Kubra 3

THE EFFECT OF REWARD SYSTEM ON EMPLOYEES
PERFORMANCE IN THE CASE OF ETHIOPIAN AIRLINES
A RESEARCH SUBMITTED TO FACULTY OF BUSINESS AND

ECONOMICS DEPARTMENT OF BUSINESS ADMINISTRATION IN
PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE
DEGREE OF MASTER OF BUSINESS ADMINISTRATION
BY SAMRAWIT BELAYNEH
FACULTY OF BUSINESS AND ECONOMICS
DEPARTMENT OF BUSINESS ADMINISTRATION
ABH CAMPUS ADDIS ABABA
Effects of reward system on employee performance in Ethiopian airlines Page i

JIMMA UNIVERSITY
ABH CAMPUS ADDIS ABABA
THE EFFECT OF REWARD SYSTEM ON EMPLOYEES

PERFORMANCE IN THE CASE OF ETHIOPIAN AIRLINES
SAMRAWIT BELAYNEH
A RESEARCH SUBMITTED TO FACULTY OF BUSINESS AND

ECONOMICS DEPARTMENT OF BUSINESS ADMINISTRATION IN
PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE
DEGREE OF MASTER OF BUSINESS ADMINISTRATION
MAIN ADIVISOR: EMENET NEGASH (MBA Associate Professor)
CO-DIVISOR: BELAY CHEKOL (MBA)
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DECLARATION
I, Samrawit Belayneh, declare that the research project entitled ‘THE effect of
reward system on employee’s performance in the case of Ethiopian airlines” is my
original work that is done under the guidance and advice of my advisor and co
advisor Emenet Negash and Belay Chekol respectively. This research project is
done as partial fulfillment for Masters of Arts Degree in Business Administration
(MBA). This research has not been done before and all sources of materials used
for the study have been appropriately acknowledged.
Samrawit Belayneh
Date: 5/20/20
Signature--------------------
Effects of reward system on employee performance in Ethiopian airlines Page iii

CERTIFICATION
This is to certify that SAMRAWIT BELAYNEH has done the study on the topic
‘THE EFFECT OF REWARD SYSTEM ON EMPLOYEES PERFORMANCE IN
THE CASE OF ETHIOPIAN AIRLINES” This study is authentic and has not been
done before by any other researcher on the same topic.
APPROVED BY BOARD OF EXAMINERS
Advisor's Name -------------------Date---------Signature--------
Co-Advisor Name -------------------Date---------Signature--------
Internal Examiner-------------------Date---------Signature--------
External Examiner -------------------Date---------Signature--------
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ACKNOWLEDGMENTS
At First, may all the honor and glory be extended to the exalted Heavenly God, for His help,
guidance and encouragement which has enabled me to complete my paper? My heartfelt thanks
and sincere appreciation goes to my advisor EMENET NEGASH and BELAY CHEKOL for
their unreserved support starting from proposal development throughout the thesis work. I would
like to forward my honest appreciation to the Jimma University, Department of Business
Administration staffs.
I am grateful to thank human resource manager of Ethiopian airline and pilots and hostesses of
the corporation employees who deliver to all necessary information and documents.
Finally, my deepest appreciations also go to my lovely husband, family and all my entire
relatives, friends who contribute your unreserved support for the accomplishment of this paper. I
really thank you all.
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Acronyms
EAL_____________________________________________Ethiopian airlines
HRM Human Resource Management
MOR Maintenance and Repair
SPSS________________________________________Statistical Package for Social Science
SD __________________________________________Standard Deviation
VIF __________________________________________variance inflation factor
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Table of Contents
DECLARATION ......................................................................................................................................... iii

CERTIFICATION ....................................................................................................................................... iv
ACKNOWLEDGMENTS ............................................................................................................................ v
Acronyms ..................................................................................................................................................... vi
CHAPTER ONE ........................................................................................................................................... 1
1. INTRODUCTION .................................................................................................................................... 1
1.1 Background of the Study..................................................................................................................... 1
1.2 Statement of the Problem .................................................................................................................... 3
1.3 Research Questions ............................................................................................................................. 4
1.4 Research Objective ............................................................................................................................. 5
1.4.1 General Objectives ....................................................................................................................... 5
1.4.2 Specific Objectives ...................................................................................................................... 5
1.5 Research Hypothesis ........................................................................................................................... 5
1.6 Significance of the Study .................................................................................................................... 6
1.7 Scope of the Study .............................................................................................................................. 7
1.8 Organization of the Study ................................................................................................................... 7
CHAPTER TWO .......................................................................................................................................... 8
2. REVIEW OF RELATED LITERATURE ................................................................................................ 8
2.1 THEORETICAL LITERATURE REVIEW ........................................................................................ 8
2.1.1 The Concept of Reward Management.......................................................................................... 8
2.2 The Aims of Reward System .............................................................................................................. 8
2.3 Financial Rewards ............................................................................................................................... 9
2.3.1 Base or Basic Pay....................................................................................................................... 10
2.3.2 Contingent Pay ........................................................................................................................... 10
2.3.3 Representation Allowances ........................................................................................................ 10
2.4 Non-Financial Rewards..................................................................................................................... 11
2.4.1 Career Development .................................................................................................................. 11
2.4.2 Recognition ................................................................................................................................ 12
2.4.3 Working Environment................................................................................................................ 13
2.5 Theory of Employee Performance .................................................................................................... 14
2.5.1 The Goal Setting Theory ............................................................................................................ 14
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2.5.2 The Expectance Theory ............................................................................................................. 15
2.6 Theory of motivation ........................................................................................................................ 16
2.6.1 Abraham Maslow’s Need Hierarchy Theory ............................................................................. 16
2.6.2 Reinforcement Theory ............................................................................................................... 17
2.7 The Relationship between Reward System and Employee Performance.......................................... 18
2.8 The Relationship between Reward System and Employee Motivation ............................................ 19
2.9. Employee Motivation and Performance .......................................................................................... 20
2.10 Empirical Literature Review ........................................................................................................... 21
2.8 Conceptual Framework ..................................................................................................................... 24
CHAPTER THREE .................................................................................................................................... 25
3. RESEARCH METHODOLOGY ............................................................................................................ 25
3.1 Research Design................................................................................................................................ 25
3.2 Research Approach ........................................................................................................................... 25
3.3. Population and Sample Size Determination..................................................................................... 25
3.3.1 Sample Size Determination ........................................................................................................ 26
3.3.2 Sampling Procedure ................................................................................................................... 26
3.4 Type and Source of Data................................................................................................................... 27
3.5. Data Collection Instruments ............................................................................................................ 27
3.5.1. Questionnaire ............................................................................................................................ 27
3.5.2. Document Analysis ................................................................................................................... 27
3.6 Data Analysis Techniques................................................................................................................. 27
3.7 Reliability and Validity Test .............................................................................................................. 28
3.8 Model Specification .......................................................................................................................... 29
3.9 Ethical Consideration ........................................................................................................................ 30
Chapter Four ............................................................................................................................................... 31
4. Data Presentation, Analysis and Discussion ........................................................................................... 31
4.1 Introduction ....................................................................................................................................... 31
4.2 Demographic Characteristics of Respondents .................................................................................. 31
4.2.1 Gender ........................................................................................................................................ 31
4.2.2 Age ............................................................................................................................................. 33
4.2.3 Educational Qualification .......................................................................................................... 34
4.2.4 Job Title and Years of Experience ............................................................................................. 36
4.3 Descriptive Analysis ......................................................................................................................... 36
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4.3 Summary of Variables ...................................................................................................................... 38
4.3.1 Salary and Employee Performance in Ethiopian Airlines.......................................................... 39
4.3.2 Performance Based Bonus and Employee Performance ............................................................ 39
4.3.3 Benefits and Employee Performance ......................................................................................... 40
4.3.4 Recognition Employee Performance ......................................................................................... 40
4.3.5 Work Condition ......................................................................................................................... 41
4.3.6 Career Development .................................................................................................................. 42
4.4. Employee motivation and performance ........................................................................................... 43
4.5. Assumption of Tests ............................................................................................................................ 43
4.5.1 Linearity test .............................................................................................................................. 44
4.5.2 Normality Test ........................................................................................................................... 46
4.5.3 Multi collinearity Test ................................................................................................................ 48
4.5.4 Homoscedasticity Test ............................................................................................................... 49
4.5.5 Autocorrelation Test .................................................................................................................. 50
4.6 Correlation Analysis ......................................................................................................................... 51
4.7 Regression Analysis Results ............................................................................................................. 53
4.8 Hypothesis Testing............................................................................................................................ 55
4.9 Reward and Employee Motivation ................................................................................................... 57
Chapter Five ................................................................................................................................................ 59
5. Summary of Finding, Conclusion and Recommendation ....................................................................... 59
5.1 Summary of Finding, ........................................................................................................................ 59
5.2 Conclusion ........................................................................................................................................ 61
5.3 Recommendation .............................................................................................................................. 62
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Abstract
In today’s aviation industry motivated and well performer employees are mandatory to survive
intense global competition. Realizing this, the main aim of this research is to identify the effect of
reward system on employee’s performance in the case of Ethiopian airlines with the reward
dimensions of base pay/salary, performance based bonus, benefits, recognition, work condition
and career development. The study used qualitative and quantitative approach based on primary
and secondary data sources. A self-administered questionnaire was designed to collect relevant
information from a sample of 303 participants. Out of this 287 were collected from pilots and
hostesses. The collected data was analyzed by SPSS version 20. Results from descriptive analysis
showed that base pay/salary, career development and benefits were found most or strong
determinate factor that able to affect employee’s performance as well as their motivation in
Ethiopian airline. Results from inferential analysis particularly from Pearson’s Product Moment
Correlation Coefficient showed that there is statistically significant relationship exist between all
variables of rewards and employee performance. The strongly correlated variables were
identified. Thus are base payment (r=.727**, p<0.05), benefit (r=.426*, p<0.01) and career
development(r= .749**). From an open ended analysis the policy and procedure issues and
management treatment were poor in implementation as well as treatment. Since the relation
between reward, motivation and performance are interlinked in Ethiopian airline exist the
management of Ethiopian airline should clearly state well-articulated reward policy by involving
employees in the process of developing it in order to increase the employee’s motivations as well
as performance to achieve its own goal
Key words: Reward system and employee performance
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CHAPTER ONE
1. INTRODUCTION
This chapter introduces about the overall research problems, questions to be addressed, research
objectives and scopes of research in reward management concept. Generally Reward
management is concerned with the formulation and implementation of strategies and policies that
aim to reward people fairly, equitably and consistently in accordance with their value to the
organization. It consists of analyzing and controlling employee remuneration, compensation and
all of the other benefits for the employees. It aims to create and efficiently operate a reward
structure for an organization. Reward structure usually consists of pay policy and practices,
salary and payroll administration, total reward, minimum wage, executive pay and team reward.
1.1 Background of the Study

Globalization is a concept that encompasses change and competition. Organizations who want to
survive in an intense competition and to develop themselves are required to produce different
kinds of solutions. There are lots of external factors that triggered organizations to work
harder. Especially in global crises, businesses in terms of profitability and permanency should
pay attention to change and development within their systems. Undoubtedly, the most important
factor is human in organizations (Danish R.Q., & Usman A., 2010).
Currently, the aviation sector is operating in a complex and changing environment that greatly
influences their growth and profitability. The constant changes occurring in the world, especially
with regards to technology and innovation enforce companies to reassess the manner in which
they communicate to both their employees and their customers. To cope with these changing
environment organizations need to use their resource effectively. Their resource may be
available in human and non-human aspect. Undoubtedly, the most important resource is human
in organizations (Armstrong 2005).
One of the main management strategies of the organizations is to invest in employees.

