Chapter 3
A Behavioural Framework
for Compensation
Copyright © 2021 by Top Hat 3-1
Learning Outcomes
(Slide 1 of 2)
• Identify the types of reward problems that can afflict
organizations.
• Define the three key employee behaviours desired by
employers.
• Identify three key job attitudes and explain their roles
in determining employee behaviour.
• Describe the causes and consequences of reward
dissatisfaction.
• Explain how to generate membership behaviour.
3-2
Learning Outcomes
(Slide 2 of 2)
• Outline the process through which task behaviour is
motivated.
• Explain how to generate organizational citizenship
behaviour.
• Discuss the role that managerial strategy plays in
determining the types of employee attitudes and
behaviour needed by an organization.
• Describe the implications of the behavioural
framework for designing effective reward systems.
3-3
Reward Systems and Behaviour
• Fair Processes: Don’t Bank on it
– the fraudulent actions at Wells Fargo are profiled in the
chapter's opening vignette
– bank employees opened millions of unauthorized
accounts without customers’ knowledge
– any organization with thousands of employees engaging
in the same behaviour must examine the situational
factors that influence that behaviour
Were the sales targets realistic at Wells Fargo?
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Types of Reward Problems
1. Failure to produce desired behaviour
2. Production of desired behaviour and
undesirable consequences
3. Production of reward dissatisfaction
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3-5
Desired Reward Outcomes
• Three Key Employee Behaviours:
1. Membership behaviour
2. Task behaviour
3. Organizational citizenship behaviour
• Three Key Employee Attitudes:
1. Job satisfaction
2. Work motivation
3. Organizational identification
Copyright © 2021 by Top Hat 3-6
Figure 3.1
How Reward Outcomes Affect Employee
Behaviour
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Figure 3.2
Key Employee Attitudes
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Assessment Question 3.1
Maeesha is well known for her willingness to
help others and participate in employee welfare
activities that are not part of her job duties.
What type of behaviour is this?
a. Task behaviour
b. Organizational citizenship behaviour
c. Commitment
d. Job satisfaction
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Causes and Consequences of
Reward Dissatisfaction
• Four main causes:
1. Violation of the psychological contract
2. Perceived inequity
3. Relative deprivation
4. Lack of organization justice
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Figure 3.3
Causes of Reward Dissatisfaction
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Causes of Reward Dissatisfaction
(Slide 1 of 4)
1. Violation of the psychological contract
– Psychological contract
• Expectations about the rewards offered by a
given job and the contributions necessary to
perform the job
Copyright © 2021 by Top Hat 3-12
Causes of Reward Dissatisfaction
(Slide 2 of 4)
2. Perceived inequity
– Equity theory
• Employees’ base perceptions of equity (fairness) on a
comparison of their contributions/rewards ratio to the
ratios of others perceived as being similar
Copyright © 2021 by Top Hat 3-13
Causes of Reward Dissatisfaction
(Slide 3 of 4)
3. Relative Deprivation
– Research suggests employees experience dissatisfaction
with pay when:
• There’s a discrepancy between the desired outcome and
received outcome
• They see that a comparison “other” receives more than they do.
• Past experience has led them to expect more than they now
receive.
• Expectations for achieving better outcomes are low.
• They feel they are entitled to more.
• They absolve themselves of personal responsibility for the lack
of better outcomes.
Copyright © 2021 by Top Hat 3-14
Causes of Reward Dissatisfaction
(Slide 4 of 4)
4. Lack of Organizational Justice
– Distributive justice
• The perception that overall reward outcomes are fair
– Procedural justice
• The perception that the process for reward
determination is fair
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Lack of Organizational Justice
• The following conditions must be met for
procedural justice:
consistent procedures are applied uniformly to different jobs and time
periods
free of bias personal interests do not enter into application of the procedures
flexible there must be procedures for employees to appeal pay system
decisions
accurate application of procedures must be based on factual information
ethical accepted moral principles must guide application of the
procedures
representative affected employees must have an opportunity to express their
concerns
Copyright © 2021 by Top Hat
Figure 3.4
Consequences of Reward Dissatisfaction
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Consequences of Reward Dissatisfaction:
Attempt to Increase Rewards
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Perception of Inequity
• Stealing is not a good way to address perceptions of
inequity.
© [Link]/Михаил Руденко
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Consequences of Reward Dissatisfaction:
Attempt to Reduce Contributions
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Predicting Employee Reactions
• Individual reactions to reward dissatisfaction
are difficult to predict
– Depends on the personal characteristics and
circumstances of the employee and on the specific
characteristics of the situation
• Equity sensitivity
– A personality trait that entails a high predisposition
toward perceiving personal inequity
Copyright © 2021 by Top Hat 3-21
Assessment Question 3.2
Tia has been working in a bank for two years after
graduating from York University. She now believes that
her employer has broken promises about her pay raise,
training opportunities, and career advancement. Which
of the following best describes her situation?
