INDEX ABSTRACT ... 3 1. INTRODUCTION ... 4 2. LITERATURE REVIEW ... 7 2.1MOTIVATION ... 7 2.1.1 Motivation theories ... 7
2.1.2 Intrinsic and extrinsic motivation ... 11
2.2COMPENSATION AND MOTIVATION ... 14
2.3PSYCHOLOGICAL NEEDS ... 18 2.3.1 Competence ... 19 2.3.2 Autonomy ... 20 2.3.3 Relatedness ... 21 2.4RESEARCH SUBJECT ... 22 3. METHOD... 25 3.1SAMPLE DESCRIPTION ... 25 3.2INSTRUMENTS ... 27
3.3DESCRIPTION OF RESEARCH MEASUREMENT SCALES ... 28
4. RESULTS ... 31
4.1DATA CLEANING ... 31
4.2DATA PREPARATION ... 31
4.3PARAMETRIC DATA ASSUMPTIONS ... 33
4.4DATA DESCRIPTION ... 35
4.5DATA ANALYSIS ... 38
5. DISCUSSION ... 42
5.1DISCUSSION ... 42
5.2LIMITATIONS ... 44
5.3PRACTICAL AND ACADEMIC IMPLICATIONS ... 45
5.4FUTURE RESEARCH ... 46 6. CONCLUSION ... 48 7. REFERENCES ... 49 8. APPENDIX ... 53 A)CONTACT E-MAIL: ... 53 B)INTRODUCTION ... 53 C)DEMOGRAPHICS ... 54 D)MODERATORS ... 56 E)MOTIVATION ... 57
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Abstract
Rewards are an important instrument for motivating employees and this has been extensively researched. This paper investigates the influence on the intrinsic motivation of compensating employees either with variable or fixed rewards. Expected in the literature is that variable rewards have a negative influence on the intrinsic motivation, in comparison to fixed rewards. Variable rewards link behavior to rewards. Since this behavior is conducted because of the
outcomes and not due to the enjoyment of conducting the task, these rewards will have a negative influence on the intrinsic motivation. Psychological needs (autonomy, competence and
relatedness) are expected to positively moderate this relation of variable rewards and intrinsic motivation. These expectations were tested by using online-surveys, which resulted in 124 respondents from different industries and with different ages. The analysis of the data showed that there is no significant relation between fixed or variable compensation systems and intrinsic motivation. Autonomy and competence likewise do not moderate the relation between variable compensations and intrinsic motivation. However, high relatedness does show a positive significant moderating effect on the relation of variable rewards and intrinsic motivation. This shows that the extra financial investments of variable rewards do not need to have a negative impact on the intrinsic motivation of employees. When a variable rewarding system is adopted, the social relations between employees need to be taken into account because of the competitive environment.
1. Introduction
The economic crisis still shows a heavy impact on the financial situation of many households. The BBC (2013) reported that since 2010 hourly wages of European employees have decreased by 0,7% on average. Although at first glance this does not seem to be a very strong decline, differences within Europe give a more pessimistic view. While wages in Germany rose by 2,7%, in the United Kingdom they decreased by 5,5%. Greece, Portugal and the Netherlands are doing even worse. The Centraal Bureau voor de Statistiek (2013) states that the available income of Dutch households decreased in 2012 with 3,2%, the strongest decrease since 1981. This decrease of income is, however, not only determined by wages, but also by for example a decrease of employment and an increase of taxes. These statistics show an increasing financial pressure, which is why salary and benefits could become increasingly important. In order to increase the understanding of the effects of these compensations, this thesis will focus on the reward systems of companies.
In many companies, the reward systems are part of the broader performance management systems. Performance management’s main focus is bringing the behaviors and outcomes of the employees’ activities in line with its organizational goals (Noe, Hollenbeck, Gerhart & Wright, 2010). Noe et al. (2010) describe that the performance management system consists of three tasks. The first task is to establish what kind of behavior and performances are important and desirable. The second task is performance appraisal: the process of informing whether
employees’ results are in line with the organizational goals. Thirdly, the final task is providing performance feedback to employees on the results of the aforementioned performance appraisal. This can for example be achieved through compensation systems, which include bonuses or non-monetary benefits. Because of the recent increase in importance of pay/salary/non-monetary benefits,
this thesis focuses on one specific goal of performance management: the link between compensation systems and performance. In these compensations systems there are different dimensions that can be of importance for their effectiveness. To sharpen the scope of the research, the thesis predominantly examines the effects of fixed or variable pay.
Cadsby, Song and Tapon (2007) explain that the performance enhancement of effective compensation systems can be explained by two different outcomes: the sorting effect and the incentive effect. The sorting effect explains the idea that specific compensation systems attract high performance employees, while others depart. The incentive effect on the other hand looks at the motivating effect rewards have on the behavior of current employees. The focus of this research is on the latter. Motivation is an important concept because it is the reason for people to act (Ryan & Deci, 2000). The type of motivation can however also be important for the
efficiency of the action. For example, Grant (2008) showed through a study of 58 firemen and 140 operators that the outcomes of their performance are determined by the type of motivation they have. These different types of motivations will be explained in the literature review.
This research is relevant because of various reasons. Firstly, there is obscurity in the literature about the influence of variable or fixed rewards on employees’ motivation. On the one hand, Eisenberger, Rhoades and Cameron (1999) state that variable rewards result in an increase of employee motivation. On the other hand, Kuvaas (2006) demonstrates that fixed pay is a stronger mechanism to motivate employees than variable pay. Furthermore, it is unclear what the moderating effect is of different psychological needs variables on the relation of compensation systems and motivation (Sonnentag, 2003). This thesis looks at the effect of different fixed-variable pay ratios on the components that determine the motivation of employees. This can reduce the ambiguity and increase the knowledge about this topic.
Furthermore, this subject is also relevant for employers and employees. Compensations form 65-70% of the production costs in the United States (Cadsby et al., 2007). Research has shown that an effective compensation system can increase the organizational performance by 4-9% as it reduces the costs and improves the employee’s retention rates (Gagné & Forest, 2008). Using the right compensation systems can therefore not only be in line with the preferences of the employees but also with organizational goals.
The main goal of this thesis is to investigate how variable and fixed pay systems affect the motivation of the employees. This thesis will firstly review the existing literature on various motivation theories and their relation with performance management. Secondly, the different variables and moderators will be set out, with the hypotheses that follow out of this literature review. This is followed by a description of the research methods and analyses applied to investigate the hypotheses. Finally, the discussion and conclusion are presented.
2. Literature review
In order to understand the relationship between compensation systems and employee motivation it is important to understand the theoretical foundations available in the scientific literature. Therefore, different motivational theories are firstly examined. Secondly, the available literature about the connection between motivation and performance management is discussed.
