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Compensation Schemes, Skill Level, and Task Performance: An Experimental Examination *
Author(s) -
Dillard Jesse F.,
Fisher Joseph G.
Publication year - 1990
Publication title -
decision sciences
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.238
H-Index - 108
eISSN - 1540-5915
pISSN - 0011-7315
DOI - 10.1111/j.1540-5915.1990.tb00320.x
Subject(s) - compensation (psychology) , incentive , task (project management) , computer science , congruence (geometry) , agency (philosophy) , scheme (mathematics) , productivity , principal–agent problem , psychology , microeconomics , social psychology , mathematics , economics , management , mathematical analysis , philosophy , corporate governance , epistemology , macroeconomics
The effect of budget‐based incentive compensation schemes is a fundamental issue in developing and implementing organizational control systems. This study investigates the effect of alternative compensation schemes on performance and satisfaction. A theoretical model outlining the primary relationships is formulated and related hypotheses specified. The hypotheses reflect an integration of agency theory and organization behavior research. Across‐group and within‐group effects are investigated using both single‐period and multiperiod analyses. A laboratory study involving 40 subjects is undertaken and the findings provide insights into the individual and group effects of alternative compensation schemes and the dynamics of changing Compensation schemes on productivity and satisfaction. Specifically, a relationship is found between compensation schemes and performance. The effect on performance is independent of the compensation scheme's perceived fairness. Satisfaction is a function of the congruence between the preferred scheme and the implemented scheme.