Investigating the Effect of Compensation on Individual Performance: A Study on the Mediating Role of Internal Motivation and the Moderating Role of Self-efficacy and Reward Expectancy

Document Type : Research Paper

Authors

1 Prof. in Business Management, Faculty of Management, University of Tehran, Iran

2 Associate Prof. in Business Management, Faculty of Management, University of Tehran, Iran

3 Prof. in Human Resource Management, Faculty of Management, University of Tehran, Iran

4 Prof. in Human Resource Management, Faculty of Management and Accounting, University of Shahid Beheshti, Tehran, Iran

5 PhD. in Human Resource Management, Faculty of Management, University of Tehran, Iran

Abstract

Objective: Compensation is the most important part of the employment relationship and is, of course, one of the heaviest costs of any organization. Human resource managers as well as management theorists have always sought to answer the question of how compensation for services affects people's performance. This research has been conducted to explain the relationship between service compensation and individual performance in response to this fundamental question.
Methods: This research was carried out using hierarchical regression method - based on real salary information. A questionnaire was used to collect data from 1950 employees of Mellat Bank throughout the country.
Results: The results of this study indicate that the effects of pay for performance on employee performance are higher than fixed payments. In addition, self-success and the expectation of receiving rewards in the relationship between performance-based pay and individual performance play a moderating role. Also, based on the results of hierarchical regression, the mediating role of internal motivation in the relationship between payment and individual performance was not confirmed.
Conclusion: The relationship between payment and performance is positive and significant, and the effect of pay for performance on individual performance is more than base-pay. Self-efficacy also has a moderating role in the relationship between performance pay and individual performance. This is a major consequence of the pay structure of the banking industry in Iran (and of course most of the Iranian organizations).

