Situation or Person? Contrasting the Effects of Budget Constraints and Individual Values on Pay-for-Performance Norms

Abstract

In this study, the effects of autonomy values and funding constraints on individual norms concerning merit pay decisions were examined. Policy-capturing regressions were performed on 72 students' answers to a pay-planning exercise. These regressions produced coefficients that described the participants' norms concerning the allocation of merit pay raises. Hierarchical analyses of variance showed that autonomy values had a significant and sizable effect on individual pay-for-performance norms. Results suggest that the administration of merit pay systems and future field studies should recognize that measuring individual values will help to explain the diversity of individual responses to the same merit pay system.