Compensation as a signal of organizational culture: the effects of advertising individual or collective incentives

Abstract

Beyond their impact on current employees, compensation systems are thought to convey important messages about an organization's values and practices to potential hires, but explicit empirical support for this belief is scant. In two experiments, US participants evaluated recruiting advertisements containing simple statements about bonuses, with performance basis manipulated between-subjects in the first experiment and within-subjects in the second. Advertising bonuses based on individual performance caused an organization to be perceived as likely to have a more individualist culture, whereas bonuses based on team or organizational performance led to perceptions of a more collectivist culture. When participants in the second study were asked to choose between hypothetical jobs at organizations with different advertised compensation systems, the relation between individual differences and job preference was contingent on their organizational culture perceptions. In contrast to previous research, no modal preference for individual over collective rewards was observed.

Keywords:

• compensation
• individualism/collectivism
• recruitment
• variable pay