Performance based compensation practices among commercial banks in Kenya

Abstract

The economic environment today is rapidly changing and organizations are faced with globalization. To compete effectively, organizations must continually improve their performance by reducing costs, innovating products, improving quality, increasing productivity of staff and efficiency in operation. Commercial banks in Kenya are faced with issues of productivity, competition for customers, efficiency in operation, trade unions and high staff turnover. Such issues must be dealt with. Commercial banks must implement motivational structures that will attract, retain and motivate employees thus the objective was to determine performance based compensation practices among large commercial banks in Kenya. The study used a cross-sectional descriptive survey design. The study targeted all the commercial banks in Kenya. Primary data was collected using a questionnaire. The analysis involved descriptive statistics and content analysis. Content analysis was used to analyze the responses from the interviews. The study findings were that the managers disagreed that on stock ownership, employees are rewarded with company stock as an outright grant. They also agreed that the piece rate system did not pay a higher piece rate wage if employees produced more than the standard. The study concluded that commercial banks practiced performance based compensation. It also concluded that stock ownership plans were based on the company‟s performance as measured by firms‟ stock prices. There were doubts as to whether employees were rewarded with company stock as an outright grant. The study recommended that organizations must align their compensation and reward systems with performance, for when they do, they will increase productivity and achieve sustainable growth.