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PERFORMANCE MANAGEMENT AND CORPORATE PROFITABILITY IN THE NIGERIAN MANUFACTURING SECTOR

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ABSTRACT

The  study  is  about  performance  management  and  corporate  profitability  in  the manufacturing  sector.  The  objectives  of  the  study  are  to  determine  the  level  of awareness of performance management in the manufacturing firms, to  ascertain the approaches use in managing performance in the manufacturing firms, to investigate the performance review mechanism utilized by manufacturing firms, to find out the nature of relationship between performance management practice and the profitability of the manufacturing firms and to identify the problems associated with performance management system in the manufacturing sector. Data for the research were obtained from primary and  secondary sources.  The study has a population of 6467, out of which a  sample  size of 376  was realized  using  Taro  Yamen  Statistical  Formula. Survey  research  design  was adopted.  Data  collected  was presented  and  discussed descriptively.  Five hypotheses  were tested using Chi square (X2), Z-test and  linear

regression  statistical  tools.  Reliability  was  done  using Pearson’s  Product  Moment Correlation,  with coefficient  of 0.94 indicating  a high degree of  consistency.  The result of the analysis revealed that the level of awareness of performance management is not significantly low. Manufacturing firms use  programme evaluation techniques, balance score card and benchmarking  to a  large extent  in managing  performance, appraisal method, management by objective and multi scale rating are performance review mechanism utilized by the manufacturing firms, there is a positive significant impact  of  performance  management  on  corporate  profitability  and  that  lack  of awareness,  organizational culture and inadequate feedback are   the key problem of performance management in the manufacturing companies. The study concludes that performance management  improves employees and organizational  performance and also  corporate  profitability  but  managers  of  these   companies  are  yet  to  fully implement  performance  management  in a  comprehensive  and  integrated  package. Therefore the researcher recommends that to ensure high productivity, effectiveness, efficiency  and  growth  of  an  organization,  performance  management  should  be adopted in a comprehensive and integrated package.

CHAPTER ONE

INTRODUCTION

1.1       BACKGROUND OF THE STUDY

The concern for high productivity in industrial organizations is universal, and is the desire of every manager. In the world of globalization there is lot of competition in the  market  also  there  is  competition  among  different   organizations  and  same organization  having  similar  product  and also  within  the organization.  The overall success of each and every organization is depending upon the quality of employees. How successful the organization will be told by the employees on the success of or growth of that company’s employees (Kumbhar 2011). Human beings are considered as an important  asset  of every organization.  It is a duty of every organization  to motivate  the   employees  and  influence  the  behavior  of  the  employees  through performance management system.

The manufacturing sector in Nigeria has suffered setbacks which are largely attributed to ineffective and inefficient management. Performance management is a tool which focuses on managing the individual and work environment in such a manner that an individual/team  can achieve  set organizational  goals.  Performance  management  is described  “as  a  systematic  process  for  improving  organizational  performance  of individuals and teams. It is a means of getting  better results by understanding  and managing performance within  an agreed  framework of planned goals, standard and competency requirement.  Armstrong  (2006: 495) Performance  management  is also considered as “a systematic  and  holistic (all-embracing)  process of work planning, monitoring  and  measurement  aimed  at  continuously  improving  the  teams  and  — individual  employee’s  contribution  to achievement  of organizational  goals”. Akata (2003:14).

The profitability of organizations can directly be linked to the performance of their managers, and it is in line with this link that Kanter (1982) and Nwachukwu (1992), also see company productivity  as dependent to a great degree on how  innovative managers   especially middle level managers are, because such managers have their fingers on the paste of operations. This means people are managed as assets not costs.

Bradley and Taylor (1992) categorically state that why capabilities of companies may be enhanced by technology, they rest fundamentally on the efforts of the employees in particular, managers who commit their best energies to corporate endeavours. Infact no  company  can  hope  to  meet  the  rising  expectations   created  by  intensified competition  without  productive  and  creative  managers  and  employees,  much  less profitable.

Managers are keys to making any performance management system work. Armstrong and Baron (1998) contend that so essential is performance management that managers must manage performance as an essential part of their job. Ironically, while all these possibilities exist through management, in Nigeria the bane of business enterprises is under performance. This explains the need for this study on performance management and  corporate   profitability   in  the   manufacturing   companies.   We  believe   that performance   management   as  an   integrated   process  could  bring  about  greater profitability for companies that practice it.

1.2      STATEMENT OF PROBLEM

Performance management is a basic tool for corporate profit. The obvious advantage of the practice performance management notwithstanding, many captains of industries are  not  aware  of this  tool.  Even  some  that  do  are  not  very conversant  with  the approaches. In view of these problems, the research seeks to address the objectives stated below.

