Analyzing The Effect Of Reward Practices Commerce Essay

For the past few decennaries, Government of Pakistan has made attempts and succeeded in its attempts to do the environment conducive for the corporate sector to increase investing and overall upheaval of economic system. These organisations from Telecommunication, Banking, Oil & A ; Gas and other industries are playing important functions in the economic development of Pakistan. For this uninterrupted procedure towards development, Human Resource Management Practices in a concern must be taken in to consideration for un-exhaustive operations and enhanced organisational public presentation.

An Overview of Telecom Industry in Pakistan

The nomadic telephone industry, adding to the velocity of globalisation is besides altering the life style of the people in Pakistan. It is a pivot in doing the life forms of multitudes easier twenty-four hours by twenty-four hours. The nomadic Industry of Pakistan is rather vivacious and is still turning in a extremely dynamic, sophisticated and competitory market environment.

The history of nomadic telecommunication services can be traced back to early 1890ss, which have a significant standing in Pakistan ‘s telecom sector and is supplying its endorsers with the cheapest naming rates in South Asiatic part. In add-on, the nomadic service suppliers are adding new services to their clients, like DSL ( Digital Subscriber Line ) , Local Loop, LDI ( Long distance and International ) , WLL ( Wireless Local Loop ) and ISP ( Internet Service Provider ) . Compared to the developed states there is still room for betterment in the service like the inclusion of WiMax and 3G cellular systems, etc..

Having said this, the deteriorating jurisprudence and order state of affairs in the Pakistan and fiscal slack has besides slowed down the development in the cellular industry in Pakistan. However, this industry still has a good net income border that is being reduced for the service suppliers due to competition. As per the study of Pakistan Telecom Authority ( PTA ) ( 2008 ) , Mobilink is the market leader with 35.3 % market portion and followed by Ufone ( 20.8 % ) , Telenor ( 20.5 % ) , Warid ( 17.8 % ) , Zong ( 5.4 % ) and Instaphone ( 0.4 % ) and overall cellular endorser base in Pakistan has reached up to 9.2 million in Sep 2008. Currently, Instaphone is wholly out of service and non in competition any longer.

A survey by Rafiq and Gao ( 2008 ) revealed certain of import facets about the market kineticss of nomadic telecommunications industry in Pakistan as a complex system of worlds and engineering is operational in the nomadic telecom industry in Pakistan. The survey besides elaborated the robust growing of nomadic telecom industry in Pakistan as a consequence of favourable conditions for growing. They farther contended that a current competitory environment for nomadic telecommunications is backed by just ordinances and policies devised by PTA. The survey besides illustrated that the healthy competition among nomadic operators is impacting the working forms of nomadic phone companies and they are supplying improved value-added services at extremely compatible rates to their consumers. Due to tough competition, some companies died out.

Wagess and Organizational Performance: A Basic Motivation Tool

Miller & A ; Hamblin ( 1963 ) and Rosenbaum et Al. ( 1980 ) analyzed the impact of assorted different combinations of wagess on squad productiveness and procedures. They deduced that improper mix of wagess leads to lowered efficiency and productiveness.

If non motivated, a skilled employee can go a hapless performing artist. One of the effectual ways to heighten employee motive and public presentation is to supply ay for public presentation compensation ( Delaney and Huselid, 1996 ) . The wagess system positively augments public presentation as the involvements of employee and the organisation is on the same wavelength, therefore ensuing in improved efficiency and public presentation ( Kalleberg and Moody, 1994 ; Huselid, 1995 ; Kling, 1995 ) . The wages system rotates around the anticipation theory, which proposes that the good public presentation of employees is straight linked to the wagess system ( Fey and Bjorkman, 2001 ; Guest, 2002 ; Mendonca, 2002 ) .

Lawler ( 2005 ) reported that organisational public presentation and effectivity, organisational design and alteration direction are the results of an outstanding Human Resource ( HR ) system. Hewitt ( 2004 ) and Saratoga Institute ( 2006 ) concluded that for the improvement of the assorted HR maps, HR indexs are required to be to through empirical observation measured and reported by HR Systems. Consequently, this attack will switch the HR systems and maps from traditional forces disposal towards Strategic Human Resource Management ( HRM ) holding broad growing chances for an organisation. Therefore, wages and public presentation are closely linked with one another in a manner that betterment in wagess system consequences in an addition in organisational productiveness.