Organizations are seeking to develop, motivate and increase the performance of their employees
in a variety of human resources applications. Therefore, the reward management system has
Effects of reward system on employee performance at Ethiopian airlines Page 1

Been the most considerable practices of the human resource management system. Reward
management system is a core function of human resource discipline and is a strategic partner
with company managements. Besides, it has an important role on employee performance.
As Losey (2005) suggests the dominant strategy of airlines is to invest on their employees.
Airlines are seeking to develop, motivate and increase the performance of their employees in a
variety of human resources applications because the survival and competitive advantage of any
organization depends on the quality of human resources
Moreover, in this competitive environment organizations are highly realizing that they have to
establish an equitable balance between the employee's contribution to the organization and the
organization's contribution to the employee. Establishing this balance is one of the main reasons
to reward employees and achieve high organizational performance through them.
According to Lawle (2000, p.21) "Employee rewards system refers to programs by different
organizations to reward performance and motivate employees on individual or group level. So
reward systems in any organization are a fundamental tool and play an important role as far as
employee motivation and performance was concerned.
This is largely due to the fact that the well-rewarded employee feels that he/she is being valued
by the company that he/she is working for. They are also encouraged to work harder and better if
they are aware that their well-being is taken seriously by their employers, and that their career
and self-development are also being hone and taken care of by their company. Thus, it is a
constant and continuous challenge for companies to really work on understanding what factors
contribute to improve performance levels of their employees. Aside from working on satisfying
their customers, it is crucial that companies also work on identifying the reward practices or
motivators that boost the performance of their workforce.
From different literatures reviewed for the purpose of this study there are variations what type of
reward can help to perform their jobbing. These differences happen due to factors like: type of
industry/sector, demographic variables, level of development of the country. Therefore the paper
tries to find out possible relationships that exist between reward and employee performance.

1.2 Statement of the Problem
A Study done by Tahleeland Hina (2015) has shown that the reward process is a major control or
influence mechanism available to organizations. Furthermore Guest D., (2002) argued reward
management systems have major impact on organizations capability to catch, retain and
motivate high potential employees and as a result getting the high levels of performance.
On the other hand Gerhart B., &Milkovich G., (20100) have investigated the individual
performance and results of his study showed that individual performance is dependent on
different factors. They point out work life balance, work condition. Leadership style, proximity
were crucial factor that affect the individual performance.
According to Ayesha et al. (2015) many professional organizations are in a dilemma weather
reward significantly affect the result of the competition that practiced attracting and retaining
highly skilled workers
As being part of dynamic competitive industry, Ethiopian Airlines practice different

reward systems to motivate and keep its valuable employees. The challenge for Ethiopian
Airlines today is to come up with an efficient reward strategy which keeps its employee
motivated for the success of the organization.
The company’s annual reports point out the following gaps .For the last three consecutive years
2015/16 budget year 392 employees left the company due to various reasons which represents
5.4% of the work force.

The employee exit interview of the company reveals that in 2016/17 fiscal year, 448 employees
left the company i.e. 4.99% of the total employees in the 2017/18 fiscal year, 648 employees left
the company for various reasons including retirement and discharge. This represents 6.34% of
the employees.
From informal interviews with HR manager and employees of the organization, though the HR
manager reveals the existence of fair and equitable reward package in the organization all
employees said that reward system of the organization is not enough with the increase in cost of
living. In addition, they reveal that design of different financial and non- financial reward
systems are not fitting with the current aviation industry. This may affect the airlines
performance adversely. Because Philip (2016) found out that employees performance is
dependent on the way they are treated in the organization and the extent to which organizational
strategy fits with the market value. So this research is aimed at investigating the effects of reward
practice which includes (base pay, performance pay bonus, benefits, recognition, work
environment and career development) on employee performance in Ethiopian airline by raising
the following research questions.
1.3 Research Questions

The main emphasis of the research is to investigate the effects of reward system (independent
Variable) on employees‟ performance (dependent variable) as per the questions listed below.
1. How do base pays affect employee performance?

2. What is the effect of pay on employee performance?
3. How performance bonus pay bonus affects employee performance
4. How do benefits, affects employee performance
5. How do recognition, affects employee performance
6. How do work environment affects employee performance
7. How do career development affects employee performance

1.4 Research Objective
1.4.1 General Objectives
The focus of this study is to determine the effect of control variables on employee performance
at Ethiopian airline. Moreover, the study reaches the following specific objectives.
1.4.2 Specific Objectives
1. To examine the influence of base pay on employee's performance.
2. To investigate the influence of performance pay bonus on employee performance
3. To determine the influence of benefits on employee's performance.
4. To examine the influence of recognition on employee motivation.
5. To investigate the influence of work environment on employee's performance.
6. To examine the influence of career development on employee motivation.

1.5 Significance of the Study
Firstly, the findings of this research are expected to help any concerned body/ stakeholders
at different levels by creating and developing awareness on the relationship between reward
system and employee performance. Specifically
For Managers: They use it to design a reward system which has high positive effect on
employee's performance. And it helps them to avoid unfair reward practice from their
organization. Compensation for good work may come in various forms. It could be money
added to your employees’ salary or a paid day off or an opportunity for growth or travel
within the company. Having an effective system that compensates workers can contribute to
their happiness. It also keeps them loyal to your company while at the same time making
them eager to move up the internal ladder. When creating employment contracts, as well as a
section on pay & benefits, you should also include a section on the company’s rewards
policy and procedures. This study would help the mangers in various forms.
For Policy Maker: it will be use full to formulate reward and compensation policy by
considering different situational and demographic factors. Reward management is concerned
with the formulation and implementation of strategies and policies that aim to reward people
fairly, equitably and consistently in accordance with their value to the organization.
Moreover it consists of analyzing and controlling employee remuneration, compensation and
all of the other benefits for the employees. It usually consists of pay policy and practices,
salary and payroll administration and this study would help the policy articulators in various
forms.
For Academician: The study is expected to be a stepping stone for further research on the
area.

1.6 Scope of the Study
To make this research manageable, the scope of the study is delimited to employees of the
Ethiopian airline at crew department with a working experience of two years and above.. The
motive why the researcher delimited it scope only for cabin crew employees were due to the
nature of their job. They do have international exposer and the pay structures of cabin crew
employees were different from the administrative workers. In addition, study only confined to
reward system particularly as mediating role of motivation. Regarding financial rewards,
salary/base pay, and performance based cash bonuses and benefits were under consideration
while none financial rewards work condition, Recognition and career development are a part of
this study. The ration behind this is those mentioned variables were practiced in the Ethiopian
airline in fragile manger.
Lastly, in order to have a quality and specialized research result and to cope with the available
time and resource constraints, this study focuses only the reward system practices via its effect
on employee’s performance.
1.7 Organization of the Study
This paper were organized in to five chapters i.e. the first chapter includes an introduction
section which consists of background of the study, statement of the problem, objectives,
hypothesis, significance, scope or limitation of the study. Chapter two include: review of related
literature which has theoretical and empirical review part. Chapter Three: presents research
design and methodology the researcher employed to investigate the problem under study.
Furthermore, data from respondents also presented, analyzed, interpreted and discussed in the
fourth chapter. The last section of the thesis contains summary of results, concluding remarks
and recommendations used for Ethiopian airline.

CHAPTER TWO
REVIEW OF RELATED LITERATURE

THEORETICAL LITERATURE REVIEW
2.1.1 The Concept of Reward Management
Reward management is concerned with the formulation and implementation of strategies and
policies that aim to reward people fairly, equitably and consistently in accordance with their
value to the organization (Armstrong &Murlis 2004). Besides, according to them reward
Management deals with the design, implementation and maintenance of reward processes and
practices that are geared to the improvement of organizational, team and individual performance.
The strategic aim of reward management is to develop and implement the reward policies,
processes and practices required to support the achievement of the organization’s business goals.
The main objectives of rewards are to attract and retain employees, to motivate employees to
achieve high levels of performance, and to elicit and reinforce desired behavior of the employees
(Gerhart &Milkovich 1990).
The main objectives of rewards are to attract and retain employees, to motivate employees to
achieve high levels of performance, and to elicit and reinforce desired behavior of the employees
Reward management is not just about pay and employee benefits. It is equally concerned with
non-financial rewards such as recognition, learning and development opportunities and increased
job responsibility.
2.1 The Aims of Reward System

Armstrong & Stephens (2005) remark that the aims of reward management are to reward people
according to the value they create, align reward practices with business goals and with empl
oyee values and needs, reward the right things to convey the right message about what is
important in terms of behaviors and outcomes, help to attract and retain the high-quality people
the organization needs, motivate people and obtain their engagement and commitment and
develop a high-performance culture.

The aims of reward system are achieved by developing and implementing strategies, policies,
processes and practices that are founded on a philosophy, operate in accordance with the
principles of distributive and natural justice, function fairly, equitably, consistently and
transparently, are aligned to the business strategy, fit the context and culture of the organization
are fit for purpose and help to develop a high-performance culture of employees from the
employment environment and the work itself, are linked together (Armstrong &Murlis 2004).
Losey (2005) summarizes total reward approach as holistic; reliance is not placed on one or two
reward mechanisms or levers operating in isolation. Account is taken of all the ways in which
people can be rewarded and obtain satisfaction through their work. The aim is to offer a value
proposition and maximize the combined impact of a wide range of reward initiatives on
motivation, commitment and job engagement. The rewards systems are comprised of two main
elements: financial and non-financial rewards. The financial rewards include rewards strategies
such as merit-pay, market-based pay, profit-related pay, while non-financial rewards focus on the
needs of people for recognition, achievement, responsibility and personal growth.
According to Lawler (2000) one of the most fundamental debates in the field of rewards
management, concerns the extent to which employees are motivated by money. At that point
there is an extensive discussion about whether or not money is a motivator and can influence the
levels of job satisfaction.
2.2 Financial Rewards

Financial rewards are monetary incentives that an employee earns as a result of good
performance. These rewards are aligned with organizational goals. When an employee helps an
organization in the achievement of its goals, a reward often follows. All financial rewards are
extrinsic.
Financial rewards consist of the value of all cash payments such as base pay, contingent pay and
allowances .And the starting point of the reward system is the business strategy of the
organization. This identifies the business drivers and sets out the business goals. The drivers are
unique to any organization but will often include items such as high performance (Armstrong
2007).

2.2.1 Base or Basic Pay
The base rate is the amount of pay (the fixed salary or wage) that constitutes the rate for the job.
It may be varied according to the grade of the job or, for shop floor workers, the level of skill
required. Base pay will be influenced by internal and external relativities. The internal relativities
may be measured by some form of job evaluation. External relativities (going rates) are assessed
by tracking market rates. Alternatively, levels of pay may be agreed through collective
bargaining with trade unions or by reaching individual agreements.
Base pay may be expressed as an annual, weekly or hourly rate. This is sometimes referred to as
a time rate system of payment. Contingent pay or allowances as described later may be added to
base pay. The rate may be adjusted to reflect increases in the cost of living or market rates by the
organization unilaterally or by agreement with a trade union (Armstrong 2007).
H1: Base pay has a significant and positive effect employee performance
2.2.2 Contingent Pay
Additional financial rewards may be provided that are related to performance, competence,
contribution, skill or experience. These are referred to as „contingent pay‟. Contingent payments
may be added to base pay, i.e consolidated. If such payments are not consolidated (i.e. paid as
cash bonuses) they are described as „variable pay‟ (Losey 2005).
2.2.3 Representation Allowances
Allowances are paid in addition to basic pay for special circumstances or features of
employment. They may be determined unilaterally by the organization but they are often the
subject of negotiation. The main types of allowances are location allowances, overtime
payments, shift payments, working conditions allowances and stand-by or call-out allowances
made to those who have to be available to come into work when required (Losey 2005).

