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UNIVERSITY OF GHANA 
 
 
THE EFFECT OF HUMAN RESOURCE MANAGEMENT PRACTICES 
(COMPENSATION) ON EMPLOYEE EFFECTIVENESS 
 
BY 
ANTIE MARIAM RABIU 
 (10702712) 
 
THIS LONG ESSAY IS SUBMITTED TO THE UNIVERSITY  
OF GHANA BUSINESS SHOOL, LEGON IN PARTIAL FULFILLMENT OF THE 
REQUIREMENTS FOR THE AWARD OF MASTER OF ART IN MANAGEMENT 
AND ADMINISTRATION  
 
 
SEPTEMBER 2019 
 
 
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DECLARATION 
I hereby declare that this material, which I now submit for assessment is entirely my own work and 
to the best of my knowledge, contains no material previously published by another person, nor 
material which has been accepted for the award of any other degree to this or any other university, 
except where due acknowledgement has been made to the text. 
 
 
 
…………………....……….    ……………...………. 
ANTIE MARIAM RABIU      DATE 
 (10702712)                                                   
 
 
 
 
 
 
 
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CERTIFICATION 
 I hereby certify that this was supervised in accordance with procedures laid down by the 
 
University. 
 
 
 
 
 
 
…...…………………………………………    …………...………….  
DR. MAJOREEN OSAFROADU AMANKWAH     DATE   
                    SUPERVISOR                                     
 
 
 
 
 
 
 
 
 
 
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DEDICATION 
To my parents, siblings, spouse and children. 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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ACKNOWLEDGEMENT  
First and foremost, I give thanks to the Almighty God for the precious life, guidance and strength 
granted me to write this thesis. I will forever be grateful to my supervisor, Dr. Majoreen Osafroadu 
Amankwah for her invaluable contributions to this work. In spite of her busy schedule, she patiently 
encouraged and guided me to complete this study. Her advice, and constructive criticisms have 
been my constant source of inspiration. I am extremely grateful to her for painstakingly reviewing 
and suggesting amendments to this work. 
I wish to thank my family, for helping further my education and always wanting me to do my best. 
I also want to thank my partner, Dr. Abubakar Saddick Al-Gabas, who encouraged me to start the 
MA program and whose moral support made the long hours bearable. I extend my thanks to friends 
and colleagues for their help, encouragement and cooperation, and for providing necessary 
information during the research. And to anybody who in diverse ways helped me out with this 
thesis, God Bless You All. 
Finally, to all the authors whose work I consulted for this research, thank you and kudos to you all. 
 
 
 
 
 
 
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ABSTRACT 
Human Resource Management is the process through which management builds the workforce and 
tries to create the human performances that the organization needs (Boxall & Purcell, 2016). 
Compensation which is the ability and responsibility of a company to contribute to its employees 
for their achievement of task and to appreciate their performance is one of the key HRM activity. 
This study was conducted to examine the effect of compensation on employee effectiveness. This 
study examined the influence of compensation on employee effectiveness as well as examined 
behaviors that employees resort to when they sense compensation inequities. It also determined 
whether the provision of benefits and incentives have any important effect on employees. 
The study adopted a quantitative research technique by the use of questionnaires to collect data in 
achieving the study objectives. A sample size of one hundred and twenty-one (121) employees was 
used. The study revealed that there is a positive relationship between compensation and employee 
effectiveness since compensation makes employees committed to the organization and also attracts 
and motivates qualified employees to perform better and harder. 
From the study, employees mostly resort to low morale when they sense compensation inequities 
or go into survival mode and eventually quit when the inequities persist. The study also revealed 
that providing benefits and incentives to employees reduces employee turnover, promotes the 
organization’s brand and increased sales leading to increased profits. 
 
 
 
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TABLE OF CONTENTS 
DECLARATION...................................................................................................................... ii 
CERTIFICATION ................................................................................................................. iii 
DEDICATION......................................................................................................................... iv 
ACKNOWLEDGEMENT ....................................................................................................... v 
ABSTRACT ............................................................................................................................. vi 
LIST OF TABLES ................................................................................................................... x 
SECTION ONE ........................................................................................................................ 1 
INTRODUCTION.................................................................................................................... 1 
1.1 Background of the study .................................................................................................. 1 
1.2 Rationale for the study ..................................................................................................... 2 
1.3 Research Objectives ......................................................................................................... 3 
1.4 Research Questions .......................................................................................................... 4 
1.5 Significance of the study .................................................................................................. 4 
1.6 Organization of the Study ................................................................................................ 4 
SECTION TWO ....................................................................................................................... 6 
LITERATURE REVIEW ....................................................................................................... 6 
2.0 Introduction ...................................................................................................................... 6 
2.1 Compensation Practices ................................................................................................... 7 
2.1.2 Benefits of Compensation .............................................................................................. 11 
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2.2 Employee and Organizational Performance .................................................................. 12 
2.3 Theoretical Framework .................................................................................................. 14 
2.3.1 Frederick Herzberg’s Two-Factor Theory .................................................................... 14 
2.3.2 John Stacey Adam’s Equity Theory ............................................................................... 16 
SECTION THREE................................................................................................................. 19 
METHODOLOGY ................................................................................................................ 19 
3.0 Introduction .................................................................................................................... 19 
3.1 Research design ............................................................................................................. 19 
3.2 Study population, sampling and sampling techniques ................................................... 19 
3.3 Data Collection Instruments .......................................................................................... 20 
3.5 Ethical Consideration ..................................................................................................... 21 
3.6 Limitation of the Study .................................................................................................. 21 
SECTION FOUR ................................................................................................................... 22 
FINDINGS, ANALYSIS AND DISCUSSION OF FINDINGS ......................................... 22 
4.1 Demographic Profile of Respondents ............................................................................ 22 
4.2 Objective 1: The influence of compensation on employee effectiveness ...................... 26 
4.3 Objective 2: Measures to Minimize Compensation Inequities ...................................... 39 
4.4 Objective 3: Effects of the Provision of Benefits and Incentives .................................. 40 
SECTION FIVE ..................................................................................................................... 42 
SUMMARY, CONCLUSION AND RECOMMENDATIONS ......................................... 42 
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5.0 Introduction .................................................................................................................... 42 
5.1 Summary ........................................................................................................................ 42 
5.3 Conclusion ..................................................................................................................... 43 
5.4 Recommendation ........................................................................................................... 44 
5. 5 Future Research .......................................................................................................... 44 
REFERENCES ....................................................................................................................... 46 
APPENDIX ............................................................................................................................. 48 
 
 
 
 
 
 
 
 
 
 
 
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LIST OF TABLES 
Table 2.1 Frederick Herzberg’s Two-Factor Theory………………………………………...15 
Table 4.1 Summary of demographic Profiles. ......................................................................... 24 
Table 4.2 Satisfied with my salary ........................................................................................... 26 
Table 4.3 Reward based on performance ................................................................................. 27 
Table 4.4 Fair Salary ................................................................................................................ 28 
Table 4.5 Equitable over payment ........................................................................................... 28 
Table 4.6 Attractive compensation system .............................................................................. 29 
Table 4.7 Salary reflects standards of living ............................................................................ 30 
Table 4.8 Recognized and rewarded appropriately .................................................................. 30 
Table 4.9 Achieving organization’s objectives ........................................................................ 31 
Table 4.10  Rewarding higher performance ............................................................................ 32 
Table 4.11 Qualified employees to perform better and harder ................................................ 33 
Table 4.12 Competitive compensation package ...................................................................... 34 
Table 4.13 Employees are compensated equitably .................................................................. 35 
Table 4.14 Awareness of compensation policy in terms of service manual ............................ 35 
Table 4.15 Compensation makes employees committed ......................................................... 36 
Table 4.16 Same qualification receives more compensation ................................................... 37 
Table 4.17 Equal compensation for the same kind of work .................................................... 38 
Table 4.18 Children’s welfare facilities are satisfactory ......................................................... 38 
 
 
 
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SECTION ONE 
INTRODUCTION 
1.1 Background of the study 
Human Resource Management (HRM) “is a strategic, integrated and coherent approach to the 
employment, development and well-being of the individuals working in organizations” 
(Armstrong, 2016 p.7). Boxall and Purcell (2016, p.7) also defined Human Resource 
Management as the “process through which management builds the manpower and tries to 
create the human performances that the organization desires”. HRM comprises of many 
practices, one of which is compensation. Effective compensation is expected to add value to 
an employee’s satisfaction to stimulate employees to continually work better. 
 
Compensation is a factor likely to have an effect on the job satisfaction of employees. 
Compensation as an HRM practice commonly refers to pay, wages, salary (remuneration) and 
benefit (Tooksoon, 2011). Amin and Ismail (2014) also defined compensation as the ability 
and responsibility of an organization to contribute to its employees for their accomplishment 
of task and to appreciate their performance. According to them, compensation is the reward 
system an organization provides to all employees who contribute to its performance. 
 