To better organisational public presentation, motive dramas cardinal function in heightening employee effectivity and its focal points on the effects of intrinsic and extrinsic “ wagess ” in determining employee behaviour. Therefore, we can state that wagess could be and frequently are being used as a incentive to heighten organisational public presentation. The determination of an employee to fall in an organisation and execute good depends, among others, the wagess and inducements system implemented ( March and Simon 1966 ; Rosenstiel 1975 ; Weinert 1998 ) .

Extrinsic versus Intrinsic Rewards

Based on the work of assorted research workers, wagess are divided into two chief classs known as intrinsic and extrinsic wagess. The intrinsic wagess exist in the occupation content and include assortment, challenge, and autonomy etc. Extrinsic wagess refer to the context of occupation such as wage and periphery benefits, publicity or promotion chances within the organisation, the societal clime, and physical working conditions. Brief and Aldag ( 1977 ) suggested that it is utile to hold a differentiation between extrinsic and intrinsic wagess. However, Crino ( 1978 ) highlighted that extrinsic and intrinsic wagess are non merely different types of results but these two are separate terminals of a same set. Contrary to this, Guzzo ( 1979 ) suggested that distinguishing extrinsic and intrinsic wagess is unequal for understanding of different types of wagess and incentive systems in organisations.

Porter and Lawler ( 1968 ) reported that there is an ambiguous relationship between extrinsic and intrinsic wagess with public presentation. However, there is a weak relationship between extrinsic wagess and work public presentation because it is really hard to keep consistence and equity in honoring work public presentation. One more ground is an familial trouble in public presentation direction system and rating to mensurate qualitative undertakings. On the other manus, intrinsic wagess can easy be linked to public presentation, as these wagess are associated with psyche and spirit of a individual. Intrinsic wagess focal point on accomplishment of something good that is pressing, immediate and straight aligned with public presentation ; such wagess are non bothered by state of affairss and are non externally controlled. Porter and Lawler ( 1968 ) further contended about extrinsic and intrinsic wagess that when we combine them with one another, they impact the satisfaction and public presentation positively.

On the other manus, Deci ( 1972a ) advocated that both extrinsic and intrinsic wagess do non better motive degree instead extrinsic wagess when surpasses certain degree, it overpowers the impact of intrinsic wagess. Resultantly, there is a negative impact of extrinsic wagess on intrinsic motive at times when the work public presentation is linked with extrinsic wagess merely.

Extrinsic Reward Structure and Policy

Although non much work has been done on associating the consciousness of extrinsic wagess construction and policy with the public presentation of the employees and/or the organisation, some research workers have found significance association among wagess and inducements tied to organisational public presentation. A survey by Bau and Dowling ( 2007 ) found that there is an association among the wages and incentive systems in organisations. They farther suggested that organisations holding big figure of skilled and qualified employees have better fiscal and non-financial wages patterns while the smaller organisations with fewer staff can non pull off to hold a structured extrinsic wagess patterns.

In order to accomplish the end and aims of an organisation, extrinsic pecuniary wage is considered to be an built-in factor among wagess given ( Heneman and Judge 2000 ; Milkovitch and Newman 2004 ) . Harmonizing to Gardner et Al. ( 2004 ) for work public presentation, an extrinsic wages in the form of pecuniary wage is frequently administered. Monetary Pay is besides used for keeping of willing workers ( Trevor et al. 1997 ) . Contrary to this, Tekleab et Al. ( 2005 ) suggested that employees perceive pecuniary wage disposal in negative footings, which shows that wage is non considered to be a positive incentive for effectual public presentation and keeping of employee ( Currall et al. 2005 ; Tekleab et Al. 2005 ; Trevor et Al. 1997 ) .

In add-on, it is argued that salary rise and benefits have strong impact upon making a sense of committedness and gratitude as an employee will experience that he/she is being reasonably treated in the organisation. Therefore, there is an indirect nexus between different aspects of occupation attitudes with wage and benefits. As Williams et Al. ( 2002 ) stated that overall occupation satisfaction has positive relationship with benefit degree and system. Dulebohn and Martocchio ( 1998 ) commented that cognition and utility of wage program is significantly related with organisational committedness. Assorted writers of the same field maintained that satisfaction of the employee is greatly tied with the extrinsic wagess that are given to the employees based on his public presentation. So, based on the findings as discussed above, an empirical probe about the extrinsic wages construction and policy demands to be conducted. In add-on, wages construction and policy becomes more of import when a new house is initiated and its wages constructions are to be formulated. A company needs to develop the major constituents of the wages and inducement system with the transition of clip, as a immature house will hold an unstructured wages and inducement system. This wages and inducement system contains assorted types of wagess such as fiscal wagess and societal inducements, which evolve as the company grows.

