THE IMPACT OF PAY SECRECY ON INDIVIDUAL TASK PERFORMANCE
PETER BAMBERGER,
ELENA BELOGOLOVSKY,
PETER BAMBERGER
Recanati Graduate School of Business Administration Tel Aviv University
Search for more papers by this authorELENA BELOGOLOVSKY
Davidson Faculty of Industrial Engineering and Management, Technion: Israel Institute of Technology
Search for more papers by this authorPETER BAMBERGER,
ELENA BELOGOLOVSKY,
PETER BAMBERGER
Recanati Graduate School of Business Administration Tel Aviv University
Search for more papers by this authorELENA BELOGOLOVSKY
Davidson Faculty of Industrial Engineering and Management, Technion: Israel Institute of Technology
Search for more papers by this author and requests for reprints should be addressed to Peter Bamberger, Recanati Graduate School of Business Administration, Tel Aviv University, Ramat Aviv 69978, Israel; [email protected]
Abstract
We generate and test a moderated mediation model of the effects of pay secrecy—a pay communication policy restricting employees’ access to information regarding the level of other employees’ pay in the organization—on individual task performance. According to this model, the effects of such a policy are posited to be mediated by informational fairness, procedural fairness, and performance-pay instrumentality perceptions, and moderated by tolerance for inequity. Using a lab-based simulation, our findings partially support this model, suggesting that perceived instrumentality mediates the adverse effect of pay secrecy on individual task performance but only for those low in inequity tolerance. For them, the instrumentality-mediated indirect effect accounted for over 20% of the total effect of pay secrecy on individual task performance. For those highly tolerant of inequity, a policy of pay secrecy was found to be directly associated with a higher level of individual performance than pay openness. The implications of the findings for research and practice are discussed.
REFERENCES
-
Ackley D. (1993). What to say about pay.
Compensation and Benefits Review, 25(1), 18–21.
10.1177/088636879302500104 Google Scholar
- Adams JS. (1963). Toward an understanding of inequity. Journal of Abnormal and Social Psychology, 67, 422–436.
- Aiken LS, West SG. (1991). Multiple regression: Testing and interpreting interactions. Newbury Park , CA : Sage.
- Andersson-Straberg T, Sverke M, Hellgren J. (2007). Perceptions of justice in connection with individualized pay setting. Economic & Industrial Democracy, 28, 431–464.
- Bamberger PA, Meshoulam I. (2000). Human resource strategy: Formulation, implementation and impact. Thousand Oaks , CA : Sage.
- Baron RM, Kenny DA. (1986). The moderator-mediator variable distinction in social psychological research: Conceptual, strategic, and statistical considerations. Journal of Personality and Social Psychology, 51, 1173–1182.
- Bartol KM, Martin DC. (1989). Effects of dependence, dependency threats, and pay secrecy on managerial pay allocation. Journal of Applied Psychology, 74, 105–113.
- Bauer DJ, Preacher KJ, Gil KM. (2006). Conceptualizing and testing random indirect effects and moderated mediation in multilevel models: New procedures and recommendations. Psychological Methods, 11, 142–163.
- Cloutier J, Vilhuber L. (2008). Procedural justice criteria in salary determination. Journal of Managerial Psychology, 23(6), 713–740.
- Cohen-Charash Y, Spector PE. (2001). The role of justice in organizations: A meta-analysis. Organizational Behavior and Human Decision Processes, 86, 287–321.
- Colella A, Paetzold R, Zardkoohi A, Wesson M. (2007). Exposing pay secrecy. Academy of Management Review, 32, 55–71.
- Colella A, Zardkoohi A, Paetzold R, Wesson M. (2003). Pay secrecy revisited: An integrative model, Academy of Management Meeting, Seattle , WA .
- Colquitt J. (2001). On the dimensionality of organizational justice: A construct validation of a measure. Journal of Applied Psychology, 86, 386–400.
- Colquitt JA, Conlon DE, Wesson MJ, Porter COLH, Ng KY. (2001). Justice at the millennium: A meta-analytic review of 25 years of organizational justice research. Journal of Applied Psychology, 86, 425–445.
- Conlon DE, Meyer CJ, Nowakowski JM. (2005). How does organizational justice affect performance, withdrawal, and counterproductive behavior? In J Greenberg, J Colquitt (Eds.), Handbook of organizational justice: Fundamental questions about fairness in the workplace. Mahwah , NJ : Erlbaum.
- Cropanzano R, Ambrose ML. (2001). Procedural and distributive justice are more similar than you think: A monistic perspective and a research agenda. In J Greenberg, R Cropanzano (Eds.), Advances in organizational justice (pp. 119–151). Stanford , CA : Stanford University Press.
