Performance-based horizontal pay dispersion : the effect on fairness perception with introduction of new performance measures

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1 Amsterdam Business School

Performance-based horizontal pay dispersion:

The effect on fairness perception with introduction of new

performance measures

Name: Simeon Volkers Student number: 10833412 Thesis supervisor: P. Kroos Date: 20 June 2016

Word count:

MSc Accountancy & Control, specialization Accountancy and Control Faculty of Economics and Business, University of Amsterdam

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2 Statement of Originality

This document is written by student Simeon Volkers who declares to take full responsibility for the contents of this document.

I declare that the text and the work presented in this document is original and that no sources other than those mentioned in the text and its references have been used in creating it.

The Faculty of Economics and Business is responsible solely for the supervision of completion of the work, not for the contents.

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1 Introduction

Organizations face in current time a high competition and must be able to keep up in a fast changing environment. Therefor old traditional performance measurement systems that only focus on financials are not sufficient. Many organizations switch to the use of models like the Balance scorecard where non-financials matter as well. Last decades many organizations try to translate their strategy into the balance scorecard which results in several KPI’s that need to be adhered to when the organizations want to create value. For an effective use of the balance scorecard method non-financials need to be taken into account in the performance measurement system. As the environment changes the performance measurement system changes along with it. Certain measures may not be as relevant anymore in the future and therefor deleted or replaced by other measures. This has a direct effect on the way employee’s performance is measured and thus an influence on their motivation.

So it is important that firms look for ways to motivate and therefor incentivize employees to produce results which are consistent with the firm’s objective. There are several ways to incentivize and motivate employees with the goal to make them perform better results. An important factor for motivation is the organizations pay spread, because this mechanism has influence on the effort of employees (Bloom, 1999). Scholars are not in agreement on which design of the pay system is the most effective for the motivation and performance of the employees.

Some state that vertical systems (i.e. high pay dispersion) have a positive effect on employee motivation (Lazear and Rosen, 1981; Rosen, 1986; Zenger, 1992). Trevor et al. (1997) states that high pay dispersion is effective in retaining top performing employees. When pay spread is considered as low this results in relative low motivation and subsequently performance for employees who are capable to become top performers.

Others argue that compressed systems have a positive effect on employee motivation and thus firm performance (Adams, 1963; Cowherd and Levine, 1992; Milkovich & Newman, 1996).

Compressed systems can be beneficial for group performance because they include feelings of fairness, common purpose, foster cooperative team-oriented behavior (Cowherd and Leivne, 1992;

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5 Lazear, 1995; Pfeffer, 1994). Kohn (1993) and Pfeffer (1994) suggest that hierarchical pay systems provide disincentives for cooperation, increase dissatisfaction and diminishes performance.

The different views on the effectiveness of pay dispersion on motivation can be explained by several reasons. Traditional economic research uses theories like the agency theory and assumes that people are self-interested and homogeneous individuals (Eisenhardt, 1989). While others argue that people are not considered to be homogeneous and have heterogenic motivational drivers relating the motivation for work and their attitude towards their own pay. While some individuals may only have attention to their own pay, others might also have attention about others’ pay (Fehr & Falk, 1999). Some people have a more reciprocal character while others are more focused on self-interest. Liebrand (1984) and Fehr & Gachter (2000), scholars from the social psychology and behavioral economics field find that many people do not only show purely self-interested behavior but rather behave in a reciprocal manner. This is where fairness comes into play. It seems that reciprocal individuals appeal more to fairness than self-interested people. People who show more self-interested behavior are assumed not to care about the fairness of a pay scheme since fairness cannot be derived from conventional economic principles (Kahneman et al., 1986). The differences in social values between individuals can have an important effect on the relationship of pay dispersion and motivation.

Another important factor that determines the associated performance and pay dispersion is whether the individuals work in an independent or interdependent setting. When employees have independent jobs than a vertical pay system is associated with better performance, while when employees face interdependent work environments than a vertical pay system has a negative effect on performance. Therefor the nature of the work setting relating independence and interdependences is relevant for the power of the pay dispersion system. (Shaw et al. 2002). These findings lead to suggest that employees who have interdependent jobs prefer horizontal pay dispersion, because the nature of their work focuses more on cooperation.

The perception of fairness on a pay spread system is depended on the personality of an individual.