Subsequently the different moderators which influence the relation between compensation
systems and the motivation of employees are discussed. This chapter finishes with the hypotheses of this research that follow from this literature review.
2.1 Motivation
In order to understand the effect of compensation systems it is important to look at the question how the motivation of individuals is influenced. As previously stated, motivation is the reason for individuals to behave to reach a certain end (Ryan & Deci, 2000). Furthermore, the introduction also shows that the source of motivation can influence the outcome of an employee’s actions. In order to further the understanding of how motivation is influenced, different motivational theories are examined. Firstly, a historical overview of theories that discuss the overall motivation process will be given, followed by a theory that makes a distinction within this motivational process based on the source of the motivation.
2.1.1 Motivation theories
Probably the most well-known but also most criticized motivational theory is the hierarchy of needs theory (Maslow, 1943). This theory states that the motivation of people is based on different needs: physiological, safety and security, belonging (social), esteem, and self-actualization needs (Figure 1). These needs are, according to the theory, hierarchically organized
based on the importance of satisfaction. This means that people will prioritize satisfying the lowest need within the hierarchy of needs. The higher-level hierarchical needs will be pursued when the lower needs are satisfied. This theory could give an explanation for what determines the motivation of people. However, Gambrel and Ciance (2003) show that this linear concept of motivation is not applicable to all individuals. Their literature research demonstrates that in individualistic societies the need for self-esteem is important, although this does not apply to collectivistic societies. This illustrates that different factors determine the motivation of employees. In order to further develop this point, this thesis will now review theories that take individual differences into account.
Adams (1963) provides a different perspective by means of his equity theory. According to this theory, people are motivated when their inputs (e.g. effort, time, skills) are matched with the outcomes (e.g. pay, recognition, promotion) (Grant & Shin, 2011). When there is a match between the inputs and outcomes, there will be a sense of fairness. This sense of fairness can be
Self
-actualization
Self-esteem
Belonging (social)
• Figure 1: Hierarchy of needs (Maslow, 1943)
Safety and security
Physiological
based on the input-outcome ratio of their former experiences or social environment. This shows that the process is not a static fact, but can also be determined by relational aspects.
The expectancy theory is a motivational theory that is based on the idea that people weigh their relative utilities in a rational consideration (Vroom, 1964). This means that the motivation of an individual is based on the expectancy that the action will lead to an valuable outcome. Grant and Shin (2011) explain that individuals look at three different components while
considering if they are motivated to do something. The first factor is the expectancy that the effort of the action will lead to performance. Furthermore, the instrumentality focuses on the idea that this performance will lead to certain outcomes. Finally, the valance is important in the
consideration, which concerns the question whether the outcomes that follow from the
performance are actually important or valuable to the individual. If one component is missing, an individual will not be motivated to act. In opposition to the hierarchy of needs theory, which generalizes the needs of individuals, this theory takes the differences of individual considerations and expectancies into account. Critics however note that the expectancy theory is too rational: it only considers the importance of outcomes of actions and does not look at the changing character of people’s opinion (Grant & Shin, 2011). Grant and Shin (2011) state that the results from empirical research are mixed, which becomes even more clear in comparison to the equity theory. When instrumentality is high but the individual feels under-rewarded, these theories give contrasting motivational results. The expectancy theory will expect that a feeling of high
instrumentality, combined with the feeling of being under-rewarded, will increase the motivation. This is because of the confidence that they can increase the valued outcome. The equity theory, however, predicts that this situation will create a feeling of inequity, which decreases motivation.
In order to get a completer view, it may be important to also discuss the relation of the receiver and the distributor of the compensation that influences the motivation.
Jensen and Meckling’s (1976) agency theory poses an idea that is similar to the concept of performance management. They describe the relationship between a principal (e.g. the employer) and an agent (e.g. the employee). The goal of the employer is to bring the goals of the employee in line with those of the organization. To achieve this, the employer gives tangible rewards to compensate for the contrasting goals of the principal and the agent. The agency theory further states that the motivation of the employee is based on the compensation he receives for showing behavior in line with the organizational goals. This is in line with the classic economic payment-based measurement that states that individuals are completely motivated by tangible rewards that are provided for conducting a task (Frey & Jegen, 2001). Frey and Jegen (2001) argue against this idea with their crowding out theory, which describes the negative effects of compensation on the motivation of individuals. They explain this by the fact that people also work to satisfy psychological needs, which are not achieved by wealth. These theories show that different aspects can be important within a business setting. In order to understand which instruments are important to influence motivation, different forms of motivation need to be examined firstly.
This section gives a broad overview of the motivational theories. These theories conceptualize motivation as one concept. There can, however, also be different kinds of motivation: intrinsic and extrinsic motivation. These will be discussed in the next section.
2.1.2 Intrinsic and extrinsic motivation
All aforementioned theories focus principally on the extent to which someone is motivated, but there also seem to be differences between the sources of motivation. This section discusses the difference between intrinsic and extrinsic motivation to get a better understanding of motivation.
The two factor theory (Herzberg et al., as cited in: Deshield, Kara & Kaynak, 2005) states that the motivation of individuals is determined by the type of need that is satisfied, which is in line with the hierarchy of needs theory. This theory does not use a linear approach but states that motivation can differ on the basis of two factors: motivation factors and hygiene factors.
Motivation factors establish satisfaction from the action itself and hygiene factors from the external outcomes that give satisfaction. While the former gives satisfaction when present the latter only gives dissatisfaction when missing. These factors are also known as intrinsic and extrinsic motivation and are proven to make a difference in the outcomes of the performed action, as mentioned in the introduction (Grant, 2008).
Ryan and Deci (2000) further develop the notion of different kinds of motivation based on the source. The Self-Determination Theory (SDT) describes that the reasons or goals can incite two different kinds of motivation: intrinsic and extrinsic (Ryan & Deci, 2000). Intrinsic
motivation is based on acting because the action itself is interesting or enjoyable. Ryan and Deci (2000) base their concept of intrinsic motivation on the learning theory (Hull, 1943). This theory states that motivation is based on psychological needs. Within SDT these needs are: competence, autonomy and relatedness. These psychological needs moderate the motivation and are discussed in the psychological needs section. A sub-theory of the SDT is the cognitive evaluation theory (CET), which looks at the social context factors that determine intrinsic motivation by
influencing the psychological needs. These contextual factors, for example reward and feedback,
may create a feeling of competence which will enhance intrinsic motivation. This can have some important implications for the compensation systems, which will be discussed in the next chapter.
