1
Kabul University
Faculty of Economics
Department of Accounting
The impact of financial incentives on the performance
of employees of the Kabul university.
A thesis submitted to the Office of the Dean, Faculty of
Economics in fulfillment of the requirement for the Degree of
Bachelors of Accountancy (B. Acy).
Researcher: Naqeeb Ahmad “ARIAN”
Supervisor: Najibullah “HADDAD”
Kabul
Dec, 2022
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Abstract
The productivity of an organization depends on the performance of its employees. The
performance of an employee depends on the financial incentive schemes used in an
institution. The broad objective for conducting this study is to find out the impact of
financial incentives on employees’ performance in educational institutions using the case
of Kabul University, the popular university of Afghanistan. The study employed a
quantitative analysis by taking the opinions of the university’s employees. The
questionnaire was designed to gather information on the influence of financial incentives
which is considered an independent variable, on employee’s performance which is a
dependent variable. The study had 42 respondents from the academic and non-academic
staff of Kabul university for gathering the information through a questionnaire with three
sections. The primary data was collected from academic and non-academic staff of the
university through the above-mentioned questionnaire. The questions were very simple
and easy to be understood by the respondents. The findings demonstrated that financial
incentives have an impact on employee performance and play a role in it. And there is also
a positive relationship between financial incentives and employee performance.
Keywords: Employee performance, financial incentives, motivation.
‫‪3‬‬
‫لنډیز‬
‫د یوۀ سازمان ګټورتیا یا بهره وري د هغه د کارکوونکو پر کارکردګۍ او فعالیت پورې اړه لري‪ .‬د یو کارکوونکي‬
‫فعالیت او کارکردګۍ په یوۀ سازمان کې د کاریدونکو مالي انګیزو په سکیمونو پورې اړه لري‪ .‬د دې څیړنې د ترسره‬
‫کولو بنسټیزه او اصلي موخه د افغانستان د مشهور پوهنتون (د کابل پوهنتون) د قضیې په کارولو سره په زده کړیز‬
‫بنسټونو کې د کارکوونکو پر کارکردګۍ او فعالیت باندې د مالي انګیزو اغیزې معلومول دي‪ .‬په دې څیړنه کې د کابل‬
‫پوهنتون د کارکوونکو د نظرونو په اخیستلو سره د کمیتي تحلیل څخه کار اخیستل شوی‪ .‬پوښتنلیک د دې لپاره ډیزاین‬
‫شوی چې د مالي انګیزو(مستقل یا خپلواک متغیر) اغیزې د کارکوونکو پر کارکردګۍ او فعالیت(وابسته یا تړلی متغیر)‬
‫په اړه معلومات راټول کړای شي‪ .‬په دې څیړنه کې د پوښتنلیک لۀ الرې چې درې برخې لري‪ ،‬د کابل پوهنتون لۀ ‪۴۲‬‬
‫اکاډمیکو او غیر اکاډمیکو کارکوونکو د ځوابونو په پایله کې معلومات راټول شوي دي ‪ .‬لومړني معلومات د پورته ذکر‬
‫شوي پوښتنلیک لۀ الرې د پوهنتون د اکاډمیکو او غیر اکاډمیکو کارکوونکو څخه راټول شوي‪ .‬د پوښتنلیک پوښتنې‬
‫خورا ساده او د ځواب ورکوونکو لخوا د پوهیدو لپاره اسانه وې‪ .‬د دې څېړنې موندنې دا ښیي چې مالي انګیزې د‬
‫کارکوونکو پر کارکردګۍ او فعالیت اغیزه لري او پدې کې خورا ډېر رول لوبوي‪ .‬او د مالي انګیزو او د کارکوونکو‬
‫د کارکردګۍ ترمنځ مثبته اړیکه هم شتون لري‪.‬‬
‫کلیدي ټکي‪ :‬د کارکوونکو کارکردګۍ‪ ،‬مالي انګیزې‪ ،‬هڅونه‪.‬‬
4
Acknowledgement
First and foremost, thanks to Almighty Allah for creating everything from nothing and a pen
to write on it, followed by our prayers and salutations to the prophet, who was the leader of
all guides and led the entire world to peace (PBUH).
It gives me great pleasure to recognize my supervisor's assistance in making this project a
success. Mr. Najibullah “Haddad”, my supervisor, gave direction and learning at every stage
of the project, which greatly aided me in the questioning, data gathering, and report
preparation. His useful advices, suggestions, and correct and unique supervision for
completing this thesis are worthy of notice and appreciation. Without his backing, the
accomplishment of this research was almost impossible. Thank you very much my respected
teacher!
Finally, but most importantly, my family who truly encouraged me to complete my education,
for which I am grateful for their ongoing moral and financial support for my studies. I am
only in a position now to complete this thesis because of their innate love, valuable guidance,
and multi-faceted support.
