which do not directly increase the employees financial position, but
rather add attraction to life on the job. Examples of such rewards may include things
like preferred office furnishing, assigned parking space, business cards, own secretary
and recognition and amongst other things.
On recognition rewards the researcher found out that there was a system in place with
almost all respondents agreeing and that the recognition system motivates the
employees. This last finding begs to differ with the views of authors like Decenzo et
al. (2007) and others. Their argument was that the irony of benefits was though they
attract and retain good workers; they do not directly affect workers performance.
According to Decenzo et al. (2007) they are membership based offered regardless of
performance levels as their absence contributes to employees dissatisfaction and
increased absenteeism and turnover. According to Nelson and Spitzer (2003) there is
revolution going on in todays workplace, workers want respect and they want it now,
they want to be trusted to do a good job, they want autonomy to decide how best to do
it, they want support even if they make mistake and they want to be appreciated when
they do a good job. Cascio (2010) adds that employee benefits do not enhance
productivity but are rather powerful tools of attracting and retaining talent, and for
improving the quality of life of employees and their dependents.
50
5.4 Conclusion
The purpose of the study was to determine the effect of employee compensation on
employee motivation at chloride Exide. Based on the findings of the study, the
following conclusions were drawn on the three key and specific objectives of the
study.
5.4.1 The Methods of Determining Employees Compensation
The fact that a good number of the respondents were not sure of the compensation
plan in place and minimum government requirements and that they disagreed that the
plan achieved internal and external equity could only mean that, the plan was either
not communicated to them adequately or it was not strongly upheld. On job well
definition there was a good response of agreeing which implies that this was well
communicated to employees and employees understood what was expected of them.
Compensation for use of skills received nearly two thirds agreeing response while a
third disagreed, this could mean that the organization uses a mixture of skills and job
based pay or it could mean that some individuals are not placed in the jobs that match
their skills. A two thirds majority confirmation that compensation decision were made
centrally indicates majority of decisions were made centrally. The fact that many
respondents were not sure or disagreed about salary survey being conducted to
determine salaries could mean that the system was not used and so they were not
familiar with it.
5.4.2 Direct Financial Payments and Employees Motivation
In conclusion a very high agreeing response on regular pay was review and variation
within the organization implies that employees were well aware this and that it was
actually happening. The mixed response of respondent feeling either motivated or
otherwise by increase in basic could only mean that basic pay does not fully motivate.
The almost equal response of those agreeing and those disagreeing to basic pay being
well balanced with the work done means that there was no good relationship between
work done and compensation received or not enough communication was done to
help employee understand how their work contributed to pay received. A very high
responses of not being sure that there was a good balance on basic pay between fellow
51
employees, could mean that there was a high imbalance in salary levels or that the
salary levels for each group or level of employees was not well communicated.
The overwhelmingly high response on pay for performance implies that a there was a
good communication of targets and individual achievements. It also meant that
individual people were well aware of the system. Since a high percentage of the
respondents felt motivated for being in a team and for achieving team targets, then
this meant that team work was highly encouraged and that it gave the desired results.
The negative correlation between current basic pay and motivation could mean that
staffs were not motivated.
The strong response on the entitlement of benefits shows that employees were quite
aware of the benefits. It also meant communication about the benefits was better.
Although there was a high response on the value that the respondents put on the
benefits, a good percentage of them felt otherwise, this could mean that the benefits
