Motivational effects of pay for performance: a multilevel analysis of a Korean case

Abstract

Individual pay for performance is regarded as a major motivational practice, but direct empirical examinations of its effects on employee motivation are rare. Such research is especially rare in collectivistic societies in which stable seniority-based practices have prevailed. The current research examines the effects of pay for performance on employee motivation. With two individual-level moderators of monetary value and perception of the practice, the current research uses a multilevel frame to examine the issue. Data were collected from 604 individuals from 30 companies in Korea, and Hierarchical Linear Modeling analyses were used. The results show that after controlling the effects of their perceptions of pay risk and intrinsic work value, monetary work value did not significantly moderate the motivational effect of the compensation practice, but the moderating effect of perception of the practice remained significant. Discussion of the results is provided.

Keywords:

• monetary value
• motivation
• multilevel analysis
• pay for performance
• perception of HR practice

Acknowledgements

This work was supported by the Korea Research Foundation Grant funded by the Korean Government (B00438).

Notes

1. In a multilevel frame, a moderator should be discussed in terms of the level issues. Whether higher-level or lower-level variables will be moderators is a conceptual issue, and unlike several studies examining higher-level variables as moderators (e.g. Hofmann et al. 2000; Whitener 2001), the research here examines individual-level variables as moderators. This is attributable to the current research frame of examining the differential effects among individuals. This research frame, therefore, is consistent with existing analyses examining individual-level variables as moderators in person–situation interactions (e.g. Meyer, Irving and Allen 1998).