2.3 Non-Financial Rewards
Non-financial rewards do not involve any direct payments and often arise from the work itself,
for example achievement, autonomy, recognition, scope to use and develop skills, training,
career development opportunities and high-quality leaders (Nelson 1997)
2.3.1 Career Development

The term career in the context of the workplace can be seen most simply as the sequence of work
experiences an employee may have over time. Work experiences may involve moving from one
job to another, but also the changing nature of work within a single job and the experience of
working on different projects. Career mobility in organizations are very often sideways rather
than upwards, and may cross‐ departmental, geographical or functional boundaries (Price, 2009)
Career development is the lifelong process of managing progression in learning and work. The
quality of this process significantly determines the nature and quality of individuals, lives: the
kind of people they become, the sense of purpose they have, the income at their disposal. It also
determines the social and economic contribution they make to the communities and societies of
which they are part.
Career development holds out the possibility of growing critical skills within the organization,
which are often not available on the external labor market; of improved deployment of people in
jobs where their talents are well used; of an improved ability to attract good people and possibly
retain them; and of improved flexibility in the workforce and therefore the ability to respond to
business change.
By attending employees as people, the nature of the employment relationship shifts to one of
higher engagement and higher performance. "Talent management" is high on the agenda of large
organizations and tends to focus on very senior people and those with the potential for such
roles. Career development is embraced more enthusiastically here, and individuals often receive
considerable personal career attention (Robbins, et al., 2009: 457).

Career advancement normally entails a clearly marked path of progression through the ranks of
an organization. It is based on merit without regard for race, gender, age or ethnicity.
Deserving cases become eligible for advancement. When employees get to know that each one
of them has an equal chance of succeeding, it becomes easy for them to put in their best.
H6: Career development has a positive and significant relationship on employee
performance
2.3.2 Recognition
According to Fred L. (2011), although money receives the most attention as a reinforce and
incentive motivator, and is even equated with reward systems by practicing managers, there is
increasing evidence that contingently administered recognition can be a powerful reinforce to
increase employee performance. Recognition is the identification or acknowledgement given for
something or it can be defined as communication between management and employees which
rewards them for reaching specific goals or producing high quality results in the workplace.
Recognizing or honoring employees for high level of service is meant to encourage repeat
actions, through reinforcing the behavior to see repeated.
Recognition considered as one of the most powerful motivators. The recognition processes in an
organization can be integrated with financial rewards through performance management and
pay-for performance schemes. The importance of recognition can be defined as a key part of the
value set of the organization and this would be reinforced by education, training and
performance management.
According to (Beer & Cannon, 2004).), examples of contingent rewards are appreciation,
recognition and rewards for good work. Employee dissatisfaction may result if an employee
perceives that their efforts are not recognized or that their rewards are not equitable tied to their
performance or tailored to their needs (Robbins 1993). Contingent rewards support the
reinforcement theory of motivation, in terms of which performance-relevant behaviors will
increase in frequency if rewarded (Beer & Cannon, 2004).
Danis and Usman (2010) found that there are different dimensions of work motivation and
satisfaction that are significantly correlated and reward and recognition greater impact on
performance of the employees.

In addition, Employees participation in the decision making process will made them more
courageous and enthusiastic towards working in the organization on the other side the
periodically salary increments, allowances, bonuses, fringe benefits and other compensations on
regular and specific periods keeps their morale high and makes them more motivated to
accomplish the given task. As a reward for employee performance, recognition is defined as
acknowledgement, approval and genuine appreciation (not phony praise). This recognition can
be set up on a formal basis (e.g., employee of the month or million dollars in sales round table)
or informally used by a supervisor/team leader in managing individual employee or team
behavior. It can be administered on a public (staff meeting, newsletter, or banquet) or on a one-
on-one private level, verbally or written. There is a fine line between recognition as defined here
and other positive reinforces or rewards such as money and feedback. For example, providing a
merit increase in pay or a bonus and feedback about performance can be considered forms of
recognition. However, this paper focuses on nonfinancial recognition and does not necessarily
contain information about performance, although some formal recognition programs may involve
prizes, dinners or plaques that cost money and both formal and informal recognition may
sometimes include information about performance. The broad appeal of recognition is that most
practicing managers believe it applies to everyone (top to bottom in the organization), no one
gets too much of it (no satiation principle here), it is available to everyone to use, and it doesn't
cost anything.
To demonstrate these claims, simply ask yourself, are you or anyone you know suffering from
too much recognition? Besides this common-sense appeal of recognition as a powerful, but still
not wisely used, positive reinforce for employee performance, there is also considerable theory
and research supporting its effectiveness.
H4: Recognition has a significant and positive effect employee performance
2.3.3 Working Environment

An attractive and supportive working environment provide conditions that enable employees to
perform effectively, making best use of their knowledge, skills and competences and the
available resources in order to provide high-quality of organization service. Basing on this study
the factors are explained below.

Physical working environment can result a person to fit or misfit to the environment of the
workplace. A physical work environment can also be known as an ergonomic workplace.
H5: Work environment has a significant and positive effect on employee performance
Researches on the workplace environment need to be done in order to get an ergonomic workplace
for every each of the employees. By having this ergonomic physical workplace at their workplace,
it will help employees from not getting the nerve injury (Cooper &Dewe, 2004).
Furthermore, McCoy and Evans (2005) stated that the elements of working environment need to be
proper so that the employees would not be stressed while getting their job done. In their article,
they also stated that the physical element plays an important role in developing the network and
relationship at workplace. Result of the employees‟ performance can be increased from five to ten
percent depending on the improvement of the physical workplace design at their workplace (Brill,
1992).
Further, Amir (2010) mentions elements that related to the working environment. There are two
main elements which are the office layout plan and also the office comfort. Amir (2010) also stated
that a physical workplace is an area in an organization that is being arranged so that the goal of the
organization could be
2.4 Theory of Employee Performance

2.4.1 The Goal Setting Theory
It suggests that the individual goals established by an employee play an important role in
motivating employee performance. It helps employees to keep following their goals. If goals are
not achieved, they either improve their performance or modify the goals and make them more
realistic. In case the performance improves it will result in achievement of the performance
management system aims (Guest 2002).
The goal-setting theory had been proposed by Edwin Locke in the year 1968. This theory
suggests that the individual goals established by an employee play an important role in
motivating him for superior performance. Skills required include the ability to engage employees

in mutual goal setting clarify role expectations and provide regular performance feedback. Time
and energy will also need to be given to providing relevant performance incentives, managing
processes, providing adequate resources and workplace training. It also advice that in order to
drive the organization to peak performance managers and supervisors must put out front the
human face of their organization. Principle here is the human-to-human interaction through
Providing individualized support and encouragement to each and every employee (Salaman et al,
2005).
Employee performance is a major multidimensional construct aimed to achieve results and has a
strong link with planned goals of an organization (Abbas and Yaqoob, 2009). Performance is the
key multi character factor intended to attain outcomes which has a major connection with planned
objectives of the organization (Sabir et al. 2012). Employees „goals achievement in this theory is
by creating of work environment attractive, comfortable, satisfactory and motivating to employees
so as to give them a sense of pride and purpose in what they do. How working environment is
designed and occupied affects not only how people feel, but also their work performance,
commitment to their employer, and the creation of new knowledge in the organization (Taiwo,
2009)
2.4.2 The Expectance Theory

It is based on the hypothesis that employees adjust their behavior in the organization on the basis
of anticipated satisfaction of valued goals set by them. The employees modify their behavior in
such a way which is most likely to lead them to attain these goals. The theory underlies the
concept of performance management as it is believed that performance is influenced by the
expectations concerning future events (Guest 2002).
The most widely accepted explanations of motivation have been propounded by Victor Vroom.
His theory is commonly known as expectancy theory. The theory argues that the strength of a
tendency to act in a specific way depends on the strength of an expectation that the act will be
followed by a given outcome and on the attractiveness of that outcome to the individual to make
this simple. Expectancy theory says that an employee can be motivated to perform better when
there is a belief that the better performance will lead to good performance appraisal and shall
result into realization of personal goal in form of some reward future events. The theory focuses
on three things efforts and performance relationship, performance and reward relationship,
rewards and personal goal relationship (Salaman et al, 2005).
This theory is based on the hypothesis that individuals adjust their behavior in the organization
on the basis of anticipated satisfaction of valued goals set by them. In order for employees to
perform in this theory is by making sure each employee's workplace goals and values are aligned
with the organization's mission and vision is important for creating and maintaining a high level
of motivation. That can lead to higher productivity, improve employee performance, reduce the
chances of low employee morale, encourage teamwork and instill a positive attitude during
challenging times.
2.4.3 Abraham Maslow’s Need Hierarchy Theory
One of the most widely mentioned theories of motivation is the hierarchy of needs theory put
forth by psychologist Abraham Maslow. Maslow saw human needs in the form of a hierarchy,
ascending from the lowest to the highest, and he concluded that when one set of needs is
satisfied, this kind of need ceases to be a motivator.
As per his theory these needs are
(i) Physiological needs: These are important needs for sustaining the human life. Food, water,
warmth, shelter, sleep, medicine and education are the basic physiological needs which fall in the
primary list of need satisfaction. Maslow was of an opinion that until these needs were satisfied
to a degree to maintain life, no other motivating factors can work.
(ii) Security or Safety needs: These are the needs to be free of physical danger and of the fear
of losing a job, property, food or shelter. It also includes protection against any emotional harm.
(iii) Social needs: Since people are social beings, they need to belong and be accepted by others.
People try to satisfy their need for affection, acceptance and friendship.
(iv) Esteem Needs: According to Maslow, once people begin to satisfy their need to belong, they
tend to want to be held in esteem both by themselves and by others. This kind of need produces
such satisfaction as power, prestige status and self-confidence. It includes both internal esteem
factors like self-respect, autonomy and achievements and external esteem factors such as states,
recognition and attention.
(v) Need for self-actualization: Maslow regards this as the highest need in his hierarchy. It is
the drive to become what one is capable of becoming; it includes growth, achieving one’s
potential and self-fulfillment. It is to maximize one’s potential and to accomplish something.
2.4.4 Reinforcement Theory
Reinforcement Theory of motivation aims at achieving the desired level of motivation among the
employees by means of reinforcement, punishment and extinction. Reinforcement approach,
which can be both positive and negative, is used to reinforce the desired behavior. Punishment
acts as a deterrent to undesirable behaviors of the employees. Extinction refers to diminishing the
probability of undesirable behavior
The Reinforcement Theory was proposed by B.F. Skinner and his associates. It is based on the
concept of “Law of Effect”, i.e., the behavior of individual towards positive consequences tends
to repeat, but the behavior of individual towards negative consequences tends not to repeat.
Skinner said, “Behavior which is reinforced tends to be repeated; behavior which is not
reinforced tends to die out or be extinguished”.
Behavior that elicits consequences is called as the operant behavior and the reinforcement theory
works on the relationship between the operant behavior and the associated consequences. This
process is called the Operant Conditioning and the change in the behavior is caused due to the
reinforcement given after the response.
This theory of motivation totally focuses on what happens to an individual when he/she takes
some action. It is no way related to the internal state of an individual i.e., inner feelings and
drives of an individual is ignored.
Thus, the external environment of the organization should be designed positively and effectively
so as to motivate the employees. This theory is a strong tool for analyzing controlling mechanism
for individual’s behavior.
Following are the methods for controlling the behavior of the employees −
Positive Reinforcement: Positive reinforcement explains that, when an employee gives a

