THE EFFECT OF REWARD MANAGEMENT

SYSTEM ON EMPLOYEE RETENTION

The Case Study of Metehara Sugar Factory

Prepared by: Mengistu Nega

Submitted to: Dr. Milkiyas A.(PhD)
October 2023

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 Table of Contents
1. Abstract..............................................................................................................................3
2. Background of The Study....................................................................................................4
3. Statement of The Problem................................................................................................6
4. Research Questions............................................................................................................6
13. Objective of The Study....................................................................................................18
a. General Objective........................................................................................................18
b. Specific Objectives.......................................................................................................19
14. Scope of The Study............................................................................................................21
15. Significance of The Study………………………………….………………………..…...23
16. Limitations of the Study………………………….………………………………..…….27
17. Review of the Related Literatures…………....…………………………………………28
18. Conceptual Frame Work………….…………………………………………………….29
3. Methodology of the Study.................................................................................................6
4. Research Design & Approach..........................................................................................6
a. Data Sources & Method of Collection........................................................................18
b. Sampling Design...........................................................................................................19
c. Methods of Data Collection & Procedures................................................................19
d. Mathematical Model....................................................................................................19
e. Methods of Data Processing & Analysis....................................................................19
14. References..........................................................................................................................21

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 1. Abstract
The purpose of this study is to determine the effects of reward management practices on employee retention in Metahara Sugar Factory. Possible
relationships between Reward Management practices and employee retention will be discussed well. A total of 198 employees will be examined
through questionnaire and then empirically will be tested using SPSS Volume 20.0.The questionnaire results and findings should show significant
correlation between reward system and retention.

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 2. Background of The Study

Today`s time, 21st century, one of the greatest challenges for any organization is to ensure their sustainability for a longer period of time in the
dynamic business environment. Therefore, the retention of employees has become of paramount importance and a critical issue for an organization
as there is extensive evidence regardless the organization facing retention challenges in today competitive labor market during the extreme economic
downturn. The success and failure of every organization depends on the quality of people found in the organization. During the last few decades a
lots of research has been taking place to find out the factors involved which can ensure their long time success in this competitive business field.
Most of the researchers are concerned about human resources management, particularly in the employee retention which is the best hands ensures
improved sales, customer satisfaction and can maintained balanced relationship between staff and management to generate overall growth of the
organization. The factors of reward management have a great correlation with employee retention. Reward management is term related to factors that
can satisfy and motivate the employees to deploy themselves towards an organization to achieve organizational goal, building up trust and being
committed toward the organization, which can induce them to be retained long term in the organization. Most of the organizations in public and
private sectors rely on employment retention by the reward system which has been ongoing research since long time. Recently, research revealed
that employee retention is enhance by the compensation and reward system, Rashid and Zhao (2009).
• Firms now a days face an increasingly competitive and rapidly changing environment characterized by a diverse labor market,
advancement in information technologies, globalization, deregulation, and continuous customer demands.

• To be successful, a firm must be able to improve performance by reducing costs, creating new products and processes, enhancing
quality and productivity, and increasing speed to market.

• Global competition is very essential to identify and retaining efficient, competent, and knowledgeable employees in the organization
by developing and maintaining an effective compensation and reward program for getting the best job performance from the
employee.

• “Mayson and Barret (2016)” found that a firm's ability to attract, motivate and retain employees by offering competitive salaries

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 and appropriate rewards is linked to firm performance and growth. In today’s competitive environment if an organization wants to
get success then its employees must be rewarded and motivated well.

• The research will have geographic, time and conceptual delimitation.

• On the geographic delimitation, the case company operates in Oromia region, East Shoa Zone, fentale woreda.

• The study encompasses to explore the effect of reward management on employee retention.

• The study will be conducted in 2023/2024 fiscal year.

• Metahara Sugar factory is one of the well-known manufacturing organizations where success has relied mainly on the performance
of its employees.

• So, in this study, the researcher will try to explore the effect of reward management practice on employees' retention in the
Metahara sugar factory.

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3. Statement of the Problem

One of the most critical issues facing organizations today is retaining the most valuable employees. The lack of competent employees
has forced companies to be creative in devising different reward mechanisms. Most companies HR department paid premium
compensation, hoping that better and bigger salaries would keep their employees. According to Frost (2001) many professional
organizations are in a dilemma as a result of the competition that is present in attracting and retaining highly skilled workers because
they fail to match the salaries being offered by their competitors or to offer more than their competitors.

• Based on the literatures available and to the best knowledge of the researcher, there are only few studies conducted in the
manufacturing sector regarding the effect of reward management practice on employee retention of manufacturing companies.

• So this research aims to oversee the effect of reward management practice on employee retention of manufacturing companies in
the case of Metahara Sugar Factory.

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 3. Research Questions

• This research study tries to see the effect compensation and reward management practice in Metehara Sugar Factory and its impact
on employee retention.

• The volume of studies suggest that effective reward management has a profound effect on employee retention. However, there is
less evidence and research on its implication and effect in businesses within production industry sectors such as Metahara Sugar
Factory. This proposed study intends to address this need and thus the study aims to provide answer to the following key
questions:

1. What is the relationship between reward practice and employee retention?

2. What are the existing practices of reward management systems in the case of Metahara Sugar Factory?

3. What are the antecedents of employee retention and how reward management affect employee retention?
4. What is the effect of reward management systems (extrinsic and Intrinsic) on employee retention in the case of Metahara Sugar Factory?