The attack to follow the extrinsic wagess construction and policies in organisations depends upon the perceptual experience of employers, market kineticss and strategic attack of the house in inquiry. The compensation strategies of the organisations greatly assist in increasing their net income borders in the related the industry. After the SWOT ( success, failing, chances and menaces ) analysis conducted by the organisation for its effectivity, the wages patterns for the whole administration is so formulated ( Stoughton and Pong Wong, 2007 )

Theoretical Model and conceptual Model

The model of the survey includes a theoretical account based on three independent variables that are assumed to hold a important impact on organisational public presentation. The occupation satisfaction ( JS ) theoretical account as presented in Figure1 includes three independent variables including Extrinsic Rewards, Intrinsic Rewards and Extrinsic Rewards Structure and Policy ( ERSP ) . Organizational Performance is the dependent variable in this hypothesized theoretical account.

Figure 1

Hypothesiss of the Study

Based on JS theoretical account shown in Figure 1 and literature hunt foundations, certain hypotheses of this survey have been developed. The study instrument was designed based on the proposed theoretical account of Job Satisfaction and the undermentioned hypotheses. The hypotheses are as follows: –

H1 Extrinsic wagess lead to better organisational public presentation.

H2 Intrinsic wagess lead to better organisational public presentation.

H3 Awareness of the extrinsic wages construction and policy positively affects organisational public presentation.


Data, Sample and Procedure

This empirical survey is designed as an explorative study research to prove the hypotheses developed based on JS theoretical account under consideration. A study instrument was developed to prove the hypotheses of this survey and primary informations for which was collected from employees of nomadic telecommunication organisations working in Pakistan. This instrument was designed with the aid of assorted stakeholders and was pre-tested for content cogency. Its linguistic communication and content both were fine-tuned on the footing of remarks received.

The duplicate metropoliss of Islamabad and Rawalpindi were used as the sample infinite in this survey. The sample size was 150, out of which 98 questionnaires were received back and 95 were found completed in all regard. The demographic information every bit good as responses on research variables were collected followed by a SEM and reading of consequences to place the importance and prognostic power of the theoretical account.


The inquiries in the study instrument were grouped together into four classs out of that three classs measured the three independent variables – extrinsic wagess ( ER ) , intrinsic wagess ( IR ) and extrinsic wagess construction and policy ( ERSP ) and the 4th group measured the dependant variable – organisational public presentation ( OP ) in this survey.

The study tool was a bipartite questionnaire consisting of demographic every bit good as research variables inquiries. Respondents were asked to reply the inquiries on a seven-point Likert graduated table runing from perfectly dissatisfied/disagree ( 1 ) to perfectly satisfied/agree ( 7 ) .

The independent variable ER was measured on 11 points scale holding dependability statistic of 0.83 whereas IR was measured on 05 points scale holding dependability statistic of 0.77 and 3rd variable named as ERSP was measured on 39 points scale. The dependability statistic for 3rd step was 0.92.

Analysis of Data and Results

Harmonizing to Bollen, 1989, structural equation mold ( SEM ) was used to mensurate relationships between the latent variables since early twentieth century for the first clip. Furthermore, Gefen et Al. ( 2000 ) commented that the SEM theoretical account is concerned about a grounded world or void hypothesis and its form of additive relationships between a set of ascertained and unseen variables. The principle behind utilizing SEM is to find whether the theoretical account based on void hypothesis is valid, instead than to place and research a proper feasible 1. SEM theoretical accounts consist of ascertained variables besides called measured variable or MV in short signifier and unseen variables besides called latent or LV in short signifiers. LVs are based on conjectural concepts that can non be straight mensurable, and in SEM, they are shown as an index of assorted multiple or measured variables ( MVs ) . The SEM theoretical account is an a priori hypothesis about a form of additive relationships among a set of ascertained and unseen variables. The aim in utilizing SEM is to find whether the a priori theoretical account is valid, instead than to ‘find ‘ a suited theoretical account.

SEM has been explained as a combination of explorative factor analysis and multiple arrested developments ( Ullman, 2001 ) . Furthermore, way analysis and collateral factor analysis are two particular instances used in SEM and are loosely utilised in societal scientific discipline research. Path analysis ( PA ) theoretical accounts spell out the forms of directional and non-directional relationships among ascertained and unseen variables. The lone LVs in such theoretical accounts are error footings ( Hair et al. , 1998 ) .