were not sold well to them or the combination of the various benefits did not work for
them. On there being a system of recognition and such a system recognizing the
respondents the high response again points out that to a high awareness on the
employees side and a better communication in the organization.
5.5 Recommendations
The recommendations for the specific areas covered are as follows.
5.5.1 The Methods of Determining Employees Compensation
From the findings and the conclusions made, there seems that proper methods of
determining employees compensation in the organization are lacking, and especially
in evaluation against what the different authors advocate for. It is with this knowledge
that the researcher recommend that the Human Resources Manager should develop
systems that will ensure that there is a proper compensation plan entailing proper job
evaluation processes and pay structures in the organization. Any changes in the plan,
like salaries or process should be supported by right fundamentals like salary survey
and facts on the ground. Employees should be encouraged to take up-skills
52
enhancement programmes and lastly proper communication and clarification channels
to be set where information is disseminated regularly to all or is easily and readily
available to all employees.
5.5.2 Direct Financial Payments and Employees Motivation
In the light of the findings, of high awareness of existence of basic and other
additional payment, only a small population was motivated with their basic pay and
the overwhelming positive response on motivation improving as a result of change in
basic pay. The researcher recommended that a proper salary survey and job evaluation
vis-a-vis total rewards received to be commissioned in a bid to ensure there is internal
and external equity in the organization and that motivation is driven by the right
fundamentals. On the contingent pay, although the study did not go deep into finding
out the various forms of contingent pay in the organization, the general feeling of
motivation was high. The researcher also recommends that a further study be done
even by department to determine the specifics and take necessary actions. In the area
of team work, team rewards and whole organization reward it is recommended that
further study be done to enhance it.
The respondents seemed quite aware of the benefits available and what they were
entitled to. There was also a high level motivation for benefits received, although a
small group felts benefits were not important. In the light of the findings the
researcher would recommend that management to take initiatives in finding out which
benefits work well and why. This could be done by creating an environment
conducive for information sharing and brain storming. Different views would then be
evaluated and implemented as necessary. This could help the organization in cost
saving with unnecessary benefits and help in improving motivation..
5.5.4 Suggestions for Further Research
To add value to this study the researcher would also recommend that further studies
be done. The study on base pay can be done to find out its effects on internal and
external equity in the organization. A further study on contingent pay can be done to
find out the different forms contingent pays in place and which form motivates more
53
and why. Finally further study on benefits is recommended to find out how current
benefits can be improved and motivates employees more. In light of the great number
of youthful population in the organization and the number of years spent in the
organization. The researcher would also recommend that further studies done on what
motivates the youth to give their best and expected duration of stay.
54
REFERENCES
Armstrong, M. (2008). Strategic Human Resource Management: A Guide to Action.
Philadelphia: Kogan Page Publishers.
A.E. Schwartz (2006). Motivating Employees: Motivation: Linking Performance to
Goals.
Beardwell, I. Holden, L. & Claydon, T. (2004).Human Resources Management: A
Contemporary approach. Pearson Education Ltd, Edinburgh Gate, Harlow,
Essex CM202JE, England.
Bernardin, H. J. (2003). Human Resources Management: An Experiential Approach.
Tata McGraw-Hill Publishing Company Ltd New-Delhi.
Biswanath G. (2000). Human Resources Development Management. Vikas Publishing
House. Pvt Ltd.
Bowen, R. B. (2000). Recognizing and Rewarding Employees. New York City:
McGraw-Hill Professional.
Brewster, C. Carey, L. Grobler, P. Holland, P. & Warnich, S. (2008). Contemporary
issues in Human Resources Management: Gaining a Competitive Advantage.
Oxford University Press Sourthern African (Pty) Ltd.