Extrinsic motivation, on the other hand, is being motivated to act because of the outcome of the action. The classic definition is that this motivation is controlled, because the locus of control is external. This means that the motivation is not focused on internal needs such as enjoyment, but formed by the need for external outcomes as rewards. Ryan and Deci (2000) make a distinction between different types of extrinsic motivation, based on the level of control and autonomy. Not all activities can be fully intrinsically motivated, nor do all extrinsic
motivations give a feeling of total external control. Some situations can cause a feeling of willingness and inner acceptance, based on the amount of autonomy. The autonomy is
determined by how the control is internalized (to what extent you adapt to the regulation) and the integration (to what extent is the regulation transformed to a sense of self). This leads to different types of extrinsic motivation, with corresponding processes and perceived loci of causality (table 1). The least self-determined motivation is amotivation, which results in a person having no intention to act. This is followed by four types of extrinsic motivation. External regulation means that an action is performed purely to obtain an external reward. Introjected regulation is also perceived as controlling because the motivation is focused on reducing feelings of guilt or anxiety. Identified and integrated regulation are more self-determined, which encompass motivation when the individual sees the personal importance of the behavior (identified) and when regulations have been fully integrated to the self (integrated). The most self-determined motivation is intrinsic motivation, which is explained already. The different types are displayed in table 1, ordered on the amount of self-determination. Even though the research of Grant (2008) showed that intrinsic motivation is more beneficial for the performance of the individual, the type
of extrinsic motivation also matters. The more autonomous the extrinsic motivation is, the higher will the engagement, performance, retention rate, learning quality and well-being of the employee be.
Regulator styles
Amotivation Extrinsic motivation Intrinsic
motivation
External regulation
Introjection Identification Integration
Locus of causality
Impersonal External Somewhat external
Somewhat external
Internal Internal
Table 1. Different motivation types (Ryan & Deci, 2000)
Amabile (1993) applied the intrinsic and extrinsic motivation conceptualizations to the work environment. Motivation can have an important impact on the performance of employees. Unmotivated people spend little effort, feel reluctance to go to the work environment, leave earlier and produce work of a lower quality. High motivation, however, creates persistence, creativity, productivity and high quality performance (Amabile, 1993). The type of motivation is, in line with Grant (2008), important for these outcomes. This motivation can be influenced by the source and type of rewards. This could have important implications for compensation systems.
This chapter discussed the different motivational theories which are relevant for this research. The hierarchy of needs gave the first, basic explanation of how motivation is formed. However, this theory did not take individual differences into account. The equity and expectancy theory further clarified this by explaining the rationality of individuals in the motivation process. But these theories do not look at the different sources and outcomes of motivation. The agency theory states that tangible rewards are the most important determinant of employees’ motivation, but the crowding out theory shows, in contrast to this, that these tangible rewards can have
negative effects on a different kind of motivation. The two-factor theory, and similarly the self-determination theory, show that there are different motivations: intrinsic and extrinsic. Jointly these theories provide a clear understanding of the complexity of the individual motivation process. These insights will be applied to the performance management literature in the next chapter.
2.2 Compensation and motivation
This chapter will describe the literature on the relation between compensations and motivation. Firstly, it is described how rewards and motivation interact. After that, the difference between variable and fixed rewards is described.
Thierry (2008) describes in his book about rewards that compensation systems have distinctive goals. The compensation systems can focus on communicating the organizations’ system, retain qualified employees, learn new behaviors, compensate for inconvenience, resolve conflicts, lowering costs, but most importantly stimulate performance. This last goal will be the focus of this research. Rewards can be an important instrument for stimulating performance by increasing the motivation of employees.
In order to understand how compensations influence motivation, it is important to understand what compensations mean to individuals. The reflection theory describes these meanings (Thierry, 1992). Different meanings of rewards may determine the effects on the motivation. Thierry (2008) describes four different meanings a reward can have. Motivational properties concern the instrumental value rewards have for an individual to reach his goals or motives. This can be compared with the instrumental value described within the expectancy theory (Vroom, 1964). This can also be seen as a source of extrinsic motivation, because the reward is mainly focused on its outcomes. The relative position meaning has informational value
for the individual. This could mean that it shows how the performed task is executed or how one performs in relation to their environment, which can be important for their perceived relatedness. Rewards can also have a feedback component, related to the perceived competence of an
employee. The third meaning of reward is called control: rewards are a reflection of how much control the individual has over others or the other way around. This can be linked to another important psychological need: autonomy. Finally, the reward can mainly be seen as a spending instrument: value of reward to purchase objects. This can, like the motivational properties, be seen as a extrinsic motivator. These different meanings of rewards can influence the effect on motivation.
Rewards can in this sense increase, but also decrease the intrinsic motivation of
employees. For employees to be motivated it is important that the feeling of competence is self-determined, which creates a feeling of autonomy. This explains the previously mentioned
crowding out theory: extrinsic rewards may undermine intrinsic motivation (Frey & Jegen, 2001). These rewards can be perceived as controlling, which decreases the autonomy and the intrinsic motivation. The action feels controlled because the individual is motivated due to the outcomes that follow out of the action, not because the action itself is enjoyable. This means that the action is not self-determined, but the outcomes determine the actions of the individual. Baard, Deci and Ryan (2004) for example conducted a survey on 698 first-line employees from an investment firm. Their research proved that autonomy supportive managers and an autonomous orientation increase the performance and psychological adjustment of employees. James (2005) also conducted research on this topic and looked at the influence of rewards on the intrinsic motivation for conducting a task. He showed that when the incentives are small, there is no significant difference. However, when incentives are high, these can feel controlling, which
reduces the intrinsic motivation and therefore decreases the performance. He however notes that when the incentives are above proportions the effort will rise again. The motivation and
incentives relation is, therefore, shaped as an S curve. He explains this by the fact that small incentives give a feeling of appreciation, which does not feel controlling. Bigger rewards can create the feeling that the compensation is a mechanism to control, which is bad for the
motivation. Finally, extreme large incentives increase the motivation, because of financial focus. This can, however, again change the locus of control to external instead of internal. This shows that the structure compensation system can have an important influence on the motivation of employees.
Although there is much research about the relation between compensations and rewards, most is done within an experimental design (e.g. respondents resolving puzzles). Although experimental designs are suited for controlling variables, there are different reasons why this can be inappropriate for this topic and why the results could differ from real life situations (Kunz & Paff, 2002). Firstly, respondents have a high level of initial task interest when conducting an experiment, for example a puzzle to test the effects of rewards on the intrinsic motivation. The task was already interesting for the respondents, because they applied to do the task even when they did not receive a reward. Jobs are, however, not always interesting. Furthermore, the experimental setting is different because there is no social surveillance, demand or expectation. But within job settings, there are more social surveillances, job demands and performance expectations that can have an influence on the relation between pay and motivation. Finally, pay is inappropriate in the setting of an experiment, which can possibly explain the negative effect of compensations on intrinsic motivation. In the business world getting paid is the social and legal norm. This can possibly mean that rewards will not have a negative effect, because it is expected.