positive and a required behavior, the response towards them should be positive. This stimulates

the occurrence of a behavior. Reward to an employee who performs well reinforces his/her
desire to perform better because of positive results of doing so.
Negative Reinforcement: Negative reinforcement takes place when certain deterrent(s) or
obstruction(s) is removed and the employee(s) responds to a desired behavior after such removal.
For instance, an employee who commutes from a long distances wraps up a few projects faster
than desired; but, when he is told by the manager to take the projects home for a couple of days
and complete them, it stimulates him/her to work as expected. By removing the negative stimuli,
the desired behavior is reinforced.
Punishment: Punishment refers to imposing negative consequences or removing positive

consequences with a view to preventing employee(s) from repeating undesirable and uncalled for
behaviors. It can, therefore, be both positive and negative.
Extinction: Extinction refers to extinguishing a learned behavior by withholding a positive

reinforcement or reward that has encouraged the behavior.
To conclude, the reinforcement theory revolves round a basic idea that consequences influence
behavior. Consequence that brings rewards propels a particular behavior and consequences that
give punishment diminish the occurrences of a behavior. Last but not the least, the consequences
that give neither reward nor punishment put an end to a behavior. The theory helps the mangers
to choose the right method of motivation to motivate their employees basing upon the prevailing
situation (www.tutorialspoint.com/employee_motivation/employee_motivation)
2.5 The Relationship between Reward System and Employee Performance
The impact of rewards on employees’ performance is well known phenomenon in the available
literature of human resources. A large number of studies have verified that reward is a powerful
tool to enhance employee behaviors leading to performance improvement. However, some other
studies also observed the negative consequences of rewards such as an environment of
favoritism, sexism and racism (Ronald J. & Cary L., 2005).
According to Payam G., (2013) there are two basic types of rewards, financial and non-financial
and both can be utilized positively to enhance performance behaviors of employees. Financial
rewards means pay-for-performance such as performance bonus, job promotion, commission,

tips, gratuities and gifts etc. Non-financial rewards are non-monetary/non cash and it is a social
recognition such as acknowledgment, certificate, and genuine appreciation.
Nelson B., (1997) posit that different individuals have different perceptions of rewards and
believes that such factors are the main driving force of satisfaction and that they help
boost the employee to work harder and better, due to the motivation that is brought about.
Put simply, motivators are able to increase internal happiness (intrinsic rewards). On the other
hand, hygiene factors are only able to boost external happiness (extrinsic rewards). If there are
missing factors (whether they may be hygiene factors or motivation factors), it is possible for the
employee to be dissatisfied and notable to perform in the best way that they can. If all the
hygiene factors are present and even when there are more than enough of hygiene factors
present, then it is possible that the employee would still not be motivated. Thus, in order for
managers to successfully motivate their employees, there is a need for them to determine the
appropriate and the sufficient motivation factors to use.
According to (Ronald J. & Cary L., 2005) the perceptions that employees have with regards to
their reward climate influences their attitudes towards their employees
According to (Redman T. & Wilkinson A., 2005) the norm of reciprocity, which focuses on the
ability of organization to accommodate the needs of their employees, and reward them for their
efforts. In exchange for the rewards provided to them, employees should reciprocate by
increasing their commitment towards their organization and their work, in addition to increasing
their ‘socio emotional bonds’ with their company and their colleagues.

2.10 Empirical Literature Review
In this part, the researcher reviews journalized articles from 1990s up to the present. Relatively
old publications were only revised as bird’s eye view but recent articles (2013-2016) were
reviewed deeply. It is done chronologically.
According to Gerhart &Milkovich (1990) claims that reward system should be carried out by the
simplification of the connection between the given reward and the additional performance.
Moreover, they suggested that to achieve positive effect, reward practices have to be
performance-dependent. Indeed, managers who attempt to run a fair rewarding system seem to
be more prosperous in performance rather than those who reward in an unfair manner.
The important relationships between employee performance and pay satisfaction have been well
established in studies by Heneman, Kochan& Locke (1995).They showed that monetary
compensation is one of the most significant variables in explaining better employee performance
and job satisfaction. In addition, Hofrichter & Platten (1996) found financial rewards to have a
significant impact on employee performance. According to Artz (2008) suggests overall, fringe
benefits play a significant role in determining employee performance.
A research by (Pınar Güngör, 2011) focuses on the relationship between the reward management
system applications and employee performance of the aviation employee in Istanbul. He
concludes that employee performance effectiveness is determined on reward systems. In addition
(Madhuri K., 2014) remark that perceived level of rewards and motivation has significant
relationship among the private sector employees and the monetary rewards had a significant
effect on employee motivation than the non-monetary rewards.
Puwanenthiren P. (2011) assert that there is positive relationship between the rewards and
employee motivation that is (+0.7550). Moreover, he splits the result between the intrinsic
reward system that is (and0.5831) and extrinsic reward system (0.7280). Lastly he concludes that
there is a considerable positive relationship between the total reward system and the employee
motivation.

Tausif (2012) conducted a study on the influence of non-financial rewards on employee in
educational sector of Pakistan. Structured questionnaire were employed to collect the data from
the selected respondents. The researcher developed two competing hypothesis on the relationship
between non-financial rewards and employee performance. In the study t test, regression and
correlation to test hypothesis, whether non-financial rewards have positive relationship with
employee job satisfaction or negative relationship with job satisfaction. The independent variable
promotion, job enrichment and autonomy and its influence on dependent variable employee
performance were his areas of study.
The findings of the study reveals that employee performance is positively and considerably
associated with non-financial rewards such as promotion, job enrichment and task autonomy.
A study conducted by Payam, Ali, Seyed, & Mahmood (2013) attempts to review various
variables in term of relationships between rewards, job satisfaction, and employee performance.
In the study, two types of reward were identified, and they were financial reward and non-
financial reward. The finding showed that reward can affect job satisfaction and thereby
employee performance. Finally the study proposes a new framework based on mediating role of
job satisfaction.
Abdul Hammed (2014) conducted a research on impact of compensation on employee

performance in the aviation sector of Pakistani. A questionnaire was designed to collect the data
on the factors related to compensation like salary, rewards, indirect compensation and employee
performance. The data was collected from different employees in Pakistan. The data collected
were analyzed in SPSS 17.0 Version. Findings were Compensation has positive impact on
employee performance. It is proved from correlation analysis that all the independent variables
have weak or moderate positive relationship to each other. Regression analysis shows that all the
independent variables have insignificant and positive impact on employee performance.
Descriptive analysis also reveals that all the independent variables have positive impact on
employee performance.
A study conducted by Sheila &Josephat (2015) with objective of finding the influence of
compensation and reward on performance of employees at Nakuru county government. Stratified
random sampling technique was used. Primary data was collected using questionnaires

interview schedules with a combination of open and closed questions. The findings indicated that
there was a strong relationship compensation and reward on employee performance in the county
government of Nakuru.
Nnaji&Nnadozie (2015) find out the Effect of Rewards on Employee Performance in selected
section of aviation employees in Awka The main objective of this study is to determine whether a
relationship exists between rewards system and employee performance. More specifically, the
study intends to address the relationship between intrinsic (non-financial) and extrinsic (financial)
rewards on employee performance. Findings: The empirical results indicated the presence of a
relationship between rewards and employee performance and that there is a significant difference
on the effects of intrinsic and extrinsic rewards on employee performance.
Nazir, Quan, Akhtar, Shafi and Nadia (2015) conduct a study about the financial rewards climate
and its impact on employee performance in the retail organizations. From the analysis, it was found
that financial rewards like rates of pay and fringe benefits affect employee performance but it was
not the only factor. The job itself and the amount of work expected were the major influence up on
those which were considered as low performers. Nazir et al (2015) concluded that the management
must pay attention to study specific indicators of financial rewards which can improve the
satisfaction of their employees and improve their performance. A study conducted by Erratul
(2016) explained factors that influence employees‟ performance in Islamic Religious Council. The
objective of the study was to identify if there’s any relationship between Intrinsic Reward and
Employees Performance and to determine if there is any relationship between Extrinsic Reward and
Employees Performance. The founding was there is positive and significant relationship between
financial and non-financial reward with Employees‟ Performance. However, the findings also
indicate that non-financial factors have more influence toward employees' performance on
employees rather than financial reward factors.
A study by Irshad A. (2016) pointed out the impact of extrinsic rewards on employees‟
performance. Primary data was collected through spreading questionnaire among employees
working in the aviation industry. He concluded that Salary and working the conditions positively
affect employee performance.

2.8 Conceptual Framework
Based on the above theoretical and empirical review the following conceptual framework is
formed. The conceptual framework is adopted from Payam Gohari, Ali Kamkar, Seyed Jafar
Hosseinipour,Mahmood Zohoori(2013)but modified and contextualize for the case. In the
conceptual framework independent variables are base pay, performance based bonus, benefits
(financial reward), recognition, work environment and career development (non-financial
reward) while dependent variable is employee performance.
Fig 2.1 Conceptual framework
Performance Based
Bonus
Benefits
Base Pay
Employee
performance
(Perceived)
Career development
Recognition
Work Environment
Fig 2.1 Conceptual framework

Source: Payam Gohari, Ali Kamkar, Seyed Jafar Hosseinipour,Mahmood Zohoori(2013) and
researchers modification

CHAPTER THREE
3. RESEARCH METHODOLOGY
3.1 Research Design
In order to accomplish this research the researcher wants to apply correlational research design.
Correlational design helped the researcher to examine the effect of reward system on employees’
performance in Ethiopian airlines. Furthermore it helped where a researcher seeks to understand
what kind of relationships naturally occurring variables (reward dimension variable) have with
one another. In simple terms, correlational research seeks to figure out if two or more variables
are related and, if so, in what way. Due to this reason the researcher applied correlational
research design.
3.2 Research Approach

In this research, the researcher applied both qualitative and quantitative research approach. The
reason why the researcher proposes the above mention approach is based on the nature of the
data. Since the researcher proposes to use two types of data which are numerical and qualitative,
the gap of one approach could be filled by another approach.
3.3. Population and Sale Size Determination

The current total number of hostess and pilots in Ethiopian airline are 2540. But out of those
pilots and hostess only 1256 are served in more than 2 years in the airline. Therefore, since the
scope of the study delimits minimum of two years, the total population of the study were become
1256.
The rationale behind for the selection of hostess and pilots were they do have different reward
packages from administrative workers regarding over time payment and other relate issues.
Furthermore they are core part of the corporation. Administrative workers were considered as
supportive and they have different treatment in Ethiopian airline and even the work conditions of
those workers were totally different from the flight attendant workers.

3.3.1 Sample Size Determination
In order to determine the sample size the researcher used yamane’s formula. The reason behind
this formula the researcher get it simplified in determining sample size and the formula is used
by different researchers before. Yamane (1967) suggested simplified formula for calculation of
sample size from a population. According to him, for a 95% confidence level and 0.05 p = size
of the sample should be
n = N
1+N (e2)
n = 1256
1+1256(0.052)
n =303
Where
n = sample size according to the previous formula
N = population size
e=level of precision
Therefore the sample size of this study is 303 pilots and hostess of Ethiopian airline.
3.3.2 Sampling Procedure

Regarding sampling procedure, since the sample size is 303 employees. By using sampling ratio
or skip interval K = N/n. Then 1256/303 = 4. Finally by simple random sampling from the list in
alphabetic manner, select the first respondents and lastly select the whole sample by 4th interval.
Then the first respondent is selected by the lottery method from the list of sample frame.