In order to place the impact of independent variables upon dependent variable, LISREL 8.8 Software was used for statistical analysis of the informations by utilizing way analysis and SEM of ordinal informations series to place the strength of proposed independent variables upon dependent one.

Goodness of fit indices was computed and the possible impact in footings of statistical values of independent variables upon dependent one was interpreted in following few tabular arraies and paragraphs.

Descriptive Statisticss

Table 1 to 6 represents descriptive statistics of sample under consideration which include demographic features such as Age, Gender, employees holding portions in Organization, educational degree, Job Tenure and Size of Organizations.

Table 1: Employee ‘s Age

Employee ‘s age



20 to 30 years



30 to 40 years



40 to 50 years



Above 50 year






Table 2: Gender













Table 3: Employees holding Shares in Org.

Employees holding Shares in Org












Table 4: Education Degree

Education Degree



Multiple sclerosis









Table 5: Occupation Tenure

Job Tenure



Less Than 2 year



Less Than 3 year



Less Than 5 year



Less Than 10 year



10 year or above






Table 6: Size of Organizations

Size of Organizations



Less Than 500 employees



Less Than 1000 employees



Less Than 3000 employees



Less Than 5000 employees



5000 employees or above






Proposed Model Analysis & A ; Hypotheses Testing

Way analysis was conducted utilizing SEM for ordinal Data Series. A JS theoretical account as shown in Fig.1 was proposed/constructed associating extrinsic wagess ( ER ) , intrinsic wagess ( IR ) and extrinsic wagess construction and policy ( ERSP ) , which is represented by a latent variable, ‘rewards ‘ to organisational public presentation ( OP ) . This theoretical account has been validated and showed theoretical account tantrum indices clearly are exemplifying a statistically important positive relationship ( P & lt ; 0.01 ) for IR and ER on OP, and a consecutive insignificant relationship of ERSP on OP. No negative relationship was reported in this theoretical account fit statistics. The goodness of fit indexs was found strong plenty for hypotheses proving in this instance.

The occupation satisfaction ( JS ) theoretical account was verified by holding clear and touchable consequences on the several hypothesis trials. The first hypothesis ( H1 ) , that is extrinsic wagess leads to better organisational public presentation, was confirmed by the informations ( way coefficient=0.60, t-values = 2.66, P & lt ; 0.01 ) .

In add-on, 2nd hypothesis ( H2 ) intrinsic wagess leads to better organisational public presentation. This hypothesis was besides found important at P & lt ; 0.01 with a path coefficient of 0.60 and t-values = 2.68. Furthermore, undistinguished consequence was found to back up H3, which tested that extrinsic wages construction and policy consciousness positively affects organisational public presentation. The way coefficient for H3 was reported as 0.42, t-value and p-value were undistinguished.

Table 7 illustrates the theoretical account fit statistics for the hypothesis H1, H2 and H3.

Table 7

Fit Indexs

Recommended Valuess

Predicted Valuess

Chi-square/degrees of freedom





















Where GFI = goodness-of-fit index ; AGFI = adjusted goodness-of-fit index ;

NNFI = non-normed fit index ; CFI = comparative tantrum index ;

RMSR = root mean square residuary ; RMSEA = root mean square mistake of estimate.

Furthermore, LISREL estimations and structural equation for the theoretical account clearly is portraying that the theoretical account holding three independent variables, which are indexs of a latent variable i.e. REWARDS histories for most of fluctuation in dependent variable i.e. organisational public presentation ( OP ) .

The Equation 1, 2, 3 and 4 shows LISREL Estimates based on Maximum Likelihood Estimation holding three measurement equations and a structural equation of independent, latent and dependent variables used in the proposed theoretical account.

