Optimizing Motivation – The Role of Meaning of Pay in Incentive- Based Sales Compensation
Type
working paper
Date Issued
2024
Author(s)
Abstract
To motivate salespeople, companies use compensation as a sales management control. However, researchers warn that individuals vary in their meaning of pay, which implies that compensation stimulates their motivation differently. As there is only sparse research on people’s meaning of pay in the context of compensation and motivation, this study provides initial insights into whether and how the meaning of pay moderates the relationship between individual-based pay for performance and intrinsic and extrinsic motivation by drawing on self-determination theory and valence–instrumentality–expectancy theory. The study enriches extant research on the crowding-out effect. A cross-sectional survey in a global manufacturing company was utilized to collect data from more than 600 salespeople located in ten different market organizations. The study finds that individual-based pay for performance crowds out intrinsic motivation while it enhances extrinsic motivation. While the results do not indicate a moderating effect of meaning of pay on individual-based pay for performance and intrinsic motivation in the overall dataset, some culturally nested subsets show a negative moderating effect. Regarding extrinsic motivation, we reveal that meaning of pay does not moderate the relationship of individual-based pay for performance, however, it directly increases it. This study aids managers to better design and use compensation and, thereby, optimally motivate their salespeople. The findings suggest deploying low individual-based pay for performance, regardless of a person’s meaning of pay.
Language
English (United States)
Keywords
pay for performance
motivation
crowding-out effect
meaning of pay