- Danziger L, Katz E. (1997). Wage secrecy as a social convention. Economic Inquiry, 35(1), 59–65.
- Day NE. (2007). An investigation into pay communication: Is ignorance bliss? Personnel Review, 36, 739–762.
- Dipboye RL. (1990). Laboratory vs. field research in industrial and organizational psychology. International Review of Industrial and Organizational Psychology, 5, 1–34.
- Edwards MA. (2005). The law and social norms of pay secrecy. Berkley Journal of Employment and Labor Law, 26, 41–63.
- Edwards JR, Lambert LS. (2007). Methods for integrating moderation and mediation: A general analytical framework using moderated path analysis. Psychological Methods, 12, 1–22.
- Erez A, Isen AM. (2002). The influence of positive affect on the components of expectancy motivation. Journal of Applied Psychology, 87, 1055–1067.
- Folger R, Konovsky MA. (1989). Effects of procedural and distributive justice on reactions to pay raise decisions. Academy of Management Journal, 32, 115–130.
- Folger R, Rosenfield D, Grove J, Corkan L. (1979). Effects of “voice” and peer opinions on response to inequity. Journal of Personality and Social Psychology, 37, 2253–2261.
- Futrell CM, Omer C, Jenkins OC. (1978). Pay secrecy versus pay disclosures for salesmen: A longitudinal study. Journal of Marketing Research, 15, 214–219.
- Gely R, Bierman L. (2003). Pay secrecy/confidentiality rules and the National Labor Relations Act. Journal of Labor and Employment Law, 6, 120–156.
- Gerhart BA. (2000). Compensation strategy and organizational performance. In S Rynes, B Gerhart (Eds.), Compensation in organizations (pp. 151–194). San Francisco : Jossey-Bass.
-
Greenberg J. (1982). Approaching equity and avoiding inequity in groups and organizations. In
J Greenberg,
RL Cohen (Eds.), Equity and justice in social behavior (pp. 389–435).
New York
: Academic Press.
10.1016/B978-0-12-299580-4.50017-3 Google Scholar
- Greenberg J. (1990). Organizational justice: Yesterday, today and tomorrow. Journal of Management, 16, 399–432.
- Greenberg J. (1993). The social side of fairness: Interpersonal and informational classes of organizational justice. In R Cropanzano (Ed.), Justice in the workplace: Approaching fairness in human resource management (pp. 79–103). Hillsdale , NJ : Erlbaum.
- Grienberger IV, Rutte CG, Van Knippenberg FM. (1997). Influence of social comparison of outcomes and procedure on fairness judgments. Journal of Applied Psychology, 82, 913–919.
- Heyman JE, Mellors B. (2008). Perceptions of fair pricing. In CP Haugtvedt, P Herr, FR Kardes (Eds.), Handbook of consumer psychology (pp. 683–699). New York : Psychology Press.
- Hrnext.com Survey. 2001. More employers ducking pay confidentiality issue—Hrnext.com survey shows many employers view issue as hot potato. Retrieved from http://hr.blr.com/whitepapers/HR-Administration/Employee-Privacy/More-Employers-Ducking-Pay-Confidentiality-Issue/, accessed September 19, 2010.
- Huseman RC, Hatfield JD, Miles EW. (1985). Test for individual perceptions of job equity: Some preliminary findings. Perceptual and Motor Skills, 61, 1055–1064.
- Huseman RC, Hatfield JD, Miles EW. (1987). A new perspective on equity theory: The equity sensitivity construct. Academy of Management Review, 12, 222–234.
- Ilgen DR, Peterson RB, Martin BA, Boeschen DA. (1981). Supervisor and subordinate reactions to performance appraisal sessions. Organizational Behavior and Human Performance, 28, 311–330.
- Jaccard J, Jacoby J. (2010). Theory construction and model-building skills: A practical guide for social scientists (methodology in the social sciences). New York : Guilford.
- Kanfer R. (1990). Motivation theory and industrial/organizational psychology. In MD Dunnette, L Hough (Eds.), Handbook of industrial and organizational psychology. Volume 1. Theory in industrial and organizational psychology (pp. 75–170). Palo Alto , CA : Consulting Psychologists Press.
- Kanfer R, Ackerman PL. (1989). Motivation and cognitive abilities: An integrative/aptitude-treatment interaction approach to skill acquisition. Journal of Applied Psychology—Monograph, 74, 657–690.
- Kemery ER, Bedeian AG, Zacur SR. (1996). Expectancy-based job cognitions and job affect as predictors of organizational citizenship behaviors. Journal of Applied Social Psychology, 26, 635–651.