……………………
Naqeeb Ahmad “Arian”
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List of Contents
Abstract ................................................................................................................................................2
‫ لنډیز‬........................................................................................................................................................3
Acknowledgement ................................................................................................................................4
List of Contents ....................................................................................................................................5
List of Tables........................................................................................................................................7
INTRODUCTION ........................................................................................................................8
I.
1.1. Background of the study................................................................................................................8
1.2. Statement of the problem ..........................................................................................................9
1.3. Objective of the study............................................................................................................. 10
1.5. Significance of the study ........................................................................................................ 10
1.6. Limitations of the study.......................................................................................................... 10
1.7. Organization of the Study....................................................................................................... 11
LITERATURE REVIEW .......................................................................................................... 12
II.
2.1. Theoretical review .................................................................................................................. 12
2.1.1 Maslow's hierarchy of needs ................................................................................................ 12
2.1.2 Expectancy theory ................................................................................................................ 13
2.1.3 Hawthorne effect .................................................................................................................. 13
2.1.4 Herzberg's two-factor theory ................................................................................................ 14
2.2. Empirical review .................................................................................................................... 14
III.
METHODOLOGY ................................................................................................................ 18
3.1. Framework and definition of the variables............................................................................. 18
3.1.1 Financial incentives .............................................................................................................. 18
3.1.2 Employee performance......................................................................................................... 20
3.2. Research design ...................................................................................................................... 21
3.3. Population and sampling ........................................................................................................ 21
3.4. Sampling design ..................................................................................................................... 21
3.5. Sources of data and data collection technique ........................................................................ 21
3.6. Data analysis methods ............................................................................................................ 21
IV.
FINDINGS AND DATA ANALYSIS .................................................................................. 22
4.1. Analysis of data ...................................................................................................................... 22
4.1.1 Gender of the respondents .................................................................................................... 22
4.1.2 Age of the respondents ......................................................................................................... 23
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4.1.3 Education level of the respondents ....................................................................................... 23
4.1.4 Descriptive statistics ............................................................................................................. 24
4.1.5. Reliability analysis .............................................................................................................. 24
4.1.6 Correlation analysis .............................................................................................................. 25
4.1.7. Regression analysis ............................................................................................................. 25
Discussion ......................................................................................................................................... 27
Conclusion......................................................................................................................................... 29
Implications and Recommendations of the study .............................................................................. 31
References ......................................................................................................................................... 32
Annexure ........................................................................................................................................... 34
Annex 1 ......................................................................................................................................... 34
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List of Tables
1. Gender of respondents
2. Age of the respondents
3. Education level of the respondents
4. Descriptive statistics for all samples
5. Reliability analysis
6. Correlation analysis for all sample
7. Regression analysis for whole sample
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I.
INTRODUCTION
1.1. Background of the study
Performance management system is the systematic technique to measure the performance
of employees. It is the process by which an organization aligns its mission, goals, and
objectives with its available resources. This method also identifies competency, skill, and
knowledge gaps, which may be addressed by offering guidance, training, coaching, and
mentoring to people or teams at various levels and designations. In today's competitive
business environment, businesses are challenged to develop the best market strategy to
increase their performance and to devise a technique to keep their employee motivation at
the highest level possible so that the organization as a whole may perform well within the
competition. Kabul university as the main university and the first institution of higher
education in Afghanistan, was established in November 1932 with the establishment of
the Medical Faculty and gradually developed with new faculties. This university as an
influential institution; at the same time, has been affected by the political and military
developments in Afghanistan over the past four decades. Kabul University had a
development period during (1932 - 1978) and observed important changes. During this
period, the modern higher education system of Afghanistan was established at the core of
Kabul University. As in 1946 (Kabul University Establishment Law) was made, which is
in fact; the foundation of the academic and administrative activities of higher education in
Afghanistan. Kabul University offers financial incentives and other benefits that are used
as a tool of motivating its employees. These are as explained below:
• It provides bonuses for employees who performs well during the work.
• it provides salary raises to employees.
• It offers overtime pay for employees who work extra hours.
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• It offers good retirement programs to its employees.
In this study an attempt has been made to see the impact of financial incentive on employee
performance in an educational institution of Afghanistan. Financial incentives are types
of incentives or awards provided to employees to improve their performance, with the
better the financial incentives system, the better the employees' performance. As a result,
the focus of this study is on the effect of financial incentives on the performance of this
institution's personnel.
1.2. Statement of the problem
Many researchers have undertaken studies on the effect of financial incentives on
employee motivation in the workplace over the years. Each of these research has been
implemented and tested in some way in terms of its effects on people's lives, employment,
and personal goals in life and in the workplace. Timothy (2008) and Shaw (2011)
conducted studies in various industrial and organizational contexts in the private sector,
but none of them included educational institutions. These studies sought to investigate the
effects of financial incentives on motivation. It was therefore vital for the current study to
address the knowledge gap explicitly by examining the impact of financial incentives on
employees' performance in the educational institutions in Afghanistan and is focused
towards addressing the following question:
1. What is the relationship between financial incentives and employee performance in
Kabul university?
2. What is the impact of financial incentives on employee performance in the Kabul
university?
