2.1. Performance-enhancing compensation practices and employee productivity
Performance-enhancing compensation practices are designed and implemented to elicit higher levels of performance from employees through increased expectations about their performance (Shaw et al., 1998). Such practices are also designed to increase motivation and employee accountability for their performance. There are several theoretical explanations for a positive relationship between performance-enhancing compensations systems and employee productivity, such as equity theory (Kepes,Delery, & Gupta, 2009) and tournament theory (Lazear, 1995).
However, expectancy theory has perhaps the most relevance to our conceptualizations in this paper. In sum, this theory posits that there are three factors that are important, or conditions that must be met, for compensation to be motivational (Lawler,1973; Vroom, 1964). First, the rewards must have positive net value or high valence; that is, the outcomes must be attractive.Second, the requested tasks must be within the expectations of the employee, or they must be perceived to be doable; that is, the effort will lead to the performance (or the E = NP relationship). Finally, the perceived probability that successfully performing the required tasks will lead to the desired outcomes, or instrumentality, must be high; that is, the employee must be assured that once the tasks are performed, they will get the rewards/achieve the promised outcomes (the P = NO relationship). There is support in the empirical research for expectancy theory in terms of managerial and employee motivation and performance(Brown, 2001; Kominis & Emmanuel, 2007).As the foregoing suggests, compensation systems, including those that are performance-enhancing, can and do influence employee performance in a positive way. However, this is not always the case, as these systemsmay have unintended consequences— an issue that we turn to in the next section.
2.2. Performance-enhancing compensation practices and unintended consequences A prominent theoretical explanation that has traditionally been used to explain the negative effects of incentives/pay-for-performance plans relates to the “crowding out” effect. Essentially, some scholars contend that rewarding a person with financial incentives (extrinsic rewards) to do an inherently interesting task “crowds out” intrinsic motivation and rewards,or doing the task for its own sake (Deci, Ryan, & Koestner, 1999). Generally, supporters of these arguments cite numerous laboratory experiments which demonstrate that subjects continue to do interesting tasks when pay is not involved, and cease to do so when pay is involved (Kohn, 1993). However, this literature criticizes all types of performance-enhancing compensation
practices; for instance, they contend that among other negative effects, these compensation practices do notmotivate employees and improve their performance. This is not our position, as there is an abundance of studies that have found these pay systems to be related to higher levels of employee performance, including meta-analyses (Gerhart & Milkovich, 1990; Heneman, 1992; Jenkins,Mitra, Gupta, & Shaw, 1998). Rather, we contend that when these practices result in increased individual competition and stress,performance-enhancing compensation practices can produce unintended consequences, such as bullying, as explained below.In terms of the relationships between performance-enhancing compensation practices and bullying, an extension of theoretical constructs in expectancy theory is useful in explaining victimization behaviors. First, valence, or the net value of the rewards, implies both potential positive and negative effects. As discussed earlier, rewards that have high positive net value can and do motivate employee productivity and performance; however, valuable rewards can also trigger negative unintended effects, including high
non-achievement costs and high risks. For instance, high pay from performance-enhancing systems, especially over time, may become an integral part of many employees' expected pay. Consequently, it is not illogical to expect these employees to incorporate this pay, including incentives, into their “normal” expenses, such asmortgage payments, childcare, and family recreational and sports activities. If this happens, then the pay system creates a burden on the employee and will most likely lead to increased stress,especially if the source of this pay – including those that are performance-enhancing – is threatened. As Gneezy, Meier, and Rey-Biel (2011) note, the unintended consequences of pay systems becomemore evident when the future viability becomes an issue (or the increased probability of them being removed as Deci and others demonstrated in their experiments). Thus, the costs for non-achievement become a crucial factor. This will likely trigger high risks for the employee and induce stress. As we explain in the next section, this stress can trigger bullying behavior.Second, for performance-enhancing compensation practices to be motivational and drive desired behaviors, employees must believe that their successful efforts will lead to the promised rewards; that is, instrumentality must be high. However, for this condition to be met/realized, employees must have trust in the organization. Trust is an integral part of an organization's culture and is a consequence of historical experiences and organizational philosophy and strategy. Certain environments,however, such as call centers (e.g., D'Cruz & Noronha, 2010, 2011; Liefooghe & Davey, 2001) induce lower levels of trust from employees because of the punishment-driven organizational culture. Such organizational cultures lead to high levels of stress among employees (Liefooghe & Davey, 2001), which stimulates increased bullying behavior (D'Cruz &Noronha, 2010).Third, employees must have an expectation (expectancy) that they can perform the required tasks. This brings to fore the difficulty of the goals and tasks. As the goal-setting literature (Locke & Latham, 1990) demonstrates, for goals to be motivational,they must be within reach. While stretch goals may be good, extremely difficult goals can drive high risk-taking behaviors and
result in unintended consequences; this has implications for bullying. Difficult standards and expectations result in a smaller number of “winners” and scarcity of rewards as well. In many instances, these become zero-sum rewards, which may result in intense individual-level competition and counterproductive workplace behaviors, such as rivalry, non-cooperation, and knowledge-hoarding, among others (Fox & Spector, 2006). Tournament theory helps to explain this effect in a similar way.The top performers may be handsomely rewarded, if the resource pool is large, while the average and low-performers will get relatively small pay increments. This can motivate those at the bottom to seek the top prizes. However, with limited resources, “zero-sum” pay systems distribute rewards in a way that forces the system to develop “haves” and “have-nots”,and a resultant toxic culture of jealously, negative individual competition, and stress. These establish fertile grounds for workplace bullying.