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6 This thesis will combine several insights from different fields of study. It will take behavioral and social psychology into account. The objective of this study is to give a better understanding of pay dispersion in relation to fairness perception. Because of changing performance measurement systems within organizations there is an opportunity to examine if implementing extra measures causes for a change in fairness perception on the employee when they face a high or low pay dispersion situation. The actual result of their fairness perception is contingent on certain variables such as type of behavior, either reciprocal or self-interested, type of work, either independent or interdependent and personality.

Structure of the research is as follows. First relevant literature is reviewed, after that a theoretical framework, mainly based on the work of Downes & Choi (2014), is presented with the research hypotheses. After that the research methodology is discussed and subsequently the results. To finish a conclusion on the thesis is elaborated.

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2 Literature review

This section will elaborate on relevant theories regarding pay dispersion, employee motivation and fairness perception and finally reaction to performance measures.

The effects of different forms of pay dispersion whether compressed/dispersed and/or

vertical/horizontal and on what further variables this effect is contingent on. Further an overview on existing theories providing insight on the effect of pay dispersion looking from different angles. Theories such as tournament theory, expectancy theory and equity theory are considered in the examination of pay dispersion. The main paper used for this examination is the paper of Downes and Choi (2014). These authors made a typology of existing research about pay dispersion from the perspective of employee reactions.

After elaboration on pay dispersion the phenomena of fairness and motivation is elaborated in broad sense and linked to pay dispersion solutions. Also literature on reactions of employees on performance measures is taken into account relating fairness perception and motivation. In this last section the most important question is whether extra performance measures or performance measures in general have an effect on the fairness perception of individuals and subsequently motivation. There can be overlap between the different subjects in discussing relevant literature.

2.1 Pay dispersion

The phenomenon of pay dispersion has received a growing attention in management literature. With the large amount of studies conducted in this field the results vary on which form of pay dispersion are the most beneficial for organizations. Bloom and Michel (2002) give a definition of pay dispersion. It is defined as “the amount of difference (inequality) in pay created by a firms pay structure” (Bloom & Michel, 2002, p. 33). The amount of difference can also be stated as the pay differential. This pay differential can be either high or low. Low pay systems are referred in his thesis as compressed systems. In a compressed system the difference in pay between the high and low earners is little and relatively close to each other. A high pay dispersion is referred to as a dispersed system. In a dispersed system the difference in pay between the highest and lowest earning individual is largely dispersed.

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8 Next to compressed and dispersed systems pay dispersion can be further categorized. Bloom (1999), Ding et al (2009) and Kepes et al. (2009) mention the difference in vertical and horizontal pay dispersion. Where pay dispersion occurs between or within hierarchical levels of an organization. Horizontal pay dispersion would refer to the difference in pay within a group of peers which are active in the same horizontal level (the employee – employee level). Vertical dispersion relates to the amount difference in pay between hierarchical levels, for example between manager and employee. Gupta et al (2012) mention another categorization of pay dispersion and that is the distinction between

performance-based and non-performance based pay dispersion. Gupta et al (2012) suggests that pay variation based on performance-based system should motivate higher performance, while other factors such as seniority (time working in a job) and politics would not foster motivation. Non-performance based pay dispersion is not based on individual differences in performance while performance-based pay dispersion can be attributed to individual performance.

2.1.1 Benefits of a dispersed system

Becker and Huselid (1992) studied dispersion of pay in a tournament setting where they examined the differences in rewards. They concluded that a high pay dispersion caused for NASCAR drivers to have more motivation to perform better. The drivers took more risk and had more aggressive decision making in the dispersed pay setting. Other research showed that a high pay dispersion had a negative effect on the out-of-service days of a truck company and positively related with return-on-equity (Kepes et al. 2009). Ding et al. (2009) showed that pay dispersion in Chinese manufacturing and service firms had a positive effect on sales growth and product/service quality within the relationship manager –employee. They however did not find a positive effect of the dispersion between groups itself, for example employee-employee or manager-manager.