Each organization should strive to boost and enhance employee satisfaction by providing a fair 
and competitive compensation program. Along the same line, the link between pay practice 
and job satisfaction is useful to influence the motivation of employees' work in order to attain 
higher productivity. An organization that offers high wages is more likely to have employees’ 
satisfaction becoming high which may lead to high productivity. In other words, a higher wage 
will increase effort by increasing workers' loyalty to the firm (Akerlof, 1984). 
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To be effective, compensation practices and policies should be aligned with organizational 
objectives (Vlachos, Tsamakos, Vrechopoulos & Avramidis, 2009). Therefore, in an ever-
competitive business environment, several firms nowadays try to spot innovative compensation 
strategies that are directly connected to improving organizational performance (Amin, 
Khairuzzaman , Zaleha & Daverson , 2014).         
 
1.2 Rationale for the study         
The rational for the study is to focus on the challenges that organizations face because of 
inequities experienced by their staff. The equity theory proposes that a person's motivation is 
based on what he or she considers being fair when in comparison to others (Redmond, 
2013).  When applied to the workplace, equity theory focuses on an employee's work-
compensation relationship or "exchange relationship" as well as that employee's attempt to 
minimize any sense of unfairness which may result. 
There are two (2) main processes an individual can use to restore equity: behavioral processes 
and cognitive processes. 
1. An individual’s power to vary the inputs or outcomes of their comparative other might 
be limited, so working to change their own inputs or outcomes is usually attempted 
first.  
2. Cognitive processes involve developing justifications for the inequity to make it appear 
equitable, distorting perceptions of inputs and outcomes, changing the comparative 
other, or any other method that attempts to re-frame the perception of the situation 
(Raja, 2009). 
In some ways, cognitive processes need less effort than behavioral processes; however, they 
are more difficult to accomplish due to the necessity of distorting one’s own perceptions. It is 
important to note that behavioral options in reducing inequity involves risks.  Many times, 
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employees find themselves avoiding these choices because pursuing one of them and failing 
could be detrimental to the level of future rewards.  As a result, the individual may end up 
feeling worse than before.  Usually employees plan to restore inequity through mental 
processes instead (cognitively).  Altering your thought process is not perceived as the easier 
option; however it produces a minimal risk factor in comparison to changing your behavior 
(Redmond, 2013). 
 
If an employee receives a higher remuneration than their colleague, they might still develop a 
perception of inequity if that colleague has a flexible schedule, and that type of schedule is 
more valuable to them than extra salary.  To combat this problem, employers can implement 
the cafeteria style which allows employees to select outcomes that they value most. This can 
help prevent perceptions of inequity because each employee has the outcomes that they value 
most.  This helps increase their ratio of inputs to outcomes when compared to their co-
workers.  Employers can even utilize intangible rewards like a pat on the back, a luncheon, or 
perhaps a simple praise in front of co-workers.  These simple intangible rewards can help 
balance a measure of inputs and outcomes. 
 
Utilizing the equity theory, this study seeks to understand how employees measure their inputs 
and outcomes as well as how employers can prevent issues associated with perceptions of 
inequity, such as reduced productivity, theft or employee turn-over.  In addition, how can 
organizations reduce or prevent negative behaviors associated with inequities and rather 
enhance satisfaction and motivation of employees. 
1.3 Research Objectives 
The objective of this project is to shed light on the relationship between compensation and 
employee effectiveness and to answer the question of whether or not there truly exist causal 
and positive links between the two.  
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 To examine the influence of compensation on employee and organizational 
effectiveness. 
 To examine behaviours that employees resort to when they sense compensation 
inequities. 
 To determine whether the provision of benefits and incentives have any important effect 
on employee and organizational performance. 
1.4 Research Questions 
1. What is the influence of compensation on employee and organizational effectiveness? 
2. What are the behaviours that employees resort to when they sense compensation 
inequities? 
3. Does the provision of benefits and incentives have any important effect on employee 
and organizational performance? 
1.5 Significance of the study 
The result would provide useful information to organizations when making policies on 
compensation. The study would encourage organizations which may not have such policy to 
adopt its usefulness of the development of the organization and its employees. The study is 
expected to function as a reference point and add to the present literature on the subject matter. 
Moreover, the recommendations will provide a helpful guide to Supervisors, Managers and 
Consultants who train and develop employees in organizations. The study will help 
organizations place importance to the development of its employees to be economically 
productive and efficient. 
1.6 Organization of the Study  
This study is organized into five (5) sections, beginning with chapter one which consists of; 
background of the study, problem statement, research objectives, research questions, 
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significance of the study and organization of the study. In section two, which is the literature 
review comprises of; compensation practices, compensation forms, benefits of compensation, 
employee and organizational performance, and theoretical models. The third section which is 
methodology also comprise of; the research design, research population, sample size and 
sampling techniques, the source of data and instrumentation, data gathering procedures, data 
analyses and presentation, and ethical consideration. Section four consists of data analysis and 
discussion of findings. Section five has to do with the summary of major findings, conclusion, 
recommendations of the study and future research. 
 
 
 
 
 
 
 
 
 
 
 
 
 
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SECTION TWO 
LITERATURE REVIEW 
2.0 Introduction 
This chapter casts light on the concepts of Human Resource Management, the varied bundles 
of Human Resource practices, contentions surrounding theories, models and previous findings. 
It looks at the concept of pay considered by many to be a major determinant of motivation to 
perform work roles. It also explores two of the main theories (needs-based theories and equity 
theory) and practices of rewards in the workplace and how they have an effect on performance. 
The theory on reward systems and their effects on performance cannot be evaluated without 
looking at how work motivation is also affected by these rewards and how that motivation is 
directly connected to performance. 
Human resource practices are informal approaches used in managing individuals (Armstrong, 
2010). Several researchers have studied Human Resource Management Practices and its 
relationship with individual and organizational outcomes. For instance, Kehoe and Wright 
(2013) examined the influence of high-performance human resource practice on employees’ 
attitudes and behaviors. They discovered that high-performance human resource practice is 
positively related to employees’ attitudes and behaviors that affects organizational commitment 
and fully mediate the link between employees’ retention and human resource practices. 
Furthermore, Vanhala and Ahteela (2011) investigated the relationship between human 
resource management practices and trust and found that the perceptions of the fairness and 
functioning of human resource management practices are connected to employee trust. 
The present study therefore presents varied theories adopted by various researchers, a 
conceptual review of the variables, a framework portraying a functional relationship and 
summary of available literature. The section ends with a critical identification of gaps in the 
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available literature. This study also targeted on compensation and the way inequities in 
compensation affects employee and organizational effectiveness which are perceived to 
directly have an effect on performance.  
 