Bussin. M (2011).The remuneration hand book for Africa. A practical and
informative handbook for managing reward and recognition in Africa.
Knowres publishing (Pty) Ltd.
Campbell, J. (2007). Motivation, Attitudes, Goal Setting, Performance and Interactive
Effects of Pay for Performance. Minneapolis, MN: Capella University.
Cascio, W. F. (2010). Managing Human Resources: Productivity, Quality of Work
Life, Profits. McGraw-Hill/Irwin, Avenue of the Americas, New York, NY,
10020.
55
Cheatle, K. (2001). Mastering Human Resources Management. Palgrave Master
Series, Houndmills, Basinkstoke, Hampsire RG216XS and 175 Fifth Avenue,
NY 10010.
Chruden H. J. & Sherman Jr A. W. (1980). Personel Management: The Utilization of
Human Resources 6th Edition. A South-Western publishing co.
Clegg, B. & Birch P (2002). Crash course in Managing people, Kogan Page, 120
Pentoville Road, London N19JN.
Cole, G. (2002). Personnel and Human Resources Management, Thomas Learning,
high Holborn House, 50-51 Bedford Row, London WC1R4LR.
Cowling, A. & James, P. (1994).The Essence of personnel management and industrial
relations. Asoke K. Gosh, Prentice-Hall of India Private Limited, M-97,
Connaught Circus, New Delhi-11001.
David, A. Decenzo. & Stephen, P. R. (2007). Fundamentals of Human Resource
Management, John Wiley and Sons, Inc.
DeNisi A. S. & Griffins R. W. (2008). Human Resources Management. Houghton
Miffling Company. Boston New York.
Denscombe, M (2003). The Good Research Guide for Small Scale Research Projects
2nd Edition. Open University Press.
Dessler, G. (2008). Human Resource Management. Upper Saddle River, NJ:
Pearson/Prentice Hall.
Dransfield R. (2000). Human Resources Management. Heinemann Educational
Publishers, Halle court, Jordan hill, Oxford.
Gerhart, B. (2000). Compensation Strategy and Organisation performance. San
Francisco, CA: Josse-Bass.
56
Farhad A. et al. (1999). Effective Human Resources: A Challenge for Developing
Countries. Ashgate.
Frey, B. & Osterloh, M. (2002).Successful Management by Motivation: Balancing
Intrinsic and Extrinsic Incentives. New York: Springer.
Jex, S.M. & Britt, T.W. (2008).Organizational Psychology. Hoboke, New Jersey:
John Wiley and Sons, Inc.
Luis, R. Gomez-Mejia, David B & Robert L. (2012). Managing Human Resources,
Pearson
Maslow, A. (1954). Motivation and Personality 3rd Edition. Harper and Row, 1987.
ISBN 0060419873, 9780060419875
Mason, R. D. & Marchal, W. G. Statistical Techniques in Business and Economics.
McGraw-Hill/Irwin, 11th Edition.
McEwen, B. C. (2010) Job satisfaction. Business Dictionary. In Answers corporation:
Online) http: www.answers.com/topic/job satisfaction.
Michael, W. D & Stan K (2002). The Human Side of Organizations. Upper Saddle
River, NJ: Pearson/Prentice Hall.
Milkovich, G. Newman J & Gerhart B. (2013). Compensation, 11th Edition,
McGraw-Hill Education: ISDN: 007802949X, 9780078029493.
Mitchell, T. R. & Daniels, D. (2003).Motivation. Handbook of Psychology, Vol. 12.
Industrial Organizational Psychology, ed. W.C. Borman, D.R. Ilgen, R.J.
Klimoski, NY: Wiley.
Mugenda, O. M. & Mugenda, A. G. (2003). Research Methods: Quantitative and
Qualitative Approaches. African Centre for Technology Studies, 1999. ISDN.
9966411070, 9789966411075
57
Nelson B & Spitzer D. (2003). The 1001 Reward and Recognition field book: the
complete guide, workman publishing. New York.
Nkomo, S. et al (2011).HR Management application 7th Edition. South-Western,
Cengage Learning. ISBN: 13:978-0-538-46807-7.
Noe, R. A, HollenBeck, J. R, Gerhart, B. & Wright, P. M. (2006).Human Resources
Management: Gaining a competitive Advantage. McGraw-Hill/Irwin, Avenue
of the Americas, New York, NY, 10020.
Pilbeam, S. & Corbridge, M. (2006).People Resourcing: Contemporary HRM in
Practice. Pearson Education Ltd, Edinburgh Gate, Harlow, Essex CM202JE,
England.
Robert B. B & Don H. (2001). Human Resources Management. An Experential
Approach Prentice Hall.
Robert Heller. (1999). Dealing With People. A DK publishing book.
Shields, J. (2007). Managing Employees Performance and Rewards: Concepts,
Practices and Strategies. Cambridge: Cambridge University Press.
Trochim, W. M. K (2006). Research Method Knowledge Base. Online
http//www.socialresearchmethods.net.
Wylie, P. & Grothe, M. (1991). Problem Employees: How to Improve Their
Behaviour and Their performance. Judy Piatkus (publishers) limited, 5
Windmill street, London.
58
APPENDICES
APPENDIX I: COVER LETTER
Patrick K. Mwangi
P.O Box 15070-00100 Nairobi
2nd July 2013
To:
Chloride Exide Group
P.O. Box 14242 00800, Nairobi
Dear sir/Madam:
Request to participate in research study
I wish to carry out a research on the effect of compensation on employee motivation;

