|Ph.D Student||Elena Belogolovsky|
|Subject||Pay Secrecy and Task Performance: A Moderated Mediation|
Model of Perceived Instrumentality and
Performance-Based Pay System
|Department||Department of Industrial Engineering and Management||Supervisors||Full Professor Erev Ido|
|Mr. Bamberger Peter|
|Full Thesis text|
Pay secrecy - a pay communication policy restricting employees’ access to information regarding the level of other employees’ pay in the organization and ability to exchange personal pay-related information with others -- is a core issue in compensation administration that has been one of the most controversial, yet under-researched topics in the management sciences for the past century. To make a theoretical and empirical contribution, the purpose of the current study was to specify the conditions that may determine the direct and indirect (via instrumentality perceptions) effects of pay secrecy on individual task performance. We, therefore, generated and tested a moderated mediation model of the effects of pay secrecy on individual task performance. According to this model, the effects of such a policy are posited to be mediated by performance-pay instrumentality perceptions and moderated by two key characteristics of the performance-based pay system, namely, performance assessment approach and performance appraisal rating approach. A total of 297 undergraduate students participated in a lab-based simulation with a 2 x 2 x 2 x 3 repeated measures, mixed-factorial design. The results of the Moderated Mediation Analysis support this model, suggesting that (a) perceived instrumentality partially mediates the adverse effect of pay secrecy on task performance; (b) subjectivity of performance assessment moderates the first stage of the mediation (pay secrecy → instrumentality), such that this inverse association is amplified when performance assessment is subjective and attenuated when it is objective; (c) performance appraisal rating approach moderates the second stage of the mediation (instrumentality → performance), such that this positive association is amplified when performance appraisal rating approach is absolute (versus relative); (d) the main direct effect (pay secrecy → performance) is jointly moderated by performance assessment approach and performance appraisal rating approach, such that this negative effect is amplified when performance assessment is subjective and appraisal rating approach is relative. The implications of the findings for research and practice are discussed.