PAY AND MOTIVATION

“Pay and Motivation” in context with CIPD Standards

Abstract

Purpose

This paper aims to explore the complex relationships between intrinsic and extrinsic motivation, pay satisfaction and job satisfaction at the retailer that uses a pay-for-performance plan for front-line employees.

Design/methodology/approach

This paper draws on a single organization case study for oil and gas company, and uses a survey, archival documents, open-ended questions and researcher interaction with employees and managers.

Findings

The results provide some support for the complementary nature of intrinsic and extrinsic motivation. Intrinsic motivation was positively associated with pay and job satisfactions, whereas extrinsic motivation was negatively associated with job satisfaction, and not associated with pay satisfaction. The qualitative insights indicate that pay fairness is important, and those who perceived pay was not fair generally made comparisons with others or felt that pay did not reflect their effort. It is also found that the majority of employees perceived that goals were clear.

Research limitations/implications

The dominance of extrinsic motivation without including behavioural, social, and psychological factors in agency theory research is questioned. The research finds no support for “crowding out”, but rather finds some evidence of “crowding in” where intrinsic motivation is enhanced, to the detriment of extrinsic motivation.

Practical implications

The findings highlight that managers should enhance both intrinsic and extrinsic motivation, and pay employees well to increase job satisfaction.

Originality/value

Few studies examine incentives for front-line employees, and there is evidence that minimum wage employees can have high intrinsic motivation. Perceptions of pay fairness can vary across motivation levels, age, and gender.

Table of Content

INTRODUCTION5

LITERATURE REVIEW8

Motivation and pay satisfaction8

Motivation and job satisfaction10

Pay fairness and goal clarity12

Pay Factors13

Fixed Pay and Performance Based Pay13

Tangible and Non Tangible Rewards16

Flexible and Rigid Benefit plans17

Skill Based and Job Based Pay Systems19

Risk Aversity21

Self-Efficacy22

Locus of Control24

Employee Job Satisfaction24

Employee Motivation27

THE CASE STUDY30

The case organization30

DATA COLLECTION32

INSTRUMENTS33

ANALYSIS OF CONSTRUCTS34

Pay satisfaction34

Work motivation - intrinsic and extrinsic35

Job satisfaction36

RESULTS AND DISCUSSION36

Quantitative results36

Motivation and pay satisfaction36

Motivation and job satisfaction37

Intrinsic and extrinsic motivation38

Qualitative data and results39

Perceptions of fairness from other employees44

CONCLUSIONS46

REFERENCES51

APPENDIX63

Introduction

No other incentive or motivational technique comes close to money

Such a quotation reflects the dominant view in the management accounting literature that pay-for-performance incentive systems have a motivational effect. In fact, some authors assert that the primary aim of incentives is to enhance extrinsic motivation by satisfying an individual employee's needs indirectly through means of pay and bonuses. The link between pay-for-performance and extrinsic motivation is explicit in the agency theory literature. Extrinsic motivation is the importance placed on external rewards, such as bonuses and promotion, or the threat of wage cuts or dismissal.

In an agency theory context, incentive contracts designed to encourage extrinsic motivation are held to be indispensable. Similarly, expectancy theory argues that linking incentives to performance motivates employees to increase their effort and performance. The literature has shown that remuneration issues play a critical role in organizations; however, there has been little advice that companies could use in terms of when certain incentive system designs have been more (or less) appropriate. The need for more theoretical development is important because the use of pay-for-performance plans is growing, and there ...