3.4 Type and Source of Data
For accomplishing the research work and research objectives both primary and secondary data
were collected. The primary data were collected from those employees of Ethiopian airline
(pilots, Copilots hostesses, supervisors and managers) through questionnaire and interview. In
addition to the primary data secondary data were used from policy directives, journal articles and
the aviation industry report.
3.5. Data Collection Instruments

To accomplish the research objective both primary and secondary data were collected. In order
to obtain reliable and sufficient information structured questionnaires were used as a data
collection instrument. All the necessary data for this study collected from the respondents
through self-administered questionnaire and document analysis.
3.5.1. Questionnaire
The researcher employed questionnaire which adopted and modified from researchers then
modified in close and open ended form and also the 5 Likert scale (namely agree, strongly agree,
neutral, strongly disagree and disagree). Under the closed ended questionnaire, the respondents
can only answer from a given alternative which limit them from further explanation of their
feeling regarding to the title of the study, even if it is easier and quicker for the research to
analyses it. This is why the researcher developed and modified questionnaire in opening ended
from which give the respondent’s freedom to express their opinion or attitude towards their job
freely without any limitation. The research instruments were adopted from Temesgen Bahiru
(2018)
3.5.2. Document Analysis

The researcher employed document analysis to extract relevant and supportive Secondary data
from the airlines report, exit interviews, policy directives and journal articles.
3.6 Data Analysis Techniques

The information collected from both primary and secondary data sources through review of
different documents and in depth interviews with key informants, personal observations as well
as questionnaire survey were organized and narrated.

Regarding, the descriptive data obtained from the structured interviews and open ended
questions were analyzed by identifying the themes. Facts that were extracted from different
documents were analyzed thematically and served to confirm study outcomes accordingly.
Indeed, descriptive analyses were presented using tables and figures where necessary.
Ultimately, inferential analysis (correlation and regression) and generalizations were made and
presented accordingly.
3.7 Reliability and Validity Test

Test reliability refers to the degree to which a test is consistent and stable in measuring what it is
intended to measure. Most simply put, a test is reliable if it is consistent within itself and across
time while Test validity refers to the degree to which the test actually measures what it claims to
measure. Test validity is also the extent to which inferences, conclusions, and decisions made on
the basis of test scores are appropriate and meaningful (Kothari, 2004)
Table 3.2 Reliability Test Result
No Variables Cronbach’s alpha Number of

items
1 Base pay/salary 0.93 3
2 Performance based bonus 0.91 3
3 Benefits 0.801 3
4 Recognition 0.831 4
5 Work Condition 0.9811 4
6 Career Development 0.879 3
7 Employee performance 0.811 4
8 Employee motivation 0.90 3
Source: Survey Result, 2020
Cronbach’s Alpha reliability result of this study is 0.88. Therefore, the Cronbach’s alpha value of the
study is strong category. So the researcher accepts the validity and reliability of the questionnaires.

3.8 Model Specification
To identify the existence and magnitude of correlation the researcher were used ordinary least
square (OLS) regression. Such model captures observations at a time or the data which the
researcher used were cross sectional. The resulting estimator or parameter can be expressed by a
regression formula (Gujarat, 1995).
The dependent variable is employee performance while the independent variables are base pay,
benefits, performance based bonus, recognition, work condition and career advancement.
Ep = f(x1, x2, x3, x4, x5, x6) ----------- (1)

EP= f (motivation) (2)
M=f (pay, benefits, performance based bonus, recognition, work condition and
career advancement)
Ep = 0 + 1x1 + 2x2 + 3 + 4x + 5x5 + 6x6+ ---------------------------(3)
Where
Ep =employee performance which is the dependent variable
M=motivation
0=average performance
X1 = base pay, X2= benefits, X3=performance based bonus, X4=recognition,
X5=work condition, X6= career advancement
1, 2, 3, 4, 5, 6 are coefficients of each independent variable
e= error term or residual or unexplained variable
3.9 Ethical Consideration

During data collection, respondents were informed as to why the data is collected. They were
informed about the objectives and methods of the study. The privacy of respondent kept safe.
Moreover, respondents expected to provide their response voluntarily. Finally, any work of
scholar would acknowledge at bibliography part.

CHAPTER FOUR
4. DATA PRESENTATION, ANALYSIS AND DISCUSSION
4.1 INTRODUCTION
As discussed in previous chapters, this study attempted to examine the effect of reward system
on employee’s performance with a mediating role of employee motivation in the case of
Ethiopian airlines. Therefore, the findings of the study are presented and discussed in this
chapter. The questionnaire were developed in five scales ranging from five to one; where 5
represents Strongly agree, 4 agree, 3 Neutral, 2 disagree, and 1 strongly disagrees. In order to
examine the effect of reward system on employee’s performance with a mediating role of
employee motivation descriptive, Correlation and regression analysis were conducted. A total of
303 questionnaires were distributed and 287 were collected from pilots and hostesses. The
collected data were presented and analyzed using SPSS (version 20) statistical software.
Regarding inferential analysis, the study conducted diagnostic tests of the data, regression and
correlation analysis, specifically Pearson correlation to measure the degree of association
between different variables under consideration. Regression Analysis was also used to test the
effect of independent variable on dependent variable.
4.2 Demographic Characteristics of Respondents

The demographic information of respondent gathered for the studies were gender, age,
educational qualification, job title and years stayed in Ethiopian airlines.
Table 4.1 Demographic Characteristics
No Demographic Description Frequency Percentage

characteristics
1 Sex Male 154 53.6%
Female 133 46.3%
2 Age Below 25 years 54 18.8&
25-30 years 68 23.6%
31-36 years 67 23.3%

37-42 39 13.5%
43- 48 37 12.8%
above 48 years 22 7.6%
3 Educational Qualification Aviation Certificate 0 0%
aviation diploma 11 3.8%
First Degree 241 83.9%
Second Degree and 35 12.1%
above
4 job title Copilot 107 37.2%
Pilot 36 12.5%
Junior hostess 97 33.7%
Senior hostess 23 8%
HR officer 19 6.6%
manager 5 1.7%
5 Experience Under 3 21 7.3%
From 3 Up To 6 56 19.5%
7 Up To 10 87 30.3%
Above Ten 123 42.8%
4.2.1 Gender
The paper tried to address gender distribution of respondents in order to answer the
questionnaires provided as shown on the following figure. The following figure depicts that
respondents of male and female answered the questionnaires distributed. Out of 287 respondents
133 (46.3) were female while 154 (53.6%) were males. This indicates that majority of the
Ethiopian airline workers are male. This implies that the male population of the airline has the
chance to be represented in every matter.
One difficulty encountered by investigators of sex differences and performance among workers
in organizational settings is the difficulty of comparing the performance of men and women

carrying out exactly the same job owning to gender segregation in the allocation of work tasks
(Rydstedt & Evans, 1998).
Men and women differ significantly in their characteristics. Although sex refers to the biological
differences between male and females, the list of actual differences is potentially long.
Obviously, males and females differ automatically. As a rule, males are more physically active
than females. Females tend to be more verbal than males. Men value independence and
achievement, women value intimacy and attachment. While men are action oriented "they take
care of the business", while women are people oriented they take care of others.
Regarding Ethiopian airline from an interview the interviewed revealed that there is no
significant difference in performance due to sex.
When we look the age group of respondents, the age below 25 are accounts 54 respondents
representing to 18.8% of the total respondents. The largest age groups which constitute 47.1% of
the respondents are 26-36 years of age. The rest covers 34% of the population which accounts 36
and above. From this result we can observe that the majority of employees (65.5%) of Ethiopian
airline were are at the productive age group. In addition, there are many senior pilots and
hostesses in the corporation.
According to Beer & Cannon (2004) old employees more concerned with health, mentoring
others, job security and place a higher value on leisure activities. In addition, they have low job
demand, job variety and feedback, lowered motivation drive when it comes to performing new
tasks. They are less motivated by training prospects, reduced concern for career advancement
and forming new relationship. Generally, relatively older worker are less motivated, flexible,
cost more and able to learn. This ultimately affects their performance.
Donald M. (2013) suggests performance may decline in jobs where certain skills are needed
(e.g., psychomotor skills) and performance may decline where executive functions are needed
(g., monitoring information). Moreover, learning may decline. But years of work experience and
wisdom likely compensates for these possible declines. Learning appears to be a bit slower
initially for older workers but then catches up. He also elaborate that age is less important than
individual skill. There is more variability in work performance within age groups than between
age groups.

On the other hand, Ismail B. (2013) argues those relatively older employees are full of cognitive
skills, fluid intelligence or working memory, abstract reasoning, attention, processing novel
information, broad educational or accumulated knowledge ("Wisdom") decrease cost of training
and supervision. Besides, he pointed out that Age more closely related to non-financial reward
(promotions and the work itself) rather than financial reward (paid in cash).
From an opened question employee’s reveal that the work life balances of senior employees were
disturbed due to high workload. Moreover they are dissatisfied for the little leisure time. This may
affect their performance adversely.
As the above tables depicts majority (96.1%) respondents were above first degree holder. a study
conducted by Kasika, B(2015) remarked the extent to which organizations perform or achieve set
objectives is a function of competencies of staff. As such employers hire and place people in
various positions based on educational qualifications required by the job and expect good
performance. However, this has not been the case, raising concerns over the ability of employees
with educational qualifications to perform on the job. The problem in this case is that if employees
with educational qualifications contribute only marginally more to job performance than less
educated workers do, then higher costs of staffing with highly educated workers are unlikely to be
recouped. This situation creates uncertainty on whether organizations such as Social Security
Commission should continue to subsidize current employees to acquire bachelors or advanced
degrees hence the need to rigorously assess the short-term returns (e.g., improved performance) and
long-term returns (e.g., heightened occupational commitment) on those investments. The study
confirmed that educational qualifications have a significant bearing on job performance. The higher
the educational level they become the more the performer. The more are the effects of education
and skill on job performance. As such people’s ability to understand and use advanced technology
is determined by the level of their education.
In Ethiopian airline the interviewed reveal that staffs were not allowed to update their career
through education. Though the corporation gives extensive training on the aviation area the
employees were not able to attend formal education. Furthermore they revealed that the educational
level of pilots and copilots were creating difference in understanding the technology. Senior
employees were understood easily than juniors in the sector.

As the above table depicts regarding job title majority of respondents (37.2%) and (33.7%) were
pilots and senior hostess while in experiences 92.7 % of the participants were more than three
year experience.
4.3 Descriptive Analysis

In this section, the collected data was entered and reported using SPSS. The mean value of each
question is analyzed and presented. The following tables showed the mean and standard
deviation of the question distributed to the participant.
In the first open ended question employees were asked to specify the rewards available in their
organization. Most of Ethiopian airlines respondents respond that in addition to the basic
payment other rewards like Medical plan, life insurance, bonus, transport allowance, staff loan,
Housing loan and educational fee programs will be provided by Ethiopian airline with different
criteria and regulations to be fulfilled.
When asked what are the major problems that the Ethiopian airlines is facing with respect to reward,
most of respondents noted that, in recent time’s problems like very high employees‟ turnover, lack of
proper communication with managers as well as customers, poor service given to employee from the
mangers.