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1.3. Objective of the study
The main purpose of this research is to study the impact of financial incentives on the
employee performance of Kabul university. The specific objectives of the research are:
➢ To examine the relationship between financial incentives and employee performance in
Kabul university and,
➢ To identify the impact of financial incentives on employee performance in Kabul
university.
1.5. Significance of the study
The study's findings will assist Afghan educational institutions in improving their
performance by improving employee performance and identifying the useful financial
incentives scheme that will affect employees' performance. The study's goal is to evaluate
the impact of financial incentives on employee performance at Kabul University. The
following are the research's significances:
This study will allow educational institutions of Afghanistan to boost the performance by
discovering useful financial incentives plan affecting staff performance.
This study will be valuable for the researchers who would like to study on the subject
related to financial incentives or employee performance.
1.6. Limitations of the study
This study was limited to the employees of Kabul University to represent the educational
institution in Afghanistan but the fact that the employees of this university were provided
the financial incentives such as; salaries, overtime pay, bonuses, salary raises and other
retirement programs vary with incentives provided by other institutions, so the findings of
the study of Kabul University can’t be realized as a general study for all the institutions of
Afghanistan. Other major limitation for this study was limited time. Because the study had
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limited time, only the employees of Kabul University including academic and nonacademic staff were distributed the questionnaires which made easy for me to collect the
needed data from the mentioned employees on time and it made it even easier to analyze
and write the report from the findings.
1.7. Organization of the Study
This study is organized in four chapters. Chapter one deals with introduction including
problem statement, research objectives, research hypotheses, significance of the study and
limitation of the study. Chapter two deals with literature review including the literatures
related to the study such as theoretical reviews and empirical reviews. Chapter three is
about the research methodology dealing with framework and definitions of the dependent
(employee performance) and independent (financial incentives) variables, research
design, Population and sample, sampling design, data collection techniques and data
analysis methods. Chapter four deals with results including analysis of data, gender of the
respondents, age group of the respondents, education level of the respondents, descriptive
statistics, reliability analysis, correlation analysis and regression analysis.
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II.
LITERATURE REVIEW
This chapter covers the findings of earlier researchers as well as pertinent journal articles,
books, and other sources. The review provides a theoretical framework for the study and
helps the author define the study's focus. Additionally, it summarizes the empirical
analysis of the findings from earlier studies.
2.1. Theoretical review
Information on performance is crucial for organizations since it tells them whether they
are stagnating, deteriorating, or improving. Employee performance refers to an
individual's success on the job after making the necessary effort and is connected with
having supportive coworkers or employers, meaningful employment, and an engaged
profile (Hellriegel, Jackson, & Slocum, 1999; Karakas, 2010). Employee performance, in
Donohoe's opinion, is related to how effectively employees can carry out their assigned
tasks. Employee performance, according to Anitha (2013), refers to an employee's
financial or non-financial outcome that is inextricably linked to performance and success.
Evaluation of performance makes it simple to identify areas where your workforce needs
more coaching and training. Employee performance is a critical component of the business
and affects how much the organization grows or shrinks. Incentives are one method an
organization uses to encourage and motivate its staff to perform better (Paille, 2009).
Many businesses utilize incentives to compensate and recognize employees who go above
and beyond expectations (Chepkemoi, 2018). There are five fundamental ideas of worker
performance described below:
2.1.1 Maslow's hierarchy of needs
Abraham Maslow, a psychologist, first used the phrase "hierarchy of needs" in his 1943
article "A Theory of Human Motivation." The key tenet of the idea is that people must
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have their most fundamental wants satisfied before they are motivated to pursue their
higher-level demands. Maslow contends that various requirements, including physiology,
love or belonging, safety, self-actualization, and esteem, can lead to internal pressures that
might affect behavior (Mark, 2019).
2.1.2 Expectancy theory
Victor H. Vroom of the Yale School of Management initially put forth the expectation
theory of motivation in 1964. (Vroom, 1995). It discusses the procedures a person goes
through to make decisions concerning the mental procedures involved in choice.
According to the expectation theory, people will behave in a way that will produce the
results they hope for. In other words, we make choices based on the results we anticipate.
We might put in more hours at work if we anticipate a wage raise. However, Expectancy
Theory also contends that how likely we believe such rewards to be also affects how we
choose our behaviors. In this case, employees If they had been guaranteed a wage raise
rather than just having the hope of receiving one, they could be more motivated to work
more. The three components of expectancy theory are expectation, valence, and
instrumentality.
2.1.3 Hawthorne effect
The Hawthorne effect was first described by Henry A. Landsberger in 1950 who noticed
a tendency for some people to work harder and perform better when they were being
observed by researchers (Point, 2020).The Hawthorne Effect is named after a series of
social experiments on the influence of physical conditions on productivity at Western
Electrics factory at Hawthorne, Chicago in the 1920s and 30s.The researchers changed a
number of physical conditions over the course of the experiments including lighting,
working hours and breaks. In all cases, employee productivity increased when a change
14
was made. The researchers concluded that employees became motivated to work harder
as a response to the attention being paid to them, rather than the actual physical changes
themselves. The Hawthorne effect studies suggest that employees will work harder if they
know they are being observed. Showing employees that we care about them and their
working conditions may also motivate them to work harder. Furthermore, one needs to
encourage employees to give feedback and suggestions about their workspace and
development.
