International Journal of Business Management and Economic Review

Vol. 5, No. 01; 2022

ISSN: 2581-4664

REWARDS IS NOT ENOUGH

Hadi Pitono, Djoko Setyadi, Sri Mintarti, Rahcmad Budi Suharto and Meiki Permana
Faculty of Economics and Business, Mulawarman University, Samarinda, Indonesia

http://doi.org/10.35409/IJBMER.2022.3362

ABSTRACT
Rewards are certainly needed to stimulate employees to be more enthusiastic in working. The
study analyzed the role of job satisfaction mediation on the relationship between rewards to
employees and employee productivity. The analysis used Structural Equation Modeling, with a
sample of 350 employees. The analysis results prove; that there is a positive and significant
influence between awards and employee productivity. There is a positive and significant influence
between rewards to job satisfaction. There is a complete mediation role of Job Satisfaction to the
relationship between Rewards and Employee Productivity. These results prove that Rewards are
not enough to increase employee productivity. However, rewards must increase job satisfaction
first before increasing employee productivity. Human Resource Managers can use these results to
formulate the types of awards given to Employees to increase Employee Productivity.

Keyword: Rewards, Job Satisfaction, Employee Productivity.

1. INTRODUCTION
Productivity is the pride of every company, organization, and even country in a state of
disruption of global financial turmoil, investment climate, slowing economic growth, trade issues,
and the industrial revolution 4.0, which has a tremendous impact on the business world.
Companies, organizations, countries strive to face these challenges by encouraging productivity
and profitability so that the company's sustainability can be adequately maintained and developed.
According to literacy, there are four determinants of productivity, namely: Physical Capital,
Human Capital, Natural Resources, Knowledge, and Technology. According to (Snell & Morris
2019), Human Resource Management is the process of managing human talent to achieve
organizational goals. While (Robert L. Mathis, 2019) "It is a formal system designed within
organizations to manage human talent to achieve organizational goals."
According to (Aithal et al., 2016), Theory X and Theory Y are based on assumptions about
human nature and behavior that determine how individuals manage their employees. XY-Z theory.
Theory X believes that employees work to meet their basic needs. Theory X managers believe that
employees need closed supervision and responsible individuals are given immediate rewards.
Employees are considered the most valuable asset to the company and drive the company's internal
workings. Theory Y states that these particular employees thrive in their challenges and hope to
improve their performance. Workers also tend to assume full responsibility for their work and do
not require constant supervision to produce higher quality and standard products.
Human Capital is analyzed by analyzing interesting phenomena of PT. Petrosea Tbk.
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International Journal of Business Management and Economic Review
Vol. 5, No. 01; 2022
ISSN: 2581-4664

The phenomenon that occurred, the company is experiencing consecutive losses from 2014 to
2016, and then experiencing a revival in 2017 to 2019, by making profits.
However, the number of projects handled did not significantly change from year to year.
Another interesting phenomenon is that, in 2016, the number of projects increased significantly,
but the company still suffered losses.
Samples from 350 employees the phenomenon is analyzed factors that affect employee
productivity as endogenous variables. With the following indicators of employee productivity;
good work attendance, good skills, and skills; complete the work on time; achieving the optimal
quantity of work; Faster transformation of job digitization. While Exogenous Variables are
Rewards, and Mediation Variables are Job Satisfaction.

2. LITERATURE REVIEW
In management, X, Y, and Z are theories of human motivation relating to Maslow's hierarchy of
needs and how human behavior and motivation are factors in productivity. (Byorum, 2015).
(Hanaysha & Tahir, 2016), Employee rewards significantly affect job satisfaction, low satisfaction
with contingent rewards, benefits, and salaries (Masum et al., 2016). Gratification plays a
significant and positive role in employee engagement and motivation and as a tool to improve
sustainable performance and competitiveness (Jeha et al., 2022). Intrinsic Rewards have a positive
and significant effect on performance. In contrast, Extrinsic Rewards have a negative and
insignificant effect on performance, and Job Satisfaction can partially mediate intrinsic rewards
relationships to performance and fully mediate extrinsic rewards relationships to Performance
(Pramono, 2021). (Böckerman & Ilmakunnas, 2012), Increasing the average level of employee job
satisfaction on productivity is positive and significant.
Variable job satisfaction does not mediate the relationship between rewards and employee
performance ( Ratri et al., 2021).

3.CONCEPTUAL FRAMEWORK AND RESEARCH HYPOTHESIS

The Conceptual Framework of the Research Model can be seen in Figure 1.

