Determinants of the Employee Performance

(A case of fertilizer industry in Pakistan)

SUBMITTED BY:

Hina Hussain Lasi (080639)

A RESEARCH REPORT SUBMITTED IN PARTIAL FULFILLMENT OF THE

REQUIREMENT FOR THE DEGREE OF BBA

DEPARTMENT OF BUSINESS ADMINISTRATION

AIR UNIVERSITY

2012

Research Project Approval Sheet

Topic of Research:

Determinants of the Employee Performance

(A case study of fertilizer industry in Pakistan)

Name of Student:

Hina Hussain Lasi (080639)

Class:

BBA Fall 2008

Approved by:

Project Supervisor

(Saeed A. Chaudhry)

Internal Examiner

(Fazaila Ali Qazi)

Internal Examiner

(Farooq Rasheed)

Dean

(Dr. I.U.Shad)

Certificate of Completion

Ms Hina Hussain Lasi, registration no.080639 semester BBA-F-08, has completed their research

on June 26, 2012 under my supervision.

Their topic is Determinants of the Employee Performance

(A case study of fertilizer industry in Pakistan)

This thesis has been examined by me and it has been found complete in all aspects and fit for

presentation. The students are, therefore, allowed in the presentation/viva voce for defending it

before the panel of examiners.

Saeed A. Chaudhry (Supervisor)

AcknowledgementFirst and foremost, we thank Almighty Allah for blessing us with the knowledge and strength to overcome the various hardships in the course of producing our thesis.

We are also grateful to our Dean for providing us with such a competent faculty with their endless persistence, support and encouragement that guided us every step of the way. We would especially like to show our gratitude to our supervisor Mr. Saeed A. Chaudhry for guiding us and who provided assistance in every way possible and its just because of his guidance, training and motivation that enabled us to complete our thesis.

Abstract

This study examines the Determinants of the Employee Performance (A case study of fertilizer

industry in Pakistan). Data was gathered by means of structured questionnaires; gathered from

150 respondents, working in the fertilizer industry of Pakistan. Two major players in the

fertilizer industry were chosen to conduct this research.

Responses from the survey were statistically analyzed using Pearson's Correlation Analysis and

Regression analysis. The results of the study indicate a statistically significant relationship

between organizational culture, employee empowerment and pay satisfaction and Employee

Performance. The findings also reveal that the most important variable in this model is

organizational culture.

Overall the dissertation provides with a critical insight and provides strategies to increasing

employee performance by fostering a positive organization culture, by making the remunerations

meeting the expectations of employees and by empowering employees.

TABLE OF CONTENTS

Description Page No.

1. Chapter 1

1.1.Introduction...11.2.Fauji Fertilizer Company...21.3.Engro Chemical Pakistan...41.4.Purpose of Study....71.5.Research Objectives...7

2. Chapter 2

2.1.Literature Review82.1.1. Organizational Culture and Employee Performance8

2.1.2. Employee Empowerment and Employee Performance9

2.1.3. Pay Satisfaction and Employee Performance..11

2.1.4. Variables ..132.1.5. Research Theoretical Design142.1.6. Research Questions..14

3. Chapter 3

3.1. Research Methodology15

3.2. Variables..15

3.2.1. Independent Variables..15

3.2.1.1. Organizational Culture..15

3.2.1.2. Employee Empowerment..15

3.2.1.3. Pay Satisfaction.16

3.2.2. Dependent Variable...16

3.2.2.1. Employee Performance..16

3.3. Research Theoretical Design16

3.4.Hypothesis Development..173.5.Research Design....173.6.Participants ...193.7.Sampling ...20

3.8. Data Processing and Analysis...20

4. Chapter 4

4.1. Data Analysis23

4.2.Correlation Analysis..234.3.Regression Analysis..23

5. Chapter 5

5.1.Conclusion ...275.2.Recommendation .28

6. References ...327. Appendix-A.36

CHAPTER 1

INTRODUCTION

The fertilizer industry has played a significant and responsible role in the development of both

the agriculture and industrial sectors of economy. Fertilizer Industry is in turmoil due to 70% rise

in gas prices in the year 1999.

Agriculture sector occupies the dominant position but failed to give due attention to Economic

Development. The yield per hectare is low in our country due to various reasons. Using Fertilizer

in required quantity and quality at appropriate time is best hope to improve per hectare yield if

irrigation water and certified seeds are provided according to requirement and weather conditions

are favorable, because fertilizer provides essential nutrients which are required for the smooth

growth of a plant.

At the time of independence of Pakistan, there was no any fertilizer factory but at present eleven

fertilizer units work both in private and public sectors. The Government imports fertilizers by

investing huge foreign exchange every year in order to meet the requirement of farmers which

results in balance of payment crisis and shortage of food. In England in 1842 Sir John Lawes

treated bones with sulphuric acid and began producing a product he called superphosphate. In

1685, or the first time, potassium was Detected in the rock salt mined at stassfurt, Germany. This

discovery led to the foundation of the potash industry.

In Pakistan, Fertilizer is produced since 1957, at present five types of fertilizer i.e. N, CAN, AS,

NP, and SSP are produced and marketed besides imported Fertilizers, by both Public and Private

Sector. Pakistan has ten fertilizer plants, six state-owned and four private, with a total annual

production capacity of 4.65 million tons. Production in 2000/01 was 3.66 million tons, up 10.5%

from 1999/00

There is an indication of improvement in urea off take as well as hike in cost of goods sold

mainly due to increase in cost of gas used as feedstock. The higher off take has been despite

continued shortage of irrigation water throughout the country and particularly in Sindh. During

this period Fauji Fertilizer Company also acquired Pak Saudi Fertilizer Limited (PSFL), which

will be merged into it. While production of DAP remained suspended at FFC-Jordan, production

1

of NPK at Engro Chemical Pakistan, at Bin Qasim plant, achieved higher level of capacity

utilization.

1.2) Fauji Fertilizer Company

With a vision to acquire self - sufficiency in fertilizer production in the country, FFC was

incorporated in 1978 as a private limited company. This was a joint venture between Fauji

Foundation (a leading charitable trust in Pakistan) and Haldor Topsoe A/S of Denmark.

