|M.Sc Student||Verech Tamar|
|Subject||The Impact of Pay Secrecy on Emoloyee Equity and|
|Department||Department of Industrial Engineering and Management||Supervisors||Mr. Peter Bamberger|
|Professor Emeritus Miriam Erez|
the major mechanism for rewarding and spurring organizational behavior. Yet
little is known about how different compensation administrations policies affect
behavior. What is actually known is that the key to designing an effective
reward system appears to revolve around the issue of perceived equity, which
has been linked to diminished performance. The purpose of this research was to
test whether a more open policy have indeed a more positive effect, as compared
to secrecy policy, in inducing employees to improving performance. The
hypotheses of the current study tested the direct effect of open pay on
performance, and the role of equity perceptions in explaining this effect.
Knowing that people construe and respond to similar circumstances in different
ways, we also tested for the role of negative affect (NA) as a possible
moderator of the link between pay policy and equity perceptions.
To test the hypotheses, 38 participants, divided into small groups, performed the same task. The research simulation manipulated the amount of information provided to participants. Groups from the two policy communication conditions differed in their performance level. Performance was found to be higher under conditions of open pay. Equity was found to explain the relationship between pay policy and performance, while with the effect of policy is contingent upon Negative Affectivity. The finding that the link between pay policy and equity is moderated by NA indicates that, particularly among those with higher levels of NA, open pay is associated with lower levels of equity and hence lower levels of performance, thus suppressing any positive effect of open pay on equity, and hence performance, among higher-NA individuals. The results suggest open pay policy has significant implications with respect to both equity perceptions and their consequences (e.g. performance).