This means that it is important to look at the classical reward-motivation relation within the work-environment.
Gagné and Forest (2008) created a model that describes the impact of compensation systems on motivation within the work-environment. They define compensation systems as the rewards that people receive for performing in their job. There are three different kinds of monetary compensations: base pay (fixed), pay adjustments (variable or fixed) and incentive pay/pay for performance (variable) (Gagné & Forest, 2008). The model is based on the different variables of the compensation system, which influence the employees’ motivation. These
different dimensions are: “the absolute amount of pay in monetary value; the perceived equity of the compensation, operationalized in terms of distributive justice; the ratio of fixed amount of pay versus the amount of pay that varies according to a certain criterion, such as performance; the objectivity of the performance appraisal that determines compensation; and the number of people whose performance is used to determine one’s compensation” (Gagné & Forest, 2008: 228). As mentioned in the introduction, the focus of this thesis lies on the dimension of fixed and variable pay. Sonnentag (2003) states that the meanings of rewards, in the context of the reflection theory, can be influenced by the type of compensation system.
There are different views on the effect of providing extra incentives, next to the base pay, on the self-determined work motivation of employees. The most self-determined motivation is intrinsic motivation (Ryan & Deci, 2000). Kunz and Pfaff (2002) explain the contrasting views of the agency theory and the Cognitive Evaluation Theory (CET). The agency theory, on the one hand, predicts that employees will choose to maximize their profit, in terms of cost and gains of conducting the action. Contingent pays will in this case increase the motivation to act in line with the organizational demands. The CET, however, states that intrinsic motivation is based on the
enjoyment and interest of the action itself, and extrinsic motivation is being motivated to act because of the outcome of the action (Ryan & Deci, 2000). Because variable pay concentrates the focus of the motivation on the rewards, it will reduce the intrinsic motivation. This is in line with the crowding out theory, which states that extrinsic rewards undermine the enjoyment and interest of conducting a task (Frey and Jegen, 2001).
There are different views about whether and if so, how, compensation can influence intrinsic motivation. The CET predicts that variable pay, relative to fixed pay, has a negative influence on the intrinsic motivation because it focuses the source of motivation on external outcomes. CET claims that psychological needs satisfaction is important for people to be intrinsically motivated (Ryan & Deci, 2000). Kunz and Pfaff (2002) show that these
psychological needs can moderate the effect of variable pay on the intrinsic motivation. In order to understand the moderating role of these psychological needs, these are discussed in relation to compensation and motivation.
2.3 Psychological needs
Psychological needs can be important for different aspects of the lives of individuals. Brien (2012) explains that need satisfaction is linked with the well-being of individuals and with a decrease of sicknesses. Furthermore, Baard et al. (2004) show that need satisfaction can lead to an increase of performance in the job environment. In the light of this research, the most important effect of this satisfaction of psychological needs is linked to an increase of intrinsic motivation, in line with the SDT (Ryan & Deci, 2000). This means that these needs can play an important role in the relation between compensation systems and motivation. This chapter describes this role of these needs: perceived competence, autonomy and relatedness.
2.3.1 Competence
Perceived competence is an important factor determining intrinsic motivation (Ryan & Deci, 2000). In order to enjoy the tasks, an employee needs to feel competent to perform them. In order to value the importance of the expected behavior, an employee needs information about his performance and feel challenged, in order to feel intrinsically motivated to do so. The literature shows conflicting results on whether fixed or variable pay is more beneficial for the perceived competence.
Cadsby et al. (2007) state that variable pay is more effective in enhancing the perceived competence. Their explanation is based on the expectancy theory (Vroom, 1964). Because employees have the expectancy that their efforts will lead to an increase of rewards, they have an increased feeling of instrumentality. This instrumentality makes it easier for employees to
understand what they need to do and whether they are able to succeed, which leads to an increased feeling of competence.
Different authors, however, state that fixed pay is more effective in enhancing the perceived competence. Kuvaas (2006) explains that fixed pay is more beneficial for intrinsic motivation because it is better in communicating information about the employees’ performance. The CET describes social contextual factors that support the intrinsic motivation, as for example feedback (Ryan & Deci, 2000). Because fixed pay is based on the performance on the long term, it contains more informational value, which will moderate the controlling feeling of the reward (Harackiewicz & Sansone, 2000). Furthermore, Kuvaas (2006) adds that through fixed pay the company shows more trust, because the organization takes more risk by paying fixed amounts in the long run. In this sense variable pay is influenced by temporary factors, which makes it weaker in communicating the competence of the employees. The variable pays could also communicate
behavioral information, but are mostly effective for employees that reach the performance goals. For the employees that do not reach the goals, the tasks could feel discouraging and decrease their feeling of enjoyment and competence (Vansteenkiste & Deci, 2003). Because all of this, Kuvaas (2006) concluded that fixed pay could increase the perceived competence of employees better than variable pay, which is supported by his empirical research. It is, however, uncertain whether the moderating effect of competence is also effective in decreasing the negative effect of variable pays.
2.3.2 Autonomy
Autonomy is the most important factor in determining the intrinsic motivation, as explained in the literature review. People must feel self-determined to fully internalize the conducted action. The more behavior feels controlled, the less one will be intrinsically motivated to act. Reeve and Deci (1996) proved the importance of autonomy for intrinsic motivation with the use of an experiment. With the use of a puzzle contest they tested what the influence of a controlled versus a controlled setting was on the intrinsic motivation. The results showed that the people in the non-controlled setting were significantly more intrinsically motivated. The role of this perceived autonomy in different ways of compensating is discussed in this section.
Eisenberger, Rhoades and Cameron (1999) explain that variable pay increases the
intrinsic motivation because this gives employees freedom of choice how to fill in their job. This means that contingent rewards would increase perceived autonomy. Their empirical research on psychological students supported this view.
From a SDT point of view, Gagné and Forest (2008) show that variable pay reduces perceived autonomy, because the locus of causality becomes more external. This is because individuals do not work because they like the task, but because it gives them rewards.
Furthermore, there is more control because this approach requires monitoring. This means that the behavior feels more controlled because the organization needs to check the outcomes of the performance. Consequently, they state that fixed base pay is more effective in motivating employees intrinsically, as it is less controlling. The importance of autonomy in variable compensation systems can, like competence, moderate the predicted negative influence of variable rewards on the intrinsic motivation of employees. This, however, needs to be further examined
2.3.3 Relatedness
In order to be willing to perform expected behavior, employees must feel valued by the people, group or culture in the company. This is important for internalizing norms and creating a feeling of belonging (Ryan & Deci, 2000). This can for example mean that an employee feels part of the group and respected by his colleagues. This feeling is referred to as relatedness. A study of Ryan, Stiller and Lynch (1994) showed the importance of relatedness for intrinsic motivation with students. Students who felt that their teacher cared about them, showed higher intrinsic motivation within the class.