The initial share capital of the company was 813.9 Million Rupees. The present share capital of

the company stands above Rs. 8.48 Billion. Additionally, FFC has more than Rs. 8.3 Billion as

long term investments which include stakes in the subsidiaries FFBL, FFCEL and associate

FCCL.

FFC commenced commercial production of urea in 1982 with annual capacity of 570,000 metric

tons.

Through De-Bottle Necking (DBN) program, the production capacity of the existing

plant increased to 695,000 metric tons per year.

Production capacity was enhanced by establishing a second plant in 1993 with annual

capacity of 635,000 metric tons of urea.

FFC participated as major shareholders in a new DAP/Urea manufacturing complex with

participation of major international/national institutions. The new company Fauji

Fertilizer Bin Qasim Limited (formerly FFC-Jordan Fertilizer Company Limited)

commenced commercial production with effect from January 01, 2000. The facility is

designed with an annual capacity of 551,000 metric tons of urea and 445,500 metric tons

of DAP, revamped to 670,000 metric tons of DAP.

In the year 2002, FFC acquired ex Pak Saudi Fertilizers Limited (PSFL) Urea Plant

situated at Mirpur Mathelo, District Ghotki from National Fertilizer Corporation (NFC)

through privatisation process of the Government of Pakistan. It has annual production

capacity of 574,000 metric tons urea which has been revamped to 718,000 metric tons

urea in 2009.

2

This acquisition at Rs. 8,151 million represented the largest industrial sector transactions

in Pakistan at that time.

FFC is committed to play its leading role in industrial and agricultural advancement in Pakistan

by providing quality fertilizers and allied services to its customers and given the passion to excel,

take on fresh challenges, set new goals and take initiatives for development of profitable

business ventures.

FFC's vision for the 21st Century remains focused on harmonizing the Company with fresh

challenges and encompasses diversification and embarking on ventures within and beyond the

territorial limits of the Country in collaboration with leading business partners.

Fauji Fertilizer enjoys the largest share of fertilizer market, registered 4.7 per cent increase in

profit after tax during Jan-June period of year 2002. It also declared second interim dividend of

30 per cent making the total payout 55 per cent so far. The 22.7 per cent increase in sales may be

attributed to higher sales volume and 3 per cent increase in urea prices since January this year. A

29 per cent increase in cost of goods sold decreased its gross margin. The decline in operating

margins highlights the relatively difficult operating environment for the company. The 32 per

cent decline in other income is due to enhanced lending to FFC-Jordan, the acquisition of PSFL

and decline in its return on deposits. The mark-up costs of PSFL's merger did not reflect in half

yearly results. However, financial charges are expected to increase significantly during the

second half of this year.

FFC is the market leader in urea sales, and is excepted to maintain its dominant position till

2010. It has market share of 50.

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1.3) Engro Chemical Pakistan

Engro Corporation Limited is one of Pakistans largest conglomerates with businesses ranging

from fertilizers to power generation.

In the interest of better managing and overseeing businesses of subsidiaries and affiliates that are

currently part of Engros capital investments, Engro Chemical Pakistan Limited converted into a

holding company structure. As part of this process, two major changes occurred with effect from

January 1, 2010; Engro Chemical was renamed as Engro Corporation Limited and it demerged

and transferred its fertilizer business into a separate wholly owned subsidiary, Engro Fertilizers

Limited.

Currently Engro Corporations portfolio consists of seven businesses which include chemical

fertilizers, PVC resin, a bulk liquid chemical terminal, industrial automation, foods, power

generation and commodity trade.

Besides providing the long term vision for the company and overseeing performance of the

subsidiaries and affiliates, Engro Corporation Limited is also responsible for allocation of

capital, management of talent, leadership development, HR guiding policies, leadership role in

public relations and CSR activities, control structures, legal and IT support.

In 1957, the search for oil by Pak Stanvac, an Esso/Mobil joint venture led to the discovery of

the Mari Gas field near Daharki a small, remote area in Upper Sindh province at the time. Esso

proposed the establishment of a urea plant in that area which led to a fertilizer plant agreement

signed in 1964. In the subsequent year, Esso Pakistan Fertilizer Company Limited was

incorporated, with 75% of the shares owned by Esso and 25% by the general public.

The construction of a urea plant commenced at Daharki in 1966 and production began in 1968.

At US $43 million with an annual production capacity of 173,000 tons, it was the single largest

foreign investment by a multinational corporation in Pakistan at the time.

A full-fledged marketing organization was established which undertook agronomic programs to

educate the farmers of Pakistan. As the nations first fertilizer brand, Engro (then Esso) helped

4

modernize traditional farming practices to boost farm yields, directly impacting the quality of life

not only for farmers and their families, but for the nation at large. As a result of these efforts,

consumption of fertilizers increased in Pakistan, paving the way for the Companys branded urea

called Engro, an acronym for Energy for Growth.

As part of an international name change program, Esso became Exxon in 1978 and the Company

was renamed Exxon Chemical Pakistan Limited. The Company continued to prosper as it

relentlessly pursued productivity gains and strived to attain professional excellence.

In 1991, Exxon decided to divest its fertilizer business on a global basis. The employees of

Exxon Chemical Pakistan Limited, in partnership with leading international and local financial

institutions, bought out Exxons 75% equity. This was at the time and perhaps still is the most

successful employee buy-out in the corporate history of Pakistan. Renamed as Engro Chemical

Pakistan Limited, the Company has gone from strength to strength, reflected in its consistent

financial performance, growth of the core fertilizer business, and diversification into other

businesses.

Along the way, a major milestone in plant capacity upgrade coincided with the employee led

buy-out; innovatively optimizing our resources, Engro relocated fertilizer manufacturing plants

from the UK and US to its Daharki plant site an international first.

Engro Chemical Pakistan Limited then started a journey of venturing into other sectors including

foods, energy, industrial control and automation, PVC resin manufacturing and marketing, and

chemical terminal and storage.

In 2009 plans were announced of demerging the fertilizer business into an independent operating

company. The expansion and growth in the company necessitated a change in the way the

company operated and conducted business. Keeping in view the operations of multi category

businesses, expansion strategy and growth vision, the management decided that the various

businesses would be better served if the Company was converted to a holding company. As a

result it was decided to demerge the fertilizer business and establish a holding company structure

to manage the affairs of various businesses.