2.1.4 Herzberg's two-factor theory
Frederick Herzberg, a psychologist, developed the two-factor theory of motivation in the
1950s after studying the responses of 200 accountants and engineers who were asked
about their positive and negative feelings toward their jobs. This theory is also referred to
as the dual-factor theory or the motivation hygiene theory. According to Herzberg, certain
aspects of the profession, such as motivational aspects and hygienic aspects, lead to
satisfaction, while other aspects of the job prevent unhappiness. According to Herzberg,
the opposite of happiness is not happiness, and the opposite of unhappiness is not
unhappiness (Juneja, 2020).
2.2. Empirical review
To better comprehend the different elements that must be taken into account, a summary
of empirical findings from earlier studies or research on financial incentives and employee
performance is presented below.
•
According to Hsu, Jiang, Klein, and Tang's 2003 research, salaries, short-term incentives,
long-term incentives, employee benefits, and perquisites are the five components of
incentives that entice employees. Hsu et al. advised firms to regularly assess employee
attitudes toward career incentives and take advantage of the occasion to ascertain their
15
attitude toward their jobs. Nelson and Spitzer, however, believe that although cash
incentives are typically accepted by staff members, managers should never utilize them as
a means of encouraging staff members to increase performance levels (Nelson and Spitzer,
2000). If this were to occur, there's a danger that people may forget what a reward really
is. The issue here is what to do if financial incentives are inconsistent with one's effort and
performance.
•
Mamdani & Minhaj (2016) studied the impact of motivational incentives on workers'
performance in 15 different Karachi banks. Levels of job satisfaction, performance,
effectiveness, organizational productivity, employee loyalty, and professionalism were all
factors taken into account for the study. The study used a 154-person sample size and
random sampling as its methodology. Although incentives had an impact on employees'
performance, the study found that employees were not loyal to their employers and were
ready to change employment if better chances presented themselves. According to the
study, financial incentives alone were insufficient. Employees should be enrolled in
capacity-building programs, which will not only make their work tough but also improve
dedication to their businesses.
•
Hameed, Ramzan, Zubair, Ali, and Arslan (2014) investigated the effects of pay on
employee performance at various Pakistani banks. This study's primary goal is to quantify
how remuneration, such as salary and benefits, affects employee performance. Based on
the findings of correlation, regression, and ANOVA for the selected variables, it is
concluded that salary has a favorable impact on employee performance.
•
Naqbi, Yosuf, and Ismail (2018) did a study on The Impact of Incentive Systems on Job
Performance Motivation as a Mediating Mechanism for Public Sector Organization in the
16
UAE. This study's primary goal is to analyze how incentives and motivation affect how
well public sector workers in the UAE perform on the job. The study also aims to show
how extensively incentives are used in the UAE's public service sector. At the Economic
Development Department (EDD) in Al Sharjah, a research study was carried out to
achieve the research's goal and to get accurate and trustworthy data. The purpose of this
study is to evaluate the impact of the UAE's public sector incentive structure on the job
performance, and to identify the mediating effect of employee’s motivation in two
dimensions (intrinsic and extrinsic) on the relationship between the incentive systems
(monetary and tangible and non-monetary and intangible), and employees’ performance.
•
Tripathi (2014) investigated the impact of rewards, recognition, and incentives (or some
combination of these) on workers' performance. One hundred employees of India's Devi
Ahilya University served as the study's subjects. An organized questionnaire that was
distributed to university staff members was used to gather the study's data. To determine
if compensation, recognition, and incentives improve employee work performance, the
study used regression (i.e., F-test and t-test) and correlation analysis. The study's
conclusions show that rewards, remuneration, and recognition have a strong positive
relationship with and a significant impact on employees' job performance. Of the 23
factors, reward motivation has the greatest impact on improving employees' job
performance at Devi Ahilya University in Indore, India. Therefore, it is recommended that
Devi Ahilya University, Indore, India should take into consideration the needs and feelings
of their employees because a happy worker is a productive worker. This study has
confirmed the importance of motivational factors (remuneration, recognition and
incentives) in getting the best performances from the employees and cannot be over
emphasized especially when it comes to being given incentives and recognition for a job
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done. It is well known fact that performances of employees improve when there is an
increase in motivational factors. From the findings of this study, it can be easily inferred
that employee incentives, recognition and remuneration are matter a lot and should be a
concerned to the employer so as to achieve total commitment from the employee.