The above table shows the means and standard deviations of reward variables such as base pay,
Performance based bonus, employee benefits, recognition, working condition and career
development rated by respondents. Descriptively, the average or mean level of employee
performance was (mean=3.4 SD= 0.885) on a five-point Likert Scale. This implies that, on the
average, the employees of Ethiopia airline were modest performer in return for any kind of
reward.
4.3.1 Salary and Employee Performance in Ethiopian Airlines

Table 4. 2 Salary
No Items Of Questions Mean S.Dv
Base Pay/Salary
1 My salary is sufficient in relation to what I perform. 3.34 .0123
2 Salary increment made for high performer would encourage 3.941 1.086
others
to perform better
3 Salary increments are made based on employee performance. 2.8355 1.305

The means score of salary in relation to employee performance is (mean= 3.37216 SD=0.801). This
implies that employees of Ethiopian airline were perceived as there performance affected by the
salary and their salary affects their performance in return.
A study conducted by Dr.B Nagaraju (2016) remarks Salary is very important for the performance
of the employees. Therefore they are very important for the organization too. In his study he
founded that salary has positive impact on employee performance. There is a positive impact on
employee performance. His ANOVA results reveal that salary has impact on employee
performance.
From open ended question and structured interviews participants revealed that in Ethiopian airline
there is always annual salary rises or increment. They also reaffirm that the salary increment is
fixed for the position. There is no salary increment for their different performance in their work.
Though they employees have different performance evaluation result they were not rewarded for
performance differently. In Ethiopian airline there were fixed salary increments as per the
corporation’s career structure which based on seniority or year of services.
4.3.2 Performance Based Bonus and Employee Performance

Table 4.3 Performance Based Bonus
Performance Based Bonus Mean S.Dv
1 The EAL bonus payment is performance based. 1.3903 .705
4
2 If I perform well, I am certain that amount of bonus increase 2.6032 1.24
9
3 The bones plan encourages to perform better 3.1806 .579
8

As the above table shows the mean score of performance based bonus is 2.3913 and Standard
deviation becomes=0.84414. This implies that in Ethiopian airline cabin crew workers were not
paid based on performance. Weather they perform well or not there were not certain about amount
of bonus increases. The bonus plan was not encouraging to perform better.

A study conducted by Nemia Galang (2019) point outs Performance Based Bonus (PBB) is a
new incentive given to employees based on their performance. This is different from existing
bonuses in government which are given to employees across the board, regardless of their
performance.
4.3.3 Benefits and Employee Performance

Table 4.4 Benefits
Benefits Mean S.Dv

1 I am satisfied with the benefits I receive 3.5871 .8834
2 The benefits are as good as most other airlines offer 3.6774 .9308
3 The benefit package of the EAL is equitable 3.1548 1.403

The mean score of benefit in relation to employee performance mean=3.4731, SD=1.072. This
indicates that on average the cabin crew workers were affected by their benefit package of the
corporation. From an open ended question employees were list out discount meals, health benefit or
medical coverage, disability, and life insurance; retirement benefits; paid time off; and fringe
benefits(parking, not excise taxing of goods ) as benefit of the corporation
A study has done by Ermias B., (2017) point outs the issue of social exchange theory. He asserts
benefits can impact employee performance and productivity. Lastly he concludes you can increase
employee productivity by creating a work environment that provides challenging responsibilities
and assistance with health and personal needs. Many work cultures are infused with high pressure
and demands.

4.3.4 Recognition Employee Performance
Table 4.5 Recognition
Recognition Mean S.Dv

1 I receive positive recognition for what I perform better 2.3806 .9638
2 When I do a good job I receive a recognition for that 2.4065 1.009
3 I feel that my job receives enough attention from my company 2.5903 .8683
4 Proper recognition of high performer will encourage low 2.8677 1.156
performer to work hard.

The mean score of recognition in as per employee’s perception is 2.56127 with standard
deviation 0.999. This showed us the recognition practice of the corporation were low.
Employee recognition is the acknowledgment of a company’s staff for exemplary performance.

Essentially, the goal of employee recognition in the workplace is to reinforce particular
behaviors, practices, or activities that result in better performance and positive business results.
One of the biggest motivators for employees is to be held in high esteem by their peers. The best
way of earning this respect is by being acknowledged for being good at what they do.
In Ethiopian airlines there was no established employee’s recognition system. Most top
managers in the corporation would relate rewards and recognition to annual salary increment.
A study done by Temesgen Bahre(2017) point outs four main benefits of employee recognition
such as make employees happier, improve employee retention and cultivate a culture of self-
improvement . Moreover He explains the benefit of employee recognition in the workplace is

that it can be the foundation of cultivating a culture of self-improvement. One of the best ways
for staff recognition is to provide them with opportunities to learn and make themselves better at
what they do. To take it a step further, it will also be great to incentivize learning reward those
who have taken the time to focus on self-improvement and boosting morale is another benefit.
4.3.5 Work Condition

Table 4.6 Work Condition
Mean sd
1 I have freedom to try new methods of doing in my job 2.5742 .8991
2 Company rules and procedures are conducive for work 2.3710 .8171
3 There are high varieties of jobs in my work 3.1452 1.302
4 I have reasonable work autonomy in my job 2.871 .9231

The mean score of work condition came up with 2.74035 with standard deviation 0.985. This
implied that the companies were not devising new methods of doing their job and company rules
and procedures should be revised considering the demand of the flight crews. Furthermore there
were unfair schedule of jobs and unreasonable work autonomy in their job.
A study done by Shagun Aggarwal (2014) attempted to analyze how an organization's working
conditions affects organizational performance of employees. He remarked that companies which
foster good working conditions such as consistent communication, heating and lighting issues,
manageable workload, work and safety, trust, nondiscriminatory policies will boost employee’s
performance. He concludes that improvement in working environment helps in improving
productivity and efficiency of the employees.
From an open ended question participants point out, though Ethiopian airline is good company
for all Africans, due to good employee character, staff air tickets, being the fastest growing
airline, and receiving advanced aircrafts with new routes expansion all over the globe, good staff
communication, there were also awkward management and lowest salary payment, very busy
environment. They also asserts the company is great company for passengers but it is not for
employees because the salary and other benefit is not enough for employees and also the
management staffs were not positive thinkers, the schedulers were not fair and understand the

fact that employees get tired. Most participants point out it’s really stressful to work. No health
benefits, they don't pay equivalent overtime and top management seems there is a political
influence.
According to Johnny C. Eluka(2015) Employees working conditions are no doubt critical to their
overall well-being and performance in their duties. Improved working conditions impacts
positively on employees’ performance. Similarly, occupational safety and healthy environment
also contributes to the attainment of organizational goals. It was also found that health risk
reduced, cost related to absenteeism and sick days was brought to the barest minimum. Also,
there is a positive correlation between working condition and improved performance as well as
competitive edge. Consequently, the researchers also discovered from the review that provision
and maintenance of facilities reduced staff turnover, fewer occupational injuries, improved
service levels, job satisfaction among employees as well as improved relationship between
employees and their employers.
4.3.6 Career Development

Table 4.7 Career Development
Career Development Mean sd
1 The EAL has a clear career Development procedure. 4.187 .51
1 24
2 EAL applies performance based career development 3.848 .78
4 38
3 there are Opportunities for more career advancement 4.338 .53
7 79

The mean score of career development in Ethiopian airline comes up with 4.1247 and it score
small standard deviation 0.611. In Ethiopian airline career development is the life long process of
managing learning, work, leisure, and transitions in order to move forward personally
determined and evolving preferred future. This high mean value implied that the EAL has a clear
career Development procedure and applies performance based career development. In shor, t
there were, opportunities for more career advancement.
Form an open ended question participates revealed that working in Ethiopian Airline Company
for long time helps to grow in all aspects of life. As a multi discipline company they have got the
opportunity to experience the skills in different departments including maintenance and repair
organization, cargo and hospitality, knowledge and experience from the well-developed aviation
academy and MRO. They also point out that Ethiopian airline has good working environment,
better opportunity to develop career, fast growing airlines, mission driven to lead the way in
aviation industry. It is African best airlines in terms of safety, profitability and sustainability to
experience, the work environment offers sufficient challenges for professional who wish to grow
through them. The company provides educational assistance for individuals interested to study in
academic institutions, there was an extensive training given throughout the company.
A study done by Saud Napitupulu (2016) examines the influence of career development on
employee performance in public sector, mediated by perceived organizational support, work
motivation, and affective commitment. The findings reveal that career development has positive
direct influence on perceived organizational support, motivation, and affective commitment.
However, career development has no direct influence on performance. The indirect examination
shows that mediating variables are perceived to have significant influence in strengthening that
relationship. These findings theoretically imply that career development may be dependent on
the extent to which organization is capable of providing perceived organizational support and
motivation in promoting affective commitment and performance.
4.4. Assumption of Tests

Inferential statistics allow one to draw conclusions or inferences from data. Usually this means
coming to conclusions about a population on the basis of data describing a sample. Statistical
inference uses probability and information about a sample to draw conclusions ("inferences")
about a population or about how likely it is that a result could have been obtained by chance.

4.4.1 Linearity test
Linear regression needs the relationship between the independent and dependent variables to be
linear. It is also important to check for outliers since linear regression is sensitive to outlier
effects. The linearity assumption can best be tested with scatter plots; the following picture
depicts no and little linearity is present.
Fig 4.4 Linearity Test Result
Source: survey result, 2020

4.4.2 Testing the Skewness and Kurtosis of the Data
Skewness is a measure of symmetry, or more precisely, the lack of symmetry. A distribution, or
data set, is symmetric if it looks the same to the left and right of the center point. Kurtosis is a
measure of whether the data are heavy-tailed or light-tailed relative to a normal distribution. That
is, data sets with high kurtosis tend to have heavy tails, or outliers. Data sets with low kurtosis
tend to have light tails, or lack of outliers. A uniform distribution would be the extreme case
(Kothari, 2004)
Table4.4 Skewness and Kurtosis
Statistics
Based Bonus
Performance
Performance
Developmen
Recognition
motivation
Pay/Salary
Employee
Employee
Condition
Benefits
Career
Work
Base
t
Skewness .163 -.567 .108 -.284 .585 -.530 -.654 .016
Std. Error of
.427 .427 .427 .427 .427 .427 .427 .427
Skewness
-
Kurtosis -.381 -.089 1.08 -.443 .241 1.016 -.195 -.982
5
Std. Error of
.833 .833 .833 .833 .833 .833 .833 .833
Kurtosis
The values within the range of +1.96 and -1.96 are the said to be acceptable. Beyond these limits
can be called skewed data (Hair, 2010) and Bryne (2010) argued that data is considered to be
normal if Skewness is between ‐ 2 to +2 and Kurtosis is between ‐ 7 to +7. From rule of the thumb
the researcher’s data is normally distributed

4.5.2 Normality Test
Normality tests are used to determine if a data set is well-modeled by a normal distribution and to
compute how likely it is for a random variable underlying the data set to be normally distributed.
The tests are a form of model selection, and can be interpreted several ways, depending on one's
interpretations of probability:
In descriptive statistics terms, one measures a goodness of fit of a normal model to the data if
the fit is poor then the data are not well modeled in that respect by a normal distribution, without
making a judgment on any underlying variable (kothari,2004)
Multiple regressions assume that variables have normal distributions (Darlington, 1968). This
implies that errors are normally distributed, and that a plot of the values of the residuals will
approximate a normal curve (Keith, 2006). This assumption can be tested by looking at the P-P
plot for the model together with above histogram of the standardized residuals. The closer the
dots lie to the diagonal line, the closer to normal the residuals are distributed.
Fig 4.5 Normality Result

4.5.3 Multi collinearity Test
Multi collinearity means a state of very high inter-correlation or inter-associations among the
independent variables. It is therefore a type of disturbance in the data, and if present in the data
the statistical inferences made about the data may not be reliable.
Multi collinearity generally occurs when there are high correlations between two or more
predictor variables. In other words, one predictor variable can be used to predict the other. This
creates redundant information (Kothari, 2004)
Strong relationship between explanatory variables is a problem of multi collinearity and not
acceptable for ordinary list square regression analyses.
Table 4.5 Multi collinearity test
Coefficientsa
Model Collinearity Statistics
Tolerance VIF
Base Pay/Salary .682 .467
Performance Based Bonus .808 .970
Benefits .844 .185
1
Recognition .783 .276
Work Condition .880 .084
Career Development .853 .172
a. Dependent Variable: Employee Performance

According to Kothari (2004) Variance-inflation factor (VIF) has also been checked and values
are found smaller, which supports that multi collinearity is not a problem. In this study all VIF
were less than 10 got acceptances as per (Hair, 2010). Moreover, tolerance statistics in
regression analysis helps to detect co-linearity problem. Tolerance value runs from 0 to 1 and
values closer to 1 indicates no multi collinearity problem (Keith, 2006). In this study all the
tolerances are above 0.8 and, therefore, the amount of variation in that construct is not explained
by other predictors. Both Tolerance and VIF tests indicated that there is no multi collinearity
problem of the data.
4.5.4 Homoscedasticity Test
Homoscedasticity means that the variance around the regression line is the same for all values of
the predictor variable (X). The plot shows a violation of this assumption. For the lower values on
the X-axis, the points are all very near the regression line. For the higher values on the X-axis,
there is much more variability around the regression line
This assumption requires even distribution of residual terms or homogeneity of error terms
throughout the data. Homoscedasticity can be checked by visual examination of a plot of the
standardized residuals by the regression standardized predicted value (Osborn & Waters, 2002).
If the error terms are distributed randomly with no certain pattern then the problem is not
detrimental for analyses. The following Figures below shows that the standardized residuals in
this research are distributed evenly indicating heteroscedasticity are not a serious problem for
this data.