5

Engro Fertilizers Limited was incorporated in June 2009 to manage the fertilizer business post

demerger. The demerger required the approval of the High Court of Sindh, which was granted on

December 9, 2009 after obtaining the requisite approvals from the creditors and shareholders of

the Company. The demerger became effective from January 1, 2010. Consequently, all fertilizer

business assets and liabilities have been transferred to Engro Fertilizers Limited against the issue

of shares to the Company.

To reflect the change in the scope of mandate and scale of operations, Engro Chemical Pakistan

Limited has been renamed as Engro Corporation Limited with effect from January 1, 2010.

Engro Corp, as the holding company is responsible for the long term vision of the company,

overseeing the performance of the subsidiaries and affiliates, allocation of capital, management

of talent, leadership development, HR guiding policies, leadership role in public relations and

CSR activities, control structures, legal and IT support.

Engro Corp will maintain a lean structure with a focused scope, allowing maximum

empowerment to the subsidiaries and affiliates to drive the operations of their respective

organizations.

Their commitment to highest standards of integrity and transparency has shaped Engros

governance framework and processes, which are aligned to the industrys best practices. Every

employee at Engro is a part of the governance system and is required to adhere to clearly laid out

policies and procedures.

Engro Chemicals profit before tax for half year increased by 80 per cent at the back of 40 per

cent increase in sales as compared to the corresponding period of last year. Profit amounted to Rs

471 million which was partly offset by Rs 57 million loss made by the NPK operation. The

company announced 20 per cent interim dividend. While some analysts term this payout an

indicator of the uncertainties shrouding the sector, they ignore two factors. These are: 1)

historically, the company has been paying similar interim dividend and 2) followed the same

despite improvement in bottom line. The over 40 per cent increase in sales may be attributed

more to the lower sales during the corresponding period of last year. Contrary to Fauji Fertilizer,

Engro's cost of goods sold increased at a rate less than the increase in sales, resulting in

6

improvement in gross margin. A 21 per cent increase in tax rate to 31.5 per cent is due to expiry

of the income tax exemption that the company has been enjoying on its expansion.

1.4) Purpose of Study

This study is aimed at developing the understanding of the role and the impact of organizational

culture, employee empowerment and pay satisfaction on the employee performance. The

literature strongly supports the construct that all three variables (organizational culture employee

empowerment and pay satisfaction) play a key role in influencing the employees performance.

Taking in account the current circumstances and the business environment, it has become

extremely necessary for the survival of the firm to maximize the employee performance,

therefore one the aim in broader perspective is to understand what cultures fosters high

performance attributes in employees, how empowering the employees would enhance their

performance and lastly the role and impact of pay satisfaction in employee performance.

1.5) Research Objectives

To discover whether the perceptions of organizational culture exists in fertilizer industry

in Pakistan.

To know the relationship between the perceptions of employee performance with

organizational culture.

To know the fluctuations in perceptions of employee performance, vary by the level of

pay satisfaction.

To investigate whether the perceptions of employee performance vary by the difference

in employee empowerment

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CHAPTER 2

LITERATURE REVIEW

2.1.1) Organizational Culture and Employee Performance

Indeed, an examination of the literature is likely to conclude that organizational culture is one of

the most popular concepts in the fields of management and organizational theory. One reason of

the popularity of the culture concept is the increasing number of theoretical perspectives (Martin,

1992) and organizational disciplines which utilize the concept (Harris and Ogbonna, 1999).

Organizational culture was once seen as how things are done around here (Drennan, 1992) but

has since evolved into a facet of management with a robust range of literature affording a far

deeper understanding. Scheins definition (1985) remains one of the most often used and can be

summed up as the learned product of group experience which affects the behavior of individuals.

Organizational culture is differentiated from organizational climate in that it is not as overt.

Organizational culture is also differentiated from organization structure in that structure has more

to do with the relationships between individuals in an organization.

Derived from literature organizational culture means organizational traditions, customs, policies

and method of working. Organizational cultures have an impact on employee performance,

learning and productivity. The organizations which expose their employees to new experiences

and try to capitalize on employee strengths are creating a human resource asset which will

benefit the entire society.

Early research suggested that strong cultures, or those with widely accepted beliefs within the

organization, performed better than those with a lack of shared values (Peter and Waterman,

1982; Pascale and Athos, 1986; Deal and Kennedy, 1982).

However, when culture is too strong it can lead to stagnation and a reduced ability to adapt to

changes in the environment (Cloke and Goldsmith, 2002). Schein (1985) actually predicts in

Organizational Culture and Leadership that the culture of the future would be the one that

heavily promoted active learning and training.

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2.1.2) Employee empowerment and Employee performance

The common dictionary definition of empowerment, "to give official authority to: delegate legal

power to: commission, authorize" (Grove, 1971) is the one most understood by most people. As

an example, Gandz (1990) writes, Empowerment means that management vests decision-making

or approval authority in employees where, traditionally, such authority was a managerial

prerogative. However, this is not the definition of what is usually called employee

empowerment. One author notes empowerment is, "easy to define in its absencealienation,

powerless, helplessnessbut difficult to define positively because it 'takes on a different form in

different people and contexts'" (Zimmerman, 1990). When most people refer to employee

empowerment they mean a great deal more than delegation.

The most comprehensive definition of empowerment in the literature can be found in Thomas

and Velthouse's 1990 article entitled "Cognitive elements of empowerment: An 'interpretive'

model of intrinsic task motivation". The definition they provide is:

To empower means to give power to. Power, however, has several meaningsauthority, so that

empowerment can mean authorization capacity. However, power also means energy. Thus to

empower also can mean to energize. This latter meaning best captures the present motivational

usage of the term.

Empowered employees have been identified sharing several characteristics through the literature:

they are self-motivated, they are committed people dedicated to high levels of effort, they

demonstrate initiative at work, and they have focus in accomplishing tasks and projects in the

work environment (Block, 1987; Kizilos, 1990; Thomas & Velthouse, 1990). Additionally,

empowered employees are frequently referenced and identified as valuable assets to

organizations (Kaye & Jordan-Evans, 2001; Quinn & Spreitzer, 1997; Spreitzer, 1996).