2.1 Compensation Practices  
Compensation is one of the human resource management practices that normally refers to pay, 
wages, salary, and benefit, etc. (Tooksoon, 2011). Compensation is the reward system a 
company provides to all employees who contribute to the organization’s performance (Amin, 
Khairuzzaman , Zaleha , & Daverson , 2014). The reward system is based on the performance 
of the employees that ultimately enhances the firm’s performance (Syed & Yan, 2012). 
Performance-based compensation has a positive effect on employee and organizational 
performance (Vlachos, Tsamakos, Vrechopoulos, & Avramidis, 2009). Therefore, workers 
should be offered rewards, incentives, and social benefits in order to motivate them to better 
performance. 
Hence, Gomez-Mejia, Berrone, (Dessler, 2011)and Franco-Santos (2010) argue that companies 
can only outperform others once they have a successful business strategy and smart 
compensation system that helps and gets support from the highest-paid executives and right 
down to the lowest-paid worker. Based on the literature review, compensation, rewards, and 
social benefits are considered as one of the independent variables in order to examine its impact 
on employee and organizational performance. 
2.1.1 Forms of Compensation 
According to Dessler (2011), compensation may be divided into two (2) forms - Direct and 
Indirect compensation which are discussed below in detail. 
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2.1.1.1 Direct/Financial Compensation 
Direct Compensation is usually restricted to the direct cash benefits that the employees receive 
on monthly, bi-monthly or weekly basis for the services they render as employees of a specific 
organization. They are salary, hourly (wages), commission and bonus types of wages. It may 
even be in the form of stock bonus compensation, where employees of the organization are 
given the chance to own shares within the organization they work for and at the end of each 
year they have the opportunity again to gain some dividend in the form of equity on their shares. 
This is also referred to as Executive Stock Options (ESO). 
Salary 
This type of reward is customarily a set sum of remuneration over a defined period of time. 
The frequency of payment is another part of the compensation and is based on industry 
standards.  In general, there is an expectation from the employer of a longer-term commitment 
from the employee for providing a regular uninterrupted compensation stream via a salary. 
Wages 
This is an amount per hour of service to the employer, more commonly used to compensate 
unskilled and skilful laborers within the work force.  This kind of compensation comes with an 
implied understanding that in times of slow or minimal workloads, the employee might not be 
used to provide services.  In effect, there is no guarantee of a regular cycle of pay. 
Commission 
When compensation is based on volume or some form of performance, this is often referred to 
as commission-based remuneration. Different terms used include piecework or 
piecemeal.  Many industries used this kind of remuneration to get a minimum standard of 
production in exchange for compensation.  It is used to shift risk from the employer to the 
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employee.  There are two ways to calculate commission.  One is based on volume of services 
and the other is based on sales. 
Bonuses 
Bonuses are used to increase performance from the employee.  This is often a variable type of 
remuneration and is more commonly found with salaried workers to incentivize them for a 
specific goal whether time or volume based.  Other reasons used for bonuses are to increase or 
maintain retention of certain skills or the pool of skill-sets required within the 
company.   Generally bonuses are paid when a company meets certain financial standards or 
goals over an extended period of time. Bonuses are not usually used with hourly or 
commission-based employees due to the nature of the type of compensation already 
established. 
2.1.1.2 Indirect Compensation/Benefits 
 Dessler (2011) refers to Indirect Compensation as the indirect monetary and non-financial 
payments employees receive for continuing their employment with the company which are an 
important part of every employee’s compensation. Other terminologies like fringe benefits, 
employee services, supplementary compensation and supplementary pay are used. Indirect 
compensation is primarily the various types of benefits and long-term incentives. 
Martocchio (2013) states that fringe benefits include any kind of programs that provide time 
off, employee services and protection programs. According to Van der Westhuizen (2017), 
fringe benefits refer to indirect forms of compensation that are meant to attract, retain and 
motivate employees. Rose (2014) attests that fringe benefits consist of non-cash elements of 
the reward that are provided by the employer either to all employees or differentiated by level. 
Employee benefits consist of arrangements made by employers to improve their employees’ 
well-being. The benefits are provided additionally to pay and form important parts of the total 
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rewards package (Armstrong, 2012). Benefit packages for employees are integral to the 
monetary reward package, and for many organizations, the employer brand determines the type 
of benefits offered, that successively, support the messages to be delivered via the employer 
brand.  
According to Armstrong (2009), Indirect Compensation or Employee benefits are elements of 
remuneration given additionally to the various forms of cash pay. Benefits included are paid 
vacation, sick leave, health & life insurance and maternity/family leave. They also include 
items that are not strictly remuneration such as annual holidays. It involves rewards provided 
by organizations to employees for their membership, attendance or participation in the 
organization. Attributable to the increasing costs of fringe benefits, some people also label 
them as 'hidden payroll’. The basic purpose of fringe benefits or supplementary compensation 
is to attract and maintain effective and efficient human resources and to motivate them. 
From the above literature, it can however be deduced that most researchers who have 
considered work in this field agree on the definition of the term compensation and also agree 
on the types of compensation being considered by this review. Some have also classified 
compensation into fixed and variable compensations. These are terms that relate to the concept 
of direct and indirect compensation; also, generally referred to as primary and secondary 
compensation. Compensation has a motivational effect and therefore implies that having a 
compensation structure in which the employees who perform better are paid more than the 
average performing employees is vital to enhancing organizational performance (Hewitt, 
2009). 
 
 
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2.1.2 Benefits of Compensation 
According to Desslar (2011), Compensation is also used to: 
 Recruit and retain qualified employees: Recruitment and retention of qualified 
employees is a common goal shared by many employers. To some extent, the 
availability and cost of qualified candidates for open positions is set by market factors 
beyond the control of the employer. While an employer may set compensation levels 
for new hires and advertise those salary ranges, it does so in the context of other 
employers seeking to hire from the same applicant pool. 
 Increase or maintain morale/satisfaction: Morale and job satisfaction are affected by 
compensation. Usually there is a balance (equity) that has to be reached between the 
monetary value the employer is willing to pay and also the sentiments of worth felt by 
the employee. In an endeavour to avoid wasting cash, employers may opt to freeze 
salaries or salary levels at the expense of satisfaction and morale. Conversely, an 
employer wishing to reduce turnover rate may seek to increase salaries and salary 
levels. 
 Reward and encourage peak performance: Compensation may be used as a reward for 
exceptional job performance. Examples of such plans include: bonuses, commissions, 
stock, and profit or gain sharing. 
 Achieve internal and external equity: External equity refers to the similarity of the 
practices of different organizations of the same sector. If perceived like this, it can be 
said that the program is considered competitive or externally equitable. Usually, these 
comparisons are done in external labor markets where the wages vary. There are various 
factors that contribute to make these variations, for example, geographical location, 
education and work expertise. Internal equity is employees' perception of their duties, 
compensation, and work conditions as compared with those of other employees in 
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similar positions within the same organization. As this comparison is usually made 
within the company, issues with internal equity may result in conflict among 
employees, mistrust, low morale, anger and even the adoption of legal actions. Workers 
can make the evaluation of internal equity regarding two main points. On one hand, 
procedural justice is the person’s perceived fairness of the process (assigned tasks) and 
procedures used to make decisions about him/her. On the other hand, distributive justice 
refers to the perceived fairness in the distribution of outcomes (salaries). The classic 
objectives of equity-based compensation plans are retention, attraction of new hires and 
aligning employees and shareholders’ interests with the long-term success of the 
company. 
2.2 Employee and Organizational Performance  
Aguinis (2013) defines performance management as a continuous process of identifying, 
measuring and developing the performance of individuals, groups and aligning performance 
with the strategic goals of the organization. In addition, Swanepoel et al. (2014) affirm that 
performance management is an action based on performance measures and reporting, which 
ends up in improvement in employee behavior, motivation and work processes as well as 
promoting innovation. Performance management is viewed more broadly as a management 
tool that aims to enhance the performance of a company (Goh, 2012). 
According to Aguinis, (2009), the definition of performance does not include the results of an 
employee’s behavior, but only the behaviors themselves. Performance is about behavior or 
what employees do, not about what employees produce or the outcomes of their work. 
Perceived employee performance represents the general belief of the employee about his 
behavior and contributions in the success of organization. 
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Equitable total compensation leads to augmented profits because motivated employees help to 
increase sales and customer satisfaction. Inequitable total compensation can create turnover, 
which costs money not only in recruitment and replacement costs but also in lost business while 
the position is vacant. Organizational performance means the organization sales growth, market 
share growth, financial growth and the overall growth of an organization. Organizational 
performance encompasses three (3) specific areas of firm outcomes:  
 Financial performance (profits, return on assets, return on investment, etc.)  
 Product market performance (sales, market share, etc.) and  
 Shareholder return (total shareholder return, economic value added, etc.) 
(Richard, Devinney, Yip, & Johnson, 2009). 
Rose (2014) states that recognition refers to a process of acknowledging or giving special 
attention to a high level of accomplishment or performance, such as customer care or support 
to colleagues, which is not dependent on achievement against a given target or objective. 
Greene (2011) attests that recognition may be utilized in lieu of financial awards, as particularly 
it could be argued that people used time that theory should have been spent on other 
organizational businesses and that the salary provided compensation. Abu Bakar, Mohamad 
and Sharmeela-Banu (2015) posit that recognition is the demonstration of appreciation for a 
level of performance, an achievement or a contribution to an objective. It may be confidential 
or public, causative or formal and it is always in addition to pay. The link between recognition, 
teamwork and job satisfaction is a very important occurrence to take note of because it indicates 
that dimensions, which constitute job satisfaction, do not essentially act alone in determining 
the job satisfaction of employees. 
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2.3 Theoretical Framework 
Another approach to motivation looks at theories for explanation. Two major theory types are 
discussed in this subsection. They are the needs-based theories (Herzberg’s two factor theory) 
and the equity theory of motivation. These theories of motivation have been used to explain, in 
different ways, what motivates people to perform well in their work. 
2.3.1 Frederick Herzberg’s Two-Factor Theory  
The two-factor model of satisfiers and dissatisfiers was developed by Herzberg, Mauser and 
Snyderman (1957) following an investigation into the sources of job satisfaction and 
dissatisfaction of accountants and engineers. The main implications of this research, according 
to Herzberg are that the wants of employees are divided into two (2) groups. One group 
revolves round the need to develop in one’s occupation as a source of personal growth. The 
second group operates as an essential base to the first and is associated with fair treatment in 
compensation, supervision, working conditions and administrative practices. The fulfillment 
of the needs of the second group does not motivate the individual to high levels of job 
satisfaction and to extra performance on the job. In order to satisfy this second group of needs 
the prevention of dissatisfaction and poor job performance must be ensured. Herzberg argues 
that it is necessary to have hygiene factors at a suitable level merely to reach a neutral feeling 
about the job. The theory is simple and supports the argument that employers should take effort 
on improving hygiene factors from the workplace and also emphasize on motivation factor to 
develop the right people on the job. 
Herzberg’s theory does not look directly at performance. Rather, it looks at job satisfaction. 
However, his study remains relevant, because job satisfaction is closely connected to 
performance. According to Herzberg’s theory, there are two independent factors that influence 
job satisfaction. These are: 
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1. Hygiene factors – These prevent job dissatisfaction. Hygiene factors are based on the 
needs of the organization so as to stop unpleasantness in the working environment. 
When employees are under the impression that these factors are inadequate, it could 
lead to dissatisfaction in the work place. 
2. Motivators – These have a positive influence on job satisfaction. Motivating factors 
could lead to an individual’s need for personal growth. When in existence, motivating 
factors could easily contribute to job satisfaction. When it is most effective, it could 
motivate an employee to perform above average and above expectations.  
Table 2.1 Frederick Herzberg’s Two-Factor Theory 
HYGIENE FACTORS MOTIVATORS 
Company policies and administration Status 
Competent Supervision Recognition 
Quality of Interpersonal relations Challenging / stimulating Work itself 
Working conditions Responsibility 
Salary, wages and other financial benefits Advancement 
Job security Personal Growth & achievements 
Source: Herzberg, Mauser & Snyderman (1957) 
Essentially, Herzberg is saying that the motivators will give employees the drive they need to 
work harder. The hygiene factors will merely keep them content with their job overall. 
According to his theory, financial benefits are hygiene factors. Compensation is a hygiene 
factor not an incentive or motivator. In other words, compensation doesn’t actually improve 
performance – rather, it secures the fort against employees feeling sad and unhappy in their 
roles, and helps boost retention rates.  
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Conversely, Herzberg’s two-factor model has been criticized because no attempt was made to 
measure the link between satisfaction and performance. However, Herzberg had huge influence 
on the job enrichment movement, which sought to design jobs in a way that will maximize the 
opportunities to get intrinsic satisfaction from work and therefore improve the standard of 
living of employees. His emphasis on the distinction between intrinsic and extrinsic motivation 
is also important. 
2.3.2 John Stacey Adam’s Equity Theory  
Adams (1965) describes equity theory as the perception of how you are treated compared to 
others and in essence that you will be more satisfied and motivated if you think you are being 
fairly treated. This procedural justice element to how rewards are interpreted runs deep in terms 
of this performance and motivation. Armstrong (2010, 10 p.41) states that “in general, use an 
evidence-based approach, which essentially means managing reward systems on the basis of 
evidence rather than opinion, on understanding rather than assumptions, and on an unrelenting 
commitment to gather the necessary facts to make more intelligent and informed decisions”.  
The behavioral psychologist, John Stacey Adams, developed a useful model for explaining 
why employee perceptions concerning fairness matters. Equity Theory (Adam's Equity 
Theory) explains the thought process an employee uses to determine the fairness of 
management decision making. The core of equity theory says that people judge the fairness of 
their treatment based on how others like them are treated. Employees make social comparisons 
to others who are similarly situated in the organization. 
Equity theory shows that inequities (perceived or real) harm employee motivation. Employees 
who feel that they are receiving inequitable treatment will be emotionally motivated to gain 
equity. What does this behavior look like? When inequities persist, employees may do any of 
the following: 
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 Decrease inputs (give less time, do less work) 
 Push for more output from the company (more pay, authority) 
 Go into survival mode (do their job and little more) 
 Become resistant (act out on other issues) 
 Become overly competitive (focus on reducing the outputs of others) 
 Quit 
These outcomes harm an organization's bottom line and where organizational turnover occurs 
the loss is two-fold (economic and talent based). Clearly, equity theory shows why employee 
perceptions concerning fairness do matter. Once employees believe that the workplace is 
unfair, they grow to distrust organizational leadership. When leaders choose to ignore this 
distrust, employee morale and motivation suffers. Organizations can sow the seeds of inequity 
and distrust in everyday operational matters. It does not require a leader to have a significant 
ethical and moral lapse to bring this about.  
Adam theory is concerned on social comparison in which, individuals can gauge the fairness 
of their work outcomes as compared to others. Perceived inequity occurs when one compares 
their rewards received for their work contribution which may appear less than the rewards that 
other people are getting for their work. The theory states when inequity exists, people are 
motivated to function less at their work place to balance up the sense of reward that they 
received.  
The general message of equity theory is that individuals are driven by the fair distribution of 
rewards or outcomes as a result of their inputs or contribution and in the amount they perceive 
appropriate. Whereas quite evidently equity theory largely focuses on wages or reward 
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comparisons, Adams (1963) argued that inequity exists as a psychological construct rather than 
as an objective standard. Moreover, whenever inequity is perceived, both observing person and 
reference person feel negatively affected. 
 
