management theory

© Academy of Management Journal
1979, Vol. 22, No. 4, 783-792. ,
Individual Versus Systems
Rewards: Who’s Dissatisfied,
Why, and What is
Their Likely Response?^
LLOYD S. BAIRD
Boston University
W. CLAY HAMNER
Duke University
This study involved 108 subjects who were randomly
assigned to individual (contingent on role performance)
and systems (contingent on participation) reward conditions. Analysis of variance found that satisfaction was
lower in the individual reward conditions even though it
was correlated positively to performance. Although
those who did not want to participate again were
dissatisfied, they were not, on the average lower performers.
Much of current management theory recommends that rewards be made
available contingent on performance. In practice, however, motivating by
providing performance contingent rewards is complicated by the need for
different types of performance. Rewards contingent on one type of performance may have results different from those of rewards contingent on
other types. The present research was undertaken to investigate responses
to rewards contingent on two different types of performance, participation in a task and accomplishment of the objectives of the task. The
research first investigated the characteristics of those who were dissatisfied
under each type of reward system. It then determined the conditions under
which dissatisfaction translated into a desire not to participate.
In order to understand these two types of performance it is helpful to
use the definitions proposed by March and Simon (1958) and Katz and
‘Funds for this research were provided by the Graduate School, Boston University.
Portions of this paper were presented at the national meetings of the Academy of Management,
783
784 Academy of Management Journal December
Kahn (1966). Participation is defined as being a member of an organization or activity. Accomplishing the objectives of the organization or activity is referred to as role performance. The advantage of using these definitions is that they relate directíy to reward systems that managers control.
Katz and Kahn (1966) refer to rewards based on participation as systems
rewards. They are available to everyone who is involved in the activity.
Rewards based on role performance are referred to as individual rewards.
SYSTEMS REWARDS
One source of systems rewards is the task itself. As Scott (1966) suggests, individuals may enjoy activities for their own sake, independent of
any other rewards they may receive. Task design research supports this
contention (e.g., see Steers & Mowday, 1977, for a review) and has found
that characteristics such as autonomy, significance, variety, and identity
are related to satisfaction. The systems rewards available for participation
on a task high on these dimensions (a stimulating task) are inherent in the
task itself. Satisfaction is contingent only upon participation. This leads to
the first hypothesis.
HI. Satisfaction with the task will be higher on stimulating than on
nonstimulating tasks.
INDIVIDUAL REWARDS
Managers are well acquainted with money as a source of individual
rewards in organizations (see Lawler, 1977, for a review). Experimental
studies (Cherrington, Reitz, & Scott, 1971; Yukl, Wexley, & Seymore,
1972) also have found that satisfaction varies in relation to the monetary
reward. Thus it can be hypothesized that satisfaction will be related to
whatever the reward is contingent upon. When role performance is
rewarded, satisfaction will vary in relation to role performance.
H2. When individual pay rewards are given contingent upon performance, satisfaction with pay will be positively related to role performance.
Another source of individual rewards is the task itself, a positive feeling
that comes from doing well and achieving. Performance becomes its own
individual reward. Managers do not directly control this type of reward,
but they can create conditions in a task that will increase the probability
that employees will have feelings of satisfaction in relation to how well
they are performing. Hamner and Harnett (1974) and Baird (1976) found
that goals and feedback are the crucial variables making satisfaction contingent on role performance. Baird’s research suggested that the best way
a manager can encourage a sense of satisfaction from role performance is
to provide information about performance. Based on these results, the
following hypothesis can be suggested.
H3. Satisfaction with performance will be positively related to role
performance when individualfeedback is given.

•979 . Baird and Hamner 785
WITHDRAWAL
Theories that recommend tying rewards to performance are dynamic in
the sense that what happens in the present affects what is likely to happen
in
the future. The implicit assumption is that those who are unrewarded
for low performance and consequently dissatisfied will mend their ways
and do better next time. There is, however, more than one possible
response to dissatisfaction. Those who are dissatisfied not only can increase their motivation but they also can (1) withdraw or (2) stay and
sabotage the system. Most organization research has focused on
withdrawal as the response to unrewarding situations. In their review of
the literature. Porter and Steers (1973) hypothesize that it is dissatisfaction
(unmet expectations) that causes people to leave situations.
H4. Those who indicate they would not be willing to participate in
the task (leavers) will be more dissatisfied than will those who indicate they would like to participate again (stayers).
These hypotheses can be combined to suggest some of the characteristics of those who indicate thay they would not like to participate again.
When individual rewards are given, low performers will be dissatisfied
because they are not receiving the rewards. When systems rewards are
given, the concept of equity (Adams, 1965) suggests that high performers
will be the ones dissatisfied because they are not being rewarded for their
performance. It can be hypothesized that this dissatisfaction will be
translated into a desire to withdraw.
H5. When individual rewards are given, leavers will be low performers who are dissatisfied.
H6. When systems rewards are given, leavers will be high performers who are dissatisfied.
METHOD
Subjects and Design
Volunteers for this study were 108 undergraduate students in a management curriculum. The study provided an opportunity for them to gain experience in exercises commonly used in management training and assessment centers. They were randomly assigned to the experimental conditions. In order to test the hypotheses, a 2 x 2 x 3 factorial design with fixed
effects and equal cell size of « = 9 was employed. Factor A was two levels
of task (nonstimulating and stimulating); factor B was two levels of feedback (systems feedback and individual feedback); and factor C was three
levels of pay (no-pay/individual pay/systems pay).
Procedure
The study used two different versions of an in-basket exercise specifically
written for the experiment. The first version was structured to be high

