When perception is reality, there is more than one reality: The formation and effects of pay‐for‐performance perceptions.

Park, Sanghee; Sturman, Michael C.

Compensation research has generally considered pay‐for‐performance (PFP) perceptions in terms of how people react to only a single PFP form or PFP systems as a whole, regardless of the complexity of the compensation system pertaining to the individual. Synthesizing construal level theory, expectancy theory, compensation activation theory, and Call and Ployhart's (2020) theory of firm value capture from employee job performance, we provide insights into how employees develop PFP perceptions when they are covered by a complex PFP system. We propose that (1) individuals shape PFP perceptions at different levels of mental construals, ranging from concrete to abstract; (2) concrete conceptualizations lead to specific, detailed, multidimensional perceptions of PFP system elements (i.e., expectancy, instrumentality, valence, and incentive‐intensity) while abstract conceptualizations lead to more general perceptions with fewer perceived dimensions; (3) an individual's construal level can change over time because of characteristics of the PFP system as well as external events, and (4) construal levels have different implications for PFP system effectiveness at the individual and organizational levels. We also discuss how this theoretical approach provides a structure for enhancing our understanding of modern pay practices that helps to close the gap that currently exists between compensation theory and practice.

EXPECTANCY theories; VALUE capture; FORM perception; JOB performance; LEAD; THEORY of the firm

Personnel Psychology, 2022, Vol 75, Issue 3, p529

0031-5826

Academic Journal

10.1111/peps.12466