Thierry (2008) argues that variable pay may create envy between employees. He explains this by using the example of a clothing shop where employees receive a bonus for every customer they sell products to. This competition may lead to envy within the team, which can reduce the level of perceived relatedness. Thus the competition caused by the variable pay can create conflicts within the team. In this competitive environment it can be important for employees to feel relatedness to their colleagues to enjoy their job and feel intrinsically motivated.
In sum, there exists disagreement about whether fixed or variable pay is more effective in satisfying psychological needs . On the one hand, some other authors note that variable compensation systems are more effective because they provide higher instrumentality and autonomy. On the other hand, some authors state that fixed compensation systems are more effective because it generates more autonomy. This is explained because these compensation systems need less monitoring. Furthermore, fixed compensation systems increase the feeling of competence because it communicates the risk the company is willing to take and it is based on long-term performance. Finally, the competing climate of contingent rewards may reduce the perceived relatedness. However, this chapter looked at the relation of psychological needs and compensation systems, because less is known about the different importance of these needs within different compensation systems (Sonnentag, 2003). In order to get a better understanding of the relation of compensation systems and self-determined motivation, this research will examine the importance of moderators in reducing the negative influence of variable rewards. The hypotheses that follow out of this literature review are examined in the next chapter.
2.4 Research subject
Now that the literature around performance management and motivation has been discussed, this section shortly describes what hypotheses are tested within this study (Figure 2).
As mentioned in the literature review the main question of this research is: “What is the effect of variable versus fixed pay systems on the self-determined work motivation?”. The most self-determined motivation, intrinsic motivation, focuses on enjoyment of conducting a task and not on the outcomes it provides (Ryan & Deci, 2000). Variable rewards are expected to decrease the intrinsic motivation because behavior is more linked to external rewards, in contrast to fixed
rewards. In line with the SDT, variable rewards may change the locus of control to the external rewards, which decreases the self-determined motivation. Expected is that fixed compensation systems are more effective in increasing self-determined work motivation (Thierry, 2008; James, 2005). This expectation leads to the following hypotheses of the main effect of this research:
H1: Fixed rewards have a stronger positive relationship with self-determined work motivation than variable rewards.
(Figure 2: conceptual model)
In order to determine how the relationship of compensation systems and motivation is influenced, three moderating factors are tested, based on the SDT of Ryan and Deci (2000). Although theories and research show that the satisfaction of these needs can be important for self-determined motivation, it is uncertain what the influence is on the negative effect of variable rewards. Expected is that perceived competence, autonomy and relatedness will moderate the negative relation of variable compensation systems and the intrinsic motivation (Ryan & Deci, 2000). Sonnentag (2003) explains, based on the reflection theory, that pay systems can influence the meaning of rewards. The negative influence of variable compensation systems on motivation
are expected to be moderated by for example the informational value rewards can have. Even though rewards are expected to have a negative influence on the intrinsic work motivation, satisfaction of the three psychological needs are proposed to moderate this effect because they are important determinants of this kind of motivation. Because of this it is expected that the three moderators have a positive effect on the relation of variable compensation systems and self-determined work motivation. This leads to the following hypotheses:
H2: Perceived competence positively moderates the relationship of variable rewards and self-determined work motivation.
H3: Perceived autonomy positively moderates the relationship of variable rewards and self-determined work motivation.
H4:Perceived relatedness positively moderates the relationship of variable rewards and self-determined work motivation.
The four hypotheses of this research are displayed in the conceptual model (figure 2). This chapter discussed what ambiguities can be found in the literature and which research questions will be used to reduce the discussion about the relation of compensations and motivation. The next chapter will describe how the hypotheses will be tested.
3. Method
This chapter describes how the research is conducted. Firstly, the sample and which instruments are used to gather the data are examined. Finally, the measurements which are used for the instruments will be explained.
3.1 Sample description
The sample used in this research was drawn from the Dutch working population. It contains 7.3 million people, between the age of 15-65, which live in the Netherlands and work twelve or more hours a week (CBS, 2014). However, self-employed individuals are not suited for this research, because these mostly have a fully variable reward. This group contains 1.1 million people, which leads to a target group of 6.2 million employees. This group is appropriate for this research because all these individuals receive a reward for their labor, which can have an influence on their work motivation.
The respondents were contacted through convenience and snowball sampling. On the one hand, acquaintances were contacted through social media, Facebook, to see whether they were willing to take time to fill in the survey and share it with their network. The advantage of this approach is that a large group of individuals can be contacted. The negative aspect of this approach, however, is that this can lead to a homogenous group of respondents, due to the fact that the used social media network mainly consists of young students. To enlarge the amount of respondents and create a more heterogeneous target group, managers of different companies were asked to distribute the survey among their colleagues and social network. For people that did not have access to internet, a small amount of hard-copy’s was distributed. The contact letter is displayed in Appendix A, which shows how the respondents were informed. In order to enhance
the probability of respondents being willing to fill in the survey and compensate them for their inconvenience, 10 cinema coupons were raffled among the interested individuals.
This research is focused on employees which are rewarded with a variable or fixed pay. Quota sampling is used to get a comparable sample size of both groups: employees compensated with fixed or variable pay. The goal was to receive data of at least 50 respondents of both groups. The total data-set covered the information of 242 respondents. This included all the respondents who started the online survey. 47 respondents did not complete all the parts of the survey. These respondents are excluded from the data set. Respondents were forced to respond to all items, which means that incomplete surveys lack the information of at least one measuring scale. This results in 195 surveys without missing data, with a dropout rate of 19%. The high dropout rate can probably be explained by the ease of using an online survey, which makes it also easy to stop half way. Furthermore, within the completed surveys different respondents were excluded because of not fitting the target group. 17 respondents work less than 12 hours a week, which means that they do not match the criteria of the Dutch working population (CBS, 2014). Within the group of respondents who completed the survey and worked 12 hours or more per week, people who do not work under employment conditions were also excluded from the data-set. This included 43 people who are self-employed and 11 from the category “other”. These respondents are excluded from analysis because people who are self-employed could distort the data because they can for example have higher levels of autonomy and their salary may be perceived as fully variable. This results in a data-set of 124 respondents appropriate for this research. 79 respondents received a fixed pay (<5% variable) and 43 received a variable pay (>4% variable pay). This means that the goal of gathering the data of 50 respondents with
variable rewards is not met. This is due to the fact that it was hard to find people with a variable reward, possibly because it is less common in the Netherlands.
