Center for Advanced Management




Prof. Mark A. Maltarich (University of South Carolina)


  • Datum: 16.06.2015
    Zeit: 12:00 - 13:45
    Ort: Geschwister-Scholl-Platz 1, Raum A022
    Titel: "Compensation Strategy: The role of threshold and forgiveness in pay for performance systems"

We use unique, longitudinal data collected over forty-three months from the healthcare industry to theorize about and test pay-for-performance (PFP) threshold as a key factor in PFP's influence on performance. We also examine the situation where managers relax (or lower) the PFP threshold in response to prior poor employee performance. These exceptions are usually granted in the name of motivation and fairness, and the field setting allows us the rare opportunity to watch these effects unfold for the individual and the unit over time. We develop theoretically generated hypotheses by integrating expectancy theory with psychological contract theory and using principles from economics. This results in explaining performance outcomes, and extending the contingency approach to PFP by showing specific conditions for when organizational PFP exemptions will be more and less effective for the individual and the unit’s performance. The theoretical advancements provide explanations for how and why PFP thresholds function, and how and why organizational decisions to adjust PFP thresholds can result in unintended consequences.