this is a partial fulfillment of MBA programme at USIU, which I am currently
undertaking.
The study uses Chloride Exide as the case study organization and you have been
selected as one of the lucky respondent, the finding will provide the organization with
information necessary to help improve on the employee motivation and this will
intern improve on employee productivity and reduce on negative effects of de-
motivated employees in the organization.
A questionnaire that will take approximately 20 minutes to complete is attached.

Please note that all the information provided is only for this study only and will be
treated with strict confidentiality, your name will not appear anywhere in the report.
Thank you for your time and participation
Yours sincerely
Patrick Kihato
59
APPENDIX II: QUESTIONNAIRE
This study is a requirement for partial fulfillment of MBA programme at USIU, the
purpose of the study is to determine the effects of compensation on employee
motivation.
The study uses Chloride Exide as the case study organization; the finding will provide
the organization with information necessary to help improve on the employee
motivation and this will intern improve on employee productivity and reduce on
negative effects of demotivated employees
This is an academic exercise and all information will be treated with confidentiality
PART I GENERAL INFORMATION
1. Gender : Male Female

2. Age : 20-30 30-40 40-50 Over 50
3. Education : Certificate Diploma Degree Masters
Phd
4. How long have you worked for Chloride Exide
: <5 year5-10 years 10-15 years 15-20 years >20 years
5. How would you describe staff motivation at Chloride Exide
: High Moderate high Not sure Moderately low Low
60
PART II METHODS USED TO DETERMINE EMPLOYEES
COMPENSATION
Please tick the box that best fits your opinion for each statement
1 2 3 4 5
Strongly Agree Not Dis - Strongly
Agree Sure agree Disagree
1 Employee compensation costs forms a
significant portion of our companys costs.
2 Employee compensation plan at Chloride

Exide is well formulated
3 The pay structure at Chloride Exide meets

the requirement of government of Kenya
4 The pay structure at Chloride Exide ensures

there is a good balance of pays between the
employees in the company
5 The pay structure at Chloride Exide ensures

that there is a good balance in comparison
with other employees of other related
companies.
6 I feel that my job is very well defined
7 I feel I am adequately compensated for use

of my skills in my job
8 My Job offers little or no incentives for

gaining new skills or knowledge.
9 All the decisions affecting employee

compensation are managed at one central
place as opposed to every departmental head
handling their areas
10 In my opinion a thorough survey of salary is

conducted within the industry before
determining a new staff salary or change in
the organization
61
PART III DIRECT FINANCIAL PAYMENTS AND EMPLOYEE
MOTIVATION
1 2 3 4 5
1 My Basic pay is reviewed periodically
2 My basic pay varies from others in other

levels of employment.
3 My basic pay motivates me to do my work

well
4 My basic pay is well balanced compared to

the work I do
5 My basic pay is well balanced compared to

other employees in the company
6 An increase in my basic pay will motivate

me improve on my performance.
7 There exist a system in the company of

compensating employees if they achieve
their targets
8 In my work, the team reward motivates me

