Strategic Importance of Compensation Strategy on Employee Performance: Evidence from Lekki Free Zone Area of Lagos State

Abstract

The study examines the strategic importance of compensation on employee performance in an organisation (a study of Lekki Free Trade Zone, Lagos), whose aim is to examine the impact of compensation on employee performance. The study concludes that adopting a better compensation strategy is essential to all organisations. However, because most businesses are unaware of the significance of compensation strategy, but managers often put pressure on workers to work hard despite receiving inadequate pay from the organisation. The study has shown that compensation and other benefits are strategic tools to organisations to influence their employees in order to remain competitive. If adequately developed, the compensation adds value to an organisation and increase workers efficiency in operation, quality service, customer satisfaction, and even achieving organisational goals. Organisations should ensure that their pay plan aligns with their strategic goals. They should also stay current on industry norms, perform frequent market evaluations to know if the company’s compensation packages are competitive and better in order to draw and keep good employees in organisation. Furthermore, they should implement other compensation benefits other than pay to influence employees towards better performance.