INTRODUCTION
Research background
In today's competitive landscape, particularly in Vietnam, human resources are recognized as the key driver of business success or failure The development of human resources is crucial to any organization's growth strategy Even with advanced technology, high-quality services, and solid infrastructure, a company cannot thrive or maintain a competitive edge in the long run without an effective workforce.
According to Lawler (2003), the treatment of employees is crucial for an organization's success and survival To thrive, organizations must foster strong cooperation and satisfaction among their workforce Additionally, effective motivation at different levels is essential to ensure that employees perform at their best (Bedeian, 1993).
Motivation is a crucial process that energizes and directs employee behavior, driving them to fully engage in their tasks (Luthans, 1998; Ishfaq Ahmed, 2011) Implementing a rewards management system is an effective strategy to enhance employee motivation and performance (Deeprose, 1994) Rewards significantly influence an organization's ability to attract, retain, and motivate high-potential employees (Fay and Thompson, 2001).
Management problem
Ho Chi Minh City, Vietnam's largest commercial and economic hub, experiences vibrant economic activities that significantly contribute to the nation's GDP However, amid the ongoing global economic crisis, many companies in the city are forced to strategize for survival, leading to necessary budget cuts This often results in staff reductions, while still aiming to retain core employees to navigate the recession effectively.
In today's competitive job market, companies face challenges in retaining skilled employees due to the allure of better benefits and work environments elsewhere Motivational programs play a crucial role in attracting talent, but they also highlight the instability of human resources as employees seek opportunities that offer greater satisfaction and intrinsic motivation As Vansteenkiste (2005) noted, modern employees engage in work activities that not only serve their interests but also provide enjoyment and fulfillment.
In Ho Chi Minh City, a significant challenge for company management is finding effective ways to motivate employees for maximum productivity This concern is paramount for managers and leaders striving to enhance workplace performance.
Research gap
In Ho Chi Minh City, many companies, particularly those with significant foreign investment, are implementing rewards management systems as a motivational strategy However, the effectiveness of financial incentives—such as bonuses, increased salaries, pensions, sick allowances, and risk payments—in enhancing employee performance is questionable If financial motivation fails, managers must consider alternative motivators, as not all employees respond positively to monetary rewards Different individuals may require different forms of motivation to drive their performance effectively.
Many employees feel undervalued when their contributions are not recognized, especially in challenging economic times, leading to decreased motivation (Hai Anh, 2013) To effectively enhance employee performance, it is crucial to implement a flexible rewards system tailored to the diverse attitudes, behaviors, and experiences of employees Despite existing research on employee motivation and job performance in Vietnam, there is a lack of studies addressing how to effectively apply a rewards management system for various employee types This study aims to bridge that gap by re-evaluating the relationship and impact of a rewards management system on employee performance, with a focus on motivation and four key reward factors: pay, benefits, promotion, and recognition.
Research objective
This study aims to explore the impact of a rewards management system on employee performance, highlighting the mediating role of motivation The findings will offer valuable insights for management on effectively implementing rewards management strategies to enhance employee productivity.
Research question
The research will address the following specific questions:
1 Is there any relationship between rewards management system, employee's work motivation and job performance?
2 How does rewards management system impact on work motivation?
3 How does work motivation impact on employee’s job performance?
4 How to apply rewards management system effectively?
Research significance
In this changing world, employee’s motivation and job performance play important roles in the development of a company Therefore, this study tries to find out
Minh City could approach the effective rewards management system which would enable their employees motivated to show the best job performance.
Research scope
This study investigates the impact of rewards management systems on employee performance, emphasizing the mediating role of motivation in companies located in Ho Chi Minh City The research targets employees currently working in these companies, utilizing a questionnaire survey distributed in July 2014 The study is scheduled for completion by September 2014.
Research structure
This study is structured into five key sections: an introductory overview, a review of relevant literature alongside formulated hypotheses, a detailed discussion of the research methodology, an analysis of the data and presentation of findings, and finally, a conclusive summary of the research outcomes.
Chapter 1 provides overview of research background, management problem that companies in Ho Chi Minh City are facing As a result, research gap, research objectives, significances as well as research scope and research structure are identified It provides a brief insight into the study
Chapter 2 provides understanding of rewards management system, motivation and employee’s job performance This chapter provides an insight into these concepts by focusing on previous research in this area and presents reviewed literature relevant to this study After that, hypotheses of the research are mentioned
Chapter 3 describes the research design which is utilized Specifically, the chapter describes the sample of the study, measurement approached, how to follow to collect the data, and the technique used for data analysis
Chapter 4 focuses on transferring, analyzing the primary data then reports on the results of the empirical analysis And based on the results, this chapter is to provide respective discussion as well as findings associated with above literature review
Chapter 5 comes to conclusion based on findings of the research with recommendation
This chapter discussed the goals, importance, and advantages of the research The next chapter will explore key concepts that influence employee motivation and job performance.
LITERATURE REVIEW
This chapter aims to elucidate the rewards management system and its impact on work motivation and employee job performance It explores the critical relationships between these elements, emphasizing relevant theories and arguments that highlight how an effective rewards management system can enhance motivation and subsequently improve employee performance.