- King WC Jr, Miles EW, Day DD. (1993). A test and refinement of the equity sensitivity construct. Journal of Organizational Behavior, 14, 301–317.
- Lawler EE III. (1966a). Managers’ attitudes toward how their pay is and should be determined. Journal of Applied Psychology, 50(4), 273–279.
- Lawler EE III. (1966b). The mythology of management compensation. California Management Review, 9, 11–22.
- Leventhal GS. (1976). The distribution of rewards and resources in groups and organizations. In L Berkowitz, E Walster (Eds.), Advances in experimental social psychology, Vol. 9 (pp. 91–131). New York : Academic Press.
- Leventhal GS, Karuza J, Fry WR. (1980). Beyond fairness: A theory of allocation preferences. In G Mikula (Ed.), Justice and social interaction (pp. 167–218). New York : Springer-Verlag.
- Locke EA. (1986). Generalizing from laboratory to field: Ecological validity or abstraction of essential elements. In EA Locke (Ed.), Generalizing from laboratory to field settings (pp. 3–9). Lexington , MA : Lexington Books.
- Locke EA, Latham GP. (2002). Building a practically useful theory of goal setting and task motivation: A 35-year odyssey. American Psychologist, 57, 705–717.
- Miles EW, Hatfield JD, Huseman RC. (1989). The equity sensitivity construct: potential implications for worker performance. Journal of Management, 15, 581–588.
- Milkovich GT, Anderson PH. (1972). Management compensation and secrecy policies. Personnel Psychology, 25, 293–302.
- Milkovich GT, Newman JM. (2005). Compensation ( 8th ed.). New York: McGraw-Hill.
- Naylor JC, Pritchard RD, Ilgen DR. (1980). A theory of behavior in organizations. New York : Academic Press.
- Noy L. (2007). Development of a measure of organizational pay secrecy. Unpublished doctoral dissertation. Alliant International University , Los Angeles .
- Preacher KJ, Hayes AF. (2004). SPSS and SAS procedures for estimating indirect effects in simple mediation models. Behaviour Research Methods, Instruments, Computers, 36, 717–731.
- Ross M, Sicoly F. (1979). Egocentric biases in availability and attribution. Journal of Personality and Social Psychology, 37, 322–336.
- Sauley KS, Bedeian AG. (2000). Equity sensitivity: construction of measure and examination of its psychometric properties. Journal of Management, 26, 885–910.
- Scarr S. (1988). How genotypes and environments combine: Development and individual differences. In N Bolger, A Caspi, G Downey, M Moorehouse (Eds.), Persons in context: Developmental processes (pp. 217–244). New York : Cambridge University Press.
- Schwab DP. (1973). Impact of alternative compensation systems on pay valence and instrumentality perceptions. Journal of Applied Psychology, 58, 308–312.
- Sim V. (2001). What should Hank do about the salary debacle? Harvard Business Review, 79(5), 44.
-
Singer JD. (1998). Using SAS PROC MIXED to fix multilevel models, hierarchical models and individual growth models.
Journal of Educational and Behavioral Statistics, 24, 323–355.
10.3102/10769986023004323 Google Scholar
- TheManageMentor. (2003). Tossing the coin—pay secrecy, Back 2 School. Retrieved from: http://www.themanagementor.com/enlightenmentorareas/hr/rr/tossingthecoin.htm, accessed July 12, 2009.
- Thibaut J, Walker L. (1975). Procedural justice: A psychological analysis. Mahwah , NJ : Elbaum.
- Thierry H. (2001). The reflection theory on compensation. In M Erez, U Kleinbeck, H Thierry (Eds.), Work motivation in the context of a globalizing economy (pp. 149–66). Mahwah , NJ : Laurence Erlbaum Associates.
- Tremblay M, Chenevert D. (2008). Influence of compensation strategies in Canadian technology-intensive firms on organizational and human resources performance. Group and Organization Management, 33, 269–302.
- Tyler TR. (1999). Why people cooperate with organizations: an identity-based perspective, Research in Organizational Behavior, 21, 201–46.
- Van den Bos K. (1996). Procedural justice and conflict. Unpublished doctoral dissertation, Leiden University , The Netherlands.
- Vroom VH. (1964). Work and motivation. New York : Wiley.
- Wheeler KG. (2007). Empirical comparison of equity preference questionnaire and equity sensitivity instrument in relation to work outcome preferences. Psychological Reports, 100, 955–972.
- Williams ML, McDaniel MA, Nguyen NT. (2006). A meta-analysis of the antecedents and consequences of pay satisfaction. Journal of Applied Psychology, 91, 392–413.