786 Academy of Management Journal December
on task identity, variety, significance, and autonomy. This was done by
(1) writing the 17 item exercise so that there were three complete organizational problems (2) varying the nature of the issues to be solved, (3) stressing the importance of the job, and (4) delegating to the participants in the
exercise all responsibility for decisions. The second version was written to
be low on these dimensions. This was done by (1) revising the task identity
so that there were 17 separate items instead of overall problems, (2) presenting each item as an information collection problem, (3) presenting the
job as only part of the total organization, and (4) limiting the subject to
data collection and advising.
In order to hold the goal constant, a common goal was set and explained to all participants. A pretest indicated that a score of 18 out of 30
was a hard but realistic goal in both versions of the in-basket. Individual
and systems feedback conditions were created for each version of the inbasket. In the individual feedback groups, the goal and scoring procedures
were explained, and it was indicated that the results would be returned at a
second meeting to be held in two days. In the systems feedback groups, the
goal and the method of scoring the in-basket was explained, but it was indicated that because of the lack of time it would not be possible to score
the exercises. Instead, at a second meeting they would “talk about how
their group did in general and how the in-basket is used in assessment
centers.” The subjects, in all conditions, worked on the exercises as individuals.
There were also three levels of pay creating the 2 x 2 x 3 design: (1) no
pay, (2) pay based on individual performance—IOC per point given by the
rater, and (3) systems pay—$2.50 for participating. It should be recognized that some individuals in the systems feedback group did receive individual pay. This gave them the possibility of translating their monetary
reward back into a point rating and using it as individual feedback.
Analyses considering this group as if they were receiving individual feedback changed none of the results. So it was decided to remain with the
2 x 2 x 3 design.
Three measures of satisfaction were collected. Each used a 7-point
Likert response format. Satisfaction with the task was measured with two
items like the following, “I found the task itself very enjoyable.” All internal consistency reliabilities were estimated by applying the SpearmanBrown prophecy formula to the average correlation among the items in
the scale. For satisfaction with task, the estimate was .60.
Satisfaction with performance was measured with two items such as, “I
am satisfied with my performance on the task.” This scale had an
estimated internal consistency reliability of .63. In order to measure
satisfaction with pay, the subjects were asked to respond to the item, “I
am satisfied with the pay I received.”
In addition to the satisfaction measures, there were two performance
measures. Participation was measured by asking the participants in a
yes/no format whether they would like to participate when the exercise

1979 Baird and Hamner 787
was conducted again. Role performance was the score on the in-basket
given to a participant by the rater who scored it. Although the versions of
the in-basket differed in terms of their task characteristics, they were written so that they could be scored using the same six dimensions: delegation,
control, sensitivity, organization, decision making, and problem solving.
These dimensions were scored from 1 (very poor) to 5 (very good) on each
of the five dimensions. This made a total possible score of 30. The
estimated internal consistency reliability for the role performance score
was .87.
Two graduate students and one of the researchers served as the raters.
Before the experiment was conducted, 100 students were given the inbasket as a class exercise in order to give the raters experience in scoring. A
second group of 20 students (10 doing each version) was given the inbaskets to check the consistency of the ratings.
The average correlation among the raters for their overall scores on the
20 in-baskets was .74. In the actual experiment, all three raters were used
and were randomly given the in-baskets to score. The actual participants
in
the research were volunteers from a totally different group of students.
The experiment was conducted in mid-semester, and the sequence was
as follows: Subjects were randomly assigned to the conditions. They spent
the first 10 to 15 minutes reading the instructions explaining the nature of
their task. The experimenter answered any questions and explained the
goal plus the type of feedback and pay that were appropriate for their condition. The subjects worked for one hour and then completed the job
diagnostic survey (Hackman & Oldham, 1976) to measure their perceptions of the task. At the second meeting held two days later, subjects
received the appropriate feedback and their pay, and they completed all
satisfaction questions.
RESULTS
In order to check the experimental task manipulation, a measure of
overall task stimulation was created by summing the ratings for identity,
variety, significance, and autonomy from the job diagnostic survey. Supporting the task manipulation, there was a significant difference between
the perceived task stimulation for those who participated on the
stimulating and nonstimulating tasks (35.28 vs. 37.60,
F=6A5, p<.0).
To investigate satisfaction, a 2 x 2 x 3 analysis of variance was used.
Table 1 presents the means and standard deviations for the satisfaction
measures, and Table 2 presents the summary of the analysis of variance. If
Hypothesis 1 is to be supported, it would be necessary for satisfaction to
be higher in the stimulating task. In the analysis of variance there were no
significant factors or interactions for satisfaction with task. However,
satisfaction with performance was significantly higher when there was no
feedback (9.18 vs. 6.76,
p<.QO). Evidently some subjects were more
satisfied not knowing how well they had done. For satisfaction with pay.

