INTRODUCTION
Research background
Nowadays, it is considered that human resource is the most important factor leading to the success or failure of a business all over the world, especially in Vietnam
The development of human resources is crucial to any organization's growth strategy Even with advanced technology, high-quality services, and robust infrastructure, a company cannot thrive or maintain a competitive edge in the long term 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 Effective motivation at different employee levels is essential to ensure optimal performance (Bedeian, 1993).
Motivation energizes and directs employee behavior and performance, encouraging them to exert full effort towards achieving tasks A key strategy for enhancing employee motivation and performance is the implementation of a rewards management system, which significantly influences an organization's ability to attract, retain, and motivate high-potential employees.
Management problem
Ho Chi Minh City, Vietnam's largest commercial and economic hub, consistently showcases vibrant economic activities that attract foreign investment, contributing significantly to the nation's GDP However, amid the ongoing global economic crisis, many companies in the city are compelled to strategize for survival, often leading to workforce reductions While these businesses must make necessary cuts, retaining core employees becomes essential to navigate the recession successfully.
In today's competitive job market, companies face challenges in retaining skilled employees, as many seek better benefits and work environments Motivational programs play a crucial role in attracting talent, but they also contribute to employee turnover when individuals pursue opportunities they perceive as more rewarding As noted by Vansteenkiste (2005), employees are increasingly engaged in their work for personal gain, driven by intrinsic motivation derived from enjoyable and satisfying activities.
In Ho Chi Minh City, a significant challenge for management is finding effective strategies 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, higher salaries, pensions, sick allowances, and risk payments—in enhancing employee performance is questionable If financial motivation proves ineffective, managers must explore alternative motivational strategies While many believe that monetary rewards can adequately motivate employees, it is essential to recognize that individuals respond differently to financial incentives, suggesting a need for a more nuanced approach to employee motivation.
Many employees feel demotivated when their contributions are not recognized, especially when they are treated the same as less effective coworkers Additionally, sudden decreases in company benefits due to economic challenges can further diminish motivation Therefore, it is crucial for organizations to identify the appropriate rewards that align with the performance and needs of different employees.
To effectively enhance employee creativity and performance, a flexible rewards system is essential, as employees possess diverse attitudes, behaviors, and experiences While numerous studies have explored employee motivation and job performance in Vietnam, there is a lack of official research on the effective application of rewards management systems tailored to various employee types This study aims to address this gap by re-evaluating the relationship and impact of rewards management systems on employee performance, emphasizing the mediating role of motivation and focusing on 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, emphasizing the mediating role of motivation The findings will offer valuable insights to management on effectively implementing rewards management systems 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, focusing on the mediating role of motivation within companies in Ho Chi Minh City Targeting employees currently working in these companies, the research utilizes a questionnaire survey distributed in July 2014, with the study concluding in September 2014.
Research structure
The article is structured into five key sections: an introductory overview of the study, a review of relevant literature along with formulated hypotheses, a discussion on the research methodology, an analysis of the data and its findings, and finally, a concluding 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 objectives, significance, and benefits of the research The next chapter will explore concepts that influence employee work motivation and job performance.
LITERATURE REVIEW
This chapter explores the interplay between rewards management systems, work motivation, and employee job performance, highlighting the significant relationships among these elements It emphasizes relevant theories and arguments that elucidate how effective rewards management can enhance motivation and, in turn, improve overall job performance.
Motivation is defined as the desires, emotions, and needs that drive individuals to take action It encompasses the reasons behind our behaviors, 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 perform at their best, whether working independently or collaboratively, ultimately leading to optimal results in their pursuits.
Motivation is categorized into intrinsic and extrinsic types Intrinsic motivation arises from internal factors like job satisfaction and skill development, driven by genuine interest in the task, leading to high-quality work and lasting effects In contrast, extrinsic motivation stems from external rewards such as promotions and salary increases, offering immediate encouragement but lacking long-term impact While some employees are primarily intrinsically motivated, others are driven by extrinsic factors; most individuals experience a blend of both motivations influenced by the specific task and situational context.
Since the early 20th century, various theories of motivation have emerged, primarily categorized into content and process theories (Mujtaba 2014) Content theories, such as Maslow’s Hierarchy of Needs, Alderfer’s ERG theory, and Herzberg’s Two Factor theory, aim to identify the specific factors that drive human motivation.
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?"