2.1.2 Negative findings on dispersed systems

Pfeffer and Langton (1993) found that a dispersed system had negative effect on the research

productivity within university employees, also job satisfaction decreased in a dispersed system. Bloom (1999) shows that dispersion was negatively related to the individual and team performance in a Baseball league. Also negative effects were examined in a dispersed system on retaining executive

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9 managers (Bloom and Michel, 2002). Relating the individual pay equity perceptions researchers Trevor and Wazeter (2006) found negative effects associated with a dispersed system within a survey of public school teachers. Cowherd and Levine (1992) find that more equal pay was positively related to product quality. More negative effects were found of dispersed systems relating turnover among managers of publicly traded firms (Messersmith et al (2011) and among low level college

administrator employees (Pfeffer and Davis-Blake, 1992). These two findings suggest that the level in the hierarchy in an organization has no influence on the turnover in dispersed systems. This finding was further investigated by Shaw et al (2002) which looked at quit rates of good, average and poor performing truck drivers. Their finding was that when communication about a performance-based pay system was communicated well and individuals understood the system than pay dispersion was negatively related to good performer quit rates. However, firms that did not have a performance-based system the pay dispersion was positively related to the quit rates of good performing truck drivers. Shaw et al. (2002) found evidence that pay dispersion has negative effect on firm outcomes, however they state that dispersion is not either good or bad, it depends on the contingencies determine the strategic effectiveness of the dispersion system.

2.2 Important characteristics of pay dispersion effectiveness

As Shaw et al. (2002) suggested, the effectiveness of a pay system depend on certain important factors. Downes and Choi (2014) examine the conditions mentioned in literature which influence the effectiveness of the pay system. They identify the following factors which have influence of the outcomes of the effectiveness of the pay system.

2.2.1 Interdependence

One of the moderators of pay system effectiveness is the interdependence of the work involved (Shaw et al. 2002). Interdependent work allows individuals to observe each other’s work and must be

therefore taken into account when it is about pay dispersion research. In the study of Shaw et al. they find that pay dispersion has negative effects on firm performance when the nature of work is highly interdependent.

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2.3 Position in the pay distribution

The position of an individual in the pay system has an impact on the motivation and fairness of the pay distribution scheme (from the individual perspective). This eventually has an effect on the

performance of a firm. Easily said Trevor and Wazeter (2006) have found evidence that individuals lower in the pay distribution would be more likely to view a highly dispersed pay system as

inequitable. On the other hand, employees that are paid considerably high will be more tolerant to the inequitable pay system, because of their larger reward. Some researchers state that this inequitable effect of the position in pay dispersion can be eliminated by applying higher wages (Brown et al, 2003). When the average pay is high within an organization this high average pay would compensate for the negative effects of a dispersed pay system.

2.4 Communication and understanding of the pay system

Shaw and Gupta (2007) provide evidence on the moderating role of pay system communication in understanding relationship with pay dispersion, firm performance and pay basis. Firms who

communicate the pay system well to employees have a negative relation with high performer quit rates within a performance-based pay situation. When communication is low about the reasons and intent of the pay system this causes employees to weaken their perceptions that horizontal pay differences are the result of legitimate factors.

2.5 Pay basis

Downes and Choi (2014) state this factor as probably the most important factor which influences the effectiveness of the pay distribution system. The pay basis refers to whether employees are paid based on their performance outcomes or based on other factors. This moderator is closely tied to fairness perception of employees. The approach to this factor is that if the pay differences between employees are legitimately based on differences in performance outcomes, then employees would probably not have the perception that the system is unfair. With this perspective in mind this would mean that when employees are paid highly based on their performance outcomes then the pay dispersion should have a positive effect on motivation, because high performers have the opportunity to earn more money. This

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11 is consistent with Lazear and Rosen (1981) view on pay dispersion from a tournament theory

perspective. Previous discussed researchers (Shaw and Gupta, 2007, Kepes et al, 2009) underline this statement with their findings that there are negative outcomes on firm’s outcomes when pay is non-performance based and that pay dispersion is positively related to return on equity when not based on politics.

2.5.1 Human capital

Gerhart and Rynes (2003) and Trevor et al. (2012) argue that next to pay basis also human capital is critical for pay dispersion research. When assessing the pay dispersion effectiveness, the used model should control for human capital variables and when this is done it can take out some of the portion of the variance in the pay dispersion measure. When controlled for human capital variables the residual independent variable represents the pay dispersion effect not represented by individual differences in performance.

2.6 Typology of pay dispersion

Downes and Choi (2014) made a typology and divided pay dispersion in four different categories. On one hand there is a distinction between performance-based and non-performance based pay dispersion and on the other hand the pay dispersion can be either vertical or horizontal.

