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A lot has been written and claimed about the relationship among job performance, job satisfaction and pay. One theory suggests that contented workers, like contented cows, produce more of whatever they are supposed to produce than do discontented workers. Pay, on the other hand, has been an enigmatic part of the formula. Motivation Theorist Hertzberg claims that pay has a limited effect as a satisfier. Other researchers like Cherrington and Luthans claim money has more of an impact. At the extreme is CEO/author Richard Sloma, who says that there are only three keys to motivation and satisfaction— money, money and more money.
Except for these disagreeing claims of an “obvious” and “logical” connec¬tion among pay, performance and job satisfaction and a few controlled labo¬ratory studies, little evidence exists. But a recent study by Indiana Uni¬versity researchers Charles N. Greene and Philip M. Podaskoff on the effects of changing the salary structure of 1,100 managers and machine operators from a performance-contingent pay basis to straight salary is quite instructive.
The research was conducted in two paper mills of a large manufacturer of paper and paper products. Both mills were identical in terms of organization and product and were part of the same company division, of approximately equal size, unionized and located in small Midwestern towns within 100 miles of each other. The only obvious significant difference between plants A and B was that plant A was about to abandon its four-year-old performance-contingent (incentive) pay plan because of union pressure to go to a flat-rate, automatic progression, cost-of-living-indexed, seniority-centered system. The new system would apply to line workers and first-line supervisors as well. Plant B, how¬ever, was retaining its incentive pay system, which was identical to the one A was discarding.
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Greene and Podaskoff recognized the situation as a rare opportunity to do a controlled field study of the effects of changing pay systems from incen¬tive to salary— a definite trend, they suggest, in business and industry. The situation was a researcher’s dream. Plant A’s 456 line employees and 37 first-line supervisors would, in effect, be one large experimental group—the experiment being the change from incentive to non-incentive. And plant B’s 592 line employees and 45 first-line supervisors would be a perfect control group.
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The two researchers studied the productivity and job satisfaction of all line employees and first-line super¬visors who were employed for a period running from four months before the pay base change at plant A until two months after the change.
Job satisfaction was assessed using the Job Description Index. The J.D.I, assesses satisfaction with five job di¬mensions: the work itself, pay, super¬vision, promotion and co-workers. Performance was assessed using the Po¬sition Analysis Questionnaire (P.A.Q.) for line employees and a simi¬lar but non standardized instrument for supervisory performance. Measures were taken in both plants A and B four months before plant A changed its pay base and two months after the change.
The researchers had expected that job satisfaction and job performance would not change in plant B, and that both satisfaction and performance would deteriorate in plant A. The ac¬tual results, however, were not so clear-cut. First, line operator per¬formance did deteriorate substantially in plant A (the plant changing from incentive to salary), while per¬formance in plant B remained the same during the study. But job satisfaction changes for line workers weren’t as straightforward. For line workers in plant A, satisfaction with work decreased significantly. Satis¬faction with pay and satisfaction with supervision, however, increased in plant A. When line, employees were stratified by performance level, the re¬searchers found that satisfaction on these two items had substantially de¬creased for high performers and in¬creased for low and medium per¬formers. Greene and Podaskoff sug¬gest that the increase in job satisfac¬tion among low and moderate per¬formers may be an expression of “relief at not being “under the gun” for less-than-optimum productivity.
Supervisors in plant A showed decreases in all performance and job satisfaction measures, though the only statistically significant decrease was in satisfaction with supervision. The researchers suggest that the managers of the first-line supervisors were pressing these supervisors to turn around the line worker decreases in performance, thus giving the first-liners cause to be dissatisfied with their managers.
The researchers conclude their re¬port by reminding that: a) there are a number of studies that suggest a strong relationship between satisfac¬tion and turnover; b) more and more companies, according to the Bureau of Labor Statistics and the Conference Board, are moving away from incentive pay- systems; and, finally, c) the best workers under an incentive pay plan become the most dissatisfied when changing from incentive to salary.
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This change from incentive to straight salary pay systems, they speculate, could precipitate a situation wherein poor performers become content with their jobs and the company, and high performers become disgruntled and leave the payroll altogether. Even worse, the high performers could become disgruntled, quit and, like the poor performers, stay on the payroll.
Source : Training Magazine – January 1979.