Motivation is defined as the desires, emotions, and needs that drive individuals to take action It is the underlying force that compels us to perform various activities, such as drinking water to quench thirst or reading a book to acquire knowledge.
Motivation is a crucial set of processes that energizes behavior and guides individuals or groups toward achieving specific goals It drives people to strive for optimal results, fostering both individual and collaborative efforts in pursuit of success.
Motivation can be categorized into two types: intrinsic and extrinsic Intrinsic motivation arises from internal factors like job satisfaction, a sense of responsibility, and opportunities for skill development, driven by genuine interest in the task itself This type of motivation fosters high-quality work and has lasting effects In contrast, extrinsic motivation is influenced by external factors such as promotions, salary increases, and benefits, which can provide immediate encouragement but may not sustain long-term engagement While some employees are primarily driven by intrinsic factors, others are motivated extrinsically; most individuals experience a blend of both types depending on various situational factors.
Motivation theories have evolved since the early 20th century and can be categorized into content and process theories Content theories, such as Maslow’s Hierarchy of Needs, Alderfer’s ERG theory, and Herzberg’s Two-Factor theory, focus on identifying what specifically motivates individuals.
And the process theories of motivation which include Vroom’s Expectancy theory, Adam’s Equity theory and Reinforcement theory are to answer the question: "How are people motivated?"
The Hierarchy of Needs theory, introduced by Abraham Maslow in his 1943 paper "A Theory of Human Motivation," is one of the foundational concepts in understanding human motivation Maslow identified five distinct levels of needs, arranged in a hierarchical structure: physical, security, social, self-esteem, and self-actualization, illustrating how these needs drive human behavior.
Physiological needs encompass essential requirements such as food, water, oxygen, salt, sugar, rest, sleep, and sexual activity According to Maslow's hierarchy, organizations must provide employees with adequate salaries to meet these fundamental living conditions effectively.
Safety needs represent the second level in the hierarchy of needs, emerging once physiological needs are satisfied These needs focus on the pursuit of secure conditions, stability, and protection To ensure a safe and supportive work environment, organizations must provide employees with safe equipment, comprehensive health insurance, and fire protection measures, allowing them to perform their duties without fear of harm.
Belonging needs, recognized as the third level of Maslow's hierarchy, emerge once the second level is fulfilled As inherently social beings, individuals seek acceptance within groups and meaningful relationships with others In organizational contexts, it is essential for leaders and managers to foster a sense of belonging by encouraging employee participation in company events, picnics, and team-building activities, thereby enhancing workplace relationships and overall morale.
Esteem needs, the fourth level in Maslow's hierarchy, encompass the desire for self-respect and recognition from others Individuals seek high evaluation through acknowledgment and respect, which fosters confidence and a sense of empowerment When these needs are fulfilled, people feel valuable and impactful in their surroundings Consequently, organizations should implement various award systems to recognize and celebrate employees' distinguished achievements, promoting a culture of appreciation and motivation.
Self-actualization needs represent the highest level in Maslow's hierarchy of needs, becoming prominent once esteem needs are fulfilled This stage emphasizes the pursuit of maximizing one's potential, encapsulated by Maslow's assertion, "What a man can be, he must be." Self-actualization is the intrinsic desire to realize one's capabilities, and individuals pursue this fulfillment in various ways.
Maslow's theory offers valuable insights for researchers and managers, highlighting that individual motivations vary significantly among people Additionally, a person's motivations can shift over time as their needs evolve Consequently, businesses should implement diverse incentive and motivational programs tailored to the unique needs of their employees.
Developed in 1969 by Clayton P Alderfer, ERG theory was a synchronization of Maslow’s need hierarchy theory with the simpler classes of needs
E stands for Existence needs, the basic material necessities In short, it includes an individual’s physiological and physical safety needs
R stands for Relatedness needs These include the aspiration that individual’s have for maintaining significant interpersonal relationships
And, G is Growth needs These include need for self-development and personal growth and advancement
The ERG theory emphasizes that managers must address multiple employee needs simultaneously to effectively motivate their team Focusing solely on one type of need can hinder motivation, highlighting the importance of understanding and satisfying the diverse needs of each employee.
Two-factor theory was developed by Frederick Herzberg in 1959 It describes about motivators and hygiene factors
Motivators play a crucial role in enhancing employee performance by making the job itself more engaging, leading to increased responsibilities and opportunities for promotion In contrast, hygiene factors, such as salary, job security, and company policies, do not actively motivate employees but can cause demotivation when lacking Therefore, while motivators directly inspire employees to work harder, hygiene factors are essential for maintaining a baseline level of satisfaction in the workplace.
According to Herzberg, once motivational factors are met, employee becomes motivated and hence performs higher Managers could use to achieve this by some following methods:
Job enlargement: is to give employees the variety of tasks which are not required the level of challenge but can make the work more interesting
Job enrichment: is to involve employees in a wider range of more complex, interesting and challenging tasks beside a complete unit of work This one can produce a greater sense of achievement
Empowerment: is to delegate more power to employees to make their own decisions over areas of their working life
Expectancy theory, developed by Vroom, seeks to clarify why individuals in organizations opt for specific actions to fulfill their needs This decision-making process is influenced by their expectations of the outcomes and their motivation, which is shaped by their assessment of their performance capabilities and the rewards they anticipate from their efforts.
