Pay-for-performance, Sometimes: An Interdisciplinary Approach to Integrating Economic Rationality with Psychological Emotion to Predict Individual Performance

Maltarich, Mark A.; Nyberg, Anthony J.; Reilly, Greg; Abdulsalam, Dhuha; Martin, Melissa

doi:10.5465/amj.2015.0737

Cited by 37 publications

(58 citation statements)

References 57 publications

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“…Established theories (e.g., equity, expectancy) and strong empirical evidence (e.g., Cerasoli, Nicklin, & Ford, 2014; Jenkins, Mitra, Gupta, & Shaw, 1998) demonstrate individual pay-for-performance (PFP) incentive effects (Gerhart, 2017; Maltarich, Nyberg, Reilly, Abdulsalam, & Martin, 2017; Mitra, Jenkins, Gupta, & Shaw, 2015), but less is known about collective PFP, which is defined as pay that is contingent on collective outcomes. This is troubling, because employees are nested in units (Conroy, Gupta, Shaw, & Park, 2014), where their individual behaviors, attitudes, and performance combine to determine collective performance (Gupta & Shaw, 2014; Ployhart, Nyberg, Reilly, & Maltarich, 2014).…”

mentioning

confidence: 99%

Collective Pay for Performance: A Cross-Disciplinary Review and Meta-Analysis

Nyberg

Maltarich

Abdulsalam

et al. 2018

Journal of Management

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Rewarding collective outcomes has become an increasingly important strategic motivational tool for driving collective success, reflecting the insight that paying employees for individual contributions does not always optimize performance in collective endeavors. Research into different types of collective pay for performance (PFP), or pay that is contingent on collective outcomes, has been studied in diverse academic fields (e.g., economics, strategy, psychology), but the compartmentalization between these academic disciplines hinders conceptual coordination. To advance this research and its related insights, this article provides a review of the theory and evidence pertaining to the relationships between different collective PFP types and collective outcomes. We also provide a meta-analysis that shows that collective PFP has desirable outcomes (e.g., meta-analysis shows an overall ρ = 0.11; p < .001), substantiating the value of studying collective PFP separately from individual PFP. The review also reveals a lack of empirical and theoretical development and highlights the need for a comprehensive theory of collective PFP. Our cross-disciplinary review of 106 empirical articles builds a foundation for advancing common pursuits, integrating knowledge, and creating theory. The consolidated perspectives point to promising directions for future research.

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confidence: 99%

Collective Pay for Performance: A Cross-Disciplinary Review and Meta-Analysis

Nyberg

Maltarich

Abdulsalam

et al. 2018

Journal of Management

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“…The novelty and importance of BE is that it questions three core tenets of neo-classical economic theory, namely that individuals (1) have well-defined, stable preferences along with unbiased beliefs; (2) make optimal choices based on these beliefs and preferences; and (3) their primary motivation is self-interest (Thaler, 2016). There is a clear relevance to the study of incentives at work, and indeed there is a series of recent studies within economics questioning whether they have the simple and direct effect posited by neo-classical economics (Fehr and Gachter, 2000;Gneezy et al, 2011;Larkin and Leider, 2012;Maltarich et al, 2017;Nyberg et al, 2016).…”

Section: Behavioural Economics: the Work Of Kahneman And Tverskymentioning

confidence: 99%

Back to the Shop Floor: Behavioural Insights from Workplace Sociology

Pendleton

Lupton

Rowe

et al. 2019

Work, Employment and Society

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This article compares insights into decision-making and behaviour developed by Kahneman and Tversky in behavioural economics with the main findings from studies of pay incentives in workplace sociology in the middle decades of the 20th century. The article shows how many of the insights offered by behavioural economists, such as loss aversion, were anticipated and considered by the workplace sociologists. It is argued that the sociological studies offer deeper and more convincing accounts of worker behaviour through a better understanding of the role of social structure, context, and social processes in framing and influencing action.

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“…According to this stream of literature, PFP incentives affect performance via such mechanisms as instrumentality, which is based on direct link between performance and pay (Baker, Jensen and Murphy, 1988;Jenkins, Mitra, Gupta and Shaw, 1998;Cadsby, Song and Tapon, 2007) and the importance of pay-forperformance incentives for motivation (Rynes, Gerhart and Minette, 2004;Garbers and Konradt, 2014), or setting and achieving difficult goals (Presslee, Vance and Webb, 2013). This traditional point of view is still topical and even the latest studies in leading management journals have unearthed new evidence that PFP incentives are positively associated with future performance (Maltarich, Nyberg, Reilly, Abdulsalam and Martin, 2017). These arguments are also strongly rooted in society, and PFP incentives are used in the majority of US companies (Rynes, Gerhart and Parks, 2005).…”

Section: Effects Of Pfp Incentives On Individual Performancementioning

confidence: 99%

“…Recent research aims to integrate economic and psychology-based explanations. For example, Maltarich et al (2017) studied the moderating role of expectations on the effect of PFP incentives on individual performance. They concluded that the effect of PFP incentives on performance was moderated by accumulated underperformance in a PFP incentive system that was carried forward to future periods.…”

Section: Effects Of Pfp Incentives On Individual Performancementioning

confidence: 99%

Performance Myopia: The Effect of Pay-For-Performance Incentives on Exploration and Coordination

Králová¹,

Král²

2019

AOP

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Incentives are one of the core practices of strategic human resource management and their effect on motivation and performance has been studied extensively. Particular attention is devoted to pay-for-performance (PFP) incentives while research on the effect of PFP incentives on performance has produced contradictory results. More importantly, incentives are not an isolated process; the effect of incentives goes beyond individual or organisational performance because they affect an entire organisation. Although incentives are included in most organisational design frameworks, the effect of incentives on other organisational design components has been neglected. The study uses the organisational design framework to focus on neglected relations between incentives and other organisational design components. The purpose of the study is to explore what are the organisational design components and how they are influenced by PFP incentives. A case study research design was used. The data was collected in a small company in which the incentive system was changed to PFP incentives as a part of substantial changes in the organisational design. Data was collected through interviews with employees, supported by internal documentation and observation. Thematic analysis was used to analyse the data. In the case, the PFP incentives led to higher performance although the PFP incentives restricted the new exploratory strategy and harmed cooperation. The effect of the PFP incentives on exploration and cooperation was slow, and hardly visible, predominantly as a result of unintentionally deviated attention. The study points out that focusing solely on performance when designing incentive systems may be myopic because PFP incentives may have a detrimental effect on other organisational design components. Based on the results, the paper provides a set of suggestions to consider when implementing PFP incentives.

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Pay-for-performance, Sometimes: An Interdisciplinary Approach to Integrating Economic Rationality with Psychological Emotion to Predict Individual Performance

Cited by 37 publications

References 57 publications

Collective Pay for Performance: A Cross-Disciplinary Review and Meta-Analysis

Collective Pay for Performance: A Cross-Disciplinary Review and Meta-Analysis

Back to the Shop Floor: Behavioural Insights from Workplace Sociology

Performance Myopia: The Effect of Pay-For-Performance Incentives on Exploration and Coordination

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