2.6.1 Performance-based versus non-performance based

Performance-based pay dispersion is a pay system where the dispersion is explained by individual differences in performance. As mentioned earlier the pay dispersion can also be a result of human capital factors such as a higher degree. Human capital factors which partly cause dispersion in pay are assumed not to have a negative impact on the perceptions or motivation of employees, because they are considered as legitimate. Pay dispersion caused by other factors such as seniority or politics would however have a negative impact on individual motivation. Therefor based on Gupta et al (2012), Downes and Choi (2014) conceptualize performance-based pay dispersion and non-performance based pay dispersion, where non-performance based means that the dispersion is not based on individual differences in performance while performance based is based on individual differences in

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12 performance. A pay system based on for example degrees would be therefore categorized as a non-performance based pay dispersion.

2.6.2 Vertical versus horizontal pay dispersion

Other distinction which is mentioned in the literature is the difference between vertical and horizontal pay dispersion (Bloom, 1999; Ding et al, 2009). This types of dispersion refers to where the dispersion in the organization occurs. Vertical pay dispersion refers to the degree of dispersion within the

organizational ladder. For example if the pay spread between top management and lower employee would be relatively high we would talk about a vertical dispersed system. Horizontal pay dispersion refers to the type of dispersion between a group of employees who would have the same job or are active within the same hierarchical level. Gupta et al(2012) define jobs as a collection of duties and responsibilities, which means that jobs could have different titles but that would not mean necessarily different jobs. According to Bloom (1999) a horizontal pay dispersion system can be created by performance-based pay or seniority.

2.6.3 Integration of dispersion distinctions

Considering the mentioned distinctions regarding different types of pay dispersion Downes and Choi (2014) categorize four types of pay dispersion categories alongside the vertical/horizontal and non-performance-based/performance-based dimension. These are: performance-based vertical pay dispersion, performance-based horizontal pay dispersion, non-performance based vertical pay dispersion and non-performance-based horizontal pay dispersion.

2.7 Theoretical lenses on pay dispersion

Different kind of theories can help in explaining the effectiveness of pay systems and associated dispersion. Equity, expectancy and tournament theory provide different lenses and perspectives on pay dispersion phenomena.

2.7.1 Equity theory

Adams (1963a, 1965) proposed the equity theory and considers the nature of inputs and outcomes, the nature of social comparison process, the conditions leading to equity or inequity and possible effects

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13 of inequity and the possible responses of individuals to reduce inequity. Inputs are factors perceived by a person to be relevant for getting return on personal investment. Examples of inputs are effort, education, personal skills (Pritchard, 1969). Outcomes are all factors that are perceived by the person as returns to himself and provide utility or value. The theory states that individuals calculate a ratio of outcomes and that ratio is weighted (compared to referent others) according to perceived importance to determine the final value of the ratio. If the perceived own ratio is not comparable with the referent other this will cause perceived inequity for the specific individual. The referent other can refer to either a direct relationship with two pesons such as in a relationship or with two persons who are related to a third party for example two employees paid by the same employer. The theoy posits that individuals in that case will take actions to reduce or avoid the inequity if it occurs and make both ratios more equitable. According to Adams (1963a, 1965) employees can take four actions which are: (1) cognitively distorting his or others inputs or outcomes, (2) make referent other to change their inputs or outcomes, (3) change own inputs o outcomes or (4) change the referent person which the individual compares itself to or leave the profession/field.

Within the pay dispersion research field the use of equity theory is explained as when pay differences increase some of the individuals will experience inequity (Downes and Choi, 2014). This experience of inequity will result in a negative effect on employee motivation and satisfaction (Kepes et al., 2009). Viewing on pay dispersion through the equity theoretical lens implicates that a pay system should be compressed in order to mitigate the potential feelings of inequity (Bloom, 1999). According to Downes and Choi (2014) the motivating mechanism is generally not considered in pay dispersion research. They argue that for a complete picture from the equity theory perspective the positive claimed effects as a result of equitable systems (and therefor equitable individual ratios) must be tested.

2.7.2 Expectancy theory

Vroom (1964) described the expectancy theory. This theory suggests that that differences in pay are motivating if outcomes are valued high (bonus or high pay) by employees, if employees believe that increased effort results in higher performance thus higher outcomes such as increased pay. In contrast

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14 to equity theory, expectancy theory would predict that larger rewards will result in greater motivation effect of the employee, because outcomes are valued high. The theory also implicates that when there is a good relationship with pay and performance this will result in greater motivation because the employee perceives a higher level of performance is tied to a higher level of pay.