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International Journal of Business Management and Economic Review
Vol. 5, No. 01; 2022
ISSN: 2581-4664

Figure 1. Conceptual Framework and Research Hypothesis

Description of Notation:
Rewards (X)
X1: Earn the applicable income. X2: Opportunity to use the ability. X3: Recognition of
achievement.
X4: An exciting and challenging job. X5: Development opportunities.
Job Satisfaction (M) M1: A decent reward.
M2: Good working facilities.
M3: The organization's internal relationships are well established. M4: Award for work
performance.
M5: Get job security. Employee Productivity (Y)
Y1: Good work attendance rate. Y2: Good skills.
Y3: Get the job done on time.
Y4: Achieving the optimal quantity of work.
Y5: The transformation of digitalization of work.

Hypothesis 1 (H1): Rewards have a Positive and Significant Impact on Job Satisfaction.
Hypothesis 2 (H2): Rewards have a Positive and Significant Impact on Employee Productivity.
Hypothesis 3 (H4): Job Satisfaction mediates the relationship between Rewards to Employee
Productivity.

4.STRUCTURAL EQUATION MODELING (SEM)

Structural Equation Modeling (SEM) can be seen in Figure 2.

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International Journal of Business Management and Economic Review
Vol. 5, No. 01; 2022
ISSN: 2581-4664

Figure 2. Structural Equation Modeling (SEM)

Notations used in Structural Equation Modeling (SEM):

ξ: Exogenous Latent Variables (Rewards).
η1: Endogenous Latent Variables (Job Satisfaction).
η2: Endogenous Latent Variables (Employee Productivity).
δ: Measurement error on the manifest variable for Exogenous latent variable. ε: Measurement error
on the manifest variable for latent variable Endogene. γ: Coefficient of influence of exogenous
variables on endogenous variables. β: Coefficient of influence of endogenous variables on
endogenous variables.

Outer Model Equation:

Rewards (X) or (ξ):
X1 = λX1ξ + δ1 X2 = λX2ξ + δ2 X3 = λX3ξ + δ3 X4 = λX4ξ + δ4 X5 = λX5ξ + δ5

Job Satisfaction (M) or (η1):

M1 = λM1η1+ ε1 M2 = λM2η1+ ε2 M3 = λM3η1+ ε3 M4 = λM4η1+ ε4 M5 = λM5η1+ ε5

Employee Productivity (Y) or (η2):

Y1 = λY1η2+ ε6 Y2 = λY2η2+ ε7 Y3 = λY3η2+ ε8 Y4 = λY4η2+ ε9 Y5 = λY5η2+ ε10

Inner Model Equation:

Job Satisfaction (M) or (η1) = γ1ξ1 +ξ1
Employee Productivity (Y) or (η2) = γ2ξ1 + β1η1 +ξ2

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International Journal of Business Management and Economic Review
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ISSN: 2581-4664

5. METHODS
This study uses survey techniques by spreading questionnaires to 350 employees, then the data or
information obtained is processed by statistical methods using software Warp PLS for data
analysis. This research is an explanatory reseach that aims to explain the relationship between
variables by testing a theory or hypothesis to strengthen or reject theories or hypotheses to analyze
and test the effect of Rewards on Employee Satisfaction and Productivity.
Using variance-based and factor-based structural equation models (SEM), the least-squares, and
factor-based methods. (Kock, 2015b)(Kock, 2015a).

There is a ten model fit and quality index (Kock, 2010)(Kock, 2014)(Kock, 2015c), as follows
(refer to Table 1):

Table 1. Model fit and quality index

No Model fit & Quality index Criteria Fit

1 Average Path Coefficient (APC) p < 0.001
2 Average R-squared (ARS) p < 0.001
3 Average Adjusted R-squared (AARS) p < 0.001
Average block Variance Inflation Factor Acceptable if ≤ 5
4
(AVIF) Ideally ≤ 3.3
Acceptable if ≤ 5
5 Average Full Collinearity VIF (AFVIF)
Ideally ≤ 3.3
Small ≥ 0.1
6 Tenenhaus GoF (GoF) Medium ≥ 0.25
Large ≥ 0.36
Acceptable if ≥ 0.7
7 Simpson's paradox ratio (SPR)
Ideally = 1
Acceptable if ≥ 0.9
8 R-squared contribution ratio (RSCR)
Ideally = 1
9 Statistical suppression ratio (SSR) Acceptable if ≥ 0.7
Nonlinear- bivariate causality- direction ratio
10 Acceptable if ≥ 0.7
(NLBCDR)

6. RESULTS AND DISCUSSION

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Vol. 5, No. 01; 2022
ISSN: 2581-4664