This section described how the sample is structured. Even though the quota of 50
respondents for each reward group is not met, it is to be expected that this data-set is sufficient to analyze the hypotheses of this research. How the data are gathered is explained in the next section.
3.2 Instruments
This section describes which instrument was used to research the described sample group and why this is appropriate for this study.
This research was conducted using a cross-sectional design to test the described
hypotheses. This means that more than one case is examined at a single point in time, leading to quantitative data to examine patterns (Bryman, 2008). This has the advantage that the
measurements can be consistent (the reliability) because tested measurement scales can be used. Furthermore, this means that this research can be repeated better (the replicability) because the structured approach enables other researchers to use all the steps of the research process. The validity (is measured what the instrument was designed to measure?) is a more complicated matter due to the small sample size.
The method used was an online questionnaire. This is an effective method because the researchers does not have to meet face to face with the respondents and the data are automatically organized in an excel-sheet. In order to resolve the problem of not reaching people who do not have access to the internet, a hard-copy of the questionnaire was also available when requested.
The introduction of the survey, which included the confidentiality notions and the incentives for the respondents, is displayed in the introduction section (appendix B).
In sum, this research was conducted within a cross-sectional design with the use of online questionnaires. In the next section it is discussed which measurements were used in these
questionnaires to measure the different concepts are discussed.
3.3 Description of research measurement scales
This section describes the measurements that are used to test the different concepts. Firstly, the control variables are explained, followed by the independent and dependent variables. Finally, the measurement scale of the moderators is explained.
There are different control variables that are used in the survey to decrease the effects of variables not included within the conceptual model: age, gender, education level, working situation, hours of work and occupation. The data of these variables is received by six items, displayed in the demographics section (Appendix C).
The independent variable in this model is the compensation system. This variable can differ in the extent that employees are rewarded with variable pay for performing their job. It is, however, and contrary to experimental research, impossible to examine fully variable pay systems in a real life setting. Because of this, different levels of variable rewards are examined. Research has shown that the smallest reward that is meaningful for people is 5% of their fixed pay (Worley, Bowen & Lawler, 1992). So the group of respondents that receive a variable reward less than 5% will be conceptualized as the fixed pay group. Research however showed that when the amount of variable pay is too high the motivation will decrease because people will feel unconscious or fully focused on external rewards (Thierry, 2008; James, 2005). That is why
different levels of variable pay groups are examined, in order to look whether there is a difference according to the different amounts of variable pay. The respondents are divided in four groups, based on the fixed-variable pay ratio: fixed pay (0-5% variable pay), low variable pay (5-15%), medium variable pay (15-25%), and high variable pay (>25%). The minimum of variable pay is based on the book of Thierry (2008). This was researched using one item, which is also displayed in the demographics section (appendix C).
The dependent variable is the type of self-determined work motivation. This is measured using the Work Extrinsic and Intrinsic Motivation Scale (WEIMS) (Tremblay et al., 2009; Appendix D). This scale determines the degree of self-determined motivation by adding the different types of motivation taking the relative amount of self-determination into account. 18 items measure the different forms of motivation: intrinsic motivation (items: 4,8,15), integrated regulation (items: 5,10,18), identified regulation (items: 1,7,14), introjected regulation (items: 6,11,13), external regulation (items: 2,9,16), and amotivation (items: 3,12,17). An example of a question focused on the amount of intrinsic motivation is: “I work because I derive much
pleasure from learning new things”. These items are translated as well from English into Dutch. The full lists of questions is available in Appendix E. Tremblay et al. (2009) state that the validity and reliability of the Work Extrinsic and Intrinsic Motivation Scale is high. They explain this by the fact that all the items had loadings higher than 0.3 (0.30-0.90) and show that the Cronbach’s Alpha coefficient was above 0.6 (.64 and .84). The results of these items are used in a formula, resulting in a score for the Work-Self Determination Index: W–SDI = (+3 x IM) + (+2 x INTEG) + (+1 x IDEN) + (-1 x INTRO) + (-2 x EXT) + (-3 x AMO). This results in a score between -36 and +36, which reflects the relative self-determination. The W-SDI shows a high internal
consistency of α=.84 (Tremblay et al., 2009).
The moderators are perceived competence, autonomy and relatedness. The effect of these variables on the relation between compensation systems and the motivation of employees is based on the theory of Ryan and Deci (2000). These variables are tested using the Basic Psychological Needs at Work Scale (BPNWS) (Baard, Deci & Ryan, 2004). The items are displayed in the moderators section (appendix D). Seven items look at the autonomy (items: 1,5 (R), 8, 11 (R), 13, 17, 20 (R)). An example of an question regarding the perceived autonomy of an employee is: “I feel like I can make a lot of inputs to deciding how my job gets done”. Six items focus on competence (items: 3 (R), 4, 10, 12, 14 (R), 19 (R)). For example: “People at work tell me I am good at what I do”. Finally, there are seven questions regarding relatedness (items: 2, 6, 7 (R), 9, 15, 16 (R), 18 (R), 21). An example of an item about the relatedness was: “I really like the people I work with”. The original survey is translated from English into Dutch and back translated by two English native speakers. The full list of questions is available in Appendix D. The three concepts showed a high reliability in the English version of the questionnaire;
autonomy α=.73, competence α=.84 and relatedness α=.79 (Deci, 2001).
This chapter explained how the research was set up. The 4 hypotheses are tested with the use of the data-set of 124 respondents. The data was collected with the use of
online-questionnaires. The independent variable (compensation system) is divided in four groups based on the percentage of variable pay. The dependent variable (self-determined work motivation) was measured with the use of the Work Extrinsic and Intrinsic Motivation Scale (Tremblay et al., 2009). Finally, the moderators are measured with the use of the Basic Psychological Needs at Work Scale (Baard, Deci & Ryan, 2004). The next chapter describes the results of this study.
4. Results
This chapter discusses how the collected data-set is analyzed. Firstly, the preparation of the data for analysis is explained, which consists of: data cleaning, data preparation and checking the parametric assumptions. Finally, the analysis section is divided in a data description section and a data-testing section in which the testing of the hypotheses is described.
4.1 Data cleaning
In order to explain how the data set is prepared this section discusses which and why certain data are not included in the data analysis. 128 respondents were excluded from the data-set because they did not suit the target group, as explained within the sample description section.