As one of the earliest theories of motivation, Hierarchy of needs theory was proposed by Abraham Maslow in his paper "A Theory of Human Motivation" in 1943
Maslow's hierarchy of needs offers a unique perspective on human behavior and motivation, categorizing it into five distinct levels: physiological, safety, social, esteem, and self-actualization This model begins with basic physical needs at the base and progresses upwards, highlighting the importance of fulfilling each level to achieve overall well-being and personal growth.
Physiological needs encompass the fundamental requirements for survival, including food, water, oxygen, salt, sugar, rest, sleep, and sexual activity In the context of organizations, Maslow's theory emphasizes the importance of providing employees with adequate salaries to ensure they can meet these essential living conditions.
Safety needs represent the second level of Maslow's hierarchy, emerging once physiological needs are satisfied These needs focus on ensuring safe environments, stability, and protection To foster a secure workplace, organizations must provide employees with safe equipment, comprehensive health insurance, and fire safety measures, enabling them to perform their duties without fear of harm.
Belonging needs represent the third level of Maslow's hierarchy, emerging after the fulfillment of basic and safety needs As inherently social beings, individuals seek acceptance within groups and meaningful connections with others In organizational settings, it is essential for leaders and managers to foster a sense of belonging by promoting employee engagement through company events, picnics, and team-building activities.
Esteem needs represent the fourth level in Maslow's hierarchy, encompassing the desire for self-respect and the respect and approval of others Individuals often seek high evaluation through recognition, which fosters confidence and a sense of empowerment When these esteem needs are fulfilled, people feel valuable and influential in their surroundings Consequently, organizations should implement various awards to acknowledge and celebrate employees' outstanding achievements.
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 in Maslow's assertion, “What a man can be, he must be.” The desire for self-actualization drives individuals to realize their capabilities, and the ways in which they fulfill this need can vary significantly from person to person.
Maslow's theory offers valuable insights for researchers and managers, highlighting that individuals are motivated by different factors and that a person's motivations can change over time Consequently, businesses should implement diverse incentive and motivational programs tailored to the varying 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 ensure effective motivation, rather than focusing on just one type at a time Understanding the diverse needs of each employee is crucial for fostering a motivated workforce.
Two-factor theory was developed by Frederick Herzberg in 1959 It describes about motivators and hygiene factors
Motivators are essential for enhancing employee performance, as engaging and interesting work fosters greater effort and opens up opportunities for additional responsibilities and promotions In contrast, hygiene factors, which include elements like salary, job security, and company policy, do not actively motivate employees but can lead to demotivation if they are lacking Therefore, while motivators drive employees to excel, hygiene factors are necessary to prevent dissatisfaction 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 explain why individuals make specific choices within organizations to fulfill their needs This theory posits that a person's motivation is influenced by their expectations of the outcomes of their actions and their assessment of their ability to achieve those outcomes.
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
Qualitative research method was done by a pilot interview with a focus group
Interviewees were individually questioned about specific statements in the measurement scales to assess their comprehension of the content and meaning of the words used This process will lead to the refinement of the language in the measurement scales, ultimately resulting in the creation of official scales for quantitative research.
The quantitative research method utilized a structured questionnaire derived from a literature review to assess the influence of four key components of a rewards management system—pay, benefits, promotion, and recognition—on employee job performance through motivation This approach enables large-scale data collection, yielding valuable insights and robust statistical analysis.
3.2 Data source and collection method 3.2.1 Primary data
Data was collected through a structured questionnaire distributed in two ways: via email with a link to an online survey, offering low cost and broad reach, and through direct hand distribution, allowing for immediate completion requests.
Secondary data was sourced from various materials, including books, articles, newspapers, online websites, and academic journals This comprehensive collection of information enabled the researcher to gain a clear and thorough 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 that the sample size for Exploratory Factor Analysis (EFA) should be a minimum of 50, ideally 100, and must meet a ratio of at least five times the number of observed variables For this research, with a measurement scale comprising 28 items, the minimum required sample size is calculated to be 110 (28 items x 5).
To ensure a reliable confidence level for the study, a sample size of 200 was selected A questionnaire was administered to 200 employees aged between 22 and 50 from various companies in Ho Chi Minh City.
Raw data gathered through questionnaires was entered into SPSS version 20 for analysis The distribution of the data was confirmed to meet measurement criteria before conducting further analysis based on the results provided by SPSS.
There were some statistical tools to be applied in this study: Descriptive statistic, Reliability analysis, and 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
The reliability of questionnaire items was assessed using Cronbach’s alpha to determine internal consistency As per 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 acceptable.
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