RESEARCH METHODOLOGY
In this chapter, the practical methods which were used in order to answer the research questions and fulfill the purpose of this study are presented
This research used both of qualitative and quantitative research method to achieve wide and clear understanding of the chosen object
A qualitative research method was conducted through a pilot interview with a focus group Each interviewee was individually asked to evaluate the clarity and comprehension of the wording in the measurement scales This process aimed to ensure that the participants understood each statement accurately Based on their feedback, the wording of the measurement scales will be refined to create official scales for subsequent quantitative research.
The quantitative method employed a structured questionnaire derived from a literature review to assess the influence of four key components of the rewards management system—pay, benefits, promotion, and recognition—on employee job performance through motivation This approach allows for large-scale data collection, providing valuable insights and statistical analysis.
3.2 Data source and collection method
Data was collected through a structured questionnaire distributed via two methods: an email containing a link to an online survey, which offered low costs and the ability to reach a large audience, and direct hand distribution, allowing for immediate completion requests.
Secondary data was sourced from a variety of materials, including books, articles, newspapers, online resources, and academic journals This information provided researchers with a comprehensive understanding of the topic while saving both time and budget.
A five point likert scale from strongly disagree to strongly agree was used as the scale for the statements defined in the questionnaire
Part I with 9 questions was to ask about biographical information, including gender, marital status, age, job classification, educational qualifications, and tenure
Part II with 22 questions was divided into four main sections in order to measure four variables: pay factor, benefits, promotion and recognition
Overall, there are 31 questions asked in the questionnaire to approach the quantitative research method
3.3.1 Scale items of four main factor of rewards management system
Scale items of pay factor, and promotion and recognition were adopted from Robert Rosan Levina (2005):
PAY1 My salary is satisfactory in relation to what I do
PAY2 I earn the same as or more that other people in a similar job
PAY3 The basis of payment, for example overtime payment, is reasonable
PAY4 Salary increases are decided on a fair manner
PRO1 I will be promoted within the next two years
PRO2 Everyone has an equal chance to be promoted
PRO3 Staffs are promoted in a fair and honest way
REG1 I am praised regularly for my work
REG2 I receive constructive criticism about my work
REG3 I get credit for what I do
REG4 I am told that I am making progress
Scale items of benefits were adopted from Paul E Spector (1994):
BEN1 I am satisfied with the benefits I receive
BEN2 The benefits we receive are as good as most other organizations offer
BEN3 The benefit package we have is equitable
BEN4 There are benefits we have which we should have
3.3.2 Scale items to measure employee's work motivation
With above four factors of rewards, motivation was measured by below items which are adopted from Mikander (2010):
MOT1 My employer encourages me to work
MOT2 I am satisfied with my salary
MOT3 I am satisfied with the amount of free time activity that my employer arranges
MOT4 I get enough feedback from my employer
3.3.6 Scale items to measure employees' job performance
Measurement scales of job performance adopted from Rego and Cunhan (2008)
PER1 I believe I am an effective employee
PER2 I am happy with the quality of my work output
PER3 Accomplishes tasks efficiently Able to complete tasks quicker as the employee gains experience
Hair et al (1998) recommend a minimum sample size of 50 for Exploratory Factor Analysis (EFA), with an ideal size of 100, ensuring it is at least five times the number of observed variables In this study, with 28 items on the measurement scale, the required minimum sample size is calculated as n = 28 x 5 = 140.
To ensure a reliable confidence level for the study, a sample size of 200 was selected The questionnaire was administered randomly to 200 employees aged between 22 and 50 from various companies in Ho Chi Minh City.
Raw data collected through questionnaires was analyzed using SPSS version 20 The data distribution was verified to ensure measurement accuracy before analysis The study utilized various statistical tools, including descriptive statistics, reliability analysis, exploratory factor analysis (EFA), and ANOVA analysis.
Descriptive statistics were used to describe the basic features of the data in this study such as mean, frequency, standard deviations, percentage and range (Sekara, 2006)
In this study, the descriptive statistics provided summaries of consolidated data when comparing demographic information among the groups of respondents
To assess the reliability of questionnaire items and ensure internal consistency, Cronbach’s alpha coefficient was utilized As outlined by Nunnally & Bernstein (1994), items with a corrected item-total correlation index below 0.3 are deemed unacceptable, while a Cronbach’s alpha value of 0.6 or higher is considered satisfactory.
After computing Cronbach’s Alpha, the Exploration Factor Analysis method would be applied in order to explore the interrelationship among the variables In the implementation of EFA:
- The Kaiser - Meyer - Olkin (KMO) index which is used to evaluate the appropriateness of EFA method with the data should be from 0.5 to 1
- And, the signification level of Barlett’s test, which is used to test the null hypothesis that the variables in the population correlation matrix are uncorrelated, would be smaller than 0.05 (p