1.3       OBJECTIVES OF THE STUDY

Objectives of the study are:

1.   To  determine  the  level  of  awareness  of  performance  management  in  the manufacturing firms

2.   To ascertain the approaches use in managing performance in the manufacturing firms

3.   To investigate  the performance  review mechanism  utilized  by manufacturing firms.

4.   To  find  out  the  nature  of  relationship  between  performance  management practice and the profitability of the manufacturing firms

5.   To identify the problems associated with performance management system  in the manufacturing firms.

1.4       RESEARCH QUESTIONS

In any research of this nature, some questions are asked which aimed at helping the researchers to accomplish his investigations. These questions are:

1.                                                                                                                What

is the level of awareness of performance management in the manufacturing firms?

2.                                                                                                               What are the  approaches  used  in managing  performance  in the  manufacturing firms?

3.                                                                                                                Which are  the  performance  review  mechanisms  utilized  by  the  manufacturing firms?

4.                                                                                                               What is

the   nature   of   relationship    between   performance    management    and profitability of the manufacturing firms?

5.                                                                                                               What are  the  problems  associated  with  performance  management  system   in Nigeria manufacturing firms?

1.5    RESEARCH HYPOTHESES

The following are the alternate hypotheses formulated, in order to provide focus for the study:

H1:    The level of awareness of performance management in the manufacturing firms is high.

H2:      Manufacturing   companies   to  a  large   extent   use  programme   evaluation techniques, balance score card and benchmarking techniques as approaches in managing performance.

H3:      Appraisal  method,  management  by  objective  and  multi  scale  rating  are performance review mechanisms  that are applied by manufacturing firms for improving staff performance.

H4:      There is significant  relationship  between performance  management  practice and corporate profitability in the manufacturing firms.

H5:          Lack of awareness, organizational culture and inadequate feedback are the key problems   of   performance   management   in   the   selected   manufacturing companies.

1.6       SIGNIFICANCE OF THE STUDY

This researcher believes that this study will be of immense important in the following ways:

It  will  help  the  management  of  the  selected  manufacturing  companies  to realize how performance management impacts on corporate profitability in an organization especially in the manufacturing sector of the economy.

It will create an awareness of the importance of performance management to managers of all organizations which would undoubtedly stimulate the use of performance   management   systems   as   an   indispensable   tool   in   human resources management in the selected organizations and other organizations.

Finally, it may serve as a benchmark for further research material for students, policy  makers  and  other  scholars  who  may  have  growing  interest  in  the operation of business organization.

1.7         SCOPE OF THE STUDY

The focus of this study is on performance management and corporate profitability in the manufacturing sector. The study covers the conceptual framework of performance management,   the  theoretical   framework   of  performance   management   and  the empirical review of works related to the topic.

The study was carried  out in four selected  manufacturing  firms in Lagos state  of Nigeria. These are Berger Paints Plc, Chemical and Allied Product (CAP)  Plc, PZ Cussons Nigeria plc and Cadbury Nigeria Plc.

1.8    LIMITATIONS OF THE STUDY

In carrying out this study, the researchers were confronted with some limitations. This is not unusual as it is part of research experience by researchers all over the globe. Some major limitations are:

Financial Constraint:   A comprehensive  survey of all manufacturing  company in Lagos  state  would  have  been  carried  out  .  Because  of  financial  constraint,  few manufacturing companies were surveyed.

Non-Challant  Attitude  of the Respondents:   Research  has indicated  that  survey investigations  are often plagued with respondents giving typical  responses, not the true responses. This is probably due to their ignorance of the  main purpose of the study. Also entrance into the companies was a bit difficult, the security personnel and the receptionist were suspicious of the purpose of the research.

Time: Other limitation was time. A survey of all the manufacturing company would have been better but due to time constraint, only four manufacturing companies were covered.

1.9       PROFILE        OF       SELECTED        MANUFACTURING        FIRMS UNDERSTUDY

Berger Paint Nigeria Plc

Berger Paints Nigeria Plc, together with its subsidiaries,  manufactures  and  markets paints and allied products in Nigeria. It offers decorative for interior and exterior use on wall surfaces  and ceiling;  industrial paints, such as Etch  primer, Quick drying enamel, Cellulose enamels, two-pack polyurethane, general purpose stoving enamels, and polyester coil coatings used as coatings for  various categories of manufactured items; and marine and protective coatings for various oil drilling companies and ship maintenance  companies.  The company  also  provides  various  automotive  products comprising autolux primer, autolux  finish, auto varnish etc under the LIGNOLAC name. In addition, it manufactures a range of emulsion, gloss, textured coatings, and red oxide,  as  well as provides  construction,  renovation,  project  management,  and other architectural services. Berger Paints Nigeria Plc distributes its products through a  network of depots and various distributors,  as well as agents. The company was formerly known as British Paints (West Africa)  Limited  and changed  its  name to

Berger Paints Nigeria Plc in 1969. Berger Paints Nigeria Plc was incorporated in 1959 and is based in Lagos, Nigeria.