well
9 My team works very closely to enable
achieve the team reward
10 I am entitled for a reward if the whole

organization achieves its set target
62
PART IV EMPLOYEE BENEFITS AND EMPLOYEE MOTIVATION
Yes No
1. In addition to my pay for the work I do, I am entitled

to the following benefits.
a. Medical
b. Pension
c. Paid leave
d. Insurance
e. Car loan
f. Meals
g. Child-care
h. Severance pay
63
1 2 3 4 5
2 The benefits are so important to me they are one
of the reasons I have not moved from Chloride
Exide
3 The benefits I receive motivates me to do well at

my work
4 At Chloride Exide there is a system of staff

recognition, where outstanding performance are
recognized on a timely manner, regularly and
also for the right reasons
5 The recognition system motivates me to work

well in my area and even to go beyond the call
of duty
64

Patrick Mwangi

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Patrick Mwangi

Uploaded by

Copyright:

Available Formats

THE EFFECT OF COMPENSATION ON EMPLOYEE

MOTIVATION: A CASE STUDY OF CHLORIDE EXIDE

UNITED STATES INTERNATIONAL UNIVERSITY

A Project Report Submitted to the Chandaria School of Business in

UNITED STATES INTERNATIONAL UNIVERSITY

Patrick Kihato Mwangi (ID 628678)

Dr. Teresia Kavoo Linge

Dean, Chandaria, School of Business

2014 by Patrick Kihato Mwangi

All rights reserved.

No part of this report may be photocopied, recorded or otherwise reproduced, stored

STUDENTS DECLARATION ............................................................................................... ii

Table 3.1 : Population size 22

1.1 Background of the Study

Motivation is among the key concerns of organizations in the modern business

Motivation is important in team-based environments as well as where employees

Maintaining highly motivated employees is therefore a strategic move to keep

On the other hand, according to Amstrong (2008) de-motivated employees exhibit

Key factors that determine employee motivation are satisfaction, recognition,

1.3 General Objective

1.4.1 To establish the methods used to determine employees compensation at

1.5 Significance of the Study

1.5.1 Chloride Exide Management and Staff

This research project examined the impact of compensation schemes by examining

1.7 Definition of Terms

1.8 Chapter Summary

2.0 LITERATURE REVIEW

2.2 Methods Used to Determine Employees Compensation

According to Gomez et al. (2012), employees compensation is the single most

2.2.1 Categorization of Employees Compensation

2.2.2 Factors Determining a Compensation Plan

Whether an organization uses job-based or skill-based compensation plan, the main

2.2.3 Compensation Plan Determination Process

Determining a well-balanced employees compensation plan comprises of five steps

2.3 Direct Financial Payments and Employees Motivation

2.3.1 Base/ Basic Pay

2.3.2 Contingent Pay

According to Amstrong, (2008), there is more to rewarding people than throwing

Dessler (2008) defines benefits as indirect financial and non-financial payments

2.4.1 Benefits Classifications

2.4.2 Recognition Benefits

2.4.3 Other Benefits

2.5 Chapter Summary

3.0 RESEARCH METHODOLOGY

3.2 Research Design

3.3 Population and Sampling Design

Table 3.1: Population size

Category Population Percentage

3.3.2 Sample Design

3.3.2.2 Sampling Technique

Kothari (2007) defines sampling design/technique as a definite plan for obtaining a

Table 3.2: Sample size

Category Population Percentage Sample size

3.4 Data Collection Methods

3.5 Research Procedures

The questionnaires designed by the researcher were first administered to 5

3.6 Data Analysis Methods

4.0 RESULTS AND FINDINGS

Table 4.1: Response Rate per Strata

Category Sample size Response Percentage

4.2 General Information

4.2.1 Gender of Respondents

4.2.2 Age of Respondents

Table 4.3: Age Distribution