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7/17/2019 Performance-Enhancing Compensation Practice and Employee Productivity
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Performance-enhancing compensation practices and employee
productivity: The role of workplace bullying
Al-Karim Samnani a,b,c, Parbudyal Singhb,c,⁎
a University of Windsor, Odette School of Business, 401 Sunset Avenue, Windsor, Ontario N9B 3P4, Canadab School of Human Resource Management, York University, Toronto, Ontario M3J 1P3, Canadac School of Human Resource Management, York University, Toronto, Ontario, M3J 1P3, Canada
a r t i c l e i n f o a b s t r a c t
Performance-enhancing compensation practices are designed to increase employee productivity
through greater accountability, while highlighting performance differentials across employees.
While productivity increases may occur, these practices can also stimulate an unintended
consequence: workplace bullying. In thispaper, we presenta typology and conceptual model that
explore the boundary conditions under which performance-enhancing compensation practices
may result in bullying behavior with differential effects on target and perpetrator productivity.
We propose the mediating roles of individual competition and stress between zero-sum pay
systems andworkplacebullying. In ourmodel,we propose that perpetrators will realizeincreased
productivity. This increased productivity will be generated through instilling fear in the targeted
employee to compete for output, which will increase the perpetrator's relative ranking. As a
result, targets will tend to suffer decreased productivity. We conclude with a discussion of the
theoretical contributions, practical implications, and offer directions for future research.
© 2013 Elsevier Inc. All rights reserved.
Keywords:
Performance-enhancing compensation practices
Workplace bullying
Employee productivity
Individual competition
Stress
1. Introduction
An organization's compensation policies and practices are integral to its success (Gomez-Mejia, Berrone, & Franco-Santos,
2010; Huselid, 1995; Lawler, 2003). Compensation plays a number of key roles in organizations including signaling employee
worth, attracting potential job incumbents, and retaining existing employees (Gerhart & Rynes, 2003). Furthermore, while
intrinsic motivators are important, extrinsic motivators such as pay continue to represent a central role in explaining why
individuals are productive in the workplace (Dulebohn & Werling, 2007). In sum, compensation systems represent a critical
influence and driver of employee attitudes and behaviors (Rynes, Gerhart, & Minette, 2004; Sweins & Kalmi, 2008). The effectiveness
of a compensation system, however, depends, to a large degree on how it is designed, among other factors.
In what is now considered a “classic” in the Academy of Management Journal, Kerr (1975) illustrates a number of cases in which
the behavior hoped for is not the behavior that is actually rewarded. Kerr's illustrations highlight the importance of carefullydesigning compensation systems in order to avoid rewarding the wrong behaviors. Moreover, Kerr's article illustrates how
undesirable behaviors may in fact be the ones that are unintentionally rewarded. Using politics as an example, Kerr describes how
voters want candidates to be frank about the specific sources and use of funds for their proposed programs; however, they punish
candidates who in fact do so. Consequently, this leads candidates to be vague about their goals and speak in general terms about
how they intend to achieve their proposed programs. Candidates will be inclined toward these latter behaviors because the
reward system punishes those who articulate operative goals, while in turn rewarding those who speak about these programs
vaguely (Kerr, 1975). Compensation systems in organizations can generate behaviors that are similarly counterproductive.
Human Resource Management Review 24 (2014) 5–16
⁎ Corresponding author. Tel.: +1 416 736 2100x30100.
E-mail address: [email protected] (P. Singh).
1053-4822/$ – see front matter © 2013 Elsevier Inc. All rights reserved.http://dx.doi.org/10.1016/j.hrmr.2013.08.013
Contents lists available at ScienceDirect
Human Resource Management Review
j o u r n a l h o m e p a g e : w w w . e l s e v i e r . c o m / l o c a t e / h u m r e s
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Moreover, those employees who engage in these counterproductive work behaviors may derive rewards in doing so, while those
who do not can find themselves being punished.
As the above entails, compensation can have particularly complicated effects on employee behavior. More specifically, the
behavior that is rewarded can be accompanied by unintended consequences. For instance, researchers have reported that
employees who are paid based on the volume of sales generated will devote less attention toward helping behaviors such as
training of new hires (Morrison, 1996; Wright, George, Farnsworth, & McMahan, 1993). Similarly, team efforts may be ignored
when individual performance is measured and highly rewarded (Campbell, Campbell, & Chia, 1998). Notably, research has
demonstrated that employees will typically engage in those behaviors that they perceive the organization to be rewarding (e.g., Beer
& Cannon, 2004; Campbell et al., 1998). However, there may be a number of intermediate mechanisms that shape how employees
may achieve these rewarded goals.