As described in the method section people who receive a variable reward for their job (>4% variable pay) were divided in 3 groups based following the percentage of variable pay in their total salary: 5-15% (25 respondents), 15-25% (12 respondents) and more than 25% (8 respondents). However, because the sample sizes of the different variable income groups are small, the 3 different groups are computed together into one variable reward group to increase the effect size. Some measuring scales are excluded out of the analysis, which will be discussed in the next section.
4.2 Data preparation
In order to prepare the useful data for analysis, different tests and actions need to be conducted. This section describes the process of data preparation which includes recoding counter-indicative items, checking the validity and reliability, and computing the scale means.
Each psychological needs component included 3 counter-indicative items which are recoded within SPSS to restore the right values. The validity of the measurement is described in the method section. To summarize, the validity is the degree to which a measurement really tests what it is supposed to measure (Field, 2009). This is mainly secured by the use of pre-tested measurement scales of researchers. The reliability describes the degree to which the measurement instrument is consistent with different situations, indicated by Cronbach’s α. Field (2009) states that a Cronbach’s α value higher than 0.7 can be considered as reliable. However, he adds that psychological measurements can even be used when the value is somewhat lower because of the complex subject it measures. From the Psychological Needs Scale two items were deleted (Baard, Deci & Ryan, 2004). Deleting item 5 increased the reliability of autonomy from Cronbach’s α = .734 to .755. Deleting item 7 from the relatedness scale resulted in an increase of the reliability
from Cronbach’s α = .666 to .715. The reliability of competence was moderate: Cronbach’s α =
.676. Because this variable also is a psychological concept, it is included in the data analysis. However, the moderate reliability should be taken into account when interpreting the results. The work motivation was tested using the Work Extrinsic and Intrinsic Motivation Scale (Tremblay, et al., 2009). The motivation concepts integrated regulation and intrinsic motivation both had a high reliability: Cronbach’s α = .749 and .841. The other motivation concepts, however, showed a moderate to low reliability: identified regulation (α = .453), introjected regulation (α = .632), extrinsic motivation (α = .636) and amotivation (.615) Even though Tremblay et al. (2009) stated that the reliability of this measurement scale was sufficient, most of the motivation concepts have an insufficient level of Cronbach’s α. This can possibly be explained by the small sample.
Because the outcomes of the WEIMS are based on the data of all the motivation concepts, only the intrinsic motivation variable is included within the study because of its high reliability. The
other 5 motivation variables are excluded, which will not devaluate the research because the literature is mainly focused on the intrinsic motivation. A disadvantage is, however, that the motivation is now measured with only 3 items, instead of 18. This could decrease the strength of the measurement instrument and should be taken into account when the results are interpreted. The reliability of the variables that are included in the data-analysis of this study are presented in table 2.
Variable Cronbach’s α
Autonomy 0.755 (After deleting item 5)
Competence 0.676
Relatedness 0.715 (After deleting item 7)
Intrinsic motivation 0.841
Table 2: Reliability test
4.3 Parametric data Assumptions
In order to test whether using parametric tests gives accurate results, four assumptions about the data-set should be made. The assumptions about what the data should be are: normally
distributed, homogeneity of variance, measured on interval level and independence between the respondents (Field, 2009). Because this research is focused on the difference between people who earn a variable or fixed reward, the assumptions of these groups are tested separately.
In order to test if the data are normally distributed, the Kolmogorov-Smirnov test is used. This test is used because it is most appropriate for samples which are smaller than 300 (Field, 2009). For the variable relatedness both the fixed and variable rewarded are significantly normal distributed, D (79) = .063, p > .05, and D (45) = .119, p > .05. Within the competence variable only the fixed rewarded is significant normal distributed: D (45) = .120, p > .05. The rest of the
fixed and variable constructs are significantly non-normal distributed, p < 0.05. These results and the summary of the skewness and kurtosis are displayed in table 3. For most of the measures this means that the assumption of normal distribution is not met. This decreases the accuracy of the data-analysis, which should be taken into account when interpreting the results.
Variable Rewarded K-S (*Significant) Skewness Kurtosis
Autonomy Fixed .143 -.915 .927 Variable .133 -.834 .302 Competence Fixed .120 -1.138 2.559 Variable .114* -.515 -.431 Relatedness Fixed .063* -.032 -.642 Variable .119* -.469 -.269 Intrinsic Motivation Fixed .162 -1.072 .485 Variable .186 -1.455 2.260
Table 3. Normal distribution tests
The assumption of homogeneity of variance assumes that the variances within the data-set are the same (Field, 2009). In order to test this assumption Levene’s test (based on the mean) is used, with the compensation variable as the factor list. For all the variables, autonomy,
competence, relatedness and intrinsic motivation, Levene’s test is insignificant, p > .05. This means that the variances are not significantly different, so the assumption of homogeneity of variance is met. An overview of the results of Levene’s test is displayed in table 4.
Variable Levene’s Statistic Significance Autonomy .647 .423 Competence .611 .436 Relatedness .018 .894 Intrinsic motivation .109 .741
Table 4. Test of homogeneity of variance.
The final two parametric assumptions cannot be statistically tested, but are validated by the research design. The interval assumption states that data should at least be measured at the interval level. The independent variable of this research, the type of reward system, is not measured at an interval level but is a binary variable because this variable is coded with 0 and 1 (Field, 2009). This will not form an issue because it can be used as a dummy variable. The rest of the variables are measured with the use of a 7-point Likert scale, which is considered to be an interval variable (Field, 2009). The final assumption is considering the independence of the data. Because the respondents conducted the online survey apart from each other, it can be assumed that the data is collected independent of each other.
4.4 Data description
In order to understand the data that are analyzed, this section briefly describes the demographics of the respondents which serve as control variables.
After the data cleaning, the data-set contains the information of 124 respondents. The description of this data is showed in table 5. In the age category the group of people of 20-30 years is the largest with 41%, followed by the groups 31-40 and 51-60 which both consist of 21%
of the respondents. This could lead to a distortion of the results, because most respondents are still in the starting phase of their career or have different motivational needs. Gender is, however, more equally distributed: 56% are males and 44% females. In the education level demographics higher education, with the exception of MBO (2%), represent the biggest part: vocational ((HBO) (35%)), and academic ((WO) (48%)). This means that the results are less suitable to generalize the findings to the whole population because it is mostly representing highly educated
individuals.
The majority of the respondents works more than the Dutch average of 30.6 of hours a week (Ostendorf, 2012): 33% of the people works 31-40 hours, where even 39% stated to work more than 40 hours per week. Most respondents work in the “sales, hotel and catering or repair” (23%) and “financial or business” (42,7%). This can be explained because these are industries where a variable reward is most common. Finally, 64% of the respondents have a fixed salary (<5% of variable pay) and 36% a variable pay (>4%). All this information is displayed in table 5. Because of the fact that not all the demographics are representatively distributed, the results could possible not be applicable to the whole Dutch working population.