•
The effects of (performance-contingent) monetary incentives on individual effort and task
performance were examined by Bonner & Sprinkle (2002). The study focused in particular
on how salient elements of accounting settings might alter the incentives-effort and effortperformance links and presented a framework for understanding these effects in a variety
of circumstances of interest to accounting scholars. The compilation and integration of
theories and evidence across a wide variety of disciplines revealed significant implications
for accounting research and practice. Based on the framework, theories, and prior
evidence, the study developed and discussed numerous directions for future research in
accounting that could provide important insights into the efficacy of monetary reward
systems.
•
In fact, Condly, Clark, and Stolovitch's 2003 investigation found that incentives are made
to help retain employees' productivity and elicit their best work. In order to achieve the
desired results, organizations need to think about using the best employee rewards.
Organizations consider a variety of ways to reward the employees for their excellent work
performance. Incentives are instrumental towards motivation and performance.
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III.
METHODOLOGY
The framework, definitions of the dependent (employee performance) and independent
(financial incentives) variables, the population and sample, the sampling design, the
sources of data, the methods used for data collecting, and the research methodology are
all covered in this chapter. Additionally, this chapter aims to describe the data collection
process and the statistical methods employed in the data analysis.
3.1. Framework and definition of the variables
The study on impact of financial incentives shall be performed by identifying dependent
and independent variables. In this research, employee performance is considered as a
dependent variable while financial incentives are considered as an independent variable.
The following is the framework of this research:
Independent variable
Dependent variable
Financial
incentives
Employee
performance
Figure1. Study framework
3.1.1 Financial incentives
In today's socioeconomic environment, money has taken on a significant role in our lives.
Almost all of our demands can only be met by money because it has purchasing power.
Financial incentives are thus those that are directly monetary, such as money, or that can
be measured in monetary terms.
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Financial incentives can be given to individuals or groups and meet their demands for
current and future security. The most typical financial incentives are:
Bonus - is a sum of money offered to an employee over and above the salary or wages as
a reward for his good performance.
Pay and allowances Salary - is the fundamental incentives for each employee to perform
well for the company. Basic pay, dearness, housing rent, and other similar allowances are
all included in the salary. Under the salary system, employees receive annual raises in
their basic pay as well as occasional increases in their allowances. These raises may
occasionally be determined by the employee's performance throughout the course of the
year.
Profit-sharing - Sometimes the employees are given a share in the profits of the
organization. This motivates them to perform efficiently and give their best to increase the
profits of the organization.
Productivity linked wage incentives - Many wage incentives are linked with the increase
in productivity at individual or at group level. For example, an employee is paid 200 AFN
per piece if he produces 20 pieces a day but if he produces more than 20 pieces a day, he
is paid 50 AFN extra per piece. Thus, on the 21st piece, he will be paid 250 AFN.
Retirement benefits - like gratuity, pension, provident fund, leave encashment, etc.
provide financial security to the employees post their retirement. Thus, they work properly
when they are in service.
Commission - Some organizations offer a commission in addition to the salary to
employees for fulfilling the targets extremely well. This incentive encourages the
employees to increase the client base of the organization
20
Stock options or co-partnership - The employee is provided with ordinary shares of the
company under the Employees Stock Option Plan at a price below the market price for a
predetermined length of time. These deals are non-standard, and the employee and
employer enter into a private contract before issuing the shares. These are typically
provided to management as a part of their compensation package for serving in that
capacity.
Perquisites and fringe benefits - Many companies provide their employees with perks
and fringe benefits in addition to pay and allowances, including housing, a car allowance,
medical, educational, and recreational facilities. The staff are encouraged to work
effectively by these incentives.
3.1.2 Employee performance
Employee behavior and job quality are both considered to be aspects of an employee's
performance at work. In an effort to provide good value to its consumers and run
efficiently, organizations frequently set performance goals for both individual employees
and the organization overall. Performance for a specific employee can refer to the efficacy,
quality, and efficiency of work at the task level. Organizations should keep an eye on staff
productivity, individual goals, and the quality of the work they do. Evaluation of job
quality and efficiency helps you avoid costly errors, increases the likelihood that your staff
will meet deadlines, and lowers wastage of time, resources, and effort. You can decide if
employees are best qualified to do their duties and provide assistance, when necessary, by
assessing the effectiveness of training and the specific work goals of each employee.
Depending on the type of organization, more particular performance indicators might be
utilized, such as the number of product defects, number of errors, number of sales, number
21
of units produced, call handling time, first-call resolution, absenteeism rate, etc (Donohoe,
Employee Performance Definition, 2019)
3.2. Research design
The research design employed in this study was quantitative, based on the questionnaire
and survey opinion of the employees of the Kabul university. Descriptive cross-sectional
survey was considered appropriate in order to analyze the impact of financial incentives
on employee performance at this educational institution.
3.3. Population and sampling
The term "population" refers to the complete group of people who make up the target
population from which samples can be taken for analysis. The study's randomly chosen
population was made up of university personnel. The 42 employees who made up the
research's target demographic ranged in age from 18 to over 70.
3.4. Sampling design
Simple random sampling was carried out to select the respondents for the questionnaire.
