“It’s [Not] All ‘Bout the Money”: How do Performance-based Pay and Support of Psychological Needs Variables Relate to Job Performance?

Abstract

Pay setting based on evaluations of employees' job performance is a popular reward system in many of today's organizations (Nyberg, Pieper & Trevor, 2016). Performance-based pay refers to many different forms of pay plans that are used within organizations, such as performance based pay raises on an annual basis, i.e., merit pay systems (Maaniemi, 2013), commissions, and bonus systems (Rynes, Gerhart & Parks, 2005). Organizations use performance-based pay plans as a way of enhancing employees' job performance (Fang & Gerhart, 2012). In this context, pay appraisals usually include quantity and/or quality aspects of performance at work, and reward decisions are determined based on measures of productivity (i.e., number of tasks completed) or manager evaluations of past performance (Cappelli & Conyon, 2018; DeNisi & Murphy, 2017). Past research has found financial rewards to be associated with higher levels of job performance (Cerasoli, Nicklin & Ford, 2014; Cerasoli, Nicklin & Nassrelgrgawi, 2016; Jenkins Jr. et al., 1998). However, their efficiency might be limited to tasks that are simple and boring (Bailey and Fessler, 2011), be of minor importance for performance quality (Cerasoli et al., 2014, 2016), and might decrease performance on interesting tasks (Weibel, Rost & Osterloh, 2009). Moreover, meta-analytic results indicate that if (or when) reward systems attenuate intrinsic motivation (i.e., doing things out of pure interest or joy) or psychological need satisfaction (i.e., satisfaction of higher needs that enable the quest to reach the full human potential as well as ensure happiness and prosperity) they run the risk of hampering performance quality (Cerasoli et al., 2014, 2016; Deci, Koestner & Ryan, 1999). This risk may be more likely when behaviors and rewards are salient and closely intertwined (i.e., when rewards are strictly performance-based) since such explicit links may provide reason for employees to narrow their cognitive attention towards those behaviors that can render future monetary gains rather than on quality (Cerasoli et al.,

Unpacking the effect of autonomous motivation on workplace performance: Engagement and distributive justice matter!

“…The literature also establishes a positive relationship between autonomous motivation and work performance (Baard et al, 2004; Gagné & Deci, 2005; Nordgren Selar et al, 2020). However, it is noted that empirical research on this relationship is rare, particularly in the organization context, although it can be observed in other contexts such as in education and athletics (Ryan & Deci, 2000; Vansteenkiste et al, 2010).…”