Performance Pay And Job Satisfaction

Performance Pay and Job Satisfaction

Introduction:

Statistics is used in all field of academics, one of the reasons why it is used is that it aids in proving theories and hypothesis whereby researchers collect data, analyse and interpret results to support theories. For example a researcher may state a hypothesis that increased earnings increases job satisfaction, the first step that the researcher will undertake is to collect data to provide the theory, and repeated studies that support his findings will make his hypothesis a theory. In this paper statistics is used in interpreting results in a study by Benjamin Artz (2008) “the role of firm size, performance pay and job satisfaction” and the following is a summary of the article.

Summary of the article:

Fernie (1999) showed that performance pay may also result into job dissatisfaction, he pointed out that there are three factors that may lead to this and they include the fact that a pay rise may result into increased monitoring of workers resulting into job dissatisfaction, the other factor is that performance pay may result into discontentment among the workers who are less productive and finally there may be increased risks whereby workers are faced with the risk of reduced earnings in future.

Baker (1992) also pointed out introducing an inappropriate performance pay scheme will result into job dissatisfaction, workers will equate the extra cost resulting from increased efforts with the marginal benefit of the rewards they get, if marginal cost is greater than marginal benefit gained by the worker then workers will be less satisfied, therefore care should be taken when selecting the performance pay scheme to use.

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Performance Pay and Job Satisfaction

Despite the negative impact of performance pay Heywood (2006) describes three ways in which the workers productivity will be increased, according to him workers who receive performance pay have higher earning which will result into increased job satisfaction, also that performance pay aligns the firms objectives with workers objectives and finally that performance pay provides an incentive to workers to work harder.

Another study by Freeman (2000) regarding job satisfaction and firm size showed that the size and organisation structure of a firm will influence job satisfaction, according to him workers in large firms that have hierarchical structures are less satisfied than workers in small firms and this is because workers in large firms feel that their effort is not recognised, another study by Baurer (2004)n showed that in “high performance work organizations” (Baurer, 2004) the hierarchical task specialised structure of the organisation is transformed into a flexible structure, the distance between workers and decision makers is reduced, results of his study showed that workers in these form of organisations are more satisfied than others and therefore large firms should adopt this form of structure to increase productivity and job satisfaction.

Hypothesis testing:

According to Benjamin Artz (2008) ANOVA and regression results showed that performance pay had a greater impact on the unionised workers and also male workers. Using AUI data set the hypothesis will be to determine whether male worker have higher benefit satisfaction than female workers.

Null hypothesis: H0: benefit mean (male) = benefit mean (female)

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Alternative hypothesis: Ha: benefit mean (male) ≠ benefit mean (female)

The table shows the results:

ANOVA:  Single Factor

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SUMMARY

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Groups

Count

Sum

Average

Variance

male

11

60.2

5.472727

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Performance Pay and Job Satisfaction

0.632182

female

14

77.1

5.507143

0.260714

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ANOVA

Source of Variation

SS

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Performance Pay and Job Satisfaction

df

MS

F

P-value

F crit

Between Groups

0.007296

1

0.007296

0.01728

0.896559

4.279344

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Within Groups

9.711104

23

0.422222

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Total

9.7184

24

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Using the F statistics and F critical value a decision is made regarding the hypothesis, the F critical value is greater and this means that both male and female individuals have equal benefits satisfaction, this means that an increase in satisfaction will also have a similar impact on both male and female satisfaction.

This implies that men and female workers mean benefit satisfaction values are equal to female mean satisfaction values, therefore changes in earnings to a level say X + Y, then if the same test was undertaken on the data set then there will be no difference in satisfaction levels.

Conclusion:

The article by Benjamin Artz (2008) provides a better understanding of job satisfaction in an organisation, he highlights the factors that will lead to reduced job satisfaction and they include increased earning risks, discontent among workers and increased monitoring of workers. Heywood (2006) highlighted the factors that will lead to increased job satisfaction if performance pay is introduced, he states that the workers will be rewarded and therefore earn more increasing job satisfaction, the scheme provides an incentive to workers to improve efficiency and that the scheme aligns the objectives of the worker with those of the firm.

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Performance Pay and Job Satisfaction

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References:

Baker P. (1992) “Incentive Contracts and Performance Measurement”, Political Economy journal 100(31), 598 to 614.

Baurer, K. (2004) “High Performance Workplaces and Job Satisfaction” IZA Discussion Paper 1265.

Benjamin Artz (2008) “The Role Of Firm Size, Performance Pay and Job Satisfaction” Labour Journal, 22 (2) 315 To 343.

Fernie S (1999) “Hanging On the Phone: Payment Systems in the New Sweatshop”, Industrial

Relations Advances Journal 9: 23 to 68.

Freeman, B. (2000) “Who Benefits Most from Employee Involvement”, Industrial Technology and Productivity journal 90(2), 219 to 223.

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Performance Pay and Job Satisfaction

Heywood, S. (2006) “Performance Pay and Job Satisfaction”, Industrial Relations Journal 48(4): 523 To 540.

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