THE INFLUENCE OF STAFF MOTIVATION ON EMPLOYEE PERFORMANCE IN MICROFINANCE INSTITUTIONS:
A CASE STUDY OF HOFOKAM- HOIMA BRANCH
LIST OF ACRONYMS
EPA Employee Performance Appraisal
ERM Employee Relationship Marketing
ESOPs; Employee Stock Ownership Plans
FFIs: Formal Financial Institutions
HOFOKAM Hoima, Fortportal and Kasese Microfinance Company
HRM: Human Resource Management
MFIs Microfinance Institutions
NGOs: Non- Governmental Organizations
NSSF: National Social Security Fund
SACCOs: Savings and Credit Cooperatives
SHGs Self- Help Groups
SIS Staff Incentive Schemes
ABSTRACT
The main purpose of the study was to examine the influence of staff motivation on employee performance at HOFOKAM. The specific objectives were; to establish methods used to motivate employees in HOFOKAAM, to analyse the effect of staff motivation on employee performance at HOFOKAM and to examine other factors influencing performance of employees in HOFOKAM.
A cross- sectional survey research design, combined with quantitative and qualitative research methods were used in the study. The survey sample consisted of 40 respondents selected from staff, clients and management of HOFOKAM. These were selected using scientific and non- scientific techniques. Primary data was collected using questionnaires and interviews. Tables and percentages contributions aided in the data presentation using statistical packages like Microsoft excel.
The study established the methods used by HOFOKAM to motivate employees which were; staff bonus schemes, salaries, profit sharing plans, gain sharing plans, delayed benefits, merit pay plans symbolic rewards, non- monetary allowances, staff training and development and the piece rate system of payment. The influence of motivation on employee performance included staff efficiency and effectiveness, increased work effort, improved customer service, increased staff loyalty, employee recruitment, management empowerment, controlling fraud risk, performance appraisal, employee training, internal employee relations and savings growth among others. The other key determinants of employee performance were organisational mission, performance goals and targets for employees, performance planning and management, performance appraisal, employee weaknesses and strengths, technology, employee training and skill development, attitudes and character, management, working conditions, career level, team work and relation skills and experience and demographic features.
The study forwarded recommendations for the employees and management of organizations, the government and other policy makers to take steps to ensure effectiveness of employee motivation and performance. The study also identified key areas of interest related to the study hence them but not directly addressed in the current study such that further studies can be conducted
CHAPTER ONE
INTRODUCTION
1.0 Introduction
I he purpose of this study was to examine the influence of staff motivation on employee performance in Microfinance institutions, referring to HOFOKAM-Hoima Branch. This chapter presents the background, problem statement, study objectives, research questions, study scope and significance.
1.1 Background to the Study
Microiinance is the provision of a broad range of financial services which include micro-credit, savings, insurance, remittances or transfers, leasing, pensions, micro-insurance; and non-financial services like training on business development, literacy and health to low income people sustainably and affordably. They are offered to the poor who can’t access to Formal Financial Institutions (FFIs) to build wealth: smooth consumption and reduce risk, (Ismawan. 2007). MFIs include a broad range of institutions that offer financial services to low-income clients. MFIs include Savings and Credit Cooperatives (SACCOs). Non-Governmental Organizations (NGOs), money lenders, rural farmers’ schemes.Self-Help Groups (SIIGs).village banks, credit unions, rural banks, savings and postal financial institutions, and a number of commercial banks, (Gramming & Holtmann, 2006).
According to Keijzers (2010), motivation is derived from the word “motivate”, meaning to move, push or persuade to act for satisfying a need. Broadly, motivation is a set of processes concerned with a kind of force that energizes behavior and directs it towards achieving some specific goals. It includes psychological processes that cause stimulation, persistence of voluntary goal directed actions, direction of destination, and determination. Motivation to work includes a set of energetic forces that originate both within and beyond an individual’s being, to initiate work-related behavior, and determine its form, direction, intensity and duration. People are motivated when they expect a course of action to lead to attainment of a goal and a valued reward that satisfies their needs.
According to Owusu (2012).motivation is “the cognitive decision making process through which goal directed behavior is initiated, energized. directed and maintained in an organization”. It has two dimensions, one being making employees work better, more efficiently and effectively from the point of view of managers, the other being enabling employees to do their jobs in the best way with enjoyment and desire from the point of view of employees. Motivation can be intrinsic or extrinsic. Ude& Coker (2012) define intrinsic motivation as self-gen crated or internal motivation. It is that sense of satisfaction and achievement one feels when he/she spends time on activities that reflect what drives them, and activities that they enjoy. It includes: being creative, solving problems, using skills and talents, completing important or challenging work, work that gives one power, authority, autonomy makes one feel important, appreciated, accepted, or advance their careers. Saleem (2011) adds that, individuals are intrinsically motivated when they seek enjoyment, interest, satisfaction of curiosity, self-expression, or challenge in work. Intrinsic rewards are psychological or intangible like appreciation, meeting new challenges, positive and caring attitude from employer, and job rotation.
