Reward strategy, organizational commitment, employee empowerment and employee performance in commercial banks listed in Nairobi Securities Exchange

Abstract

Employee performance is critical to organizations in this era of free market and intensive competition. In this, reward strategy, organizational commitment and employee empowerment are considered important determinants of employee performance. The general objective of this study was to establish the moderated mediated effect of employee empowerment and organizational commitment on the relationship between reward strategy and employee performance in commercial banks listed in Nairobi Securities Exchange. The specific objectives were to establish the direct effect of reward strategy, organizational commitment, and employee empowerment on employee performance, reward strategy on organizational commitment, the mediating effect of organizational commitment on the relationship between reward strategy and employee performance, the moderating effect of employee empowerment on the relationship between; reward strategy and organizational commitment, reward strategy and employee performance and lastly the moderating effect of employee empowerment on the indirect relationship between reward strategy and employee performance through organizational commitment. The study was anchored on Social exchange theory. Other theories were Self Efficacy theory, Equity theory, Social-Structural and Psychological empowerment theory. The study adopted positivism research philosophy, explanatory research design. Stratified random sampling techniques was used in collecting data from a sample size of 394 employees of commercial banks listed in Nairobi Securities Exchange. Data were collected using closed-ended self-administered questionnaire. The study used Cronbach alpha and factor analysis to test for reliability and validity of the instrument. Data were analyzed and hypotheses tested using hierarchical and multiple regression models using Hayes Process macro. Results indicate that reward strategy (β = 0.622, p = 0.000, R 2 = 0.401, ∆R 2 = 0.379), organizational commitment (β = 0.513, p = 0.000, R 2 = 0.617, ∆R 2 = 0.217) and employee empowerment (β = 0.130, p = 0.003, R 2 = 0.630, ∆R 2 = 0.013) significantly influences employee performance. Furthermore, results reveal that; reward strategy has a direct impact on organizational commitment (β = 0.292, p = 0.000, R 2 = 0.308, ∆R 2 0.075), organizational commitment mediates the relationship between reward strategy and employee performance (β = 0.209, CL= 0.122, 0.319), employee empowerment moderates the relationship between; reward strategy and organizational commitment (β = - 0.175, p = 0.000, R 2 = 0.342, ∆R 2 = 0.034), and reward strategy and employee performance (β = - 0.182, p = 0.000, R 2 = 0.665, ∆R 2 = 0.035). The study further shows that employee empowerment moderates the indirect relationship between reward strategy and employee performance through organizational commitment (- 0.072, CI = - 0.026, - 0.018). This study provides new knowledge that organizational commitment acts as the mechanism through which reward strategy enhances employee performance. Additionally, the moderation and moderated mediation models provided new understanding in literature and theory that employee empowerment moderated the indirect relationship between reward strategy and employee performance through organizational commitment and moderated mediation took place at the lower level of the moderator. The findings will hence be very vital for policy formulation and development of appropriate strategies for rewarding employees as well as empowering them for enhancement of organizational commitment and employee performance. Organizations should formulate reward management strategies which are externally competitive, internally fair and consistent with the current acceptable standards for the purpose of enhancing commitment, empowerment and employee performance.