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 5. Objectives Of The Study

a. General Objective

The general objective of this study is to investigate the effect of reward management practice in manufacturing companies in the case of Metehara
sugar factory.

b. Specific Objectives

1. To identify the existing practices of reward management systems in the case of Metahara Sugar Factory,

2. To assess the extent of employee retention in the case of Metahara Sugar Factory,

3. To determine the relationship between reward management practice and employee retention,

4. To examine the relationship between reward management systems (extrinsic and Intrinsic) on employee retention in the case of Metahara
Sugar Factory,

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 6. Scope of The Study

The research will be conducted to employees of Metahara Sugar Factory, which is found at Oromia region, East Shoa zone, Fentale District. The
factory’s employees involve permanent, contract and seasonal workers. In order to limit the scope of the study this research will be focused only
on permanent employees of the factory.

The study will try to address only eight factors of reward practice. Such as; Salary, reward strategy and policy, benefit, promotion, working
condition, employee empowerment, recognition, personal growth and career advancement the will affect employee retention. That means,
other components in relation to reward management practices will not be considered for this study.

The source of information will be gathered from the current employees of the factory by using simple random sampling. Data’s would be
collected through questioner.

The scope of the assessment will be made on the factory depending on the time schedule.

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 7. Significance of The Study

Although the primary purpose of this study is for academic use it is expected that findings from this study will be important to the
management and members of Metehara Sugar Factory.

As well as to other organizations in the same industry to understand the relationship between compensation and reward, and employee
performance.

This study will have practical significance to Metehara Sugar Factory. In understanding the effect of compensation and reward management
practice on employees’ performance and their intended impact on organizational achievements.

Therefore, this study is expected to link the gap on the determinants of employee retentions in Metahara Sugar Factory. The end outcomes of the
study will serve as a fundamental platform for the factory employee retention system and base for future research in identifying determinants of
employee retentions.

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 8. Limitations of The Study

There will be several limitations occur during the progress of this study. Some of these expected limitations are listed below:

• Some of the employees will not willing to fill out the questionnaires distributed,

• some respondents will not also return questionnaire on time,

• There will be time constraint to address interview and questionnaire as per the schedule since the factory is very wide and most of
employees will be so busy during the operation period.

• As the research will be conducted from the private source of finance, there will be some budget and resources constraints.

• The researcher will not use a qualitative research method of study to conduct interview with some management members. However,
due to their tight time, the interview could not be take place as per the schedule.
Furthermore, there might be other variables that can be the factors to influence an employee retention other than this study point.

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9. Review of Related Literatures

This chapter will offer a review of related literature by various scholars and researchers that have been conducted and analyzed to provide
understanding on issues of reward management and employee retention. Hence, based on the relevant theories that explain reward
management, employee motivation and retention strategies.

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10.Conceptual Framework

The framework below summarizes the factors that the researcher will analyze to discuss the variables of reward and
employee retention, i.e. independent variables (reward) and the dependent variables employee retention. The independent
variables of this study are reward strategy and policy, extrinsic and Intrinsic Rewards and the dependent variable as
employee retention.

Independent Variables

Working
condition
Dependent variable
Intrinsic reward
Employee empowerment
Reward

Payment
r

Benefits Employee
Extrinsic Reward Promotion Retention
Appreciation pg. 8
11.Methodology of The Study
a. This research work is designed to the effect of reward management practice on employees of manufacturing companies in the
case of Metahara Sugar Factory.

b. The Research design is used to guide the researcher on methods and procedures used in collecting and analyzing measures of
the variables. So the research design used in this study is a descriptive type of research design.

12. Research Design And Approach

The study will use both descriptive effect of reward management on employee retention and explanatory study design to examine the
effect of reward management on employee retention.

a. Data Sources and Method of Collection

The research will use both primary and secondary sources of data collection.

Primary Sources will take place by interviews, surveys, and fieldwork tour of the company.

Secondary Sources of data from files, reports, brochures and manuals in the organization and also external source of
Published books, the internet (web pages), and magazines of the organization.

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 b. Sampling Design

The researcher will use sampling technique by the category of employees of the Metahara sugar factory.

The sample size of the study was 50% of the entire working population at Metahara Sugar factory department.
Half percent of employess will be chosen because of the reason that it‘s not possible to assess each top and middle-level manager at
Metahara Sugar factory because of time constraint.

Total Number of top and Sample (50% of

middle level managers population)
No Department

1 Agriculture operation 47 23
2 Factory operation 50 25

3 Over Head 100 50

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Total 197 98

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c. Methods of Data Collection and Procedures
• Above stated points survey including interviews, surveys, and fieldwork are sets of questions that will be filled with
characters and signs so that the respondents can tick the suitable clue of his/her view on a provided space or write
short answers.

• The questionnaires will be made up of both closed and open questions. Concerning the closed-ended questions,
there will be choices given or provided for respondents to choose from.

• In the case of the opened questions, the respondents have the opportunity or chance to express their views and
suggestions to indicate ther opinions and feelings.

• In addition to this questionnaires will be made up of various items written in a simple and clear language to enable
respondents understand and respond easily.

d. Mathematical Model
Regression Model

To investigate the effect of independent variable i.e., (reward), regression analysis method will be used as a tool of
study.

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 e. Methods of Data Processing and Analysis

Data that will be collected from questionnaires will be analyzed by using the system of SPSS of latest version.

• Using the system of SPSS of latest version.

• To attain the objective of the study, the descriptive method will be used to interpret and analyze the details of the
effect of employee productivity depending on the type and nature of data gathered from the structured
questionnaires.

• In this analysis process of the data, the information will be grouped into qualitative and quantitative type.

• The data absorbed through questionnaire will be analyzed using regression and correlation systems.

• The data results will be collected accordingly, organized and summarized in tables in a suitable manner for future further
research and use

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pg. 16
13.References

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• Belachew, K.( 2019). Reward System and its Effect on Employees Work Motivation:
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• Snell, B. (2004). Managing Human Resources. (3 rd Ed.) Thomson-South-Western

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