The influence of organizational culture and compensation on employee performance with work motivation as mediating Variable

The Influence of Organizational Culture and Compensation on Employee Performance

with Work Motivation as a Mediating Variable

A Proposal submitted
By

Apsara Majeed (10119)

Ramal Saleem (11068)
Syeda Rija Alvi (10566)
Talha Asif (11067)
Samilullah (11040)
to
Department of Business Administration

In partial fulfillment of
The requirement for the
Degree of

BACHELOR OF BUSINESS ADMINISTRATION

In
[HUMAN RESOUCE MANAGEMENT]

This Project has been

Done under the supervision of

Sir. [Umer Ahrar]

Advisor

,
IQRA UNIVERSITY

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 The influence of organizational culture and compensation on employee performance with work motivation as mediating Variable

Acknowledgement

With the blessings of Almighty Allah who is most merciful and beneficial, we are excited to

present our little contribution to the expansion of some research. We are grateful to our

supervisor, Mr. Umer Ahrar, without his help guidance and motivation this work would not have

been possible. The commitment and dedication reflects our work in this research paper, which

can be useful in the future. We would like to thanks our teacher, class fellows, friends and those

people who helped us to complete this research paper.

We are extremely hopeful that this research paper can be informative to other students.

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 The influence of organizational culture and compensation on employee performance with work motivation as mediating Variable

Abstract

This study examines the influence of Organizational Culture and compensation on employee

performance with work motivation as a mediating variable. A strong culture is a common

dominator among the most successful companies; the organizational culture has become

influence on motivation of an employee. Compensation and Organizational culture have a

positive imperative effect on work motivation. This study is based on the primary data according

to the nature of the study. The data of this study have been gathered through design

questionnaires on the bases Likert scale. Total 150 employees from different organizational

sectors in Karachi have been the respondents of this study.

Employee performance and work motivation was taken as the dependent variable whereas

Organizational culture and compensation were taken as independent variable. To get the results

Correlation (chi square) was applied with the use of SPSS 17 software. The results indicate that

the Organizational culture, compensation and work motivation has direct influence on employee

performance.

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 The influence of organizational culture and compensation on employee performance with work motivation as mediating Variable

Contents
Acknowledgement..................................................................................................................................2
Abstract..................................................................................................................................................3
Chapter 1: Introduction........................................................................................................................6
1.1 Background of the study....................................................................................................................6
1.2 Problem Statement.............................................................................................................................7
1.3 Purpose of the Study..........................................................................................................................7
1.4 Significance of the study...................................................................................................................9
1.5 Outline of the Study:........................................................................................................................10
1.6 Definition of the terms:....................................................................................................................10
Chapter 2 Literature Review:.............................................................................................................11
2.1 Underpinning and supporting theories.............................................................................................11
2.2 Empirical Review:...........................................................................................................................13
2.3 Theoretical Framework:...................................................................................................................18
2.4 Hypotheses:.....................................................................................................................................18
Chapter 3: Research Method:.............................................................................................................19
3.1: Research Approach:........................................................................................................................19
3.2: Research Design:............................................................................................................................20
3.3 Sampling Design:............................................................................................................................20
3.4 Instrument of data collection:..........................................................................................................21
3.5 Procedure of data collection:...........................................................................................................21
3.6 Statistical Technique........................................................................................................................21

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 The influence of organizational culture and compensation on employee performance with work motivation as mediating Variable

Chapter 1: Introduction

1.1 Background of the study

Successful organization is to have a culture based on a strongly held and widely shared beliefs.

Human Resource has an important role in perceiving culture, starting with recruiting and

selecting applicants who will share the organization beliefs.

A strong culture is a common dominator among the most successful companies, the

organizational culture has come influence on motivation of an employee.

The results of this study found that, compensation and organizational culture have a positive

imperative effect on work motivation.

According to Doug Conant, to win in the market place, you must first win in the workplace,

according to Gordon and DiTomaso (1992); Sorensen (2002) strong corporate culture increase

behavioral consistency within organizations.

This study is about the influence of organizational culture and compensation on employee

performance with work motivation as a mediating variable, focusing the 4-drive theory, the four

drive model of an employee motivation is a holistic way to look beyond typical financial

workplace rewards. It is an innovative and unique approach for organizational leaders and each

drive is necessary to perceive motivation in the workplace.

The four drive theory of motivation explained in the book driven by Drs. Pawl Lawrence (2002).