Fig 4.6 Homoscedasticity result
4.5.5 Autocorrelation Test
Autocorrelation is a mathematical representation of the degree of similarity between a given time

series and a lagged version of itself over successive time intervals. It is the same as calculating
the correlation between two different time series, except autocorrelation uses the same time
series twice: once in its original form and once lagged one or more time periods (Kothari, 2004)
Table 4.7 Autocorrelation Test

Model Summary
Model R R Adjusted R Square Std. Error of the Durbin-
Square Estimate Watson
1 .813a .660 .572 .65211 1.922
a. Predictors: (Constant), Career Development, Recognition, Performance Based
Bonus, Benefits, Base Pay/Salary, Work Condition
b. Dependent Variable: Employee Performance

Autocorrelation or independence of errors refers to the assumption that errors are independent of
one another, implying that subjects are responding independently (Stevens, 2009). Durbin-
Watson statistic can be used to test the assumption that our residuals are independent (or
uncorrelated). This statistic can vary from 0 to 4. For this assumption to be met, the DW value
needs to be close to 2. Values below 1 and above 3 are problematic and causes for concern.
4.6 Correlation Analysis
Correlation analysis was applied to test the “interdependency” of the variables. In this section,
the direction and degree of the strength of the relationship among the variables were determined.
The Pearson’s Product Movement Correlation Coefficient was computed to determine the
relationships between Laissez-Faire, transformational leadership, autocratic leadership,
transactional leaders and organizational performance.
Correlation analysis is useful way of exploiting relation (association) among variables. The value
of the coefficient (r) ranges from -1 up to +1. The value of coefficient of correlation (r) indicates
both the strength and direction of the relationship. If r = -1 there is perfectly negative correlation
between the variable. If r = 0 there is no relationship between the variable and if r = +1 there is
perfectly positive relationship between the variables. For values of r between + and 0 or between
0 and -1, different scholars have proposed different interpretation with slight difference.
For this study decision rule given by Bartz (1999) was used to describe the strength of
association among the variables as follows.

Table 4.8 correlation coefficient
Measure of Association Descriptive Adjectives
>0.00 to 0.20; <-0.00 to -0.20 Very weak or very low
>0.20 to 0.40; <-0.20 to -0.40 Weak or low
>0.40 to 0.60; <-0.40 to -0.60 Moderate
>0.60 to 0.80; <-0.60 to -0.80 Strong or High
>0.80 to 1.0; <-0.80 to -1.0 Very high or Very Strong
Source: Bartz (1999)

Table 4.9 Correlation Result
Work Condition
Development
Performance
Recognition
Employee
Base Pay
Benefits
Career
Bonus
Pearson
1 .413* -.022 .237 .455* .316 .727**
Correlation
Base Pay
Sig. (2-
.023 .906 .208 .012 .089 .000
tailed)
Pearson
.413* 1 .128 .110 .669** .208 .426*
Correlation
Bonus
Sig. (2-
.023 .502 .564 .000 .271 .019
tailed)
Pearson
-.022 .128 1 .329 .119 -.155 .426*
Correlation
Benefits
Sig. (2-
.906 .502 .076 .533 .413 .000
tailed)
Pearson
.237 .110 .329 1 .282 -.051 .153
Correlation
Recognition
Sig. (2-
.208 .564 .076 .131 .789 .420
tailed)
Pearson .455*
Correlation .669** .119 .282 1 .109 .447*
Sig. (2- .012

tailed) .000 .533 .131 .567 .013
Pearson .316
Correlation .208 -.155 -.051 .109 1 .749**
Sig. (2- .089

tailed) .271 .413 .789 .567 .000
Pearson .727**
Correlation .028 .426* .153 .013 .749** 1
Sig. (2- .000

tailed) .080 .000 .420 .131 .000

As we can see from the above table independent variables like base payment (r=.727**, p<0.05),
benefit (r=.426*, p<0.01) and career development(r= .749**) have strong and significant
correlation with the dependent variable employee performance. This implies that increase or
decrease in independent variables is associated with similar change in employee’s performance.
The above table also tells us that the existence of significant and positive, positive but insignificant,
and negative but significant correlations.
4.7 Regression Analysis Results
Multiple regression analysis applied to find out whether there was statistically significant relation
surfaced between work motivation and the seven reward dimensions or not. Moreover, it helped to
devise a formula that shows the relation between the dependent variable (work motivation) and the
independent variables (payment, benefit, and promotion, recognition, working condition,
employee’s autonomy and career development opportunity
This part of analysis includes a regression model to test the hypothesis. Seven extracted dimensions
were taken as independent variables against motivation of employees as dependent variable in a
multiple regression model. For all the hypothesis of the study below 95% confidence interval was
used.
Table 4.10 Model Summary
Model Summary
Model R R Square Adjusted R Std. Error of Durbin-Watson
Square the Estimate
1 .813a .660 .572 .65211 1.922
a. Predictors: (Constant), Career Development, Recognition, Performance Based Bonus,
Benefits, Base Pay/Salary, Work Condition
b. Dependent Variable: Employee Performance

As indicated in the model summery table the linear combination of the independent variable was
significantly related to the dependent variable, R=.813, R square= .660 adjusted R square=.572,
F=7.454 (p=0.000).
R value tells that the overall reward dimensions such as career development, recognition,
performance based bonus, benefits, base pay/salary, work condition have strong effect on the
dependent variable(performance).
R-square value .660 indicates that 66 % of variation on dependent variable (performance) is

explained by the above Reward dimensions (career development, recognition, performance based
bonus, benefits, base pay/salary, work condition). And other factors that are not included in the
model may explain the remaining (34%) variation in employee’s performance.
Table 4.11 ANOVA result
ANOVAa
Model Sum of df Mean F Sig.
Squares Square
Regression 19.019 6 3.170 7.454 .000b
1 Residual 9.781 23 .425
Total 28.800 29
b. Predictors: (Constant), career development, recognition, performance based bonus, benefits,
base pay/salary, work condition
The above ANOVA table indicates the statistical significance of the regression model that was
run. Here, p is less than 0.05, and indicates that, overall, the regression model statistically
significantly predicts the outcome variable (i.e., it is a good fit for the data). The regression
model considers employee performance as dependent variable career development, recognition,
performance based bonus, benefits, base pay/salary, work condition as independent variables.
The regression coefficients explain the average amount of change in the dependent variable due
to a unit change in the independent variable holding other explanatory variables constant.

4.8 Hypothesis Testing
Table 4.12 Regression Coefficient
Coefficient
Model Unstandardized Standardized t Sig.

Coefficients
Coefficients
B Std. Error Beta
(Constant) 2.992 1.087 2.75 .011
3
Base Pay/Salary .776 .151 .756 5.13 .000
7
Performance
Based .228 .232 .167 .982 .336
Bonus
Benefits .103 .178 .077 .580 .568
Recognition .061 .159 .052 .381 .706
Work Condition .052 .171 .053 .304 .764
Career .519 .192 .355 2.69 .000
Development 9
 H1: Base pay has a significant and positive effect employee performance
As we can see in the above coefficient table base pay has a b value .756 (p<0.05). Therefore we
can say that Base pay has a positive and significant effect on employee’s performance. This
implies we reject the null hypothesis and accept the alternate one.
 H2: Performance pay bonus has a significant and positive effect on employee
performance
The beta value of benefit shows .167 (p<0.05) tells us that there is positive and significant
relationship between Performance Based Bonus and employees performance. Therefore we

reject the null hypothesis and accept the alternate hypothesis of existence of significant
relationship with performance.
The expected positive coefficient estimates of base pay and bonus are consistent with Moncarz et
al., (2009) and Chiu et al., (2002). According to these papers it can be explained that salary was
the prime factor for the performance of salaried employees. In addition, benefits are a motivator
for employee’s commitment within an organization, which results in attraction and retention.
 H3: Benefits, has a positive and significant relationship on employee performance
The regression result tells us to a accept H0 since there is a no significant relationship between
Benefits and employees performance.
The beta value of benefit is .077 however the p value is .568 which is greater than 0.05.
Therefore we reject the null hypothesis. This finding is consistent with Azim and Sharma (2012)
Study finding suggesting that satisfaction with benefit packages do not have a direct and positive
impact on motivation. And inconsistent with Peterson, (2003), Kreitner and Kinicki (2004).
According to these papers it can be explained that verities of benefit packages has a great
connection with performance.
 H4: Recognition has a significant and positive effect employee performance
There is no significant relationship between Recognition and employee’s performance.

Recognition is found to be insignificant relationship with performance with beta value of .052
and p value. 706 which is higher than 0.05.Therfore we accept the null hypothesis and reject the
alternate one.
This positive and insignificant coefficient of Recognition is consistent with Baron and Greenberg
(1995) and Robbins (2001). According to these papers absence of Recognition leads to lower
performance.
 H5: Work environment has a significant and positive effect on employee

performance
When we come Work environment, the alternate hypothesis which states working condition has
no positive and significant effect on employees performance is supported with coefficient of .053
and sig value greater than 0.05.Therefore we reject the null hypothesis.

 H6: Career development has positive and significant effect on employee’s
performance
The regression result shows Career development opportunity has positive and significant Effect
on employees performance with the coefficient of .355 and sig. value less than 0.05. There is
positive and significant relationship between career development and employees performance.
Therefore we reject the null hypothesis and accept the alternate hypothesis of existence of
significant relationship with performance.
Generally based on the above analysis the researcher concludes that base payment, performance
based bones and career development variables have the highest positive and significant impact
on performance. But working condition, recognition and benefits have positive but insignificant
effect.