Presently Berger Paint Nigeria plc has staff strength of 360

CAP PLC

Chemical   and  Allied   Products   plc  evolved   from  the  world-renowned   British multinational   Imperial  Chemical  Industries  plc,  which  formalized   its   Nigerian operations  in  1957  under  ICI  Exports  Limited.  In  1962,  ICI  Paints  was  also incorporated to manufacture Dulux paints. In 1965, ICI Exports Limited changed its

name to ICI Nigeria Limited and in 1968 it subsumed the paints company.

Following the promulgation of the first and second Indigenisation Decrees in  1972 and 1977, ICI Nigeria Limited at first sold 40 percent but later 60 percent of its share capital  to  the Nigerian  public,  and  went  further  to change  its name  by  a special resolution of the shareholders to Chemical and Allied Products Limited (CAPL) in the spirit of indigenisation.  In 1991, the ‘Limited’ appellation was dropped for ‘Plc’ in compliance with the provision of the Companies and Allied Matters Act of 1990.

In 1992, ICI Nigeria Limited  finally disposed of its minority 40% shareholding  in

CAP plc when it sold 35.7% of the equity to UAC of Nigeria Plc and the rest to the

Nigerian public on the floor of the Nigeria Stock Exchange.

Today,  CAP  plc  is  a  Nigerian  Company  operating  in  Coatings  Business  and  is currently employing 320 workers CAP Plc, a fully owned Nigerian  Company  is a participant of the U.N Global Compact initiative.  A winner of  the Nigerian Stock Exchange merit award (2006) and has retained the Pearl award for sector leadership in

Chemical and Paints from 2004 to date.

PZ Cussons Nigeria PLC

Pz Cussons Nigeria Plc the largest subsidiary of PZ Cussons has enjoyed tremendous business success in Nigeria for over a century.

Pz  Cussons  Nigeria  Plc  Manufactures  and  markets    a  wide  range  of  consumer products     and    home    appliances     including     soaps,    detergents,     cosmetics, pharmaceuticals,  confectionery,  air  conditioners,  refrigerators,  freezers,  packaging materials, and milk. The company boasts of its  understanding of its customers in a

way  which  no  other  consumer  goods  company  can.  Their  approach  to  Nigeria, customers, consumers and to business is designed to sustain them far into the future. Their prime business objective in Nigeria is sustainable and  profitable  growth and their drive to be world-class in every aspect of their business life is relentless.

To achieve this, they adopted a Strategic Business  Unit (SBU) structure, in  which each SBU has clear focus on its markets; developing a deep  understanding  of the needs and aspirations of its consumers and the dynamics of the marketplace, which it can exploit to deliver its objectives.

Their business policies, systems and actions (procedures and processes, corporate and personal  ethics,  corporate  image,  employee  development,  equality  of  opportunity, remuneration,  services  provided  to distributors  etc)  are  harmonized  between  their SBUs, ensuring the sharing of best practice and operational synergies. By combining their financial strength and the commercial acumen encouraged at all levels amongst their people, they have positioned  themselves to seize profitable new opportunities within their chosen sectors. PZ Cussons Nigeria Plc has staff strength of 3775.

Cadbury Nigeria Plc

Cadbury Nigeria plc engages in the manufacture and sale of fast moving consumer goods   primarily   in   Nigeria.   The   company   operates   through   two   segments, Confectionery and Food Drinks, and Intermediate Cocoa Products. The Confectionery and Food Drinks segment involves in the production and sale  of Bournvita, Bubba, Stimorol,  Tom  Tom,  Trebor,  Ahomka,  Buttermint,   and   Eclairs  products.  The Intermediate  Cocoa  Products  segment  offers  cocoa  powder,  cocoa  butter,  cocoa liquor, and cocoa cake. It distributes its products through a network of 43 distributors. The company was founded in 1965 and is based in Lagos, Nigeria. Cadbury Nigeria plc is a subsidiary of Cadbury Schweppes plc.

The staff strength of Cadbury Nigeria plc is 2012.

1.10     DEFINITION OF TERMS

The following words are defined for easy understanding of the study.

Corporate   Profitability:        It   is   an   economic   indicator   that calculates   net income using Profit from Current Production.

Human  Resources  Management:  It is  a strategic  and  coherent  approach  to  the management of an organization’s most valued assets – the people working there who individually   and   collectively   contribute   to   the  achievement   of   its   objectives (Armstrong 2006:3).

Management: It is about developing people, working with them, reaching objectives and achieving results. (Mullins 2010: 425)

Motivation: It is the creation of stimuli, incentives and working environments that enable people to perform to the best of their ability. (Mullins 2010: 253) Performance:  It is the ability of an individual or an organization to accomplish activities that lead to achieving desired or stated goals, which in turn affect organizational growth and success   positively (Inyang 2006:213)

Productivity:     It is a measurement of how much work comes from a given input.


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