3.5. Sources of data and data collection technique
The primary data was collected from academic and non-academic staff of the university
through semi-structured questionnaire which included demographic data and the
structured part consisting of the impact of the financial incentives on employee
performance. The questions were very simple and easy to be understood by the
respondents. Secondary data was collected from academic concepts, journal articles, the
related work of the previous researchers and online books.
3.6. Data analysis methods
The primary data collected from the employees of the university were analyzed using
various statistical analyses tools, such as SPSS version-23 and correlation and regression.
The analyzed data was presented in tables, etc.
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IV.
FINDINGS AND DATA ANALYSIS
This chapter shows the findings and analysis of data gathered from Questionnaire. The
analysis of data is carried out using statistical tool such as; SPSS version-23 to determine
the impact of financial incentives on employee performance of Kabul university.
4.1. Analysis of data
The primary data was collected from the respondents of the university in a systematic way.
There are only a few missing values, which was discovered after the final data was
gathered.
In Kabul university 42 sample questionnaires were distributed to its academic and nonacademic staff, and 40 of them were deemed to be valid with a response rate of 95.23%.
In order to examine the dependent (employee performance) and independent (financial
incentives) variables of the study, a questionnaire including demographic data and key
parameter perceptions on a 5-point Likert scale was developed. Data collected from the
respondents are entered into SPSS software for statistical analysis. First, descriptive
statistics (mean, standard deviation, and variance) were calculated for both the financial
and employee performance. Correlation and regression analysis are then carried out using
the mean values that have so far been acquired.
4.1.1 Gender of the respondents
The profile of the respondents is shown by gender in table 1. As a result, males made up
95% of all respondents, while females made up 5%.
Table 1. Gender of the respondents
Valid
Cumulative
Frequency Percent
Percent
Percent
Valid Male
38
95.0
95.0
95.0
Female
2
5.0
5.0
100.0
Total
40
100.0
100.0
23
Source: Questionnaire
4.1.2 Age of the respondents
Table 2 shows that 42% of participants are between the ages of 19-30, which represents
the majority of the respondent's age profile. 30% of the total respondents were in the age
group of 31-40, 17% in 41-50 and 10% in 51-60.
Table 2. Age of the respondents
Valid
Cumulative
Frequency Percent
Percent
Percent
Valid 19-30
17
42.5
42.5
42.5
31-40
12
30.0
30.0
72.5
41-50
7
17.5
17.5
90.0
51-60
4
10.0
10.0
100.0
Total
40
100.0
100.0
Source: Questionnaire
4.1.3 Education level of the respondents
According to Table 3, 47% of respondents had a Master's degree, which accounts for the
majority of the respondent profile in the education level group, which may influence
respondents' perceptions of financial incentives. Similarly, 30% of all responders have a
Bachelor's degree, and 22% have a PHD.
Table 3. Education level of the respondents
Valid
Frequency Percent
Percent
Valid bachelor degree
master's degree
PhD
Total
Source: Questionnaire
12
19
9
40
30.0
47.5
22.5
100.0
30.0
47.5
22.5
100.0
Cumulative
Percent
30.0
77.5
100.0
24
4.1.4 Descriptive statistics
The staff perception on the impact of financial incentives on employee performance is
assessed on the scale of 1 to 5 (1 being strongly disagree and 5 being strongly agree).
Table 4 shows the descriptive statistics of the entire sample used in this study.
Table 4. Descriptive statistics for all samples
Std.
N Mean
Deviation
Variance
Employee performance
40 3.5594
.40330
.163
Financial incentives
40 3.1375
.52486
.275
Valid N (listwise)
40
Source: Questionnaire
It is observed that mean value is highest in employee performance with 3.5594,
followed by financial incentives with 3.13. The standard deviation and variance are also
concerned and it is lowest employee performance with 0.40 and 0.163 respectively. For
financial incentives, it is at 0.52 for standard deviation and 0.27 for variance, respectively.
4.1.5. Reliability analysis
The Table 5 shows the reliability analysis of the variables under research that was
produced using SPSS verion-23 commands-analyze>scale>reliability analysis. The
reliability analysis is performed on the entire sample. It helps in determining the
consistency of the measure.
Table 5. Reliability analysis
Cronbach's
Alpha
.793
N of Items
2
The Cronbach’s Alpha value is computed .79 or 79% which means the measure is
substantially reliable and there is consistency in the results of the measure.
25
4.1.6 Correlation analysis
The Table 6 shows the correlation analysis of the variables under research that was
produced using SPSS verion-23. The correlation analysis is performed on the entire sample.
It helps in determining the relationship between the variables.
Table 6. Correlation analysis for all samples
EP
Employee performance
Pearson
Correlation
1
Sig. (2-tailed)
Financial incentives
N
Pearson
Correlation
Sig. (2-tailed)
FI
.680**
.000
40
40
.680**
1
.000
N
40
a. Correlation is significant at the 0.01 level (2-tailed).
b. Source: Questionnaire
40
Table 6 shows the Pearson correlations for each pair of variables and the related significant
tests. Employee Performance (EP) is found to be positively correlated with Financial
Incentive (FI) (R = 0.680 or 68% and p is less than 0.001). The correlation analysis shows
that the independent variable (financial incentive) has positive and significant relationship
with employee performance in Kabul university.