Employee empowerment shares many common threads with employee involvement initiatives

(Corrigan, 1998). Empowerment has also been associated with an emphasis on quality (Howard

& Foster, 1999). While employee involvement may be considered more process oriented, and in

many cases a precursor to successful empowerment, employee empowerment is more of a state

of mind, or cognitive variable. Thomas and Velthouse (1990) built on the research and analyses

9

performed by Conger and Kanungo (1988) to describe a richer cognitive theory of

empowerment. Thomas and Velthouse determined there are four cognitive variables or task

assessments that determine employee empowerment. Spreitzer (1995) provided further

applications of the four variables, with self-determination (Deci, 1975) being synonymous with

choice.

Finally, impact is related to the perception of an employee that their functions add value. Thomas

and Velthouse (1990) stated that impact relates to the accomplishment of the task or producing

intended effects in the work environment. It was believed that employees will feel empowered if

they (a) perceive their actions positively affect movement towards the goals or vision of the

company and (b) believe their actions have an effect on making progress towards those goals.

Descriptions offered by Deci (1975) regarding intrinsically motivated people are consistent with

descriptions of empowered employees (Thomas & Velthouse, 1990). Deci and Ryan (1985)

characterized intrinsically motivated behavior as individuals with more confidence, flexible,

creative, and resilient when compared to extrinsically motivated behavior. Bennis and Nanus

(1985) believed when individuals were intrinsically motivated they are more sensitive to the

quality of their work. They further believed that intrinsic motivation had deeper meaning to the

individual; therefore it was more likely to be sustained through time.

Employee empowerment is best defined as cognitive elements as opposed to employee

involvement, which can be more process oriented. Two main types of empowerment appear in

the research: structural empowerment and psychological empowerment. Structural empowerment

deals more with the delegation of power and decision making than psychological empowerment,

which tends to view the condition from a more intrinsic and self-determined aspect. A significant

portion of the research involved self-efficacy (Bandura, 1977; Conger & Kanungo, 1988; Ozer &

Bandura, 1990), which relates to the psychological view of empowerment and lead the

discussion to the four cognitions of empowerment (Thomas & Velthouse, 1990). Thomas and

Velthouse believed that empowerment was deeper than only self-efficacy, and concluded there

were four components of empowerment: competence, meaningfulness, choice, and impact.

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2.1.3) Pay satisfaction and Employee Performance

Compensation satisfaction represents an important construct to organizations and to the field of Human Resource Management, because it serves as a critical mediator between an organizations compensation policy and relevant behavioral and attitudinal outcomes (Blau, 1994; Sturman & Short, 2000). Pay satisfaction is defined as the amount of overall positive affect (or feelings) individuals have toward pay (Miceli & Lane, 1991). Beyond this simple definition, the most recent reviews (Gerhart & Milkovich, 1992; Heneman & Judge, 2000; Miceli & Lane, 1991) reveal disagreement regarding the conceptualization of the construct. Some researchers argue that pay satisfaction is uni dimensional (Miceli, Near & Schwenk, 1991) others operationalize it as having between four (DeConnick, Stilwell, & Brock, 1996) and seven dimensions (Williams, Carraher, Brower, & McManus, 1999); and yet others suggest that the number of dimensions depends on moderators such as cognitive complexity (Carraher & Buckley, 1996) and employee job classification. Despite numerous studies focused on determining the true dimensionality of pay satisfaction, the problem has not been definitively resolved.Pay has long been considered one of the most important organizational rewards (Heneman & Judge, 2000) because it allows employees to obtain other reward. Frederick Taylor (1911) was one of the earliest to recognize the motivating effects of pay when he proposed that workers put forth extra effort on the job to maximize their economic gains. Although this premise lost favor in the late 1920s with the emergence of the human relations school (Wren, 1994), money remains the fundamental way that organizations reward employees.

Yet, despite the long-standing importance of pay, the way pay impacts the behavior of employees remains to be explained. Reinforcement theory and expectancy theory emerged as the earliest theories to shed some light on how pay influences employee behavior. Reinforcement theory suggests that

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pay acts as a general reinforcer because of its repeated pairing with primary reinforces. People learn from life experiences that a primary need, such as food or shelter, can be satisfied if money is obtained. Other theorists suggest that through similar experiences a drive for money itself develops (Dollard & Miller, 1950). Whether treating pay as a means to an end or as an end itself, reinforcement theory does not provide a clear explanation for how pay acts as an impetus for action. People engage in behaviors because of past experiences, but the process by which past experiences determine an individuals future behavior remained unclear.

Clearly, providing an employee with a satisfactory pay package is important to the operations of an organization. If employees do not feel they are being treated fairly, they will act to reduce the tension caused by inequity. For example, if the employee feels the output/input ratio is below the referent other, the employee may reduce the number of organizational citizenship behaviors (OCBs) exhibited (Organ, 1994; Williams & Anderson, 1991).

Global pay satisfaction research has advanced the understanding of pays importance in organizations in significant ways. First and foremost, the shift in focus from objective pay to the affective reaction to pay provides an important intervening variable between pay and outcomes.Secondly, the theoretical underpinnings of this research stream, equity theory (Adams, 1963) and its close derivative, discrepancy theory (Lawler, 1971), expand on the theories used in pay research to provide a process by which pay satisfaction is determined. Finally, these theories offer suggestions regarding the effect of pay satisfaction on outcomes (Adams, 1963; Campbell & Pritchard, 1976; Lawler, 1971). What this stream of research does not explain is which of these possible behaviors will be chosen. If the pay level or benefit level is not satisfactory, the desirability of movement will increase and it is more likely that withdrawal behaviors such as tardiness, absenteeism, and turnover will increase. Unsatisfactory pay and

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benefit levels may also reduce the motivation of employees and eventually negatively impact individual, group, and organization performance.2.1.4) Variables Independent Variables: The independent variables chosen are based on literature support. Due to certain research limitation such as time and cost constraint only three variables were chosen. These are as following:

Organizational Culture Employee Empowerment Pay satisfaction

Dependent Variable:The focus of research is on the performance of employees; therefore the dependent variable in this study is Employee PerformanceAs discussed earlier, employee performance is affected by many other variables but in order limit the scope of research due to limitations; only three variables have been added for the study.

