Reinforcement theory states that a response followed by a reward is more likely to recur
in the future (Thorndike's Law of Effect). The implication for compensation management is that
high employee performance followed by a monetary reward will make future high performance
more likely. By the same token, high performance not followed by a reward will make it less
likely in the future. The theory emphasizes the importance of a person actually experiencing the
reward.
Like reinforcement theory, expectancy theory (Vroom, 1964) focuses on the link between
rewards and behaviors (instrumentality perceptions), although it emphasizes expected (rather
than experienced) rewards (i.e., incentives). Motivation is also a function of two other factors:
expectancy, the perceived link between effort and performance, and valence, the expected
value of outcomes (e.g., rewards). Compensation systems differ according to their impact on
these motivational components. Generally speaking, pay systems differ most in their impact on
instrumentality: the perceived link between behaviors and pay, also referred to in the pay
literature as "line of sight." Valence of pay outcomes should remain the same under different
pay systems. Expectancy perceptions often have more to do with job design and training than
pay systems