Table 2. Composite reliability coefficients, Cronbach's alpha coefficients, Average

variances extracted (AVE)

Latent Variables Composite reliability Cronbach's alpha Average variances

coefficients coefficients extracted (AVE)

Rewards (X) 0.891 0.847 0.621

Job Satisfaction (M) 0.965 0.955 0.849

Employee 0.962 0.950 0.836

Productivity (Y)

Table 3. Analysis Results Model fit and quality index

Model fit & Quality Analysis Remarks

No Criteria Fit
index results
Average Path 0.438 Good
1 p < 0.001
Coefficient (APC) p < 0.001 Significant
Average R-squared 0.520 Good
2 p < 0.001
(ARS) p < 0.001 Significant
Average Adjusted R- 0.519 Good
3 p < 0.001
squared (AARS) p < 0.001 Significant
Average block Acceptable if ≤ 5
4 Variance Inflation 1.205 Ideal
Ideally ≤ 3.3
Factor (AVIF)
Average Full Acceptable if ≤ 5
5 Collinearity VIF 1.394 Ideal
Ideally ≤ 3.3
(AFVIF)
Small ≥ 0.1
6 Tenenhaus GoF (GoF) Medium ≥ 0.25
Large ≥ 0.36 0.632 Large
Simpson's paradox ratio Acceptable if ≥ 0.7
7
(SPR) Ideally = 1 1 Ideal
R-squared contribution Acceptable if ≥ 0.9
8
ratio (RSCR) Ideally = 1 1 Ideal
Statistical suppression 1 Accepted
9 Acceptable if ≥ 0.7
ratio (SSR)
Nonlinear- bivariate 1 Accepted
10 causality- direction Acceptable if ≥ 0.7
ratio (NLBCDR)
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Vol. 5, No. 01; 2022
ISSN: 2581-4664

Table 4. R-squared coefficients, Adjusted R-squared coefficients, Q-squared coefficients

Latent Variables R-squared Adjusted R-squared Q-squared

coefficients coefficients coefficients

Job Satisfaction (M) 0.280 0.278 0.278

Employee Productivity (Y) 0.761 0.759 0.759

Results of 1st Hypothesis Analysis (H1)

Figure 3. The best-fitting curve for a multivariate relationship between Rewards (X) with Job
Satisfaction (M)
The relationship between Rewards (X) to Job Satisfaction (M) is Positive (β = 0.529) and
Significant (p < 0.001). The results showed that the higher the rewards received by employees,
causing job satisfaction to increase.

Results of the Second Hypothesis Analysis (H2)

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International Journal of Business Management and Economic Review
Vol. 5, No. 01; 2022
ISSN: 2581-4664

Figure 4. The best-fitting curve for a multivariate relationship between Rewards (X) with
Employee Productivity (Y)

The relationship between Rewards (X) to Employee Productivity (Y) is Positive (β = 0.430) and
Significant (p < 0.001). The better the rewards are given to employees, the better or increase
employees' productivity.

Results of the Third Hypothesis Analysis (H3)

Figure 5. Before mediated by Job Satisfaction

Figure 6. After Job Satisfaction Mediated

The mediation role of Job Satisfaction (M) to the relationship between Rewards (X) and
EmployeeProductivity (Y) can be analyzed by looking at Figure 6 and Figure 7. In Figure 6, it
appears that the relationship between Rewards (X) and Employee Productivity (Y) is Positive
and Significant (β =0.43, p<0.001). In Figure 7, it appears that, after the role of Complete
Mediation of Job Satisfaction (M), it can be seen that the relationship of Rewards (X) with
Employee Productivity
(Y) becomes positive and insignificant (β = 0.09, p = 0.05).

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Vol. 5, No. 01; 2022
ISSN: 2581-4664

7. CONCLUSION
The results of the overall model analysis show that there is a Complete Mediation Role of Job
Satisfaction to the relationship between Rewards (X) and Employee Productivity (Y).

The Research Model can produce a Coefficient of Determination of Employee Productivity of

0.76, which means Variable Rewards and Job Satisfaction of employees can explain their
performance by 76%. In comparison, the rest (24%) are variables outside the research and error
factor.
The theoretical implication of this research is that other factors besides appreciation to employees,
as well as job satisfaction that causes an increase in employee productivity.

The practical implication of this research is as a reference for policymakers, namely managers and
directors of human resources, in determining the Reward Policy for employees so as not to make
Rewards a weakening factor or a factor that results in a decrease in employee productivity. Awards
are not enough to increase Employee Productivity.

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