Through statistical technique paired-t test where comparing the two populations of top Pakistani

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 The influence of organizational culture and compensation on employee performance with work motivation as mediating Variable

Banks, two samples in which observations of one sample can be paired with observations in the

other sample.

The productivity and culture of organization helps in improving performance, the job

performance of organization has a strong impact of strong organization culture as it leads to

enhance productivity. Corporate culture binds the workforce together and provides a direction

for the company, different cultures operating in one company can also impact employee

performance. For example, if the organisation maintains a reserved “talk when necessary”

culture, employees may work accordingly - however, if the organisation allows one area, say the

sales team, to be outspoken and socially active, the organisation may experience rivalries among

areas. Thus, allowing an area to set up their own culture can affect the performance of the

employees deployed elsewhere in the company.

Key words: Organizational Culture, compensation, motivation and mediating variable.

1.2 Problem Statement

Maintaining organizational culture is the most challenging part for any company because

maintaining organizational culture will increase the level of employee engagement, every

employee must be involved in every activity and reinforcing it all the time is daunting. To avoid

burnouts, there must be a fit between the individual and the organization.

Scientists agree that satisfaction and performance increases the intrinsic motivation.

both simple and monumentally challenging to build the type of company culture that inspires and

sustains motivation and engagement.Kroeber and Parsons (1958) proposed a conceptual and

analytical distinction between social systems and cultural systems.

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 The influence of organizational culture and compensation on employee performance with work motivation as mediating Variable

1.3 Purpose of the Study:

In this study we find the impact of any organizational culture on employee performance and

compensation on employee performance with work motivation so usually purpose of the study

is:

-why study is being conducted?

-Goal of the study.
-Identify or describe a concept.
-predict a solution to a situation.
As we all know that human resource management (HRM) plays an important role in any

organization they are responsible for employee performance as well as organization performance

because how much they motivate their employees that much they earn from them so in this study

we actually compare these terms and find how much they affect each other in any organization

and how much they relate or differ with each other as well as the relationship between them so

we compare these:

1-Is organizational culture has influence on work motivation?

2-Is compensation has influence on work motivation?

3-Is organizational culture has influence on employee performance?

4-Is compensation has influence on employee performance?

5-Is work motivation has influence on employee performance?

Above 5 statements clearly show and define the purpose of the study.

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 The influence of organizational culture and compensation on employee performance with work motivation as mediating Variable

The study was conducted from Pakistani banks through paired T-test and applying 4 drive

theories. Through above statements we just take an idea that, if culture of organization is good so

it impacts a good influence on work and motivate as well. same as if culture is bad so it impacts

bad influence on work. Like if any organization gives compensation to an employee so he/she

become happy and motivate also. As well as if there is no reward so there is no motivation at all

for employees. Then if we talk about employee performance so this is based on organizational

culture, compensation and work motivation and they plays an important role in any organization

performance.

1.4 Significance of the study

Organizational culture affects performance of employees and motivation level also. Through

employee performance any organization can easily achieve their goals. This study fulfills and

acknowledges the impact of culture of an organization on job performance of employees of the

Pakistani banks.

1-It explain your company’s identity as internal and external both.

2-It enhances your company’s core value.

3-Strong culture can transform your employees into advocates.

4-Strong organization culture helps to find best employee.

5-If function of culture is good so it motivate overall environment of an organization and the way

of thinking of employees.

6-Organizational culture must transform your organization into a strong team.

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 The influence of organizational culture and compensation on employee performance with work motivation as mediating Variable

7-Strong culture impact performance of employees long lasting because now they think

differently and have a lots of ideas in mind to deal with.

8-These all benefits impact on employee personal life also because when your mind become

sharper so you deal any situation easily.

These all significance of organizational culture impact in organization as well as general also.

This research will be beneficial to the development of organization as well as employee thinking

through motivation and compensation as well.

1.5 Outline of the Study:

The basic concept of this research paper is to examine the impact of organizational culture and

compensation on employee work motivation and performance. The variables that we will discuss

in this paper are: Organizational Culture; Compensation; Work Motivation; Employee

Performance. However, the method of data collection will be Questionnaire and Survey research.

In the sampling method we will use Census technique however the sample size will be of 150

employees. Then we will analyze the research through statistical method and that will be

Correlation test (Chi-Square).

1.6 Definition of the terms:

Organizational Culture: Organizational culture is defined as the underlying beliefs,

assumptions, values and ways of interacting that contribute to the unique social and

psychological environment of an organization.

Compensation: is an award given to employees in order in recognition of loss, suffering or

injury, most likely in the form of money.