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2.1.5) Research Theoretical Design

(Independent Variables) (Dependent Variable)

2.1.6) Research Questions

Does organizational culture play a role in enhancing the employee performance?

Does empowerment of employees lead to enhanced performance?

To what extent does pay satisfaction impacts the employee performance?

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Organizational Culture

Employee Empowerment

Pay Satisfaction

Employee Performance

CHAPTER 3

RESEARCH METHODOLOGY

This research was conducted in order to determine the impact and role of organizational culture,

employee empowerment and pay satisfaction on the employee performance. Originally it was

decided to include more variables but due to the limitation discussed in the prior chapter; the

research was focused to only three variables i.e. Organizational Culture, Employee

Empowerment and Pay Satisfaction. Evidently, a lot literature also support that these variables

play major role in enhancing or decreasing employee performance; much detail has already been

provided in the second chapter of this dissertation.

3.2) Variables 3.2.1) Independent Variables:

The independent variables chosen are based on literature support. Due to certain research

limitation such as time and cost constraint only three variables were chosen. These are as

following:

Organizational Culture

Employee Empowerment

Pay Satisfaction

3.2.1.1) Organizational Culture:

Organizational culture is the collective behavior of humans that are part of an organization, it is

also formed by the organization values, visions, norms, working language, systems, and symbols,

it includes beliefs and habits. It is also the pattern of such collective behaviors and assumptions

that are taught to new organizational members as a way of perceiving, and even thinking and

feeling. Organizational culture affects the way people and groups interact with each other, with

clients, and with stakeholders.

3.2.1.2) Employee Empowerment:

Employee empowerment is a strategy and philosophy that enables employees to make decisions

about their jobs. Employee empowerment helps employees own their work and take

15

responsibility for their results. Employee empowerment helps employees serve customers at the

level of the organization where the customer interface exists.

3.2.1.3) Pay Satisfaction

Degree to which the actual pay of an employee matches what he or she thinks to deserve. High

pay equity means high employee satisfaction with his or her job, low pay equity increases the

potential for absenteeism, grievances, strikes, and turnover.

3.2.2) Dependent Variable:

The focus of research is on the performance of employees; therefore the dependent variable in

this study is

Employee Performance

As discussed earlier, employee performance is affected by many other variables but in order

limit the scope of research due to limitations; only three variables have been added for the study.

3.2.2.1) Employee Performance

The job related activities expected of a worker and how well those activities were executed.

Many business personnel directors assess the employee performance of each staff member on an

annual or quarterly basis in order to help them identify suggested areas for improvement.

3.3) Research Theoretical Design

(Independent Variables) (Dependent Variable)

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Organizational Culture

Employee Empowerment

Pay Satisfaction

Employee

Performance

Research Questions

Does organizational culture play a role in enhancing the employee performance?

Does empowerment of employees lead to enhanced performance?

To what extent does pay satisfaction impacts the employee performance?

3.4) Hypothesis Development

Based on the research questions, research objectives and the theoretical frame work, the

following hypotheses are devised to be tested using statistical analysis.

H1o: Pay Satisfaction does not have a significant impact on employee performance

H1: Pay Satisfaction has a significant impact on employee performance

H2o: Employee Empowerment does not have a significant impact on employee performance.

H2: Employee Empowerment has a significant impact on employee performance.

H3o: Positive Organizational Culture does not have a significant impact on employee

performance.

H3: Positive Organizational Culture has a significant impact on employee performance.

3.5) Research Design

The descriptive method of research was used for this study. To define the descriptive type of

research, Creswell (1994) stated that the descriptive method of research is to gather information

about the present existing condition. The emphasis is on describing rather than on judging or

interpreting. The aim of descriptive research is to verify formulated hypotheses that refer to the

present situation in order to elucidate it. The descriptive approach is quick and practical in terms

of the financial aspect. Moreover, this method allows a flexible approach, thus, when important

new issues and questions arise during the duration of the study, further investigation may be

conducted.

Descriptive research on the other hand is a type of research that is mainly concerned with

describing the nature or condition and the degree in detail of the present situation. This method

is used to describe the nature of a situation, as it exists at the time of the study and to explore the

17

cause/s of particular a phenomenon. The aim of descriptive research is to obtain an accurate

profile of the people, events or situations. With this research type, it is essential that the

researcher already has a clear view or picture of the phenomena being investigated before the

data collection procedure is carried out. The researcher used this kind of research to obtain first

hand data from the respondents so as to formulate rational and sound conclusions and

recommendations for the study. The descriptive approach is quick and practical in terms of the

financial aspect.

In this study, the descriptive research method was employed to explain Impact and role of

organizational culture, employee empowerment and pay satisfaction on the employee

performance. This required correlating independent and dependent variables. The interpretive

and co relational part required statistical testing. To calculate the impact; alongside correlation;

regression was also applied. Both descriptive as well as inferential statistics have been jointly

applied to provide greater flexibility. The results are, in any case, based on first hand data from

the respondents.

The descriptive method is advantageous for the researcher due to its flexibility; this method can

use either qualitative or quantitative data or both, giving the researcher greater options in

selecting the instrument for data-gathering.

While primary data were derived from the answers the participants gave during the survey

process, secondary data were obtained from published documents and published materials. With

the use of the survey questionnaire and published literatures, this study took on the quantitative

approach of research.

Quantitative data collection methods are centred on the quantification of relationships between

variables. Quantitative data-gathering instruments establish relationship between measured

variables. When these methods are used, the researcher is usually detached from the study and

the final output is context free. Measurement, numerical data and statistics are the main

substance of quantitative instruments. With these instruments, an explicit description of data

collection and analysis of procedures are necessary. An approach that is primarily deductive

reasoning, it prefers the least complicated explanation and gives a statement of statistical

18

probability. The quantitative approach is more on the detailed description of a phenomenon. It

basically gives a generalization of the gathered data with tentative synthesized interpretations.