788 Academy of Management Journal
TABLE 1
Means and Standard Deviations For Satisfaction Measures
December
Independent
Measure
Nonstimulating task
Systems feedback
No Pay
Systems pay
Individual pay
Individual feedback
No pay
Systems pay
Individual pay
Stimulating task
Systems feedback
No pay
Systems pay
Individual pay
Individual feedback
No pay
Systems pay
Individual pay
Satisfaction
With
M
8.89
8.44
9.33
8.89
7.44
9.79
9.22
8.67
10.22
8.44
9.00
10.00
Task
SD
4.11
2.51
3.32
2.15
2.51
2.73
2.22
2.40
2.64
3.01
2.96
2.12
Satisfaction Measures
Satisfaction
With
Performance
M
9.89
9.33
8.56
6.56
6.44
5.56
9.33
8.33
9.67
6.11
7.67
8.22
SD
1.83
2.06
2.24
3.13
3.05
2.40
1.87
1.87
3.16
2.32
3.91
3.70
Satisfaction
With
M
5.00
4.67
-6.11
2.56
4.89
5.33
5.67
4.67
Pay
SD
1.32
1.87
1.27
1.81
1.27
1.50
1.23
2.06
TABLE 2
Analysis of Variance for Satisfaction and
Performance Measures
Effect
Satisfaction with task
A (nature of task)
B (feedback)
C (pay)
AxB
AxC
B x C
A x B x C
Satisfaction with performance
ABC
A x B
A x C
B x C
AxBxC
Satisfaction with pay
ABC
AxB
AxC
BxC
AxBxC
MS
5.79
1.12
19.53
.01
.07
.68
3.17
6.75
158.90
.03
11.34
13.86
5.34
2.62
5.56
.90
22.22
1.39
12.50
24.50
3.56
F
.75
.15
2.54
.00
.27
.09
.41
.91
21.48**»
.00
1.53
1.87
.72
.35
2.25
.36
9.00**
.56
5.06*
9.92**
1.44
*p<.05
**p<.01
***p<.OOI

1979 Baird and Hamner 789
those who received the systems rewards (hourly pay) were substantially
more satisfied, on the average, than were those who received individual
rewards based on their performance (5.42 vs. 4.31,
p<.0). There also
were two significant interactions for satisfaction with pay: task x reward
(F=5.06,p<.05) and feedbackxreward (F=9.92,p<.01).
The relationship in Hypothesis 2 between satisfaction with pay and performance was investigated by computing the correlations for the individual and systems pay conditions. Supporting the hypothesis, there was
a significant difference between the correlations of satisfaction with pay
and role performance in the two conditions (p<.001). When individual
pay was provided, satisfaction with pay varied positively with role performance so that the high performers were the ones who were satisfied
(/? = .58, /?<.OO1). Also of note is the finding that, with systems pay,
satisfaction with pay varied negatively with role performance (/? = -.35,
p<.05).
Feedback also was hypothesized as a source of individual task rewards.
Again, the hypothesis was supported. There was a significant difference
between the correlations
{p<.05). Satisfaction with performance was
significantly correlated with role performance when individual feedback
was given (/? = .49, /?< .001) but was not related when there was systems
feedback (r=.14, n.s.). Thus, in each case, the relevant satisfaction
measure varied in relationship to role performance when individual
rewards were provided.
The fourth, fifth, and sixth hypotheses were tested using a 3 x 2 analysis
of variance with satisfaction and performance as the dependent measures.
The first factor was the reward system; no pay, individual, and systems
pay. Each of these pay groups was then split into those who indicated they
would be willing to participate again (stayers, total = 26; no pay = 14, individual pay = 6, systems pay = 6) and those who were not willing to participate again (leavers, total = 82; no pay = 22, individual pay = 30, systems
pay = 30).
Supporting Hypothesis 4, leavers were significantly less satisfied with
the task than were stayers (7.46 vs. 9.53, ;?< .001), and less satisfied with
the pay (3.83 vs. 5.07, /?< .05). In each case there were no significant interactions. An analysis also was done for performance. It should be
remembered that the nature of the task was changed along the task dimensions of identity, variety, significance, and autonomy. The ability of the
subject to obtain higher ratings thus was limited to some extent by the
nature of the task. Because of this, it is not appropriate to compare performance across tasks. It is feasible, however, to consider leavers versus
stayers in general and within any given task. In the 3×2 ANOVA no
significant factors or interactions were found for performance. In order to
support Hypotheses 5 and 6, leavers who received systems rewards should
have been higher in role performance and lower in satisfaction than
stayers who received systems rewards. Similarly, leavers who had received