4.1.7. Regression analysis
Regression analysis is used to determine the effect of an independent variable on a
dependent variable. The regression analysis is performed on the entire sample. Regression
analysis is performed in the study for the impact of financial incentives on employee
26
performance at Kabul University. In SPSS, the commands Regression-Linear are used to
create a multiple regression model. Table 7 shows the SPSS output tables.
Table 7. Regression analysis for whole sample
Adjusted R
Std. Error of the
Model
R
R Square
Square
Estimate
1
.680a
.462
.448
.29969
a. Predictor: (Constant), FI; b Dependent Variable: EP
b. Source: Questionnaire
This model includes the multiple correlation coefficient, R, its square, R2, and an adjusted
version of this coefficient as summary measures of model fit. The multiple correlation
coefficient R = 0.680 suggests that there is a strong positive correlation (68.0%) between
the employee performance and financial incentives predicted by the regression model.
The Model Summary table provides an estimate of the standard deviation of the error term
which is 0.299.
27
Discussion
The broad objective for conducting this study is to find out the impact of financial
incentives on employees’ performance in educational institutions using the case of Kabul
University, the popular university of Afghanistan. The study employed a quantitative
analysis by taking the opinions of the university’s employees. The questionnaire was
designed to gather information on the impact of financial incentives which is considered
an independent variable, on employee’s performance which is a dependent variable. The
study had 42 respondents from the academic and non-academic staff of Kabul university
for gathering the information through a questionnaire with three parts. The primary data
was collected from academic and non-academic staff of the university through the abovementioned questionnaire. The following is the discussion made on the study's primary
findings based on the survey and data analysis:
•
According to the questionnaire data analysis, the weighted mean of the survey on
employee performance ranges between 3.05 and 4.10. In this situation, the majority of the
respondents agree with the acknowledgment from the supervisor and colleagues
influences their job performance, while they have disagreement and doubt about the
University Allowances and prizes that are given for particular efforts in job performance.
•
The weighted mean in the survey on financial incentives ranges from 2.75 to 3.55. In this
situation, the majority of respondents agree that the university provides fair and enough
retirement incentives, but they disagree that the university provides good medical
reimbursement to its employees.
•
According to the statistical analysis, the mean value for employee performance is 3.5594,
followed by financial incentives at 3.13. The standard deviation and variance are also
taken into account; employee performance is the lowest at 0.40 and 0.163, respectively.
28
In terms of financial incentives, it is 0.52 for standard deviation and 0.27 for variance.
This demonstrates that respondents are more interested in employee performance that is
affected by financial incentives.
•
According to the correlation analysis, the independent variable (financial incentive) is
positively correlated to employee performance at Kabul University.
•
Using SPSS software, a multiple regression model predicts the multiple correlation
coefficient (R = 0.680), indicating that there is a high positive relationship between
employee performance and financial incentives.
29
Conclusion
Performance management system is the systematic technique to measure the performance
of employees. It is the process by which an organization aligns its mission, goals, and
objectives with its available resources. This method also identifies competency, skill, and
knowledge gaps, which may be addressed by offering guidance, training, coaching, and
mentoring to people or teams at various levels and designations. In today's competitive
business environment, businesses are challenged to develop the best market strategy to
increase their performance and to devise a technique to keep their employee motivation at
the highest level possible so that the organization as a whole may perform well within the
competition.
The survey conducted in this study is to collect academic and non-academic staff’s
perception the impact of the financial incentives on the performance of employees in
Kabul university. Furthermore, the survey also aimed to uncover the variables that aid to
increase the employee performance. Financial incentives are seen as independent
variables, whereas employee performance is regarded as dependent variables. The study
has 42 respondents from the academic and non-academic staff of Kabul university for
gathering the information through a questionnaire with three parts. The above-mentioned
questionnaire was used to obtain primary data from academic and non-academic
university staff.
The findings indicate that financial incentives influence employee performance and play
a role in it. Employee performance has the greatest mean value (3.5594), followed by
financial incentives (3.13). The correlation analysis shows that the independent variable
(financial incentive) is positively correlated to the employee performance in Kabul
university.
30
Based on the above analysis, it is clear that financial incentives effects employee
performance and, as a result, can improve the overall performance of the organization.
Finally, it is possible to conclude that the impact of financial incentives (FI) on employee
performance (EP) at Kabul University is considerable and there is a relationship between
financial incentives and employee performance.
31
Implications and Recommendations of the study
According to the findings of this study, there is a positive relationship between the impact
of financial incentives (FI) and employee performance (EP) at Kabul University.