2.7.3 Tournament theory

A tournament is a contest where actors compete amongst each other for a prize that is based on relative rank and is designed to incentivize an optimal effort level (Becker & Huselid, 1992; Lazear, 1999). The tournament theory originates from the paper of Lazear and Rosen (1981). They focused with their research on optimum labour contracts and promotions. The theory poses that a greater reward (larger prize) for winning (promotion earning) will increase the amount of effort an employee will give to win the prize (achieve the promotion). Lazear and Rosen describe two types of

performance measurement: relative performance measurement and absolute performance

measurement. Absolute performance measurement is where firms choose to evaluate employees on absolute actions and results. In a tournament the contestants are evaluated relatively to each other. An advantage of this way of evaluation is that it is easier for observation than that of absolute positions. Monitoring costs are reduced with applying relative assessment. In a situation with relative

comparison, a situation can occur where minor differences between employees can result in big differences in pay. The theory explains why large salaries are given to executives. Promotions within organizations (with attached salary growth) are used as continuous incentive mechanisms to pursue an optimal level of motivation among employees, but also has an attraction effect (to attract high

performers). The higher salary related to a promotion is considered as the “prize” the employee can win. With regard to pay dispersion the theory predicts that large pay differences will result in greater motivation of employees (Trevor & Wazeter, 2006).

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2.8 Effects of pay dispersion

Pay dispersion is said to have an effect on the individual motivation (effort) and sorting (attraction and retention effect) (Downes and Choi, 2014). All the individual responses accumulated would have an impact on firm-level performance. Through the lens of equity theory performance-based vertical and horizontal dispersion would have a positive effect on motivation and sorting effects. Non-performance based vertical and horizontal pay dispersion could have different effects on motivation and sorting. From the strategic level point of view sec the non-performance basis would create inequity between employees and this inequity would presumably result in lower motivation and makes attraction and retention more difficult. However, from the employees’ perspective the direction of the pay dispersion effect is depended on the perception of the employee if he or she considers the dispersion of pay as legitimate. Shaw and Gupta (2007) state that employees view on the legitimacy of pay differences may moderate the effects of pay dispersion. Trevor and Wazeter (2006) suggest that the fairness perception of the pay basis influences the negative associations of pay dispersion. When pay dispersion occurs between employees is based on for example skills, people may believe that when they improve skills their pay must increase as well. This skill-based dispersion is considered as legitimate and will not result in negative equity perceptions. A dispersion based on politics however may not be as seen as legitimate and will increase negative equity perceptions and thus decrease motivation and sorting effects. Legitimized non-peformance based pay dispersion has a positive effect on organizational performance through the individual motivation and sorting effects. Illegitimate non-performance pay dispersion will result a discrepancy with the input and output ratio between two parties and therefor have negative effects on the individuals motivation (Cohen-Charash & Spector, 2001). Through the expectancy theory lens performance-based horizontal dispersion would have positive effects on motivation and sorting effects. Van Eerde & Thierry (1996) found that greater levels of perceived value, greater level of believe that increased effort results in higher performance and that higher performance results in higher pay had a positive correlation with certain organizational criterion measues such as effort, individual performance, intention to apply for a job, ratings of attractiveness and preference of jobs and more. From the tournament theory perspective performance-based vertical

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16 dispersion would have positive effects on motivation and sorting effects. From an individual

motivation perspective larger rewards will result in increased motivation to compete for the prize. Also sorting effects occur because from a tournament theory perspective the tournament has winners and losers. Losers of the tournament may voluntarily leave the firm or pursue another career. Another effect is the attraction effect of the vertical dispersed system. High-performing employees would be attracted to organizations that have a greater degree of dispersion and would select themselves into the positions that would make them earn higher compensations.

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2.9 Employee motivation and fairness perception

Section which will discuss relevant literature about employee motivation, where it comes from and how it is influenced. The link will be made with fairness perception. Also performance measures are linked in this section to employee motivation. Explained will be how performance measure can influence employee’s motivation and fairness perceptions.