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 The influence of organizational culture and compensation on employee performance with work motivation as mediating Variable

Chapter 2 Literature Review:

2.1 Underpinning and supporting theories

Maslow’s Hierarchy of Needs:

This is the theory that covers entire needs of an employee and is widely used in almost every

part of the world. Abraham Maslow is among the most prominent psychologists of the twentieth

century. His hierarchy of needs is an image familiar to most business students and managers.

There are some needs that are basic to all human beings, and in their absence nothing else

matters. As we satisfy these basic needs, we start looking to satisfy higher order needs. In other

words, once a lower level need is satisfied, it no longer serves as a motivator.

 Physiological Needs: These needs are basic to human life and, hence, include food,

clothing, shelter, air, water and necessities of life. These needs relate to the survival and

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 The influence of organizational culture and compensation on employee performance with work motivation as mediating Variable

maintenance of human life. They exert tremendous influence on human behavior. These

needs are to be met first at least partly before higher level needs emerge. Once

physiological needs are satisfied, they no longer motivate the man.

 Safety Needs: After satisfying the physiological needs, the next needs felt are called

safety and security needs. These needs find expression in such desires as economic

security and protection from physical dangers. Meeting these needs requires more money

and, hence, the individual is prompted to work more. Like physiological needs, these

become inactive once they are satisfied.

 Social Needs: Man is a social being. He is, therefore, interested in social interaction,

companionship, belongingness, etc. It is this socializing and belongingness why

individuals prefer to work in groups and especially older people go to work.

 Esteem Needs: These needs refer to self-esteem and self-respect. They include such

needs which indicate self-confidence, achievement, competence, knowledge and

independence. The fulfillment of esteem needs leads to self-confidence, strength and

capability of being useful in the organization. However, inability to fulfill these needs

results in feeling like inferiority, weakness and helplessness.

 Self-Actualization Needs: This level represents the culmination of all the lower,

intermediate, and higher needs of human beings. In other words, the final step under the

need hierarchy model is the need for self-actualization. This refers to fulfillment. The

term self-actualization was coined by Kurt Goldstein and means to become actualized in

what one is potentially good at. In effect, self- actualization is the person’s motivation to

transform perception of self into reality.

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 The influence of organizational culture and compensation on employee performance with work motivation as mediating Variable

According to Maslow, the human needs follow a definite sequence of domination. The second

need does not arise until the first is reasonably satisfied, and the third need does not emerge until

the first two needs have been reasonably satisfied and it goes on. The other side of the need

hierarchy is that human needs are unlimited. However, Maslow’s need hierarchy-theory is not

without its detractors.

2.2 Empirical Review:

 Compensation and Work Motivation:

Compensation, in the companies of today is a main consideration in Human Resource

Management (HRM), and how it is allocated sends a message to employees about what the

companies consider to be essential and really worth encouraging. For employers, the

compensation generally represents a full-size percentage of operating costs. Many employers

view this only as a cost, while failing to think about the strategic advantages of a properly

considered remuneration and advantages plan.

Compensation is all income in the shape of money, direct or oblique goods received through

personnel in return for offerings supplied to the company”. In addition, if employees sense they

have not been properly compensated, there is excessive emotional dissatisfaction. This emotional

feeling will grow and accumulate over time, making employees sad and disappointed with

working for the corporation (Mabaso & Dlamini, 2017). Thus, compensation is necessary for

employees as employees due to the fact the amount of compensation displays the magnitude of

their work among the employees themselves, their families and the community (Sudiardhita et

al., 2018)

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 The influence of organizational culture and compensation on employee performance with work motivation as mediating Variable

First, individuals acquire some kind of reward, extrinsic (such as money) or intrinsic (satisfaction

coming from the work), in change for their performance Steers and Porters (1991). The person

holds positive non-public expectations in terms of form and quantity of reward, which he/she

must acquire for the furnished service. Thereby, the overall performance of a individual as well

as the decision to remain in the organization is influenced through the degree to which such

expectations are met Steers (1991). Second, the workplace affords opportunities for socialization

with other humans Hall (1994). Third, the job is regularly a source of rank, or status, in the

society in normal Steers (1991). In other words, the work can also provide a source of social

delineation. Fourth, cause pointed by way of Steers and Porter (1991) shows that work has an

individual that means for every person. It may additionally range from a source of identification

and self-esteem, to a source of frustration, monotony, and a feeling of futility, which can also be

due to the work itself or even might also be due to the personality traits of the person.