Variable Options Frequency Percent Variable Options Frequency Percent
Gender Man 69 56% Work (hours
per week)
13-20 18 14%
Women 55 44% 21-30 17 14%
Age 16-20 1 1% 31-40 41 33%
21-30 51 41% More than 40 48 39%
31-40 26 21% Industry Sales, hotel/catering
or repair 28 23% 41-50 18 14% Transport or communication 1 1% 51-60 26 21% Financial or business service 53 43% 60+ 2 2% Government 4 3% Education Primary school 1 1% (Health) service 13 10% VMBO 1 1% Other 25 20% HAVO 7 6% Reward system Fixed pay (<5% variable) 79 64%
VWO 8 7% Variable pay (>4%
variable)
45 36%
MBO 3 2%
Table 5: Data description
HBO 43 35%
WO 60 48%
Other 1 1%
4.5 Data analysis
This section describes the data analysis for this research. Firstly, the results from the correlation matrix are described. This is followed by the testing of the proposed hypotheses.
Table 6 displays an overview of the means, standard deviations and correlations of the different recorded variables. Several significant correlations are found (table 6). Type of industry is excluded from the interpretation of these results because this is a nominal variable without a significant order. Age has a significant relation with the hours of work (r (122) = 0.46, p<0.01), competence (r (122) = 0.28, p<0.05) and intrinsic motivation (r (122) = 0.28, p<0.01). This means that older people work more hours a week and experience more competence and intrinsic motivation when they work. Gender also has significant correlations: hours of work (r (122) = -0.15, p<0.05), reward (r (122) = -0.20, p<0.05). This means that women work less and receive less variable rewards than men. Furthermore, the results show that there is a significant
correlation between the amount of hours of work and: education level (r (122) = 0.18, p<0.05), autonomy (r (122) = 0.25, p<0.01), competence (r (122) = 0.19, p<0.05), relatedness (r (122) = -0.30, p<0.01) and intrinsic motivation (r (122) = 0.39, p<0.01). This shows that people who work more hours a week tend to have a higher level of education, have a higher feeling of autonomy, competence and intrinsic motivation, but seem to feel less relatedness within their work environment. Higher educated people feel more autonomy (r (122) = 0.21, p<0.05),
competence (r (122) = 0.17, p<0.05) and intrinsic motivation (r (122) = 0.22, p<0.05). The results also reveal that people who feel autonomous at work also tend to feel more competent (r (122) = 0.6, p<0.01) and related (r (122) = 0.23, p<0.01). Finally, high intrinsic motivation is correlated with greater feelings of autonomy (r (122) = 0.49, p<0.01) and competence (r (122) = 0.54, p<0.01).
Variables M SD 1 2 3 4 5 6 7 8 9 10 1. Age 3.19 1.25 - 2. Gender 0.44 0.50 -0.55 - 3. Hours of work 3.96 1.06 0.46** -0.15* - 4. Industry 8.39 1.75 0,21** 0.18* 0.29** - 5. Education 6.10 1.28 0.15 0.11 0.18* 0.26** - 6. Reward 0.36 0.48 -0.59 -0.20* 0.11 -0.21* -0.10 - 7. Autonomy 5.17 0.91 0.30** -0.03 0.25** 0.01 0.21* -0.01 (0,76) 8. Competence 5.49 0.79 0.28** -0.01 0.19* 0.08 0.17* 0.04 0.60** (0,68) 9. Relatedness 5.43 0.69 -0.12 0.03 -0.30** -0.26** -0.05 -0.04 0.23** 0.10 (0,72) 10. Intrinsic motivation 5.31 1.18 0.28** 0.01 0.39** 0.29** 0.22* 0.10 0.49** 0.54** -0.09 (0,84)
** Correlation is significant at the 0.01 level (1-tailed).
*Correlation is significant at the 0.05 level (1-tailed).
Table 6: Means, Standard Deviations, Correlations
Now the different hypotheses, which were proposed in the literature review, are tested.
H1: Variable rewards have a stronger positive relationship with the intrinsic motivation than fixed rewards.
In order to test the influence of the type of compensation system on the intrinsic
motivation a regression analysis was conducted, with the variables age, gender, hours of work, industry and education as control variables. The ANOVA model is significant, F (6, 17)= 5.486,
p<0.01. The results show that there is not a significant relation between the compensation system and the intrinsic motivation, β=0,097, t=1.126, p>0.05.
In order to look at the moderating effect of autonomy, competence and relatedness on the relationship between the type of compensation system and the intrinsic motivation, PROCESS was used in SPSS.
H2: Perceived competence positively moderates the relationship of variable rewards and intrinsic work motivation.
Testing the moderating effect of competence resulted in a significant model, F(3, 120)=16,760, P<0.01. There is however no significant interaction effect, F(1,120)=0.140, p>0.05. This means that competence does not have a moderating effect on the relationship between the type of compensation system and the intrinsic motivation.
H3: Perceived autonomy positively moderates the relationship of variable rewards and intrinsic work motivation.
The model significantly explains the moderating effect of autonomy on the relation between the type of compensation system and the intrinsic motivation, F(3, 120)= 12.645, p<0.05. The results however show that there is not a significant interaction effect, F(1, 120)= 0.058, p>0.05. This means that autonomy does not have a significant moderating effect on the relationship of compensation systems and the intrinsic motivation.
H4:Perceived relatedness positively moderates the relationship of variable rewards and self-determined work motivation.
Finally, the model for the moderating effect of relatedness is not significant, F (3, 120)= 2.01, p>0.05. There is however a significant interaction effect, F (1, 120)= 4.55, P<0.05. The results show that when relatedness is above 6 (effect=0.615), there is a significant positive moderation effect on the relation between the type of compensation system and intrinsic motivation, t=2.0, p<0.01.
In order to check whether the results are due to the fact that only intrinsic motivation is used within the analysis, the hypotheses were also tested with an adjusted motivation model. Because the identified regulation measurement was not reliable it was excluded, together with the other moderate self-determined motivation variable introjected regulation. This led to an adjusted WEIMS model: (Intrinsic motivation x +2) + (Integrated regulation x +1) + (Extrinsic Motivation x -1) + (Amotivation x -2). This new model, however, does not result in any new findings, so this is not included in any analysis.
To sum up, most of the hypotheses are rejected. There is no significant relation between the type of compensation system and intrinsic motivation. Furthermore, the moderating effect of compensation and autonomy is also not significant. Finally, the only significant result is the moderating effect of relatedness, which means that high levels of relatedness positively
influences the relation of variable compensation systems and intrinsic motivation. There are also some significant correlations found, which are discussed in the next chapter.
