Managers' compensation preferences and the existing compensation schemes (a case study of the co-operative bank of Kenya)

Abstract

In an attempt to determine managers' compensation preferences and the relevance of the existing compensation schemes in the Banking Industry of Kenya, this study was designed to take the nature of a survey and focussed on a case study of the Cooperative Bank of Kenya. The Secondary data that guided in the conceptual frame work took a motivation theory based approach to the broad view of compensation. This enabled the development of the research instrument by way of the items of compensation of both intrinsic and extrinsic nature categorized into either economic or non economic rewards and incentives. Out of the 40 questionnaires given out, only 33 of them were responded to by an equivalent number of managers from the Bank. They were required to respond to them by asserting their degree of importance of the items listed in a 5- point Likert scale as well as their opinions towards the items of compensation. The instrument was found to have high reliability and internal consistency of 0.77 measured by the Coefficient Alpha. The findings of the study were analyzed using both parametric and non- parametric techniques of Factor Analysis, Z- statistic and chi- square statistic respectively. The results of the study showed that the managers have significant compensation preferences which are weakly associated with the demographic variables of occupation and seniority and relatively different across the items of compensation. Ten factors were extracted as the most critical issues of concern for compensating the managers in the Bank, some of which are highly correlated. Those non-economic items were relatively more preferred to the economic ones. It was also found that the current compensation scheme of compensation is irrelevant with an expected utility of zero with regard to the identified preferences of the managers. The irrelevance was theoretically explained as not to be emanating from the items of the scheme per se, but from reasons that touch on structural and administrative issues of these rewards that are incongruent with the postulates of motivation theory to compensation. However, the study concluded by noting that the sample size drawn was too small to generalize these findings across the entire Banking industry and the Kenyan Economy at large.