When work motivation increases, productivity will increase, the outcomes can show that

motivation has a giant high-quality impact on worker productivity. Compensation has a direct,

positive and significant effect on work productivity. Tilaar et al. (2017), if compensation rises;

productivity will rise indicating that compensation has a full-size impact on work productivity. A

productive work environment in addition to motivating worker work can additionally extend

employee motivation and exhilaration that can make employee productiveness will be maximal.

Research performed by using states that the work environment has a effective and significant

impact on worker productivity

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 The influence of organizational culture and compensation on employee performance with work motivation as mediating Variable

 Organizational Culture and Employee Performance

Organizational improvement has certain factors that enhance sustainability on basis of

effectiveness. The enhancement in productiveness leads to employee commitment as norms,

values and goals helps in improving subculture of an organization. The system of organization

was based upon high quality establishment of culture that maintain gaining knowledge of

environment strong. The overall performance of employees improves through establishment of

strong tradition of an organization. The worker overall performance would be considered as

spine organization as it leads to its improvement effectively. The loyalty of employee relies upon

understanding and focus of culture that improves conduct of organization (Brooks, 2006)

Organization culture have first time been identified through Administrative Science quarterly

(Pettigrew, 1979). The value and norms of employee’s basis upon administration identification

that assist in enhancing worker performance the awareness of first-rate helps in enhancing

organizational and employee development

 Organizational Culture

The distinctive attributes of culture have been arranged on basis of norms and attitudes which

help in differentiating one company from another. (Forehand and von Gilmer, 1964) The process

of questioning helps in setting up one member from every other on basis of cognitive thinking.

The success guidance primarily based upon exclusive values and norm that makes culture

effective (Schein, 1990). The set of beliefs, behaviors, norms and values helps in making

tradition most nice (Kotter and Heskett ,1992). The understanding of culture has been received

through perception and beliefs on groundwork of large groups. The thought of high-quality

organization culture helps in improving business decisions. The survival of culture in an

company lies upon countrywide and overseas culture differentiation in culture management. The
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 The influence of organizational culture and compensation on employee performance with work motivation as mediating Variable

subculture of organization has been affected via attitudes, norms and beliefs that lead to strong

conversation between employees.

 Strong Culture

(Deal and Kennedy, 1982) The discount in gaps on employee relationship has been agreed with

managers so far. The regulations in organization have to be considered essential for employees.

The policies, strategies and objectives designed through top managers have to influence upon

behavior of personnel so that competitive advantage have been gained. (Deal and Kennedy,

1982)

 Weak Culture

The diversity between personal objectives and organizational goals has creative management of

policies and procedures so that perfect association has been created between them. (Deal and

Kennedy, 1982)

 Employee Organizational Performance:

The degree of an achievement to which an employee’s fulfill the organizational mission at

workplace is called performance. Performance has been perceived differently through a number

of researchers, but most of the scholars relate overall performance with measurement of

transactional0efficency and effectiveness toward organizational goals. The job of a worker is

constructing up with the aid of degree of success of a particular goal or mission that defines

boundaries of overall performance (Cascio, 2006).

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 The influence of organizational culture and compensation on employee performance with work motivation as mediating Variable

 Linkage of Organizational culture with Organizational performance

Denison (1984) studied 34 Americans cultural performance on basis of characteristics that helps

in enhancing performance over time. The culture and overall performance have been interrelated

to each other primarily based upon perfect association between business processes. In more than

200 organizations financial and long term performance have been investigated (Kotter and

Heskett ,1992). Several researches have been made to evaluate overall performance of

organization based upon efforts as culture has been given significant association.

 Culture and Work Motivation

According to Luthans (2002), motivation is the process of producing and maintaining behavior

and performance. One way to motivate individuals is to make employees more satisfied so that

they are committed to their work. Organizational culture refers to the values and norms of

behavior that are accepted and understood together by members of the organization as a basis for

the rules of behavior within the organization. Motive is defined as a tendency to move, starting

from self-impulse and ending with adjustment (Sperling, 1987). The organization will influence

the level of employee motivation and will make employee motivation high to control and

improve organizational culture (Bagirova & Vavilova, 2015)

 Compensation and Employee Performance

Compensation is a form of implementing human resource management functions that relate to all

types of awards given to individuals for doing their work. According to Hameed et. al., (2014)

and Teclemichael and Soeters (2006), compensation has an effect on employee performance

because the appropriate amount of compensation will improve performance

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 The influence of organizational culture and compensation on employee performance with work motivation as mediating Variable

 Work Motivation and Employee Performance

Increased motivation leads to increased performance and decreased motivation causes a decrease

in performance (Kothari, 2008). The higher the level of employee motivation in carrying out the

work, the better the employee’s performance will be. Susan et. al., (2012) state that work

motivation influences employee performance

2.3 Theoretical Framework:

Organizational culture

Work Motivation
Employee Performance

Compensation

2.4 Hypotheses:

After examining the literature review the following hypothesis is formulated:

H1: Compensation has a significant influence on work motivation

H2: Organizational Culture has a significant influence on Employee Performance

H3: Organizational Culture has a significant influence on Work Motivation

H4: Compensation has a significant influence on Employee Performance.