In many organizations, employers may directly measure certain aspects of performance. In such instances, employers may set
a considerable portion of employee pay to be based on levels of employee productivity ( Chien, Lawler, & Uen, 2010). When HRM
systems, such as compensation, are used to differentially affect employee performance through increased expectations (Batt &
Colvin, 2011), these are referred to as performance-enhancing (or expectation-enhancing) practices (Shaw, Delery, Jenkins, &
Gupta, 1998; Shaw, Dineen, Fang, & Vellella, 2009; Tsui, Pearce, Porter, & Tripoli, 1997 ).
As defined by Batt and Colvin (2011; p. 698), “Performance-enhancing practices are short-term incentives designed to
respond to immediate competitive pressures to improve performance”. In the context of compensation, these incentives take the
form of short-term plans that link individual pay to employee performance, such as commission pay, individual bonuses, merit
pay raises, and other individual incentive pay (Batt & Colvin, 2011; Shaw et al., 2009). While incentive plans typically produce
higher performance outcomes (Chien et al., 2010), as mentioned earlier, the means by which these performance increases are
achieved may be associated with unintended and undesirable consequences. One of these unintended consequences may be
bullying behavior. Workplace bullying refers to repeated and ongoing negative acts that one or more employees perpetrate on
another employee (Fox & Stallworth, 2010).
In theorizing on the relationship between performance-enhancing compensation practices and workplace bullying, this paper
makes several contributions to the literature. First, we illustrate the potential unintended consequences associated with
performance-enhancing compensation practices in the form of bullying behavior. While performance-enhancing compensation
practices may result in increased productivity, the means by which this is achieved may be harmful to co-workers. Second, we
explore how a compensation system can represent a predictor of individual competition and stress, while specifying the key
boundary conditions. In this regard, we present a typology that reflects the interaction of three aspects of reward systems
(compensation design, rewards' value/costs for non-achievement of rewards, and scarcity of rewards) that have not been
previously explored together in the literature. Based on this typology, we present a testable model for the potential effects of
bullying on employee performance. Third, we extend the workplace bullying literature by investigating the role of pay systems as
an antecedent. While Salin (2003) mentioned that reward structures may play a role in stimulating bullying, we explore how this
may in fact occur. Finally, we extend expectancy theory to help explain the unintended consequences of compensation systems,especially when they are not complete and poorly designed (Kominis & Emmanuel, 2007; Lawler & Jenkins, 1992; Lawler &
Rhode, 1976).
Overall, while there have been several studies examining the relationship between performance-enhancing practices and
turnover levels (e.g., Batt & Colvin, 2011; Batt, Colvin, & Keefe, 2002; Shaw et al., 1998, 2009), there is relatively little research on
how such practices may result in interpersonal forms of conflict. We believe that an important consequence of the pressures
associated with performance-enhancing compensation practices may be the indirect encouragement of bullying behavior. With
studies reporting a high prevalence rate and negative consequences of bullying in organizations (e.g., Fox & Stallworth, 2005;
Lutgen-Sandvik, Tracy, & Alberts, 2007), the possible unintended consequences of performance-enhancing compensation
practices on bullying represent an important avenue for investigation.
We first provide an overview of performance-enhancing compensation practices and theoretical explanations why these may
produce both positive and negative, unintended consequences. We follow with a review of the workplace bullying literature,
which highlights findings related to the role of work design and stress in predicting bullying behavior. Second, we present a
typology and model that illustrate how performance-enhancing compensation practices can trigger bullying behavior. Third, wediscuss the mediating roles of individual competition for rewards and stress between zero-sum compensation systems (which we
discuss shortly) and workplace bullying, and how bullying behavior can lead to differential productivity outcomes for targets and
perpetrators. Finally, we conclude the paper with a discussion of theoretical and practical contributions, while offering avenues
for future research.
2. Performance-enhancing compensation practices
Performance-enhancing practices include HRM practices that are intended to increase employee performance, such as
employee monitoring, individual pay-for-performance plans, and performance appraisals (Shaw et al., 2009). In this paper, we
focus on the pay system in the organization. We focus specifically on the role of pay systems because of the paucity of research
investigating how pay practices may result in interpersonal forms of conflict. This paucity continues to exist despite speculation in
prior research that reward structures may contribute to workplace bullying (e.g., Salin, 2003). Because of the important direct role
that pay has on employee behavior (Rynes et al., 2004; Sweins & Kalmi, 2008), we believe that investigating the role of paypractices in stimulating interpersonal forms of conflict can be particularly fruitful.