Keywords

Main Subjects

References

Reference
Akerlof, G. A., & Yellen, J. L. (Eds.). (1986). Efficiency wage models of the labor market. Cambridge University Press.
 Ashton, R. H. (1990). Pressure and performance in accounting decision settings: Paradoxical effects of incentives, feedback, and justification. Journal of Accounting Research, 28, 148-180.
Awasthi, V., & Pratt, J. (1990). The effects of monetary incentives on effort and decision performance: The role of cognitive characteristics. Accounting Review, 65(4), 797-811.
Bailey, C. D., & Fessler, N. J. (2011). The Moderating Effects of Task Complexity and Task Attractiveness on the Impact of Monetary Incentives in Repeated Tasks. Journal of Management Accounting Research, 23(1), 189-210.
Bandura, A. (1977). Self-efficacy: toward a unifying theory of behavioral change. Psychological review, 84(2), 191-215.
Bandura, A. (1986). The explanatory and predictive scope of self-efficacy theory. Journal of social and clinical psychology, 4(3), 359-373.
Bartol, K. M., & Durham, C. C. (2000). Incentives: Theory and practice. Cooper. C. and Locke, E.,(Eds.) Industrial and Organizational Psychology, Oxford: Blackwell.
Bartol, K. M., & Locke, E.A. (2000). Incentives and motivation. In Rynes S.L, and Gerhart, Compensation in organizations: Current research and practice. Wiley, 104-147.
Belcher, D.W., & Atchison, T.J. (1987). Compensation Management (2nd Ed). New Jersey: Prentice- Hall.
Bergmann, T.J., Scarpello, V.G. (2002). Compensation decision making. Australia: South-Western Thomson Learning.
Brown, M. P., Sturman, M. C., & Simmering, M. J. (2003). Compensation Policy and Organizational Performance: The Efficiency, Operational, and Financial Implications of Pay Levels and Pay Structure. Academy of Management Journal, 46(6), 752-762.
Cameron, J., & Pierce, W. D. (1994). Reinforcement, reward, and intrinsic motivation: A meta-analysis. Review of Educational research, 64(3), 363-423.
Chen, G., Gully, S. M., & Eden, D. (2001). Validation of a new general self-efficacy scale. Organizational Research Methods, 4(1), 62-83.
Deci, E. L., & Ryan, R. M. (1980). Self-determination theory: When mind mediates behavior. The Journal of Mind and Behavior, 1(1), 33-43.
Deci, E. L., & Ryan, R. M. (1985). Intrinsic motivation and self-determination in human behavior. New York, NY: Plenium.
Deci, E. L., Koestner, R., & Ryan, R. M. (1999). A meta-analytic review of experiments examining the effects of extrinsic rewards on intrinsic motivation. Psychological bulletin, 125(6), 627-668.
Divandari, A., Seyed Javadin, S.R., Khodadad Hoseini, S.H. (2015). Market orientation in Iran banking Industry with an emphasis on HR roles. Journal of Business Management, 7(2), 295-314.
(in Persian)
Eisenberger, R., & Aselage, J. (2008). Incremental effects of reward on experienced performance pressure: Positive outcomes for intrinsic interest and creativity. Journal of Organizational Behavior, 30(1), 95-117.
Eisenberger, R., Pierce, W. D., & Cameron, J. (1999). Effects of reward on intrinsic motivation-Negative, neutral, and positive: Comment on Deci, Koestner, and Ryan (1999). Psychological bulletin, 125(6), 677-691.
Fang, M., & Gerhart, B. (1999). ‘How do Company Divergences in Pay for Performance Strategy Influence Intrinsic Motivation, Extrinsic Motivation and Overall Motivation? Paper presented at the annual meeting of the Academy of Management, Chicago.
Fessler, N. J. (2003). Experimental evidence on the links among monetary incentives, task attractiveness, and task performance. Journal of Management Accounting Research, 15(1), 161-176.
Gardner, D. G., Dyne, L., & Pierce, J. L. (2004). The effects of pay level on organization‐based self‐esteem and performance: A field study. Journal of Occupational and Organizational Psychology, 77(3), 307-322.
Gerhart, B., & Milkovich, G. T. (1990). Organizational differences in managerial compensation and financial performance. Academy of Management Journal, 33(4), 663-691.
Gerhart, M., & Rynes, S. L. (2003). Compensation: Theory, evidence, and strategic implications. Thousand Oaks, CA: Sage.
 Hasangholipor Yasory, T., Ansari, M., Elahi Gol, A. (2012). A Conceptual Model to Examine the Relationship between "Internal Marketing" and "Market Orientation" Considering the Mediator Variables of "Organizational Commitment" and "Organizational Citizenship Behavior: A Case Study in Bank Mellat. Journal of Business Management, 4(11), 39-54. (in Persian)
Heneman, R. L., Ledford, G. E. J., & Gresham, M. T. (2000). The changing nature of work and its effects on compensation design and delivery. In S. L. Rynes, & B. Gerhart (Eds.), Compensation in organizations: Current research and practice (pp. 195–240). San Francisco: Jossey-Bass.
Igalens, J., & Roussel, P. (1999). A study of the relationships between compensation package, work motivation and job satisfaction. Journal of Organizational Behavior, 20(7), 1003-1025.
Jenkins Jr, G. D., Mitra, A., Gupta, N., & Shaw, J. D. (1998). Are financial incentives related to performance? A meta-analytic review of empirical research. Journal of Applied Psychology, 83(5), 777-787.
Kenny, D. A., Kashy, D. A., & Bolger, N. (1998). Data analysis in social psychology. The handbook of social psychology, 1(4), 233-265.
Kohn, A. (1998). Challenging Behaviorist Dogma: Myths about Money and Motivation. Compensation and Benefits Review, 30 (2), 27 -33.
Kuvaas, B. (2006). Work performance, affective commitment, and work motivation: the roles of pay administration and pay level. Journal of Organizational Behavior, 27(3), 365-385.
Libby, R., & Lipe, M. G. (1992). Incentives, effort, and the cognitive processes involved in accounting-related judgments. Journal of Accounting Research, 30(2), 249-273.
Locke, E. A., & Latham, G. P. (2002). Building a Practically Useful Theory of Goal Setting and Task Motivation on November 9th, 2011. In Business Models, Business Theories. American psychologist, 57(9), 705-717.
Lum, L., Kervin, J., Clark, K., Reid, F., & Sirola, W. (1998). Explaining nursing turnover intent: job satisfaction, pay satisfaction, or organizational commitment? Journal of Organizational Behavior, 19(3), 305-320.
Lyons, F. H., & Ben-Ora, D. (2002). Total rewards strategy: The best foundation of pay for performance. Compensation & Benefits Review, 34(2), 34-40.
Milkovich, G. T., & Newman, J.M. (2008). Compensation. (9th ed). New York, NY: McGraw-Hill Irwin.
Milkovich, G. T., Gerhart, B., & Hannon, J. (1991). The effects of research and development intensity on managerial compensation in large organizations. The Journal of High Technology Management Research, 2(1), 133-150.
Mitchell, T. R., & Mickel, A. E. (1999). The meaning of money: an individual differnce perspective. Academy of Management Review, 24(3), 568–578.
Opsahl, R. L., & Dunnette, M. D. (1966). The role of financial compensation in industrial motivation. Psychological Bulletin, 66(2), 94-118.
Park, S., & Sturman, M. C. (2012). How and What You Pay Matters The Relative Effectiveness of Merit Pay, Bonuses and Long-Term Incentives on Future Job Performance. Compensation & Benefits Review, 44(2), 80-85.
Preacher, K. J., & Hayes, A. F. (2004). SPSS and SAS procedures for estimating indirect effects in simple mediation models. Behavior Research Methods, Instruments, & Computers, 36(4), 717-731.
Ramooz, N; Moshabbaki, A; Ahmadi, P; KhodadadHosseini, H; (2013) Internal Marketing Orientation Measurement in Service Industry (Case Study: Iran Banking Industry). Journal of Business Management, 4 (14), 93-106. (in Persian)
Richter, A. (2003). Total rewards: Meeting the pay challenge. Strategic HR Review, 3(1), 16-19.
Rosalie, J. (2005). Reward for value: Six steps to increasing your company‘s―people value. Benefits and Compensation Digest, 42(7), 28-33.
Ryan, R. M., & Deci, E. L. (2000). Self-determination theory and the facilitation of intrinsic motivation, social development, and well-being. American psychologist, 55(1), 68-78.
Rynes, S. L., & Gerhart, B. A. (2000). Compensation in organizations. Jossey-Bass.
Schunk, D. H., & Lilly, M. W. (1984). Sex differences in self-efficacy and attributions: Influence of performance feedback. Journal of Early Adolescence, 4(3) 203–213.
Sprinkle, G. B. (2000). The effect of incentive contracts on learning and performance. The Accounting Review, 75(3), 299-326.
Stajkovic, A.D., Luthans, F. (1998). Self-efficacy and work-related performance: a meta-analysis. Psychoogical Bulltin, 124(2), 240–261.
U.S. Bureau of Labor Statistics. (2007, December). Employer costs for employee compensation for the regions. Retrieved from http://www.bls.gov/ro7/ ro7ecec.pdf.
Voyt, D. (2011). Identifying Total Rewards Systems and Organizational Culture Type Using The Competing Values Framework. Thesis, Capella University.
Vroom, V. H. (1964). Work and motivation. New York: Wiley.
Journal of Business Management
Volume 10, Issue 3
2018
Pages 673-694

Files

Share

How to cite

Statistics