H5: Work Motivation has a significant influence on Employee Performance

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 The influence of organizational culture and compensation on employee performance with work motivation as mediating Variable

Chapter 3: Research Method:

3.1: Research Approach:

Quantitative Approach: Since we will be using Questionnaire later on so our research will be

based on quantitative approach. In this approach, first we will collect the data through

questionnaire, or firsthand observation, by employees or by focusing on a group of employees in

different organizational sectors in Karachi so that we could gather data in depth to understand

influence of organizational culture and compensation on employee work motivation.

Inductive Approach: The inductive research method will be a systematic technique for

analyzing data during which the analysis is most likely going to be guided by specific evaluation

objectives. It will begin with a collection of empirical observations, looking for patterns in those

observations, and then it will theorize about those patterns. No theories or hypotheses will apply

in this inductive study at the starting of the research and therefore, we will be free in terms of

changing the direction for the study after the research process will begin

.Exploratory Approach: The exploratory research method means secondary research;

reviewing available literature review data like discussion and interviewing in depth with

employees or focus group of organization culture or compensation on work motivation. In this

research method researcher will explore the data investigation which will not clearly define. It

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 The influence of organizational culture and compensation on employee performance with work motivation as mediating Variable

will conduct to explore much better understanding of the research data, but it will not provide the

final results

3.2: Research Design:

Correlation Design: According to the hypothesis that we have concluded:

-Compensation and organizational culture has significant influence on work motivation

-Organizational culture, compensation and work motivation has direct influence on employee

performance.

Casual Research: The basic cause to do this research is to examine that whether the

organizational culture and compensation have any direct or indirect impact on employee

motivation and performance or not.

3.3 Sampling Design:

Target Population: Employees are our target population/audience because work motivation,

compensation and organizational culture also has a significant influence on employee

performance. Organizational culture affect performance of employees and motivation level also.

Through employee performance any organization can easily achieve their goals.

Sample Size: Sample size will be of 150 employees. The study was conducted from Pakistani

banks through paired T-test.

Sampling Technique:

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 The influence of organizational culture and compensation on employee performance with work motivation as mediating Variable

 Probability Sampling: Organization’s HRM department is responsible for employee

performance as well as organization performance because how much they motivate their

employees that much they earn from them so in this study we actually compare these

terms and find how much they affect each other

-According to research type “CLUSTRING SAMPLING” may be useful because in this

research population are used as the sampling unit and divided into subgroups.

 Non probability Sampling:

1-Is organizational culture has influence on work motivation?

2-Is compensation has influence on work motivation?

3-Is organizational culture has influence on employee performance?

4-Is compensation has influence on employee performance?

5-Is work motivation has influence on employee performance?

-In order to find these and according to our research “QUOTA SAMPLING” may be

useful because in this method interview technique used to select or find the results easily..

3.4 Instrument of data collection:

The population in this research study is 150 employees. Likert scale questionnaire will use in

our research data. The data will collect by employing a questionnaire such as physically hand

written or demographic questionnaire and through online survey by Google. The questions will

be 15 in our research study. After the information will collect, than it will analyze by a path data

technique using SPSS software system to measuring the relationships among the constructs

which are: organizational culture, compensation, and work motivation and worker performance.

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 The influence of organizational culture and compensation on employee performance with work motivation as mediating Variable

3.5 Procedure of data collection:

This data research study will conduct from different employees in organizational sectors such

as; Industry, Private banks, Hospitals, Universities in Karachi. Liker scale base questionnaire

will be use in our research study. The questionnaire will fill by different types of employee’s

through physically hand-written questionnaire and online survey data collection by Google.

3.6 Statistical Technique

The statistical technique that we will be using is Multiple Regression the reason is that through

this method we will be able to predict the value of variables that we are focusing which is work

motivation more specifically and othee dependent variables are organizational structure and

compensation

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