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In past research on performance-enhancing practices (e.g., Batt & Colvin, 2011; Shaw et al., 1998, 2009), scholars have focused
specifically on individual-level performance pay systems; consistent with this conceptualization, we limit our analysis in this paper
to individual-level performance pay systems and not group or organizational performance pay systems. While similar on some
aspects, such as pay variability based on performance, individual-level performance pay systems can be quite different from those
that are group-, and/or organization-based. For instance, performance indices and measurements are different for individual
versus group and organizational incentives. Further, bullying is more an issue with individual pay plans in which personal/individual
competition would be more pronounced in comparison to cooperation-driven team and organizational-level pay systems, such as
gain-sharing and profit-sharing.
Performance-enhancing practices are often distinguished from a distinct set of practices labeled HRM inducement and
investment practices (Shaw et al., 1998; Tsui et al., 1997). In particular, the latter set of practices is designed to signal a sustained
commitment toward employees. HRM inducement and investment practices include overall pay and benefit level, training, and job
security, as well as processes that enhance procedural justice (Shaw et al., 2009), which reflect the organization's consideration
toward employee well-being and perceptions of fairness. We will first discuss the positive effects of performance-enhancing
compensation practices on employee behaviors and productivity, followed by the unintended negative effects.
2.1. Performance-enhancing compensation practices and employee productivity
Performance-enhancing compensation practices are designed and implemented to elicit higher levels of performance from
employees through increased expectations about their performance (Shaw et al., 1998). Such practices are also designed to
increase motivation and employee accountability for their performance. There are several theoretical explanations for a positive
relationship between performance-enhancing compensations systems and employee productivity, such as equity theory (Kepes,
Delery, & Gupta, 2009) and tournament theory (Lazear, 1995).
However, expectancy theory has perhaps the most relevance to our conceptualizations in this paper. In sum, this theory posits
that there are three factors that are important, or conditions that must be met, for compensation to be motivational (Lawler,
1973; Vroom, 1964). First, the rewards must have positive net value or high valence; that is, the outcomes must be attractive.
Second, the requested tasks must be within the expectations of the employee, or they must be perceived to be doable; that is, the
effort will lead to the performance (or the E = NP relationship). Finally, the perceived probability that successfully performing
the required tasks will lead to the desired outcomes, or instrumentality, must be high; that is, the employee must be assured that
once the tasks are performed, they will get the rewards/achieve the promised outcomes (the P = NO relationship). There is
support in the empirical research for expectancy theory in terms of managerial and employee motivation and performance
(Brown, 2001; Kominis & Emmanuel, 2007).
As the foregoing suggests, compensation systems, including those that are performance-enhancing, can and do influence
employee performance in a positive way. However, this is not always the case, as these systems may have unintended consequences
—
an issue that we turn to in the next section.
2.2. Performance-enhancing compensation practices and unintended consequences
A prominent theoretical explanation that has traditionally been used to explain the negative effects of incentives/
pay-for-performance plans relates to the “crowding out” effect. Essentially, some scholars contend that rewarding a person with
financial incentives (extrinsic rewards) to do an inherently interesting task “crowds out” intrinsic motivation and rewards,
or doing the task for its own sake (Deci, Ryan, & Koestner, 1999). Generally, supporters of these arguments cite numerous
laboratory experiments which demonstrate that subjects continue to do interesting tasks when pay is not involved, and cease to
do so when pay is involved (Kohn, 1993). However, this literature criticizes all types of performance-enhancing compensation
practices; for instance, they contend thatamong other negative effects, these compensation practices do not motivate employees and
improve their performance. This is not our position, as there is an abundance of studies that have found these pay systems to be
related to higher levels of employee performance, including meta-analyses (Gerhart & Milkovich, 1990; Heneman, 1992; Jenkins,
Mitra, Gupta, & Shaw, 1998). Rather, we contend that when these practices result in increased individual competition and stress,performance-enhancing compensation practices can produce unintended consequences, such as bullying, as explained below.