790 Academy of Management Journal December
individual pay rewards should have been lower in satisfaction and lower in
role performance than stayers who had received individual pay rewards.
DISCUSSION
Consistent with reinforcement theory (Skinner, 1969), satisfaction was a
reflection of the reward system and thus was related to the type of
behavior on which the rewards were contingent. When individual task and
pay rewards were given, role performance became a source of satisfaction.
The high performers tended to be satisfied and the low performers
dissatisfied.
Even though satisfaction was higher on the average when systems task
and pay rewards were given, it was not positively related to role performance. In fact, supporting what equity theory (Adams, 1965) would
predict, satisfaction with pay was negatively related to role performance.
It was the poor performers who were satisfied and the high performers
who were relatively dissatisfied. These results are consistent with Baird
(1976) and Greene and Podsakoff (1978), who also found that when participation was rewarded the general level of satisfaction was higher than
when role performance was rewarded. What might be happening is that
the satisfaction of the low performers outweighs the dissatisfaction of the
high performers, thus bringing the average level of satisfaction up.
These results, plus previous work on rewards (Yukl et al., 1972; Cherrington et al., 1971), suggest that without knowing the nature of the
reward system one might make some incorrect assumptions about the information that satisfaction measures are providing. For example, assume
two groups of people, with satisfaction significantly lower in one group. If
the reward structure is examined carefully, one might find that the reason
satisfaction is low is that those who are iow performers are not receiving
the rewards they want. The problem in this group is how to help these low
performers translate their dissatisfaction into renewed effort and new
skills so that their performance will increase and they can obtain the
rewards. This is a far different problem from that in a systems reward
structure. Then the problem most likely would be how to prevent the high
performers from translating their dissatisfaction into decreased performance.
The high levels of satisfaction in the other group do not necessarily indicate that everything is fine either. There may be serious problems. It may
be that even though average satisfaction is high, the high performers are
the ones who are dissatisfied with the systems rewards they are receiving.
A renewed effort to increase performance is not an option for them. The
only responses open are decreased performance, sabotage, or withdrawal.
The low performers are quite satisfied so they have no impetus for change
and are likely to continue to do what they have been doing in the past, i.e.,
performing poorly.

1979 Baird and Hamner 791
It is also noted that, even though satisfaction and performance were
related when individual rewards were given, dissatisfaction did not
translate into a desire to withdraw from the situation proportionately
more for either the high or low performers. This is consistent with the
original contention that there are numerous options open to dissatisfied
individuals, only one of which is withdrawal. Knowledge that a person is a
low performer and/or dissatisfied might not be enough to predict whether
that person will withdraw from the situation or remain and (1) choose to
work harder or (2) try to sabotage the system.
CONCLUSIONS
In interpreting these results, there are, of course, the ever present questions of laboratory studies—i.e., whether these results can be generalized
to ongoing organization situations. Organizations have more complex
reward structures and more complex problems. They are similar, however,
to this experimental design in the sense that they have both monetary and
task rewards that are given as either individual or systems rewards. If the
results can be generalized, they have interesting implications. They support the contention that satisfaction is a function of the various reward
systems and will vary with whatever the rewards are contingent upon.
Thus managers need to know not only that satisfaction is low, but who is
dissatisfied, why, and what their likely response will be.
The results also support the complex nature of turnover and participation data (Steers & Rhodes, 1978). Just knowing that people are leaving
and that the reason they are leaving is because they are dissatisfied might
not be enough. Managers must know what type of performers they were
and why they chose the withdrawal option. Presumably, there are some
low performers that the organization would be very happy to lose and
some high performers whose choice to leave would raise some real questions about the management system.
The present study also raises potential questions about the use of
satisfaction measures as the sole basis for management action. Future field
and laboratory research needs to investigate the theoretical and practical
implications of various levels of individual and systems rewards for both
satisfaction and performance.
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792 Academy of Management Journal December
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