Therefore, the educational institutions notably, Kabul university should focus on variables
that directly or indirectly affect the employee performance, which will further contribute
to the performance and profitability of the organizations. The majority of respondents
agreed with or were neutral on most of the questionnaire's opinions, which appears
appropriate in terms of job performance and satisfaction. It is recommended that
educational institutions, notably Kabul University, should support group incentives
schemes based on group performance and provide appropriate medical reimbursement to
its staff. It should provide allowances and awards that should be granted for special efforts
in job performance. It should offer effective retirement schemes, and should establish
attractive salaries. It should also assess its financial incentives plan and add strong
financial incentives to it.
32
References
1. Hellriegel Jackson and Slocum. (1999). Management (8th edition.).
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3. Anitha. (2013). Determinants of employee engagement and their impacts on
employee performance. International journal of productivity and performance
management.
4. Paille. (2009). Assessing organizational citizenship behavior in the French
context: Evidence for the four-dimensional model. The journal of psychology.
5. Chepkemoi, J. (2018). Effect of incentives on employee performance at Kenya
forest service Uasin Gishu County. Journal of Business and Management.
6. Mark. (2019). 5 psychological theories of motivation to increase productivity.
https://contactzilla.com/blog/5-psychologicaltheories-motivation-increaseproductivity/
7. Vickto, H. (1995). Work and motivation (1st edition.).
8. Point, A. (2020). Hawthorne effect, theory of motivation.
https://www.assignmentpoint.com/science/geographicminerals/hawthorne-effecttheory-motivation.html.
9. Juneja, P. (2020). Herzberg’s two-factor theory of motivation.
https://managementstudyguide.com/herzbergs-theorymotivation.html.
10. Hsu, M., Jiang, J., Klein, G., and Tang, Z. (2003). Perceived career incentives
and intent to leave. Information and management.
33
11. Nelson and Spitzer. (2000). The 1001 rewards & recognition field book: The
complete guide (1st edition.).
12. Mamdani and Minhaj (2016). Effects of motivational incentives on employees’
performance: A case study of banks of Karachi, Pakistan. South east asia journal
of contemporary business, economics and law.
13. Hameed, Ramzan, Zubair, Ali, and Arslan (2014). Impact of compensation on
employee performance: Empirical evidence from banking sector of Pakistan.
International journal of business and social science.
14. Naqbi, Yosuf, and Ismail (2018). The effect of incentive system on job
performance motivation as mediator for public sector organization in UAE.
International journal of engineering and technology.
15. Tripathi (2014). Impact of motivation on job performance of contractual staff in
Devi Ahilya University Indore, India. Indian journal of research.
16. Bonner & Sprinkle (2002). The effects of monetary incentives on effort and task
performance: theories, evidence, and a framework for research. Accounting,
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17. Condly, Clark, and Stolovitch's (2003). The effects of incentives on workplace
performance: A meta-analytic review of research studies.
34
Annexure
Annex 1
Questionnaire
THE IMPACT OF FINANCIAL INCENTIVES ON EMPLOYEE PERFORMANCE IN
KABUL UNIVERSITY.
This questionnaire is designed to gather information on the impact of financial incentives
on employee performance at Kabul university. It is kindly requested to provide
information by putting a tick mark or fill in the blank. The information provided shall be
kept confidential and used for academic purpose only.
PART 1
Demographic information
Name [optional]: ____________________________
1.
a)
b)
2.
a)
b)
c)
d)
e)
f)
3.
a)
b)
c)
d)
What is your gender?
Male
Female
What is your age interval? (In years)
19-30
31-40
41-50
51-60
61-70
Above 70
What is your education level?
High school level
Bachelor degree
Master’s degree
PHD
35
PART 2
EMPLOYEE PERFORMANCE
S. No
1.
2.
3.
4.
5.
6.
7.
8.
Item
The financial incentives
provided by the university
are generally supportive
to my job performance.
University’s recognition
and personal attention on
its employees is important
in job performance.
The recognition from my
supervisor and colleagues
influences my job
performance.
Financial incentives
increase responsibility,
scope and challenge in
my performance.
The University
encourages group
incentive systems on
group performance.
Allowances and rewards
are given for special
efforts in job
performance.
Certificates and attention
as incentives benefits
directly to my
performance.
Financial incentives
directly affect the
performance of the
employees.
Strongly Disagree Neutral Agree
Strongly
Disagree
Agree
1
2
3
4
5
1
2
3
4
5
1
2
3
4
5
1
2
3
4
5
1
2
3
4
5
1
2
3
4
5
1
2
3
4
5
1
2
3
4
5
36
PART 3
FINANCIAL INCENTIVES
S. No
1.
2.
3.
4.
Item
Basic salary as a
financial incentive is
valuable for the
employees of Kabul
university.
The university provides
a good fringe benefits
and allowances.
The university provides
fair and adequate
incentives on retirement.
The university provides
good medical
reimbursement to its
employees.
Strongly Disagree Neutral Agree
Strongly
Disagree
Agree
1
2
3
4
5
1
2
3
4
5
1
2
3
4
5
1
2
3
4
5
End of questionnaire.
Thank you for your valuable time.