 
 
 
 
 
 
 
 
 
 
 
 
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SECTION THREE 
METHODOLOGY  
3.0 Introduction   
This section presents on the research methodology that was adopted for the study. It covers; 
research design, study population and sampling, data collection, reliability and validity, ethical 
considerations, data analysis and limitations of the study.  
 
3.1 Research design  
According to Creswell (2009), the choice of any research approach should be informed by the 
aim of the study and the research questions that the study sought to find answers to. The study 
was a survey type in the form of cross-sectional study in which data were collected once across 
a population through random sampling technique. A quantitative research approach was 
adopted since the data was gathered using structured questions. Also, the research study can be 
replicated given its high reliability.  
 
3.2 Study population, sampling and sampling techniques 
The population is the larger pool from which sampling elements are drawn and to which 
findings can be generalized. The population encompasses all the elements that make up the unit 
of analysis (Terre-Blanche, Durheim, & Painter, 2006). The study considered employees across 
Ghana. The size of the sample determines the statistical precision of the findings. Therefore, a 
sample size of 121 employees were used for the study. Simple random sampling techniques 
was adopted to get the samples. This method is to allow each element of the population to have 
an equal probability of being selected. All the questionnaire disseminated were retrieved. 
121
Therefore, the response rate is   X 100 which is 100%. 
121
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3.3 Data Collection Instruments 
Self-administered questionnaires were used in collecting the primary data for the research. A 
lot of the data that was collected from this source mostly directed the conclusions and provided 
the majority of empirical evidence. The questionnaires were closed ended questions and it was 
based on the research questions and objectives of the study. Respondents were also given 
detailed instructions as to how the questionnaires is to be completed and returned. For 
questionnaire sample, see Appendix.  For the purpose of data collection, Google forms was 
created for the questionnaires to be disseminated online to employees. The questionnaire was 
designed into four sections. Section A was the demographics i.e., gender, age, marital status, 
experience etc. Section B was for the influence of compensation on employee and 
organizational effectiveness. They were supposed to answer against each item of the 
questionnaire in this section on the Likert scale ranging from 1 (strongly disagree) to 5 (strongly 
agree). The respondents were asked to indicate whether they strongly disagree, disagree, 
neutral, agree or strongly agree to each question asked. Section C was for the measures to 
minimize compensation inequities (behaviors to resort to when employees sense inequity) and 
section D was for the effects of the provision of benefits and incentives to both employees and 
their organizations. 
 
3.4 Data Analysis 
The study was descriptive and after a field collection of the primary data, Statistical Package 
for Social Sciences (SPSS) was used to analyze the obtained data. This software is to facilitate 
the analysis by helping to generate frequency distribution tables and charts, measurement of 
central tendencies and hypothesis testing (when necessary). The responses were coded and 
keyed into SPSS. From the obtained results, presentation was done using tables, bar charts and 
pie charts.   
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3.5 Ethical Consideration 
The rights, nobility, benefit and well-being of the individuals who participated in the study was 
taken into consideration. The author assured them that this rule is critical to the distinctive 
components in the study. Secondly, consent for partaking in the study was given by respondents 
and also the author stayed away from deception. The respondents were guaranteed of the 
confidentiality of their information received. 
 
3.6 Limitation of the Study 
This sample size is not sufficient enough to reflect the factual image of the organizations 
functioning. Firstly, in this study, a small size sample was used to analyze the impact of human 
resource management practices on organizational performance. As the behaviors of employees 
change with changing the environment and organizational practices, so we should collect data 
more than one time and compare the results. So, it is important to follow the best human 
resource management practices, so as to enhance the performance of employee which 
ultimately would lead to the profitability. 
 