Measurement Equations

ERSP = 0.42*REWARDS, Errorvar. = 1.90 aˆ¦aˆ¦aˆ¦aˆ¦aˆ¦aˆ¦aˆ¦ # 1

Standerr ( 0.28 )

T-values 6.75

P-values 0.000

ER = 0.60*REWARDS, Errorvar. = 0.25 aˆ¦aˆ¦aˆ¦aˆ¦aˆ¦aˆ¦aˆ¦ # 2

Standerr ( 0.23 ) ( 0.049 )

T-value 2.66 5.20

P-values 0.008 0.000

IR = 0.60*REWARDS, Errorvar. = 0.15 aˆ¦aˆ¦aˆ¦aˆ¦aˆ¦aˆ¦aˆ¦ # 3

Standerr ( 0.22 ) ( 0.039 )

T-value 2.68 3.93

P-values 0.007 0.000

Structural Equation

REWARDS = 1.18*OP, Errorvar. = 0.52 aˆ¦aˆ¦aˆ¦aˆ¦aˆ¦aˆ¦aˆ¦ # 4

Standerr ( 0.44 ) ( 0.23 )

T-value 2.69 1.29

P-values 0.007 0.197

The measurement equation # 1 shows that Extrinsic Rewards Structure and its policy have insignificant relationship with latent variable, Rewards, holding no standard mistake, t-value and p-value calculated.

However, the measurement equation # 2 shows important relationship of Extrinsic Rewards with latent variable, Rewards, holding standard mistake = 0.23, t-value = 2.66 and p-value = .0008.

Similarly, the measurement equation # 3 shows strong and important relationship of Intrinsic Rewards with latent variable, Rewards, holding standard mistake = 0.22, t-value = 2.68 and p-value = .0007.

Finally, the structural equation ( Equation # 4 ) illustrates the strong and important relationship of REWARDS being used as a latent variable for intrinsic, extrinsic wagess and ERSP upon Organizational Performance. The equation is holding standard mistake = 0.44, t-value = 2.69 and p-value = .0007 shows a theoretical account tantrum for farther usage.

The Figure # 2 shows the tested the Model utilizing path analysis technique and SEM for ordinal informations series. The way coefficients and remainders are shown in the figure for the same theoretical account. The bold blue line shows important relationships and a grey line shows undistinguished relation among the variables.

Furthermore, the whole theoretical account sum-up such as R Square and Adjusted R square values are important which are presented as follows:

Model Summary



R Square

Adjusted R Square

Std. Mistake of the Estimate






a. Forecasters: ( Constant ) , IR, ERSP, ER

Dependent Variable: Org. Performance

Discussion and Decision

This paper focuses on the impact of wagess and its patterns upon organisational public presentation. The wagess patterns play a decisive function in actuating the work force and augmenting organisational public presentation and HR specializers are required to be more focussed to detect the cardinal factors that are more imperative and of important importance for actuating the work force and deriving organisational effectivity. Succinctly, the most of import determination of the survey is the high degree of importance and value that has been given to intrinsic wagess than extrinsic wagess. Furthermore, least concern was reported about extrinsic wagess construction and policy consciousness upon organisational public presentation by the sample standby.

The consequences obtained support the probe made by Ryan & A ; Deci ( 2000 ) who commented that employees who are per se motivated/rewarded when compared to those who are extrinsically motivated/rewarded, were found to hold more involvement in work, shows exhilaration, experience merriment at work, and are more confident which finally leads to heighten organisational public presentation, finding, creativeness and invention, occupation security, and high degree of self-esteem, among other benefits. Like wise, intrinsic motive enhances engagement and high degree of satisfaction along with improved competence degree contrary to extrinsic motive, which increases anxiousness, and decreases self-pride ( Frederick and Ryan, 1993 ) .

The sample of employees in this survey recognizes intrinsic wagess as a better motivation instrument than extrinsic wagess and they are found to the lowest degree concerned with their wagess construction and policy being administered in their organisation.

Therefore, it is concluded that attacks to heighten intrinsic wages patterns as a incentive are important and premier value for better and enhanced organisational public presentation followed by secondary importance given to extrinsic wagess and eventually, extrinsic wagess construction and policy.

Research Implications/Limitations

The HR experts may change wages patterns and its disposal in order to do organisational public presentation better. Therefore, this survey provides empirical grounds to the HR directors about the considerable relationships and links between wagess patterns and organisational public presentation. This survey has revealed certain important facts sing perceptual experiences of employees of Mobile Telecom Industry of Pakistan about wagess patterns and its impact on public presentation of any house, which were non already explored yet.

Although, a sample chosen for this survey was really limited in number/size, nevertheless, the response rate to our study was just plenty and it is confidently said that the non-response prejudice is non important in the consequences of this survey.

Future Research Opportunities

The future research may concentrate on the impact of wagess patterns in public sector telecom industry organisations of Pakistan so that to hold a clear comparing of perceptual experiences among corporate and public sector companies.