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Does Pay for Performance Increase Employee Motivation and Performance? Results from a Longitudinal Study in a Swedish Industrial Company
Stockholm University, Faculty of Social Sciences, Department of Psychology, Work and organizational psychology.
Stockholm University, Faculty of Social Sciences, Department of Psychology, Work and organizational psychology.
Stockholm University, Faculty of Social Sciences, Department of Psychology, Work and organizational psychology. North-West University, Potchefstroom, South Africa.
2018 (English)In: Book of proceedings 13th Conference of the European Academy of Occupational Health Psychology: Adapting to rapid changes in today's workplace / [ed] K. Teoh, N. Saade, V. Dediu, J. Hassard & L. Torres, Nottingham: European Academy of Occupational Health Psychology , 2018, p. 329-329, article id O161Conference paper, Oral presentation with published abstract (Refereed)
Abstract [en]

The private sector in Sweden as well as other industrial countries is rapidly moving towards more performance-oriented pay systems in order to increase employees’ work motivation. In the research literature there has been a long lasting debate on whether pay for performance increases or decreases motivation, especially in relation to intrinsic motivation (the crowding-out effect), and scholars are still debating the effects of pay-for-performance systems on employee motivation and performance. The overall aim of this study is to contribute to an increased understanding of how pay relates to employee motivation and performance within the context of a pay-for-performance system. More specifically, drawing on self-determination theory (SDT) and goal setting theory this study investigates how psychological needs (autonomy and feedback), goal setting (goal clarity), pay level and performance-based pay raise (assessed at Time 1) relate to subsequent motivation (intrinsic and extrinsic) as well as self-rated and supervisor-rated performance (assessed at Time 2), after controlling for demographic factors (age and sex). Questionnaire data was collected in 2015 and 2016 among all employees in a private Swedish industrial company (N=512, response rate approximately 40 percent). This was supplemented with register data on monthly pay level and individual pay raise along with performance ratings from their pay-setting managers. The findings indicate that pay for performance may have a positive impact on employee motivation and performance but that psychological need satisfaction and goal-setting seem to be crucial for both motivation and job performance. The study gives an input to the pay-motivation-performance puzzle with implications for managers and organisations.

Place, publisher, year, edition, pages
Nottingham: European Academy of Occupational Health Psychology , 2018. p. 329-329, article id O161
Keywords [en]
pay, performance, employee motivation, longitudinal
National Category
Psychology
Research subject
Psychology
Identifiers
URN: urn:nbn:se:su:diva-160553ISBN: 978-0-9928786-4-1 (print)OAI: oai:DiVA.org:su-160553DiVA, id: diva2:1251724
Conference
13th European Academy of Occupational Health Psychology Conference 2018, Lisbon, Portugal, September 5-7, 2018
Available from: 2018-09-27 Created: 2018-09-27 Last updated: 2019-01-10Bibliographically approved

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