Changing Pay Systems in Organizations: Using Behavioral Reasoning Theory to Understand Employee Support for Pay-for-Performance (or Not)

Abstract

Recently, the use of pay-for-performance systems has rapidly expanded into new industries. However, many employees resist these changes, mitigating effectiveness. Unfortunately, little scientific research has examined underlying reasons for the support or nonsupport of such systems, informed by theory. Grounded in behavioral reasoning theory and organizational change frameworks, this study examined antecedents and consequences of employees’ reasoning process to support or not support pay-for-performance systems. Structural equation results on 245 employees demonstrated that reasons for and reasons against supporting pay-for-performance systems predicted attitudes and intentions to support the systems. Significant antecedents of the reasoning included pay valence, top management support, and coworker support. Top reasons for supporting the systems included increased opportunities to make money and being recognized for high performance. Top reasons against supporting the systems included the political nature of pay-for-performance and concerns that performance would not be measured accurately. Implications for organizational change programs are highlighted.