Effects of Compensation on Employee Job Performance: The Case of Oromia Agricultural Research Institute

Published on International Journal of Economics & Business
ISSN: 2717-3151, Volume 1, Issue 1, page 147 – 160
Date: 5 October 2018
© Copyright International Journal of Zambrut

Wakgari Mulugeta & Robsan Mokonnon

Wakgari Mulugeta & Robsan Mokonnon
Oromia Agricultural Research Institute, Addis Ababa, Ethiopia
College of Business and Economics, Haramaya University, Haramaya, Ethiopia

Abstract
Human Resource Development is concerned with the provision of learning, development and training opportunities in order to improve individual, team and organizational performance. Compensation is one of the most important elements which motivate employees to contribute their best effort to generate innovative ideas that lead to better business functionality and further improve organizational performance both financially and non-financially. The purpose of this study is to assess the compensation management strategy and its relationship to employee performances in Oromia Agricultural Research Institute within the headquarter located at Gotera, Nifas Silk Lafto Sub-city, near Special Zone of Oromia and in its centers found at 17 different places in Oromia Regional State. A total of 286 sample respondents were selected using sample technique; of which 29 and 257 are from head office and centers, respectively. A semi-structured questionnaire was used to collect primary data. Additionally, secondary data were also gathered from previous research works in the sector and different published and unpublished manuscripts. The data were analyzed using SPSS statistical software version 20. Ordinal logistic regression was employed to analyze the relationship between compensation management and employee’s job performance. The analysis of this paper focused on the three compensation employee direct compensation, indirect compensation and employee job performance. Policy implication drawn from this study revealed that responsible governmental organization should adjustment the compensation management strategy and Special attention must also be given to all employees. In addition, the organization has to create opportunities that allow its employees to take a different advanced position as to utilize their maximum performances.

Keywords: Compensation, Employee, Job Performance.

1. Intorduction
Compensation is one of the most important elements which employees to contribute their best share to generate innovative ideas that lead to better business functionality and further improve organizational performance both financially and non-financially. According to Dewhurst et al. (2010), there are employees that do not just focus on financial compensation.
Employee compensations refer to all forms of pay or reward going to employees and arising from their employment. Rewards include direct compensation, indirect compensation, and nonfinancial reward. Developing an effective and appropriate compensation system is an important part of the human resource process. An effective and appropriate compensation system can help, attract and retain competent and talented individuals who can help the organization accomplish its mission and goals (Dessler, 2002).
Compensation implies having a compensation structure in which the employees who perform better are paid more than the average performing employees (Pearce, 2010). Compensation processes are based on compensation philosophies and strategies and contain arrangement in the shape of policies and strategies, guiding principles, structures and procedures which are devised and managed to provide and maintain appropriate types and levels of pay, benefits and other forms of compensation (Bob, 2011).
Compensation as a concept according to Bernadin, (2007) refers to all forms of financial returns and tangible benefits that employee receives as part of the employment relationship. Compensation includes issues regarding wage or salary programs and structures accruing from job descriptions, merit-based programs, bonus-based programs, commission based programs and so on, while benefits typically refer to retirement plans, health life insurance, disability insurance, vacation, employee stock ownership plan and so on.
Compensation is a fundamental component of human resource management and covers economic reward in the form of wages and salaries as well as benefits, indirect compensation or supplementary pay. Compensation emanates basically from the fact that it provides income to workers and constitutes an important cost item to the employer ( Martochio, 2011).
Rajagop (2010) argues that compensation, as well as sales territory design, influences the effectiveness of the sales forces. According to Kraft et al. (2012) compensation is used as a mechanism for directing sales force energy, activity, and performance. Compensation is a form of remuneration awarded for a responsibility carried out or strength exerted to accomplish a target which assists as a motivational factor that emboldens an individual to put more vitality or commitment into his or her job …….

2. Research Desain and Methodology
The study was conducted in selected centers under Oromia Agricultural Research Institute (OARI). The head office of the institute is found at Addis Ababa /Finfinne/, located at Gotera, Nifas Silk Lafto Sub-city, near Special Zone of Oromia. It has about 17 research centers spread throughout the region. Each of the centers has their own management. The centers are located in West Showa, East shoa zones and South of Oromia Regional State. Holeta town, where one of the centers is found, is about 45 km west of Addis Ababa at an altitude of 2400 meters above sea level; It is found at 9º4’North and 38º30’east. Other centers are located in Batu town which is 163km south of Addis Ababa at an altitude of 1500 to 2000 meters above sea level on the main road from Addis to Hawasa and located at 7° 40’ North and 380 53’ East.
Another town is Bako research center which is located at 258 km west of the capital, Addis Ababa, 8 km away from the nearest town; Bako is 4 km from highway road to Nekemte town, western Ethiopia ……

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