2.9.1 Fairness perception

The concept of fairness has a normative dimension (how should it be done) and ethical component (what is just). There has been done a lot of research on the topic of fairness in relation with incentives in the fields of political philosophy, legal studies, social psychology, economics and management (Pepper et al. 2015). Rawls (2001) and Nozick (1973) argue the possible trade-off between the distributions of wealth between persons and distributions that enhance the total wealth of society. Rawls (2001) defines the “difference principle” which proposes that making a greater availability of primary goods for more advantaged groups can be justified if it adds also value to the less advantaged groups. Nozick (1973) takes in another point of view with the entitlement theory and says that

someone who acquires goods in a just way, by means of a legitimate transfer from someone who was entitled to the holding of those goods, is justly entitled to the goods even when that person becomes extremely wealthy as a consequence. Another view on fairness without considering ethical dilemmas is the approach of Festinger (1954). This author talks about social comparison theory. He argues that people evaluate themselves in comparison with other people. There are many more authors which have a view and perspective of the phenomenon of fairness. In respect to look at fairness perception in relation to the tournament theory we can look at the study of Pepper et al. (2015). These authors use an economic model of fairness for their research. The economic model derives from the definitions of fairness from Varian (1974) and Baumol (1986). They define fairness as follows:

• Distribution of goods is called fair when X and Y prefer both their own bundle of goods or;

• Distribution of goods is called fair when X prefers bundle of goods from Y and Y prefers bundle of goods from X

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18 Based on these definitions Fehr and Schmidt (1999) have developed a model of fairness. They look at two attributes that can cause for feelings of inequity. These are envy and guilt. Envy is the feeling players get when they end up worse than other players in the game. Guilt is when a player ends up better off than other players in the game. The authors make an assumption that envy weights heavier than guilt. So the experience of inequity will be greater if X is worse off than Y and the experience of inequity will be lesser if they are better off.

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3 Theoretical Framework

In this chapter the theoretical framework is discussed and the hypothesis presented. Focus will be made on testing performance-based horizontal pay dispersion and its effects on fairness perception when new performance measures are introduced. In this chapter following hypothesis will be presented:

1. Performance based horizontal pay dispersion has negative effects on fairness perception

when new performance measures are introduced

2. Compressed horizontal pay dispersion systems have no effect on fairness perception

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4 Research design

The study will be conducted through an experiment. Two separate groups will be created to assess the effect of an extra performance measure on fairness perception in different pay dispersion systems The goal of the experiment is to test if pay structures have influence on the fairness perception of employees when they are measured on more measures than they were in the past. The new measure will create uncertainty for their future outcomes (bonus).

Table 1 Expectations

High performance-based horizontal pay dispersion (dispersed system)

Low performance-based horizontal pay dispersion (compressed system) Extra performance measure Negative effect on fairness

perception

No effect on fairness perception

4.1.1 Sample

Sample will be taken among students and friends through an online survey.

The idea is to have filled in 20-30 questionnaires for each of the two groups. In total I need to have around 60 filled in questionnaires.

4.1.2 Description experiment

I’m going to describe a fictional case setting where respondents will read a story about working in a sales division with a competition element. It is important that the story stays overall the same expect for the pay dispersion system.

4.1.3 Dispersed system group

“You work at a sales division and competing against other individuals (with all equal education and

skills) for the best sales of the year (you work alone). The prizes for number one, two and three in the competition are: #1 = €10,000 bonus, #2 = €1,000 bonus and #3 = €100 bonus. The competition

ended for this year and everyone got their bonus. This last year everyone only got measured on their

amount of sales. Management wants to change way of assessing the ranks and therefor introduces an

extra measure of customer satisfaction next to the amount of sales for everyone. This results for

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would rank for last year if customer satisfaction was used. But for next year the measure is taken into

account.

4.1.4 Compressed system group

“You work at a sales division and competing against other individuals (with all equal education and

skills) for the best sales of the year (you work alone). The prizes for number one, two and three in the competition are: #1 = €10,000 bonus, #2 = €8,000 bonus and #3 = €6,000 bonus. The competition

ended for this year and everyone got their bonus. This last year everyone only got measured on their

amount of sales. Management wants to change way of assessing the ranks and therefor introduces an

extra measure of customer satisfaction next to the amount of sales for everyone. This results for

everyone that the ranking order of last year would show a different picture. Nobody is sure how they

would rank for last year if customer satisfaction was used. But for next year the measure is taken into

account.

After the proposed story important verification questions are asked in order to make sure every respondent read the case well. Also background questions are asked relating the view if they find the differences in pay compressed of dispersed.

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4.2 Results

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5 Discussion

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6 Conclusion

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