CHAPTER FIVE
5. CONCLUSION AND RECOMMENDATION
5.1 CONCLUSION
The study aimed examine the effect of reward system on employee’s performance with a
mediating role of employee motivation in the case of Ethiopian airlines cabin crew employees
based on the questionnaire of randomly selected cabin crew employee. A total of 303
questionnaires were distributed and 287 were collected from pilots and hostesses and the
response rate 94.2 % which acceptable for data analysis and discussion of the study.
In the demographic analysis, out of 287 respondents 46.3% were female while 53.6% were
males. It implies majority of the Ethiopian airline workers are male. Regarding age group of
respondents, the larger number of employees which constitute 47.1% of the respondents are 26-
36 years of age while their education level majority of respondents (96.1%) were above first
degree holder. Lastly regarding job title majority of respondents (37.2%) and (33.7%) were
senior pilots and senior hostess respectively while their experiences 92.7 % of the participants
were served at Ethiopian airline more than three year experience.
The result of the distributive analysis shows that, the most determine factor of employee
performance which scored low mean deviation was pay/salary (mean=3.37216, SD=0.801),
performance based bonus (mean=2.3913, SD=0.844), benefits (mean=3.4731, SD=1.072),
recognition (mean=2.56127, SD=0.999), work condition (mean= 2.74035, SD= 0.985) and
career development (mean= 4.1247. SD=0.611). From this base pay/salary, career development
and benefits were found most or strong determinate factor that able to affect employee’s
performance as well as their motivation in Ethiopian airline.
Results from inferential analysis particularly from Pearson’s Product Moment Correlation
Coefficient and as per Bartz (1999) interpretation of r value were used to discuss the relationship
between dependent variable (employee performance) and an independent variables base

pay/salary, performance based bonus, benefits, recognition, work condition and career
development. The relation between dependent and independent variable shows that there is
statistically significant relationship exist between all variables of rewards and employee
performance. The correlation result reveals independent variables base payment (r=.727**,
p<0.05), benefit (r=.426*, p<0.01) and career development(r= .749**) have strong and
significant correlation with the dependent variable employee performance
The model summary or the linear combination of the independent variable was significantly
related to the dependent variable, R=.813, R square= .660 adjusted R square=.572, F=7.454
(p=0.000). R value tells that the overall reward dimensions such as career development,
recognition, performance based bonus, benefits, base pay/salary, work condition have strong
effect on the dependent variable (performance).R-square value .660 indicates that 66 % of
variation on dependent variable (performance) is explained by the above Reward dimensions
(career development, recognition, performance based bonus, benefits, base pay/salary, work
condition). The ANOVA result indicates the statistical significance of the regression model that
was run. Here, p is less than 0.05, and indicates that, overall, the regression model statistically
significantly predicts the outcome variable (i.e., it is a good fit for the data). Regarding
hypothesis three hypothesis (base pay/salary/, benefit and career development) were accepted
and the meaning (recognition, work condition and performance based bonus) are rejected.
When we analyze the open ended question, items related to policy and procedure more than 50%
of the respondents are blaming on the implementation of existing policy and procedure thus the
corporation has poor implementation and execution of the reward system in clear and reasonable
manner.
Generally Reward system plays a vital role in motivating employees to perform their assigned
job. Since money/financial reward are a main motivator in encouraging the employee’s
performance required in today’s competitive business environment. The ability to attract, keep
and motivate high- performance is becoming increasingly important in today’s competitive
organizational environments. The study also asserts that employee’s will improve their
performance if the all reward package problems identified and tackled by the management

Based on the above finding reward system can improve organizational performance as well as it
fulfills other objectives such as employees goal, legal compliance, labor cost control, perceived
fairness towards employees and enhancement of employee performance to achieve high level of
productivity and customer satisfaction in the aviation. The success of most service organizations
specifically the aviation industry depends on the performance and output of the human elements of
the system. Employees constitute the most critical input in service industries, and as such their
performance and motivation is at the forefront of managerial task. Managers are therefore faced
with the challenge of choosing which measure to adopt or whether to rely on intrinsic or extrinsic
rewards system in order to gauge employee performance.

5.2 Recommendation
Based on the findings and conclusions of the research the following recommendations were
forwarded to Ethiopian Airline managements.
 The management of Ethiopian airline should redesign its reward package system in
general and its salary scale/ base pay structure in particular based on the work load of
employees, the inflation rate as well as market condition(aviation industry scale).
Because the highest influential factors for employee performance were base pay/salary,
benefit package and career development. There must be an appropriate, clearly known
and visible career development path.
 The level of employee motivation is directly related to their performance in Ethiopian
airline. Therefor the company should draft a strategy that can increase thee extrinsic as
well as the intrinsic motivation of employees and increase their performance.
 The Ethiopian airline should conduct a continuous performance appraisal measurement
based on its vision and mission and develop a strategy that able to reward based on their
performance.
 Schedulers, Supervisors and managers have to acknowledge employees deeds on a
daily/weekly/monthly basis. As study reveals the company is the busiest place and
become difficult to handle their work life balance. The company should work on
balancing the work life balance of employee.
 In general the current aviation industry is full of competition and rewards also go far
beyond cash compensation and payments. Monetary compensation alone is insufficient to
motivate employees. Other factors such as giving greater recognition, creating employees
autonomy and establishment of better leadership system have the greatest impact on
employee motivation as well as their performance.

Reference
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Beer & Cannon, 2004, Promise and peril in implementing pay for performance. San
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Motivation, International Journal of Business and management
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master of business administration, Addis Ababa university
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And Performance Level in IT Industry, Imperial Journal of Interdisciplinary
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development: A compensation perspectiv
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Management Alexandria, Virginia USA: John Wiley and Sons, Inc.
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Inc.
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case. Harlow, England, London, New york, Boston and San Francisco: Prentice hall
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(www.tutorialspoint.com/employee_motivation/employee_motivation)

APPENDIXES
JIMMA UNIVERSITY
Dear respondents!
The main objective of this questionnaire is to gather your opinion regarding the effect of reward
system on employee’s performance with a mediating role of employee motivation in the case of
Ethiopian airlines. The data and opinion gathered will be used for partial fulfillment of the
requirement for Master’s Degree in MBA. Your faithful and quick response will make the
research fruitful. The information you provide will be kept confidential. Thank you in advance
for your collaboration. If you have problems in completing this form, please do not hesitate to
contact.
Samrawit Belayneh
Mobil NO: 0911517909

Part One: General Information of Respondents
 Note: no need of writing your name

 Circle your answer
1) Gender: A. Male B. Female
2) Age: A. Below 25 years B.25-30 years C.31-36 years
D.37-42 years E.43- 48 years F. above 48 years
3) Educational Qualification:
A. Aviation Certificate B. aviation diploma
C. First Degree D. Second Degree and above
3) Job title
A. Copilot B. Pilot
C. Junior hostess E. Senior Hostess
D HR officer F. manager
4) Years stayed in Ethiopian airline
A. under 3 years B.3-6 years
C.7-10 years D. over 10 years
Part II Specific Questions
Key: SDA- Strongly disagree D-Disagree
N-Neutral A-Agree SA-Strongly Agree

NO ITEMS OF QUESTIONS SDA DA N A SA
Base Pay/Salary
1 My salary is sufficient in relation to what I
perform.
2 Salary increment made for high performer
would encourage others to perform better
3 Salary increments are made based on employee
performance.
Performance Based Bonus
1 The EAL bonus payment is performance based.
2 If I perform well, I am certain that amount of
bonus increase
3 The bones plan encourages to perform better
Benefits
1 I am satisfied with the benefits I receive
2 The benefits are as good as most other airlines
offer
3 The benefit package of the EAL is equitable
Recognition
1 I receive positive recognition for what I perform
better
2 When I do a good job I receive a recognition for
that
3 I feel that my job receives enough attention
from my company
4 Proper recognition of high performer will
encourage low performer to work hard.

Work Condition
1 I have freedom to try new methods of doing in
my job
2 Company rules and procedures are conducive
for work
3 There are high varieties of jobs in my work
4 I have reasonable work autonomy in my job
Career Development
1 The EAL has a clear career Development
procedure.
2 EAL applies performance based career
development
3 there are Opportunities for more career
advancement
Employee Performance
1 Employee’s performance has a strong link to the
benefits they earn.
2 Here in my company I am rewarded for my
performance
3 The reward system of the company affects my
performance
4 The reward system of the company is fair for
employees performance
Employee motivation
1 The reward system of the company can affect
the employees motivation
2 Employee motivation linked with reward system
of the company
3 The reward system of the company affects my
motivation

Part Three: Open Ended Questions
1. How do you rate your working performance in Ethiopian Airline? (Low, good or
excellent)? Is it equivalent or not from what you rewarded? Please explain.
2. What do you suggest for the overall process of reward system in Ethiopian airline (Base
pay/salary, benefits, recognition, promotion, over time payment and working condition)
Thank you so much!!

Interview guideline
1. How do you see the reward practice of the company

2. What are the financial and non-financial reward that you provide for your employees
3. How do you see reward and employee performance in the company

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THE EFFECT OF REWARD SYSTEM ON EMPLOYEES

PERFORMANCE IN THE CASE OF ETHIOPIAN AIRLINES

A RESEARCH SUBMITTED TO FACULTY OF BUSINESS AND

FACULTY OF BUSINESS AND ECONOMICS

DEPARTMENT OF BUSINESS ADMINISTRATION

ABH CAMPUS ADDIS ABABA

Effects of reward system on employee performance in Ethiopian airlines Page i

FACULTY OF BUSINESS AND ECONOMICS

DEPARTMENT OF BUSINESS ADMINISTRATION

ABH CAMPUS ADDIS ABABA

THE EFFECT OF REWARD SYSTEM ON EMPLOYEES

A RESEARCH SUBMITTED TO FACULTY OF BUSINESS AND

MAIN ADIVISOR: EMENET NEGASH (MBA Associate Professor)

CO-DIVISOR: BELAY CHEKOL (MBA)

Effects of reward system on employee performance in Ethiopian airlines Page ii

Effects of reward system on employee performance in Ethiopian airlines Page iii

APPROVED BY BOARD OF EXAMINERS

Advisor's Name -------------------Date---------Signature--------

Co-Advisor Name -------------------Date---------Signature--------

External Examiner -------------------Date---------Signature--------

Effects of reward system on employee performance in Ethiopian airlines Page iv

Effects of reward system on employee performance in Ethiopian airlines Page v

HRM Human Resource Management

MOR Maintenance and Repair

SPSS________________________________________Statistical Package for Social Science

VIF __________________________________________variance inflation factor

Effects of reward system on employee performance in Ethiopian airlines Page vi

DECLARATION ......................................................................................................................................... iii

Effects of reward system on employee performance in Ethiopian airlines Page vii

Effects of reward system on employee performance in Ethiopian airlines Page viii

Effects of reward system on employee performance in Ethiopian airlines Page ix

Key words: Reward system and employee performance

Effects of reward system on employee performance in Ethiopian airlines Page x

1.1 Background of the Study

One of the main management strategies of the organizations is to invest in employees.

Effects of reward system on employee performance at Ethiopian airlines Page 1

Effects of reward system on employee performance at Ethiopian airlines Page 2

As being part of dynamic competitive industry, Ethiopian Airlines practice different

Effects of reward system on employee performance at Ethiopian airlines Page 3

1.3 Research Questions

1. How do base pays affect employee performance?

Effects of reward system on employee performance at Ethiopian airlines Page 4

1.4.1 General Objectives

1.4.2 Specific Objectives

1. To examine the influence of base pay on employee's performance.

2. To investigate the influence of performance pay bonus on employee performance

3. To determine the influence of benefits on employee's performance.

4. To examine the influence of recognition on employee motivation.

5. To investigate the influence of work environment on employee's performance.

6. To examine the influence of career development on employee motivation.

Effects of reward system on employee performance at Ethiopian airlines Page 5

Effects of reward system on employee performance at Ethiopian airlines Page 6

1.7 Organization of the Study

Effects of reward system on employee performance at Ethiopian airlines Page 7

REVIEW OF RELATED LITERATURE

2.1 The Aims of Reward System

Effects of reward system on employee performance at Ethiopian airlines Page 8

2.2 Financial Rewards

Effects of reward system on employee performance at Ethiopian airlines Page 9