 
 
 
 
 
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SECTION FOUR 
FINDINGS, ANALYSIS AND DISCUSSION OF FINDINGS 
This section seeks to present the results of findings and discussions on the effect of human 
resource management practices (compensation) on employee and organizational effectiveness. 
The results are the outcome of the investigation on the objectives of the study.  
4.1 Demographic Profile of Respondents 
4.1.1 Gender of Respondents 
Majority were female (59%) with the number of respondents being 71 and males being 41% 
with the number of respondents being 50. This clearly shows that; the study had a lot of female 
respondents than males which is typical in many researches. 
 
4.1.2 Age Distribution of Respondents   
Majority of the respondents were aged between 20-29 years which is 56%, followed by 30-39 
years which is 35%, 40 - 49 years which is 5% and 50-59 years is 4%.  
4.1.3 Marital status 
From the study, 54.5% of the respondents were single while 43.8% respondents were married. 
1 person was divorced and another 1 widowed. This implies that; most of the respondents were 
single.   
 
4.1.4 Highest Qualification 
Majority of the respondents have tertiary education which is 64.5%, followed by masters which 
is 23.1%, high school was 5.8%, doctorates was 3.3% while others was 3.3%. This shows that 
most of the respondents have tertiary education. 
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4.1.5 Type of Organization, Sector or Industry 
Majority of the employees work in private organizations which is 52% while public 
organizations was 48%. From the study, most employees do work in private organizations.  
 
4.1.6 Number of Employees in respondents’ Organization 
Majority of the employees are in organizations with staff membership of 1-50 employees which 
is 41.3%, followed by above 500 which is 33.9%, 51-100 was represented by 11.6%, 201-500 
was 8.3% while 5% of the respondents represent 101-200.  
 
4.1.7 Type of employment contract  
Majority of the respondents are full-time workers which is 70.2%, followed by contract 
workers which is 15.7%, part time workers which is 8.3%, temporal workers which is 4.1% 
while others is 1.6%.  
 
4.1.8 Number of years in the organization 
Majority of the respondents have worked with their organization for 1-5 years which is 73.6%, 
followed by 6-10 which is 18.2%, 11-15 years which is 3.3%, 16-20 years which is 0.8%, 21-
30 years which is 0.8% while above 30 is 3.3%. 
 
 
 
 
 
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Table 4.1 Summary of demographic Profiles.  
Gender of Respondents Frequency Percentage 
Female 71 59 
Male 50 41 
Total 121 100 
Age Distribution   
20 - 29 68 56 
30 - 39 42 35 
40 - 49 6 5 
50 - 59 5 4 
50 and Above 0 0 
Total 121 100 
Marital Status  
Single 66 54.5 
Married 53 43.8 
Divorced 1 0.8 
Widowed  1 0.8 
Total 121 100 
Highest Qualification  
High School 7 6 
Tertiary 78 65 
Master 28 23 
Doctorates 4 3 
Other 4 3 
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Total 121 100 
Type of organization  
Private  63 52 
Public 58 48 
Total 121 100 
Number of Employees  
1-50 50 41.3 
51-100 14 11.6 
101-200 6 5 
201-500 10 8.3 
Above 500 41 33.9 
Total 121 100 
Type of employment contract  
Full-time 85 70.2 
Part time 10 8.3 
Contract 19 15.7 
Temporal 5 4.1 
Others 2 1.6 
Total 121 100 
Working Experience  
1 – 5 years 89 73.6 
6- 10 years 22 18.2 
11 -15 years 4 3.3 
16 - 20 years 1 0.8 
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21 – 30 years 1 0.8 
Above 30 years 4 3.3 
Total 121 100.0 
Source: Field data, 2019 
4.2 Objective 1: The influence of compensation on employee effectiveness 
4.2.1 Satisfied with my salary 
From the respondents, 15.7% strongly disagreed, 14.9% disagreed, 33.9% was neutral, 26.4% 
agreed and 9.1% strongly agreed. This implies that there is a neutral influence of compensation 
on employee effectiveness. According to Frederick Herzberg’s Two-Factor Theory, salary is a 
hygienic factor and when employees are under the impression that these factors are inadequate, 
it could lead to dissatisfaction in the work place. However, its provision does not lead to 
motivation. This finding appears to confirm Hertzberg’s assertion. This is shown in Table 4.2  
Table 4.2 Satisfied with my salary 
 Frequency Percent Valid Percent Cumulative Percent 
Strongly disagree 19 15.7 15.7 15.7 
Disagree 18 14.9 14.9 30.6 
Neutral 41 33.9 33.9 64.5 
Agree 32 26.4 26.4 90.9 
Strongly agree 11 9.1 9.1 100.0 
Total 121 100.0 100.0  
Source: Field data, 2019 
 
 
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4.2.2 Reward based on performance  
From the analysis, 18.2% of the respondents strongly disagreed, 17.4% disagreed, 28.9% was 
neutral, 21.5% agreed and 14.0% strongly agreed. This means, reward can be or may not be 
based on performance. This is shown in Table 4.3 
Table 4.3 Reward based on performance 
 Frequency Percent Valid Percent Cumulative Percent 
Strongly disagree 22 18.2 18.2 18.2 
Disagree 21 17.4 17.4 35.6 
Neutral 35 28.9 28.9 64.5 
Agree 26 21.5 21.5 86.0 
Strongly agree 17 14.0 14.0 100.0 
Total 121 100.0 100.0  
Source: Field data 2019 
4.2.3 My salary is fair considering what other people are paid 
From the respondents, 14% strongly disagree, 17.4% disagreed, 30.6% was neutral, 22.3% 
agreed and 15.7% strongly agreed. This implies there is a neutral response to whether salaries 
are fair considering what others are paid for. This affirms John Stacey Adam’s Equity theory 
(1965) concerning social comparison in which, people will gauge the fairness of their work 
outcomes as compared to others. This is shown in Table 4.4 
 
 
  
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Table 4.4 Fair Salary  
 Frequency Percent Valid Percent Cumulative Percent 
Strongly disagree 17 14.0 14.0 14.0 
Disagree 21 17.4 17.4 31.4 
Neutral 37 30.6 30.6 62.0 
Agree 27 22.3 22.3 84.3 
Strongly agree 19 15.7 15.7 100.0 
Total 121 100.0 100.0  
Source: Field data 2019 
4.2.4 Equitable overtime payment 
From the respondents, 42.2% strongly disagreed, 14% disagreed, 15.7% was neutral, 15.7% 
agreed and 12.4% strongly agreed. From the study, there is no equitable overtime payment. 
This is shown in Table 4.5 
Table 4.5 Equitable over payment 
 Frequency Percent Valid Percent Cumulative Percent 
Strongly disagree 51 42.2 42.2 42.2 
Disagree 17 14.0 14.0 56.2 
Neutral 19 15.7 15.7 71.9 
Agree 19 15.7 15.7 87.6 
Strongly agree 15 12.4 12.4 100.0 
Total 121 100.0 100.0  
Source: Field data 2019 
 
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4.2.5 Attractive compensation system   
From the analysis, 28.9% of the respondents strongly disagreed, 20.7% disagreed, 24% was 
neutral, 16.5% agreed and 9.9% strongly agreed. Form the respondents, compensation systems 
are not attractive. According to Frederick Herzberg’s Two-Factor Theory, Hygiene factors in 
which compensation is one of the factors, are based on the needs of the organization in order 
to prevent unpleasantness in the working environment. When employees are under the 
impression that these factors are inadequate, it could lead to dissatisfaction in the work place. 
This is shown in Table 4.6 
Table 4.6 Attractive compensation system 
 Frequency Percent Valid Percent Cumulative Percent 
Strongly disagree 35 28.9 28.9 28.9 
Disagree 25 20.7 20.7 49.6 
Neutral 29 24.0 24.0 73.6 
Agree 20 16.5 16.5 90.1 
Strongly agree 12 9.9 9.9 100.0 
Total 121 100.0 100.0  
Source: Field data 2019 
4.2.6 Salary reflects standard of living 
From the respondents, 22.3% of them strongly disagreed whiles 15.7% disagreed, 38.8% was 
neutral, 19% agreed and 4.2% strongly agreed. This implies that, employees’ salaries may or 
may not reflect the standard of living. This is shown in Table 4.7 
  