On the other hand, individuals are extrinsically motivated when they engage in the work in order to obtain some goal that is apart from the work itself. Extrinsic rewards are tangible rewards that are external to the job or task performed by the employee; like salary, incentives, bonuses, promotions, or job security. (Srivastava&Bannola. 2011). External motivators are given by others, like a salary, bonuses, incentives, security, praise, recognition, promotion or even punishment or withdrawal of privileges. Extrinsic motivators are determined at the organizational level and outside the control of individual leaders and managers. If withdrawn, motivation declines, (Prantheepkanth, 2011).
There is a strong relationship between intrinsic and extrinsic motivation. In some cases extrinsic motivators can decrease intrinsic motivation. For example, if money is administered contingently, it decreases intrinsic motivation. Extrinsic and intrinsic motivation can have a reinforcing effect: once extrinsic motivation is taken care of intrinsic motivation can lead to high levels of satisfaction and performance. Both intrinsic and extrinsic values can motivate employees to work, but they can have very different effects on employees. Not all people are equally motivated; some employees are more intrinsically and others more extrinsically motivated. (Chaudhary& Sharma, 2012).
According to Ismawan (2007).employee performance is often defined simply in output term that is needed for achievement of pre-decided goals. Performance is concerned what job is done, how it is done and what has been achieved. Performance refers to the degree of accomplishment of the task that makes an employee’s job reflects how well employee is fulfilling the requirement of the job.
Hoima. Fort Portal, and Kasese Microfinance Company (HOFOKAM) was founded in March 2003 by the Catholic Relief Services to serve the rural poor especially in Western Uganda. It is one of the fastest growing MFls in the country. It has since taken a smooth path towards growth and expansion by attracting and retaining a large and diverse base of skilled human resources. It has also introduced numerous motivation tools to boost staff performance. It suited the study to aid in assessing how its staff motivation schemes affect the level of productivity of staff and its overall performance.
1.2 Statement of the problem
Despite all efforts and progress in automation, microfinance essentially remains a people business (conducted by and among people), (he human resource function is the most important of all in MFIs just like other organizations, as employees are wholly responsible for managing other resources to meet organizational goals. The overall performance of MFIs is a function of the efforts of its employees. Currently, MFIs focus on strategic human resource management as a way of improving employee performance and to meet social and financial organizational goals. It is widely accepted that a well-motivated, committed, loyal and productive staff will help MFIs achieve both satisfactory outreach and financial performance. Properly designed motivation schemes will ensure optimal staff performance, commitment, loyalty, job satisfaction, teamwork, and innovativeness. Yet motivation schemes have been criticized for bending more towards physical and not mental outcomes; causing conflicts and disgruntlement among staff, undermining team work, and promoting inequality, let alone associated monetary costs. Given this contradiction, it was necessary to conduct a thorough analysis of the relationship between staff motivation and employee performance in MFIs.
1.3 Objectives of the Study
1.3.1 General Objective
To conduct an in-depth examination of the influence of staff motivation on employee performance in MFIs, with specific reference to HOFOKAM-Hoima branch.
1.3.2 Specific Objectives
- To establish the methods used to motivate staff in HOFOKAM.
- To examine the relationship between staff motivation and employee performance in HOFOKAM.
- To examine the factors influencing employee performance in HOFOKAM.
1.4 Research Questions
- What methods are used to motivate employees in HOFOKAM?
- What is the relationship between staff motivation and employee performance in HOFOKAM?
- What are the factors influencing employee performance in HOFOKAM?
1.5 Scope of the Study
1.5.1 Content Scope
The study analyzed the relationship between staff motivation and employee performance in MFIs. It also explored the different tools used in MFIs to motivate employees, and other determinants of employee performance in MFIs all integrated in an attempt to answer the research questions.
1.5.2 Geographical Scope
The study was conducted at HOFOKAM (Hoima District). It was chosen for the study due to its convenience and possible accessibility data. More importantly, it is a regulated MFI with sound human resource policies and procedures, including staff motivation.
1.5.3 Time Scope
Primary, data was collected from April-May 2013. Secondary data sources did cover a period of five years, from 2007-2012 to capture relevant and up to date information for the study.
1.6 Significance of the Study
The study shall enhance the researcher’s volume of knowledge and experience not only relating to the topic of study but also to the field of research in general.
To future researchers, the study will provide a body of knowledge that can help enrich their study and contextualize their findings.
The study will provide an insight to MFIs in particular and business firms in general on how to design staff motivation schemes that can contribute to employee performance and their overall financial and social performance.
To the government and other policy makers or advocacy bodies like labor unions, the study will equally expose the potential of motivation in enhancing workers’ overall performance in organization. As such, they can legislate motivation schemes for different sectors to motivate workers so as to enhance the performance of different entities- both public and private.
The study will also help employees and employers to know both positive and negative effects of motivation schemes and to develop appropriate and acceptable as performance indicators upon which motivation can be based to stimulate employee performance
