The Impact of Incentives in Productivity in Selected Manufacturing Firms in Nairobi

Abstract

Two firms in the same environment with exactly similar resources are likely to perform differently, with one reporting better performance than the other or worse still one making profits while the other makes losses. What makes these identical firms perform differently is the human resources, which cannot be duplicated. There are various characteristics that differ from one individual to another and that cannot be copied. Some of those characteristics are education. ability and experience. The human element is, therefore, important in giving a competitive advantage in a free market, and firms and organisations that recognise this invest in improving capabilities in its human resources. Creating an atmosphere that will enable the full potential of the human resources to be tapped and directed towards the common goal of the organisation should be a priority of the top management. This study investigated the impact that incentives have on the productivity of firms in the manufacturing sector in Nairobi. The study found that high productivity improvement was achieved in firms tha had well designed incentive schemes with some having as high as 50° productivity improvement in the last few years. However, ill designed schemes create an atmosphere of dissatisfaction within the work force and were a cause of low or no productivity improvement. From the study, it is recommended that firms without performance base incentive schemes should introduce them as they are major motivator that assist firms in being competitive through reduced production costs Those that have performance incentive schemes in place shoul continuously strive to improve them and make them adaptable an relevant to the changing environment.