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Table 4.7 Salary reflects standards of living 
 Frequency Percent Valid Percent Cumulative Percent 
Strongly disagree 27 22.3 22.3 22.3 
Disagree 19 15.7 15.7 38.0 
Neutral 47 38.8 38.8 76.8 
Agree 23 19.0 19.0 95.8 
Strongly agree 5 4.2 4.2 100.0 
Total 121 100.0 100.0  
Source: Field data 2019 
4.2.7 Recognized and rewarded appropriately in respondent’s organization 
From the respondents, 27 (22.3%) strongly disagreed, 19 (15.7%) disagreed, 47 (38.8%) was 
neutral, 23 (19.0%) agreed and 5 (4.2%) strongly agreed. This confirms that; employees can 
either or not be recognized and rewarded appropriately in the organization in which they work 
since majority of the respondents neutrally agreed. According to John Stacey Adam’s Equity 
Theory (1965), when inequity exists, people will be motivated to function less at their work 
place to balance up the sense of reward that they received. This is shown in Table 4.8 
Table 4.8 Recognized and rewarded appropriately 
 Frequency Percent Valid Percent Cumulative Percent 
Strongly disagree 24 19.8 19.8 19.8 
Disagree 21 17.4 17.4 37.2 
Neutral 44 36.4 36.4 73.6 
Agree 23 19.0 19.0 92.6 
Strongly agree 9 7.4 7.4 100.0 
Total 121 100.0 100.0  
Source: Field data 2019 
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4.2.8 Compensation packages encourage employees to achieve their organization’s 
objectives 
From the respondents, 16 (13.2%) strongly disagreed, 16 (13.2%) disagreed, 32 (26.4%) was 
neutral, 25 (20.8%) agreed and 32 (26.4%) strongly agreed. This implies that; majority of the 
respondents strongly agree to the fact that compensation packages encourage employees to 
achieve organization’s objectives. This supports Frederick Herzberg’s Two-Factor Theory 
(1957) since organizational objectives are motivators, when it is most effective, it could 
motivate an employee to perform above average and above expectations. This is shown in 
Table 4.9 
Table 4.9 Achieving organization’s objectives 
 Frequency Percent Valid Percent Cumulative Percent 
Strongly disagree 16 13.2 13.2 13.2 
Disagree 16 13.2 13.2 26.4 
Neutral 32 26.4 26.4 52.8 
Agree 25 20.8 20.8 73.6 
Strongly agree 32 26.4 26.4 100.0 
Total 121 100.0 100.0  
Source: Field data 2019 
4.2.9 Profit sharing/bonuses as a mechanism to reward higher performance 
From the respondents, 28 (23.1%) strongly disagreed, 18 (14.9%) disagreed, 22 (18.2%) was 
neutral, 31 (25.6%) agreed and 22 (18.2%) strongly agreed. The majority of the respondents 
agreed to the above and this means, profit sharing or bonuses are used as a mechanism to reward 
higher performance. This is shown in Table 4.10  
 
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Table 4.10  Rewarding higher performance 
 Frequency Percent Valid Percent Cumulative Percent 
Strongly disagree 28 23.1 23.1 23.1 
Disagree 18 14.9 14.9 38.0 
Neutral 22 18.2 18.2 56.2 
Agree 31 25.6 25.6 81.8 
Strongly agree 22 18.2 18.2 100.0 
Total 121 100.0 100.0  
Source: Field data 2019 
4.2.10 Compensation attracts and motivates qualified employees to perform better and 
harder 
From the respondents, 13 (10.7%) strongly disagreed, 11 (9.1%) disagreed, 26 (21.5%) was 
neutral, 39 (32.2%) agreed and 32 (26.5%) strongly agreed. From the study, majority of the 
respondents strongly agreed to the statement above and this implies that, compensation attracts 
and motivates qualified employees to perform better and harder. This affirms the study of 
Vlachos (2009), which indicated that performance-based compensation has a positive effect on 
employees and organizational performance. This is shown in Table 4.11 
 
 
 
 
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Table 4.11 Qualified employees to perform better and harder 
 Frequency Percent Valid Percent Cumulative Percent 
Strongly disagree 13 10.7 10.7 10.7 
Disagree 11 9.1 9.1 19.8 
Neutral 26 21.5 21.5 41.3 
Agree 39 32.2 32.2 73.5 
Strongly agree 32 26.5 26.5 100.0 
Total 121 100.0 100.0  
Source: Field data 2019 
4.2.11 Compensation package of the organization is competitive 
From the respondents, 27 (22.3%) strongly disagreed, 22 (18.2%) disagreed, 34 (28.1%) was 
neutral, 23 (19.0%) agreed and 15 (12.4%) strongly agreed. The study shows that majority of 
the respondents neutrally agree to the statement “compensation packages of the organization is 
competitive”. This implies that; compensation packages can be or may not be competitive in 
the organization and it supports the work of Gomez-Mejia et al. (2010), which in the study 
argued that firms can only outperform others when they have a successful business strategy 
and good compensation system that helps and gets support from the highest-paid executives 
and down to the lowest-paid employee. This is shown in Table 4.12 below. 
 
 
 
 
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Table 4.12 Competitive compensation package 
 Frequency Percent Valid Percent Cumulative Percent 
Strongly disagree 27 22.3 22.3 22.3 
Disagree 22 18.2 18.2 40.5 
Neutral 34 28.1 28.1 68.6 
Agree 23 19.0 19.0 87.6 
Strongly agree 15 12.4 12.4 100.0 
Total 121 100.0 100.0  
Source: Field data 2019 
4.2.12 Employees are compensated equitably 
From the respondents, 24 (19.8%) strongly disagreed, 28 (23.1%) disagreed, 33 (27.3%) was 
neutral, 26 (21.5%) agreed and 10 (8.3%) strongly agreed. This shows that employees think 
they are compensated equitably but not at all times since majority of the respondents neutrally 
responded and therefore affirms the work of Hewitt (2009), which shows that having a 
compensation structure in which the employees who perform better are paid more than the 
average performing employees is vital to enhancing organizational performance. This is 
supported by John Stacey Adam’s Equity Theory which shows that individuals are driven by 
the fair distribution of rewards or outcomes as a result of their inputs or contribution and in the 
amount they perceive appropriate. This is shown in Table 4.13 
 
 
 
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Table 4.13 Employees are compensated equitably 
 Frequency Percent Valid Percent Cumulative Percent 
Strongly disagree 24 19.8 19.8 19.8 
Disagree 28 23.1 23.1 42.9 
Neutral 33 27.3 27.3 70.2 
Agree 26 21.5 21.5 91.7 
Strongly agree 10 8.3 8.3 100.0 
Total 121 100.0 100.0  
Source: Field data 2019 
4.2.13 I am aware of the compensation policy of the organization in the conditions of service 
manual 
From the respondents, 25 (20.7%) strongly disagreed, 22 (18.2%) disagreed, 28 (23.1%) was 
neutral, 30 (24.8%) agreed and 16 (13.2%) strongly agreed. Majority of the respondents agreed 
to the statement and this shows that; employees are aware of the compensation policy of their 
organizations in the conditions of service manual. This is shown in Table 4.14 
Table 4.14 Awareness of compensation policy in terms of service manual 
 Frequency Percent Valid Percent Cumulative Percent 
Strongly disagree 25 20.7 20.7 20.7 
Disagree 22 18.2 18.2 38.9 
Neutral 28 23.1 23.1 62.0 
Agree 30 24.8 24.8 86.8 
Strongly agree 16 13.2 13.2 100.0 
Total 121 100.0 100.0  
Source: Field data 2019 
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4.2.14 Compensation makes employees committed to the organization 
From the respondents, 8 (6.6%) strongly disagreed, 12 (9.9%) disagreed, 30 (24.8%) was 
neutral, 40 (33.1%) agreed and 31 (25.6%) strongly agreed. From the study, compensation 
makes employees committed to their organizations since majority of the respondents agreed to 
the statement. This is shown in table 4.15 
Table 4.15 Compensation makes employees committed 
 Frequency Percent Valid Percent Cumulative Percent 
Strongly disagree 8 6.6 6.6 6.6 
Disagree 12 9.9 9.9 16.5 
Neutral 30 24.8 24.8 41.3 
Agree 40 33.1 33.1 74.4 
Strongly agree 31 25.6 25.6 100.0 
Total 121 100.0 100.0  
Source: Field data 2019 
4.2.15 My colleague in another department with the same qualification receives more 
compensation than I do 
From the respondents, 18 (14.9%) strongly disagreed, 20 (16.5%) disagreed, 26 (21.5%) was 
neutral, 28 (23.1%) agreed and 29 (24.0%) strongly agreed. The study revealed that; colleagues 
in another department with the same qualification receive more compensation that they do since 
majority of the respondents strongly agreed to the statement. This affirms John Stacey Adam’s 
Equity Theory (1965) which shows that, perceived inequity occurs when one compares their 
rewards received for their work contribution which may appear less than the rewards that other 
people are getting for their work. This is shown in Table 4.16 
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Table 4.16 Same qualification receives more compensation 
 Frequency Percent Valid Percent Cumulative Percent 
Strongly disagree 18 14.9 14.9 14.9 
Disagree 20 16.5 16.5 31.4 
Neutral 26 21.5 21.5 52.9 
Agree 28 23.1 23.1 76.0 
Strongly agree 29 24.0 24.0 100.0 
Total 121 100.0 100.0  
Source: Field data 2019 
4.2.16 Compensation is managed to ensure that all employees receive equal compensation 
for the same kind of work 
From the respondents, 21 (17.4%) strongly disagreed, 19 (15.7%) disagreed, 42 (34.7%) was 
neutral, 23 (19.0%) agreed and 16 (13.2%) strongly agreed. Majority of the respondents 
neutrally responded to the statement “Compensation is managed to ensure that all employees 
receive equal compensation for the same kind of work” and this implies that employees can 
really tell if compensation is managed to ensure that all employees receive equal compensation 
for the same kind of work. This is shown in Table 4.17 
 
