Reward Systems

The present study investigated whether incentive and rewards have a positive effect on employees' performance through the enhancement of job satisfaction. An interesting result was that an insignificant direct effect has been found between incentive and rewards and employees' performance; therefore, this hypothesis (H1) did not receive statistical support from our data. Although this result is in line with some previous research while contradicting others, a possible explanation for this might be related to gender differences as most of the participants in this study were males (94%). This could have influenced the outcome since the Saudi collectivistic culture dictates that each gender has distinctive roles, and that males are the primary financial supporters of their families; hence they tend to be more concerned and motivated with financial well-being rather than intangible or moral incentives. This finding was also reported, where the performance of males was significantly improved by monetary and mixed incentives.

The results support a positive relationship between incentives and rewards and job satisfaction (H2a) and a significant direct effect between job satisfaction and employees' performance (H2b). More importantly, the mediating role of job satisfaction in the relationship between incentive and rewards, and employees' performance was significant (H3). This means that incentives and rewards have an indirect effect on employee's performance through job satisfaction. In other words, an increase in incentives and rewards increases job satisfaction thus increasing employee's performance. The reason behind the existence of this facilitation is that when employees are properly incentivized on a regular and systematic basis, their level of job satisfaction increases (H2a). This was the highest direct effect found for a relationship with a standardized coefficient of 0.91. Consequently, when employees are satisfied with their jobs, they tend to perform better because they believe in what they do (H3), which was the second highest direct effect relationship with a standardized coefficient of 0.74.

The present study makes three important contributions: First, the added value of the present study is that it avoids the traditional linkage in the Incentives and Rewards–Employees' Performance relationship by highlighting the critical mediation effect of job satisfaction. The findings of this research are in agreement with a number of previous published research work, and in partial disagreement with other research findings in the literature. Incentives and rewards in themselves do not influence performance. However, a mediating variable such as job satisfaction or job motivation is needed.

The current study significantly demonstrated the importance of non-financial, moral incentives in achieving job satisfaction. This finding was supported in that intrinsic reward being positively related to employee satisfaction, where the latter is serving as a mediator between intrinsic reward and employee performance. The relationship between reward systems, employee motivation and employee performance in car dealers in Bahrain and found that both direct and indirect (financial and non-financial) incentives and rewards had a significant direct relationship on employee performance notwithstanding a mediating variable. His findings are not supported by this research findings on Saudi industrial sector employees. Nonetheless, support was found in the existence of a relationship between employee job satisfaction and performance, a common conclusion between this research and that of.

Under the Incentives and Rewards variable, the three highest relevant measurement instruments were found to be IR5, IR6, and IR10. IR5 had the highest relevance evident by a factor loading of 0.78, where ~64% of employees within the sample testified through their responses that sufficient monetary incentives were provided, and 67% agreed that performance-based incentives were paid (IR6, factor loading of 0.76. However, only 42% indicated that they were further incentivized through additional bonuses for professional, distinguished performance (IR10, factor loading of 0.78). According to the results, this research finds that organizations within the Saudi industrial sector invest in basic, performance-based incentives and rewards systems that are acceptable by their employees. The findings show that reward systems providing basic needs as well as performance-based incentives are established within major corporations in the industrial sector, indicating a high degree of satisfaction with employment conditions related to compensation enhancement measures (incentives and rewards). However, the area where Saudi industrial sector companies are lacking is in providing additional monetary rewards for professionalism.

Moreover, under the performance construct, the highest relevant measurement instruments were found to be PM1 with a factor loading of 0.74. However, employee performance effects with respect to incentivization were measured by two instruments, one for financial incentives (PM3, factor loading of 0.64), and the other for moral, non-financial incentives (PM4, factor loading of 0.60). Both results showed that nearly 89% of respondents, a dominant majority, agreed that their performance was influenced by being incentivized or motivated. The results from these two instruments do not contradict the unsupported H1, the hypothesized significant positive relationship between incentive system and performance measures, rather they reflect the emotionally influenced perceptions of employees to financial and moral incentives as isolated dimensional responses, irrespective of the low significance level of the overall relationship between Incentives and rewards and Performance Measures variables. The statistical analysis realized and successfully eliminated the possibility of a Type-I error due to the skewed results of PM3 and PM4, which were extremely skewed to the left side of the Likert scale, towards strong agreement.

The survey expanded to measure satisfaction with forms of moral incentives, other measurement instruments included in the survey section tested factors of relevance to the dependent variable, incentives and rewards, including deserved promotions, respect of opinions and aspirations, and provision of transportation allowance, all of which were >55% in agreement, which further establishes that companies in the industrial sector in Saudi Arabia provide competitive benefits to employees but that there is a need for further enhancement to remain competitive against the rapidly increasing competition leading in the sector.

Second, the added value in this study is in the context, source and the size of the data. The study explores the research model in Saudi Arabia, a country with a cultural profile different than the Western context where most previous studies were conducted. This study responded to the scarcity of research in such context, hoping that it provides theoretical and practical insights for scholars and practitioners. Moreover, it could be an advantage that the data was collected from a big and wide sector (i.e., industrial sector) where many local and global talents have landed. Therefore, the study sample representation and implications are better compared to other sectors with narrow employment size and less effect to the overall economy.

Third, it is interesting that when job satisfaction acts as a mediator, the influence of incentives and rewards system on employees' performance is significant. Job satisfaction seems to be an important mediator that contributes to employees' performance. That is, employees' productivity becomes visible and enhanced when their levels of job satisfaction are high and supported by managers' good incentives and reward systems. This finding suggests that the relationship between reward and performance is complex and encourage researchers to further examine potential intervening variables in future studies.