Quantitative approach is useful as it helps the researcher to prevent bias in gathering and

presenting research data. Quantitative data collection procedures create epistemological

postulations that reality is objective and unitary, which can only be realized by means of

transcending individual perspective. This phenomenon in turn should be discussed or explained

by means of data analysis gathered through objective forms of measurement. The quantitative

data gathering methods are useful especially when a study needs to measure the cause and effect

relationships evident between pre-selected and discrete variables. The purpose of the quantitative

approach is to avoid subjectivity by means of collecting and exploring information which

describes the experience being studied.

Quantitative methods establish very specific research problem and terms. The controlled

observations, mass surveys, laboratory experiments and other means of research manipulation in

qualitative method makes gathered data more reliable. In other words, subjectivity of judgment,

which is not needed in a thesis discussion, can be avoided through quantitative methods. Thus,

conclusions, discussion and experimentation involved in the process are more objective.

Variables, both dependent and independent, that are needed in the study are clearly and precisely

specified in a quantitative study. In addition, quantitative method enables longitudinal measures

of subsequent performance of the respondents.

3.6) Participants

In order to determine the impact and role of organizational culture, employee empowerment and

pay satisfaction on the employee performance, a total of 150 respondents were asked to

participate. To achieve pertinent information, certain inclusion criteria were imposed. The

participants qualified for sample selection must be employees working in the Pakistani Fertilizer

Industry. The respondents were selected from two companies in Pakistan, FFC & Engro

Chemicals. Both right now are the top performers in the fertilizer industry of Pakistan. 100

questionnaires were dispatched to each company. The questionnaire was filled by both

management as well as non management carder. The blend in respondents was to get a picture of

19

the wider perception of all employees across different levels of management. Only the

questionnaire which was filled completely was included in the research. Out of the 100

questionnaires sent to FFC, 82 were usable for data analysis. The response rate was 82%. Out of

the 100 questionnaires sent to Engro Chemicals only 68 were included; since rest were partially

filled. The response rate for Engro Chemicals was 68%. Overall the response rate was 75%.

Details are also given the graph shared below:

Response Rate

FFC

Engro Chemicals

3.7) Sampling

Simple random sampling was done for the sample selection. This sampling method is conducted

where each member of a population has an equal opportunity to become part of the sample. As

all members of the population have an equal chance of becoming a research participant, this is

said to be the most efficient sampling procedure.

3.8) Data Processing and Analysis

After gathering all the completed questionnaires from the respondents, total responses for each

item were obtained and tabulated. In order to use the Likert-scale for interpretation, mean value

to represent each question was computed. The mean values were later punched into SPSS for

statistical testing. For this research, Correlation Analysis and Regression Analysis has been

applied to interpret data and to draw conclusions from it.

20

CHAPTER 4

DATA ANALYSIS

In this chapter the results of the data analysis are presented. The data were collected and then

processed in response to the problems posed in chapter 1 of this dissertation. The statistical tools

used are also discussed in the research methodology section of this dissertation are explained to

develop better understanding.

4.2) Correlation Analysis:

The correlation between two variables reflects the degree to which the variables are related. The

most common measure of correlation is the Pearson Product Moment Correlation (called

Pearson's correlation for short).

When measured in a population the Pearson Product Moment correlation is designated by the

Greek letter rho (). When computed in a sample, it is designated by the letter "r" and is

sometimes called "Pearson's r." Pearson's correlation reflects the degree of linear

relationship between two variables.

4.3) Regression Analysis:

Regression analysis is the next step up after correlation; it is used when we want to predict the

value of a variable based on the value of another variable.

In this case, the variable we are using to predict the other variable's value is called the

independent variable or sometimes the predictor variable.

The variable we are wishing to predict is called the dependent variable or sometimes the

outcome variable.

As discussed in the research methodology chapter, SPSS was used for data analysis. Prior to

inputting data into SPSS, MS Excel was used to create a spreadsheet in order to calculate the

mean scores for all variables present in the model.

21

Table 4(a)

Correlations

Pay Satisfaction

Employee

Empowerment Org_Culture

Employee

Performance

Pay Satisfaction Pearson

Correlatio

n

1.000 .408** .602** .768**

Sig. (2-

tailed).000 .000 .000

N 170.000 170 170 170

Employee

Empowerment

Pearson

Correlatio

n

.408** 1.000 .381** .488**

Sig. (2-

tailed).000 .000 .000

N 170 170.000 170 170

Org_Culture Pearson

Correlatio

n

.602** .381** 1.000 .806**

Sig. (2-

tailed).000 .000 .000

N 170 170 170.000 170

Employee Performance Pearson

Correlatio

n

.768** .488** .806** 1.000

Sig. (2-

tailed).000 .000 .000

N 170 170 170 170.000

**Correlation is significant at the 0.01 level (2-tailed).

These numbers measure the strength and direction of the linear relationship between the two

variables. The correlation coefficient can range from -1 to +1, with -1 indicating a perfect

negative correlation, +1 indicating a perfect positive correlation, and 0 indicating no correlation

at all. A correlation coefficient explains the extent to which the value of one variable can be

22

predicted over the value of the other variable or in this case variable. Also note that, by

definition, any variable correlated with itself has a correlation of 1. As shown in table 4(a), all

correlation values are positive. This means that as one variable increases in value, the second

variable also increase in value. Similarly, as one variable decreases in value, the second variable

also decreases in value. Here the following can be concluded:

Increase will Pay Satisfaction will enhance the employees performance.

Empowering Employee will enhance the employees performance.

Positive Organizational Culture will enhance the employees performance.

Also, as shown in the table above; the values show a strong correlation. Pay satisfaction with

regards to employee performance has a value of .768, showing a strong correlation and is also

highly significant.

Employee Empowerment with regards to employee performance has a value of .488, showing a

mild correlation but is highly significant.

Organizational Culture with regards to employee performance has a value of .806, showing a

strong correlation and is also highly significant.

Sig. (2-tailed) - This is the p-value associated with the correlation. The footnote under the

correlation table explains what the single and double asterisks signify.

As shown in Table 4(a) Correlation is significant at the 0.01 level (2-tailed) for Pay Satisfaction,

Employee Empowerment & Organizational Culture with regards to Employee Performance.

N - This is number of cases that were used in the correlation. Because we have no missing data

in this data set, all correlations were based on all 170 cases in the data set. However, if some

variables had missing values, the N's would be different for the different correlations. In this case

there are no missing values.