 
 
 
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Table 4.17 Equal compensation for the same kind of work 
 Frequency Percent Valid Percent Cumulative Percent 
Strongly disagree 21 17.4 17.4 17.4 
Disagree 19 15.7 15.7 33.1 
Neutral 42 34.7 34.7 67.8 
Agree 23 19.0 19.0 86.8 
Strongly agree 16 13.2 13.2 100.0 
Total 121 100.0 100.0  
Source: Field data 2019 
4.2.17 The welfare facilities like medical, housing, canteen, transport, recreation & 
education for the children of employees are satisfactory in this organization. 
From the respondents, 33 (27.3%) strongly disagreed, 21 (17.4%) disagreed, 27 (22.3%) was 
neutral, 23 (19.0%) agreed and 17 (14.0%) strongly agreed. From the study, majority of the 
respondents neutrally responded to the statement and this shows that employees cannot really 
tell if welfare facilities medical, housing, canteen, transport, recreation and education for the 
children of employees are satisfactory in this organization. This is shown in Table 4.18  
Table 4.18 Children’s welfare facilities are satisfactory 
 Frequency Percent Valid Percent Cumulative Percent 
Strongly disagree 33 27.3 27.3 27.3 
Disagree 21 17.4 17.4 44.7 
Neutral 27 22.3 22.3 67.0 
Agree 23 19.0 19.0 86.0 
Strongly agree 17 14.0 14.0 100.0 
Total 121 100.0 100.0  
Source: Field data 2019 
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4.3 Objective 2: Measures to Minimize Compensation Inequities 
4.3.1 Which of the following do you resort to when you sense inequity? 
 Responses Percentage 
Quit 16 13.2 
Anger 14 11.6 
Mistrust 22 18.2 
Low morale 57 47.1 
Conflicts among employees 15 12.4 
The adoption of legal actions 8 6.6 
Distrust organizational leadership 31 25.6 
Become resistant (act out on other issues) 9 7.4 
Decrease inputs (give less time, do less work) 23 19 
Go into survival mode (do their job and little more) 23 19 
Push for more output from the company (more pay, authority) 35 28.9 
Become overly competitive (focus on reducing the outputs of 9 7.4 
others) 
Others, please specify 7 5.6 
Source: Field data 2019 
From the study, employees mostly resort to low morale when they sense inequity, followed by 
push for more output from the company (more pay, authority), distrust in organizational 
leadership, decrease inputs (give less time, do less work) and go into survival mode (do their 
job and just a little more), mistrust, quit, conflicts among employees, anger, become resistant 
(act out on other issues) and become overly competitive (focus on reducing the outputs of 
others) and the adoption of legal actions. These findings affirm the work of Vanhala and 
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Ahteela (2011), in which they investigated the relationship between human resource 
management practices and trust and found that the perceptions of fairness and functioning of 
human resource management practices are connected to employee trust. John Stacey Adam’s 
Equity Theory indicates that employees who feel that they are receiving inequitable treatment 
will be emotionally motivated to gain equity and therefore employees may show the 
aforementioned behaviors. 
4.4 Objective 3: Effects of the Provision of Benefits and Incentives 
4.4.1 What benefits do your organization provide? 
 Responses Percentage 
Time off 43 35.5 
Sick leave 78 64.5 
Paid vacation 20 16.5 
Annual holidays 54 44.6 
Health and life insurance 56 46.3 
Maternity/family leave 76 62.8 
Others, please specify 8 6.4 
Source: Field data 2019 
According to the respondents, most of benefits provided by their organization is sick leave 
which is respectively followed by maternity or family leave, health and life insurance, annual 
holidays, time off, paid vacation and others. According to Armstrong (2009), the 
aforementioned are some benefits that organizations do provide. 
 
 
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4.4.2 What is the effect of providing these benefits on employees? 
 Responses Percentage 
Attract employees 34 28.1 
Retain employees 68 56.2 
Motivate employees 88 72.7 
Others, please specify 3 2.4 
Source: Field data 2019 
Form the survey, there are many effects of providing these benefits on employees but the most 
effect is that; it motivates employees, retains and attract employees respectively. These findings 
were confirmed by Armstrong (2009), who notes that benefits included are paid vacation, sick 
leave, health & life insurance and maternity/family leave and the effect of providing these 
benefits on employees are that, it helps to motivate, retain and attract employees. 
4.4.3 What is the effect of providing these benefits on the organization? 
 Responses Percentage 
Reduce employee turnover 61 50.4 
Promotes the organization’s brand 60 49.6 
Increases sales leading to increased profits 54 44.6 
Others, please specify 3 2.4 
Source: Field data 2019 
In terms of the effect of providing these benefits on the organization, the study revealed that; 
it reduces employee turnover, promotes the organization’s brand and increased sales leading to 
increased profits respectively. This support the work of Armstrong (2009), which indicated that 
the effect of providing these benefits to organizations are to reduce employee turnover, 
promotes the organization’s brand, increased sales leading to increased profits. 
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SECTION FIVE 
SUMMARY, CONCLUSION AND RECOMMENDATIONS 
5.0 Introduction 
This part presents a summary of the findings of the study as well as the conclusions, 
recommendations and directions for further research. 
5.1 Summary 
This research examined the effect of human resource management practices (compensation) 
on employee and organizational effectiveness. The research had the objectives to examine the 
influence of compensation on employee and organizational effectiveness. Also, it examined 
behaviours that employees’ resort to when they sense compensation inequities and also to 
determine whether the provision of benefits and incentives has any positive effect on employee 
and organizational performance. 
In achieving these objectives, questionnaires were used to collect data. A sample size of one 
hundred and twenty-one (121) employees were selected and questionnaire were administered 
to them, in which 121 questionnaires were retrieved. The following findings were revealed: 
Firstly, there is no equitable overtime payment and the compensation system is not attractive. 
Compensation packages encourage employees to achieve organizational objectives. Also, 
compensation attracts and motivates qualified employees to perform better and harder but 
profit sharing or bonuses are not mechanisms to reward higher performance. Compensation 
makes employees committed to the organization. The welfare facilities like medical, housing, 
canteen, transport, recreation and education for the children of employees are not satisfactory. 
Secondly, to minimize compensation inequities, employees resort to the following; low morale, 
conflicts among employees, the adoption of legal actions, distrust in organizational leadership, 
become resistant (act out on other issues), decrease inputs (give less time, do less work), go 
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into survival mode (do their job and little more), push for more output from the company (more 
pay, authority) and become overly competitive (focus on reducing the outputs of others).  
Thirdly, organizations do provide benefits and such benefits are in order of importance as; sick 
leave, maternity or family leave, health and life insurance, annual holidays, time off, paid 
vacation and other. To the organisation, the effect of providing these benefits are to reduce 
employee turnover, promote the organization’s brand, increase sales leading to increased 
profits.  
From the analysis of data, there is a relationship between compensation and employee 
effectiveness and since compensation makes employees committed to the organization, 
compensation packages encourage employees to achieve organizations’ objectives. It also 
attracts and motivates qualified employees to perform better and harder. It can be concluded 
that compensation has a positive effect on organizational effectiveness. When there is an 
effective compensation system, employees’ performance increase and when compensation is 
not effective, it will lead to a decrease in employees’ performance.   
 
5.3 Conclusion 
The study contributes in understanding the influence of Human Resource Management 
practices on the performance of employees. The results provide the sufficient evidence to say 
that, Human Resource Management practices have a positive and statistically significant 
relationship with employee performance. The results show a significant and positive 
relationship between compensation and performance evaluation. 
A comprehensive compensation system can contribute a lot to attract and retain competitive 
human resources and can also shape the behaviours and performance of employees. The results 
of the present study are in accordance with and validate the results of earlier studies creating 
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harmony with the results that Human Resource Management practices of compensation have a 
positive and significant relationship with employee performance. 
 
