An empirical investigation of pay and employee satisfaction

Compensation costs are among the most significant expenses incurred by organizations. To date, the theory and research on the effectiveness of financial compensation has been limited and has largely been based on subhuman species and on nonrepresentative subjects acting in simulated environments. There have been few tests of the theory in operating organizations. Management approaches to compensation have not been evaluated in terms of higher need satisfaction, need desire, general satisfaction, feelings of equity, job involvement, nor intrinsic motivation. This exploratory study investigated these relationships and examined the interrelationship of factors proposed by E.E. Lawler in a model of the determinants of pay satisfaction. Data was gathered by questionnaire from 15 junior management and supervisory level employees in one organization. Salary satisfaction was significantly correlated with opportunities for personal growth and development and with self-fulfillment. Satisfaction with salary was not significantly correlated with general satisfaction. The results indicated that if a salary administration program is to be effective, it must be manageable and understandable to the employees. Employees expect to receive feedback and when they do not they are critical of their supervisors. Similarly, employees expect that when they receive praise from their supervisors for performance well done, it will be translated into salary increases. Where this does not occur, employees are dissatisfied. In evaluating the equitability of their salaries, participants considered not only their absolute pay levels, but also the relative levels of input and outcome of comparison persons. The results did not support Lawler's hypothesis that female employees would be more satisfied with their salaries than male employees. Data on general satisfaction contradicted Herzberg's dual-theory constructs. Job involvement factors were found to be highly intercorrelated supporting Lawler's conception of a job involvement factor. The data did not, however, support the existence of an intrinsic motivation factor. Data on need fulfillment and need desire were inconclusive.Business, Sauder School ofGraduat