Premium
CONTINGENCIES IN THE EFFECTS OF PAY RANGE ON ORGANIZATIONAL EFFECTIVENESS
Author(s) -
KEPES SVEN,
DELERY JOHN,
GUPTA NINA
Publication year - 2009
Publication title -
personnel psychology
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 6.076
H-Index - 142
eISSN - 1744-6570
pISSN - 0031-5826
DOI - 10.1111/j.1744-6570.2009.01146.x
Subject(s) - workforce , productivity , performance related pay , pay for performance , compensation (psychology) , empirical research , range (aeronautics) , economics , psychology , social psychology , microeconomics , incentive , statistics , mathematics , macroeconomics , economic growth , materials science , composite material
The degree of pay spread can influence many organizational level outcomes (e.g., workforce productivity and organizational performance), but empirical studies are inconsistent about the directionality of the effect. We argue that it is not simply the width of the pay range but also the factors responsible for the width that explain the effects of the pay range on employee and organizational outcomes. We expect that when wider pay ranges are attributable to the use of performance‐based pay, the effects of the pay range on performance are positive, but narrower pay ranges attributable to performance‐based pay reduce this effect substantially. By contrast, wider pay ranges attributable to politically based pay should have negative effects on performance, and this effect should be weakened when the pay ranges are narrower. Data from a sample of motor carriers generally support our predictions. Although wider pay ranges have positive effects, the results reveal a complex pattern of relationships among the basis of pay allocations and pay range width on the one hand and workforce productivity and organizational performance on the other. Implications for future compensation and strategic human resource management research are discussed.