5.4 Recommendation  
At the end the researcher recommends that all policy makers of human resource management 
should be more concerned with policies and practices related to employees which results into 
developing the employees’ performance. 
Based on the findings and conclusions, the following are the researcher’s recommendations: 
 Organizations should provide employees with bonuses, incentives and job security 
when employees are able to achieve their targets which will enhance performance. 
Since Human Resource Management practices (compensation) have a very strong 
positive relationship with employees’ performance. 
 Since it is clear from the findings that the welfare facilities like medical, housing, 
canteen, transport, recreation and education for the children of employees are not 
satisfactory, management should put in place effective measures to improve the welfare 
facilities. 
 The study indicated that there is no equitable overtime payment and this implies that, 
there should be a compensation structure in which the employees who perform better 
are paid more than the average performing employees because compensation has a 
motivational effect and is vital to enhancing organizational performance. 
 
5. 5 Future Research   
Regardless of some limitations, this study contributes well to understand and validate the 
relationship of the Human Resource Management practices and employee performance. Future 
studies can take larger samples to validate the results of the present study. Studies can also 
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include other Human Resource Management practices to their models and some other 
variables, which can mediate or intervene the relationship of Human Resource Management 
practices and employee performance. 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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REFERENCES 
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Adams, J S;. (1965). Integrity in Social Exchange. (L. Berkowitz, Ed.) New York: Academic 
Press. 
Adams, J. S. (1963). Toward an understanding of inequity. Journal of Abnormal and Social 
Psychology, 422-436. 
Aguinis , H. (2009). Performance Management (2 ed.). Person education, Inc. 
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Amin, M., Khairuzzaman , W. W., Zaleha , A. R., & Daverson , A. S. (2014). The impact of 
human resource management practices on performance: Evidence from a Public 
University. The TQM Journal, 26(2), 125-142. 
Armstrong , M. (2016). Armstrong’s Handbook of Strategic Human Resource Management. 
London: Kogan Page. 
Armstrong, M. (2009). A handbook of Human Resource Management Practice (11 ed.). 
Philadelphia: Kopan Page Limited. 
Armstrong, M. (2010). A handbook of human resource management practice (11 ed.). London: 
Kogan page. 
Boxall, P., & Purcell, J. (2016). Strategy and Human Resource Management,. London: 
Palgrave Macmillan. 
Dessler, G. (2011). Human resource management (12 ed.). Upper Saddle River: NJ: Pearson 
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Goh, S. C. (2012). Making performance measurement systems more effective in public sector 
organizations. Measuring Business Excellence, 16(1), 31–42. Retrieved from 
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Gomez-Mejia, L. R., Berrone, P., & Franco-Santos, M. (2010). Compensation and 
Organizational Performance: Theory, Research, and Practice. New York: M E Sharpe 
Inc. 
Greene, R. J. (2011). Rewarding performance: Guiding principles; custom strategies. London, 
United Kingdom : Taylor & Francis Ltd. 
Herzberg, F. W., Mauser, B., & Snyderman, B. (1957). The Motivation to Work. New York: 
Wiley. 
Hewitt, A. (2009). Managing performance with incentive pay. Journal of personnel 
Management, 7(1), 20-31. 
Martocchio, J. J. (2013). Strategic compensation: A human resource management approach (7 
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Raja, S. (2009, April 26). Motivation Theories. Retrieved from Retrieved from 
http://www.authorstream.com/Presentation/nsraja_hhh-180607-motivation-theories-
education-ppt-powerpoint/ 
Redmond, B. F. (2013). Lesson 5: Equity Theory: Is what I get for my work fair compared to 
others? Work Attitudes and Motivation. The Pennsylvania State University World 
Campus. 
Richard, P. J., Devinney, T. M., Yip, G. S., & Johnson, G. (2009). Measuring organizational 
performance: Towards methodological best practice. Journal of Management, 35(3), 
718-804. 
Rose, M. (2014). Reward management. London: Kogan Page. 
Swanepoel, B. J., Erasmus, B. J., Schenk, H. W., & Tshilongamulenzhe, T. (2014). South 
African human resource management: Theory and practice (4 ed.). Cape Town, South 
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Academy of Marketing Science, 37(2), 170-180. 
 
 
 
 
  
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APPENDIX  
UNIVERSITY OF GHANA BUSINESS SCHOOL 
M.A MANAGEMENT AND ADMINISTRATION 
QUESTIONNAIRE ON THE EFFECT OF HUMAN RESOURCE MANAGEMENT 
PRACTICES (COMPENSATION) ON EMPLOYEE AND ORGANIZATIONAL 
EFFECTIVENESS. 
Dear Respondent, 
I am a Masters student of Management and Administration at the University of Ghana Business 
School, conducting a research on ‘The Effect of Human Resource Management Practices 
(Compensation) On Employee and Organizational Effectiveness”. The objective of this 
questionnaire is to shed light on the relationship between equitable compensation and 
organizational effectiveness. 
The information required is strictly for academic purpose and any information provided would 
be treated with the utmost confidentiality. Your candid and impartial opinion is highly solicited.  
If you need findings of this research, please send a request to amrabiu@st.ug.edu.gh. Thanks 
for your time and cooperation. 
Antie Mariam Rabiu. 
INSTRUCTION: Please tick √ beside the responses that are applicable. 
SECTION A: Demographics/ Bio-Data 
1. Gender  
Male [ ] Female [ ]  
2. Age range 
20-29 [ ] 30-39 [ ] 40-49 [ ] 50-59 [ ] 60&above [ ] 
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3. What is your marital status? 
Single [ ] Married [ ] Divorced [ ] Widowed [ ] Others [ ] 
4. What is your highest qualification? 
High School [ ] Tertiary [ ] Masters [ ] Doctorate [ ] Others [ ] 
5. What type of organization or sector are you in? 
Private sector [ ]     Public sector [ ] 
6. How many employees are in your organization? 
1 – 50 [ ] 51-100 [ ] 101-200 [ ] 201-500 [ ] Above 500 [ ] 
7. What type of employment contract do you have? 
Full-time [ ] Part-time [ ] Contract [ ] Temporal [ ] Others [ ] 
8. How long have you been employed in the organization (Years)? 
1–5 [ ]  6-10 [ ] 11-15 [ ] 16-20 [ ] 21-30 [ ]    Above 30 [ ] 
 
 
 
 
 
 
 
 
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SECTION B: 
Thinking about your work and the working environment, to what extent do you agree or 
disagree with the following statements:                            
Strongly Disagree Disagree Neutral Agree Strongly agree 
1 2 3 4 5 
 
NO The Influence of Compensation On Employee and 1 2 3 4 5 
Organizational Effectiveness 
10 I am satisfied with my salary      
11 I am rewarded based on my performance      
12 My salary is fair considering what other people are paid      
13 There is equitable overtime payment      
14 The compensation system is attractive      
15 My salary reflects my standard of living      
16 We are recognized and rewarded appropriately in this      
organization 
17 Compensation packages encourage employees to achieve      
organization’s objectives 
18 Profit sharing/bonuses are used as a mechanism to reward      
higher performance. 
19 Compensation attracts and motivates qualified employees to      
perform better and harder 
20 The compensation package of this organization is competitive       
21 In this organization employees are compensated equitably      
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22 I am aware of the compensation policy of the organization in      
the conditions of service manual 
23 Compensation makes employees committed to the      
organization  
24 My colleague in another department with the same      
qualification receives more compensation than I do 
25 Compensation is managed to ensure that all employees receive      
equal compensation for the same kind of work 
26 The welfare facilities like medical, housing, canteen, transport,      
recreation & education for the children of employees are 
satisfactory in this organization. 
 
SECTION C: Measures to Minimize Compensation Inequities  
27. Which of the following do you resort to when you Please tick as many as 
sense inequity? applicable 
Quit  
Anger  
Mistrust  
Low morale  
Conflict among employees  
The adoption of legal actions  
Distrust organizational leadership  
Become resistant (act out on other issues)  
Decrease inputs (give less time, do less work)  
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Go into survival mode (do their job and little more)  
Push for more output from the company (more pay,  
authority) 
Become overly competitive (focus on reducing the outputs  
of others) 
Others, please specify  
 
 
SECTION D: Effects of the Provision of Benefits and Incentives 
28. What benefits do your organization provide? Please tick as many 
as applicable 
Time off  
Sick leave   
Paid vacation  
Annual holidays   
Health & life insurance   
Maternity / family leave  
Others, please specify  
  
29. What is the effect of providing these benefits on employees?  
Attract employees   
Retain employees  
Motivate employees  
Others, please specify  
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30. What is the effect of providing these benefits on the organization?  
Reduce employee turnover   
Promotes the organization’s brand  
Increased sales leading to increased profits  
Others, please specify  
Thank you for your valuable time and cooperation to complete this questionnaire. 
………………….. 
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