a. Lack of organizational justice
b. Employer unethical practice
c. Inequity
d. Violation of psychological contract
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Understanding Membership
Behaviour
• Organizational commitment:
– Strength of individual attachment to the organization
• Affective commitment, attachment to an organization based on
positive feelings toward the organization
• Continuance commitment, attachment to an organization based
on perceived lack of better alternatives
– No relationship between continuance commitment and
affective commitment or between continuance
commitment and job satisfaction
– Affective commitment and job satisfaction are related
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Understanding Task Behaviour: Theories of
Motivation
Content Theories Process Theories
• focus on understanding • focus on understanding
motivation by motivation by
identifying underlying determining the process
human needs humans use to make
choices about the specific
actions they will take
Copyright © 2021 by Top Hat 3-24
Figure 3.5
Understanding Task Behaviour
Copyright © 2021 by Top Hat
Two-Factor Theory of Motivation
• Herzberg concluded that job satisfaction was
caused by extrinsic (hygiene) factors and
motivation by intrinsic (motivator) factors.
• To have both satisfied and motivated
employees, organizations should prove both
extrinsic and intrinsic rewards (i.e., both
hygienes and motivators).
• Hygienes correspond to the lower-order needs
and the motivators to the higher-order needs.
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Job Characteristics Theory of
Motivation
Task identity The extent to which a worker performs a complete cycle of job
activities
Task significance The perceived importance or social value of a given task
Skill variety The variety of skills required for task completion
Job autonomy The degree of freedom workers have in deciding
how to perform their jobs
Job feedback The extent to which the job itself provides feedback on worker
performance
Job enrichment The process of redesigning jobs to incorporate more of the five
core dimensions of intrinsically satisfying work
Copyright © 2021 by Top Hat 3-27
Figure 3.6
Content Theories of Motivation
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Process Theories of Motivation:
Reinforcement
• Reinforcement theory
– behaviour will be repeated if valued outcomes
flow from that behaviour or if performing the
behaviour reduces undesirable outcomes
– positive reinforcement takes place when a reward
follows a valued behaviour
– negative reinforcement takes place when an
undesirable consequence occurs whenever the
valued behaviour does not occur
Copyright © 2021 by Top Hat 3-29
Process Theories of Motivation:
Expectancy
• Expectancy theory
1. Is the task worth doing—do the rewards exceed
the costs? (Is net valence positive?)
2. Will I actually receive the rewards if I accomplish
the task? (Is the instrumentality clear?)
3. Will I actually be able to accomplish the task if I
exert the effort? (Is my expectancy strong?)
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Figure 3.7
Expectancy Theory of Motivation
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Process Theories of Motivation:
Attribution
• Attribution theory:
– Humans often act without understanding their
motives for their behaviour and afterward attempt
to attribute motives for their actions
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Theories of Motivation: Economic
• Economic theory:
– Assumes that people are motivated only by
extrinsic (economic) rewards, and they will always
seek to maximize these rewards while minimizing
their contributions to the organization
– Agency theory:
• Agents (employees) will pursue their own self-interests
rather than the interests of their principals (employers)
unless they are closely monitored or their interests are
aligned with the interests of their principals
Copyright © 2021 by Top Hat 3-33
Assessment Question 3.3
Arvind is under impression that even if he
finishes the project in five days, the company
will not provide him with the promised pay
raise. Which of the following refers to Arvind’s
belief?
a. Instrumentality
b. Expectancy
c. Valence
d. Salience
Copyright © 2021 by Top Hat 3-34
Money as a Motivator
• Noncash employee recognition program:
– Provides noncash rewards to employees in
recognition of accomplishments or actions that
are valued by the organization
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Assessment Question 3.4
Which of the following is NOT a content theory
of motivation?
a) Maslow’s hierarchy of needs
b) Expectancy theory
c) Two-factor theory
d) Job characteristics model
Copyright © 2021 by Top Hat 3-36
Understanding Organizational
Citizenship Behaviour
• Voluntary or discretionary behaviours that go
beyond task and membership behaviour; a
“willingness to cooperate” in the pursuit of
organizational goals
– Five main dimensions:
• Altruism
• General compliance
• Courtesy
• Sportsmanship
• Civic virtue
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Citizenship Behaviour
• Shared organizational
goals
• Feelings of membership
• People might join
UNICEF because they
want to help fight child
PA Images/Alamy Stock Photo
poverty
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Creating Citizenship Behaviour
• Preconditions necessary for the development
of citizenship behaviour
– Employment security
– Employees trust management
– Organization should concern for employee needs
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Behavioural Implications for
Designing Reward Systems
(Slide 1 of 2)
1. Define the employee behaviour that is really
needed.
2. Determine the employee attributes and
qualifications necessary to perform the
needed behaviour.
3. Identify the needs that individuals possessing
these qualifications are likely to find salient.
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Behavioural Implications for
Designing Reward Systems
(Slide 2 of 2)
4. Ensure a positive valence for needed
behaviour by providing rewards that address
salient needs and by reducing the costs to
the employee of performing the behaviour.
5. Make it clear that performance of the
behaviour will lead to the promised rewards.
6. Provide conditions that make it likely that
employee effort will actually lead to the
desired behaviour.
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