Influence of Financial Reward on Employee Performance in Large Commercial Banks in Nairobi City County in Kenya

Abstract

The banking industry has developed a culture based on performance, rewards and compensations. Employees are feeling the pressure of the ever-rising targets from the employers. Employers have become more aggressive about restructuring work in ways that push for higher productivity supported by an array of technologies and management practices. The study sought to determine the effect of financial reward on employee performance. Operant Conditioning Theory on financial rewards was used to inform the study. The study adopted a descriptive research design. Descriptive statistics was chosen since it utilized data collection and analysis techniques that yield reports concerning the measures of central tendency, variation, and correlation. The combination of its characteristic summary and correlation statistics, along with its focus on specific types of research questions, methods, and outcomes necessitated the choice of this design. The study adopted a positivism philosophy. The target population was 22,856 employees working in the six selected Commercial Banks in Nairobi City County composed of both clericals and Management staff. Krejcie and Morgan sample size determination table was used to derive a sample of 377 respondents. Primary data was collected using structured questionnaires that had both close ended and open-ended questionnaires. Quantitative data were analyzed using SPSS. The study conducted various tests including normality test, multicollinearity, stationarity, heteroscedasticity and autocorrelation tests. Factor analysis was carried out among corresponding questions to allow formation of factors with the highest Eigen values. Test of hypothesis was done at 95% confidence interval. The study established a positive and significant relationship between financial reward and employee performance (r=0.427, p=0.000), the alternate hypothesis was not rejected. Based on the findings, the study concluded that financial reward has a positive and significant effect on employee performance. The study recommended for management to consider the many factors involved in a complex and dynamic situation before making decisions on financial rewards that will influence the effectiveness, efficiency and ultimately the sustainability of their organizations. .