23

Regression Analysis:

Table 4(b)

Model Summary

Model R R Square

Adjusted R

Square

Std. Error of the

Estimate

1 .887a .787 .783 .46284

a. Predictors: (Constant), Org_Culture, Employee Empowerment, Pay

Satisfaction

R - R is the square root of R-Squared and is the correlation between the observed and predicted

values of dependent variable. Values close to one reflect a higher predictability of the dependent

variable, from the variables used in the model. As shown in table 4(b), the R value is .887.

R-Square - This is the proportion of variance in the dependent variable (Employee

Performance) which can be explained by the independent variables (Organization

Culture, Employee Empowerment, and Pay Satisfaction). This is an overall measure of the

strength of association and does not reflect the extent to which any particular independent

variable is associated with the dependent variable. As shown in table 4(b), the R Square value is .

787.

Adjusted R-square - This is an adjustment of the R-squared that penalizes the addition of

extraneous predictors to the model. Adjusted R-squared is computed using the formula 1 - ((1 -

Rsq)((N - 1) /( N - k - 1)) where k is the number of predictors. As shown in table 4(b), the R

Square value is .783.

All values are close to 1, indicating significant impact on the dependent variable.

Std. Error of the Estimate - This is also referred to as the root mean squared error. It is the

standard deviation of the error term and the square root of the Mean Square for the Residuals in

the ANOVA table 4(c) as shown below:

24

Table 4(c)

ANOVAb

Model Sum of Squares Df Mean Square F Sig.

1 Regression 131.316 3 43.772 204.333 .000a

Residual 35.560 166 .214

Total 166.876 169

a. Predictors: (Constant), Org_Culture, Employee Empowerment, Pay Satisfaction

b. Dependent Variable: Employee Performance

Regression, Residual, Total - Looking at the breakdown of variance in the outcome variable,

these are the categories we will examine: Regression, Residual, and Total. The Total variance is

partitioned into the variance which can be explained by the independent variables (Model) and

the variance which is not explained by the independent variables (Error).

Sum of Squares - These are the Sum of Squares associated with the three sources of variance,

Total, Model and Residual. The Total variance is partitioned into the variance which can be

explained by the independent variables (Regression) and the variance which is not explained by

the independent variables (Residual).

df - These are the degrees of freedom associated with the sources of variance. The total variance

has N-1 degrees of freedom. The Regression degrees of freedom correspond to the number of

coefficients estimated minus 1. Including the intercept, there are 4 coefficients, so the model has

4-1=3 degrees of freedom. The Error degree of freedom is the DF total minus the DF model,

169 - 3 =166.

Mean Square - These are the Mean Squares, the Sum of Squares divided by their respective

DF.

F and Sig. - This is the F-statistic the p-value associated with it. The F-statistic is the Mean

Square (Regression) divided by the Mean Square (Residual): 43.772/.214 = 204.333.

25

Table 4(d) contains the values of B Coefficients, as shown below:

Table 4(d)

Coefficientsa

Model

Unstandardized Coefficients

Standardized

Coefficients

t Sig.B Std. Error Beta

1 (Constant) .042 .170 .247 .805

Pay Satisfaction .383 .043 .407 8.808 .000

Employee Empowerment .125 .039 .126 3.163 .002

Org_Culture .504 .045 .512 11.211 .000

a. Dependent Variable: Employee Performance

B - These are the values for the regression equation for predicting the dependent variable from

the independent variable.

Pay Satisfaction - The coefficient for Pay Satisfaction is .383. So for every unit increase

in Pay Satisfaction, a 0.383 unit increase in Employee Performance is predicted, holding all

other variables constant.

Employee Empowerment - For every unit increase in Employee Empowerment, we expect a .

125 unit increase in the Employee Performance score, holding all other variables constant.

Organizational Culture- The coefficient for Org_Culture is .504. So for every unit increase

in Org_Culture, we expect an approximately .504 point increase in the Employee

Performance score, holding all other variables constant.

Std. Error - These are the standard errors associated with the coefficients.

All three variables Pay Satisfaction, Employee Empowerment and Organizational Culture are

highly significant, and have .000, .002 and .000 respectively as their P Values.

26

CHAPTER 5

CONCLUSION AND RECOMMENDATIONS

5.1) Conclusion

The objective of business or organization is profitability. The success of the organization is very

much dependent upon the level of its employees' performance; poor performance is detrimental

to the company's success. Creating a well-rounded approach to managing and coaching your

work force requires the expertise of a human resources leader and the support of your company's

executive leadership. Where its mandatory to review performance of the employees; it is also

very important to keep in picture the factors that might influence the employees performance.

The findings of this study indicate a significant relationship between positive organizational

culture, pay satisfaction and employee empowerment in positively enhancing the overall

employee performance. On the basis of results of the regression analysis the following can be

concluded.

Based on the significance level (.000) of pay satisfaction; H1o will be rejected. The beta value

is .383. From this it can be drawn that when employees are satisfied with the compensation and

benefits they are getting, it will positively influence the employees performance. Keeping all

other variables constant, this will lead to a 0.383 unit increase in Employee Performance.

Similar to pay satisfaction, employee empowerment is also a significant variable, based on the

significance level (.002); we will reject H2o, implying that employee empowerment has a

significant impact on employee performance.

Although, both pay satisfaction as well as employee empowerment are significant but they have

relatively lower beta coefficient values (.383) and (.125) respectively. Organization culture is not

only significant but also has a high beta coefficient value. Based on its significance level (.000),

H3o is rejected; implying the fact that positive organizational culture has a significant impact on

the employee performance. Not only this but also that positive culture will foster employee

performance. With a beta coefficient value of .504 it can be said that for every unit increase

27

making the organization more positive, we expect an approximately .504 point increase in the

employee performance

This study has some important implications for management of firms working in fertilizer

industry. This study can also help researchers to better understand the relationship between

organizational culture, pay satisfaction and employee empowerment with employee

performance.

Hypothesis Summary

H1: "Pay Satisfaction has a significant impact on employee performance" (Accepted)

H2: "Employee Empowerment has a significant impact on employee performance" (Accepted)

H3: "Positive Organizational Culture has a significant impact on employee performance" (Accepted)

5.2) Recommendation

Fostering the Positive Organizational Culture

Every organization has a culture. Some are more positive than others. In order to get constant

input on employees perception of the prevailing organizational culture upper management

should convene regular meetings to discuss and gather feedback from the employees. By doing

so, managers encourage a collective responsibility for the well-being of the company. The

organization culture is considered positive if it has the following elements in it:

More involvement in decisions that affect the employees.

A feeling of safetymore openness and trust.

Better communication and more information.

28

Better teamwork and more cooperation.

More focus on getting work done and less on politics.

Clearer tasks, responsibilities, and boundaries, so there is no ambiguity in the

processes.

Improving performance by increasing Pay Satisfaction

The following four steps should be considered while designing compensation and benefit strategies of the firms.

Step 1: Institute a Standard Process

Institute a standard process for evaluating pay rates, adjustments (cost of living, market, and merit), and incentive/pay for performance practices on an annual or bi-annual basis. This can be done by using compensation surveys and/or job evaluation to evaluate pay rates. Whatever the method used, its recommended that you be consistent and use the same method each year.

Step 2. Analyze How Pay Rates Differ

Analyze how pay rates differ especially among individuals in the same jobs. If pay rates are differing by valid factors such as performance, education, skills/competencies, and/or other job-related variables, this is acceptable. If they are not varying by valid factors (race, gender, and other extraneous variables), this could increase your liability so take steps to equalize pay rates and reduce differentials. Even if your policies prohibit discussion of pay rates, realize that talk does happen in the workplace and employees will be constantly comparing how they are paid relative to others. The danger is to have differentials that cannot be accounted for by performance and job-related variables.

29

Step 3. Use Market Information Cautiously

Be cautious when using market information to base adjustments and increases. Realize that if your organization had an extremely profitable and successful year but the market is showing a low adjustment being given by other employers and you choose to provide a low market adjustment, employees may feel a disconnect. Its recommended that management must consider internal organizational factors in addition to the market as organizations are performing differently in this variable market.

Step 4. Develop a Communication Strategy

Develop a communication strategy that includes managers. Employees need to know how their pay rates are being determined at the most basic level (comparing pay rates to the market, what markets youre using, how job evaluation is conducted, when pay rates are evaluated, how often, etc.) and what the organizations pay philosophy is (at market, above market, etc.). Be transparent about the process, because most employees will fill in the blanks with their own perceptions, ideas, and opinions if you dont communicate fully.

Empower employees to increase their Performance

Effective empowerment requires an open dialogue between the manager and the employee. It

entails identifying all of the tasks and responsibilities the employee is expected to perform. Once

the full extent of the tasks are determined, the manager and employee discuss which of these

tasks they mutually agree the employee can perform independently, and which tasks require the

involvement of the manager before action is taken. They discuss the employees willingness and

readiness to be held accountable for the decisions he or she makes and the actions one will take

in those areas where one has the authority to do so. Empowerment leads to higher levels of

performance because he/she is more committed to the task as the methodology is designed by

themselves.

Way Forward

This study has produced several provocative and surprising findings. More in-depth future

research is needed to explore the underlying reasons for the relationships depicted in the data.

30

This study has its own limitations. First, we have only examined only two organizations. The

survey should be distributed in more organizations. Also, individual analysis can be extracted by

running statistical tests on various kinds of respondents. The categorization can be done on the

basis of different socio demographic elements.

Second, this study suffers from the common limitations inherent in survey-based research. The

study relies on self-reported information of the respondent. But overall, the study can assist a lot

in fostering the Positive Organizational Culture, Improving performance by increasing Pay

Satisfaction Empower employees to increase their Performance which will eventually help in

enhancing the employees performance.

31

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Appendix-A

Dear Respondent,

This questionnaire has been designed to gather data which will be used in research being

conducted to quantify the impact of organizational culture, employee empowerment and pay

satisfaction on the employee performance.

There is no right or wrong answer, please mark one option in each question which best

describes your response. Data gathered through this survey will be kept confidential.

Thank you for taking out and helping in conducting this research.

Demographics: Please tick mark on for each question

Gender Male Female

Age group: 20 29

30 39

40 50

50 60

Job Designation:______________________________________________

Income Group 50,000 69,000

70, 000 89,000

90,000 100,000

100,000+

36

Note: For the remaining sections, 5 Point Likert Scale is used. Please encircle One option which

best describing your response.

Score Interpretation

5 Strongly Agree

4 Agree

3 Neutral

2 Disagree

1 Strongly Disagree

Organizational Culture Profile Items:

There is a single culture throughout the organization. 5 4 3 2 1

There are opportunities for Professional growth 5 4 3 2 1

The company pays high for good performance 5 4 3 2 1

There is security of employment in this organization. 5 4 3 2 1

The company has a clear guiding philosophy 5 4 3 2 1

Pay Satisfaction Items:

I get adequate take home pay . 5 4 3 2 1

I am satisfied with the raises I have typically received in the past. 5 4 3 2 1

I am satisfied with the companys pay structure. 5 4 3 2 1

I am satisfied with the value of my benefits. 5 4 3 2 1

In general there is consistency in the companys pay policy. 5 4 3 2 1

37

Employee Empowerment Items:

My job activities are personally meaningful to me. 5 4 3 2 1

I am self-assured about my capabilities to perform my work. 5 4 3 2 1

I have significant autonomy in determining how I do my job. 5 4 3 2 1

I get many opportunities and freedom in how I do my job. 5 4 3 2 1

My impact on what happens in my department is large. 5 4 3 2 1

Employee Performance Items:

The bonds between this organization and its employees is very strong. 5 4 3 2 1

People in this business unit view themselves a team and offer support to other others around them.

5 4 3 2 1

In general, employees put in effort beyond their role to attain the

organizations objectives.

5 4 3 2 1

People in this business unit are genuinely concerned about the needs and

problems of each other.

5 4 3 2 1

Employees working in this organization are highly committed 5 4 3 2 1

38

The following four steps should be considered while designing compensation and benefit strategies of the firms.Step 1: Institute a Standard Process Step 2. Analyze How Pay Rates DifferStep 3. Use Market Information CautiouslyStep 4. Develop a Communication Strategy