In terms of the relationships between performance-enhancing compensation practices and bullying, an extension of theoretical
constructs in expectancy theory is useful in explaining victimization behaviors. First, valence, or the net value of the rewards, implies
both potential positive and negative effects. As discussed earlier, rewards that have high positive net value can and do motivate
employee productivity and performance; however, valuable rewards can also trigger negative unintended effects, including high
non-achievement costs and high risks. For instance, high pay from performance-enhancing systems, especially over time, may
become an integral part of many employees' expected pay. Consequently, it is not illogical to expect these employees to incorporate
this pay, including incentives, into their “normal” expenses, such as mortgage payments, childcare, and family recreational and sports
activities. If this happens, then the pay system creates a burden on the employee and will most likely lead to increased stress,
especially if the source of this pay – including those that are performance-enhancing – is threatened. As Gneezy, Meier, and Rey-Biel
(2011) note, the unintended consequences of pay systems become more evident when the future viability becomes an issue (or the
increased probability of them being removed as Deci and others demonstrated in their experiments). Thus, the costs for
non-achievement become a crucial factor. This will likely trigger high risks for the employee and induce stress. As we explain inthe next section, this stress can trigger bullying behavior.
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Second, for performance-enhancing compensation practices to be motivational and drive desired behaviors, employees must
believe that their successful efforts will lead to the promised rewards; that is, instrumentality must be high. However, for this
condition to be met/realized, employees must have trust in the organization. Trust is an integral part of an organization's
culture and is a consequence of historical experiences and organizational philosophy and strategy. Certain environments,
however, such as call centers (e.g., D'Cruz & Noronha, 2010, 2011; Liefooghe & Davey, 2001) induce lower levels of
trust from employees because of the punishment-driven organizational culture. Such organizational cultures lead to high
levels of stress among employees (Liefooghe & Davey, 2001), which stimulates increased bullying behavior (D'Cruz &
Noronha, 2010).
Third, employees must have an expectation (expectancy) that they can perform the required tasks. This brings to fore the
difficulty of the goals and tasks. As the goal-setting literature ( Locke & Latham, 1990) demonstrates, for goals to be motivational,
they must be within reach. While stretch goals may be good, extremely difficult goals can drive high risk-taking behaviors and
result in unintended consequences; this has implications for bullying. Difficult standards and expectations result in a smaller
number of “winners” and scarcity of rewards as well. In many instances, these become zero-sum rewards, which may result
in intense individual-level competition and counterproductive workplace behaviors, such as rivalry, non-cooperation, and
knowledge-hoarding, among others (Fox & Spector, 2006). Tournament theory helps to explain this effect in a similar way.
The top performers may be handsomely rewarded, if the resource pool is large, while the average and low-performers will
get relatively small pay increments. This can motivate those at the bottom to seek the top prizes. However, with limited
resources, “zero-sum” pay systems distribute rewards in a way that forces the system to develop “haves” and “have-nots”,
and a resultant toxic culture of jealously, negative individual competition, and stress. These establish fertile grounds for
workplace bullying.
3. Workplace bullying
While several researchers have attempted to define workplace bullying, disagreement continues to exist on a single,
consensus-based definition (Nielsen, Matthiesen, & Einarsen, 2010). Nevertheless, the following represents one of the most
commonly used definitions in the literature:
Bullying at work means harassing, offending, or socially excluding someone or negatively affecting someone's work.
In order for the label bullying to be applied to a particular activity, interaction, or process, the bullying behavior has to
occur repeatedly and regularly (e.g., weekly) and over a period of time (e.g., six months). Bullying is an escalating process
in the course of which the person confronted ends up in an inferior position and becomes the target of systematic negative
social acts (Einarsen, Hoel, Zapf, & Cooper, 2011: p. 22).
This definition of workplace bullying has revolved around four key features (Bartlett & Bartlett, 2011). These features include
the frequency, persistency, intensity of the behaviors, and the perceived power imbalance (not necessarily hierarchical) between the
perpetrator and targeted employee (Bulutlar & Unler Oz, 2009; Fox & Stallworth, 2010; Lutgen-Sandvik et al., 2007). Furthermore,
researchers have also suggested that behaviors must be systematic and repetitive in order to constitute bullying (Bulutlar & Unler
Oz, 2009; Hoel, Rayner, & Cooper, 1999; Zapf & Einarsen, 2011).
Workplace bullying may include a wide variety of behaviors such as overt intimidation, insults, violence, belittling opinion,
excessive monitoring of an employee's work, meaningless tasks, not providing credit when deserved, and rumor spreading,
among others (Fox & Stallworth, 2005; Parzefall & Salin, 2010). Moreover, bullying behavior may be very subtle (e.g., rumor
spreading, belittling opinion, meaningless tasks) or more overt (e.g., overt intimidation, violence). Surprisingly, Fox and Stallworth
(2005) found that 97% of the participants in their study had experienced some form of bullying in the workplace over the past five
years, which suggests high pervasiveness in organizations. In addition, Lutgen-Sandvik et al. (2007) found that approximately 47% of
employees in U.S. workplaces have been subjected to bullying behavior over the past two years.
A number of studies have investigated potential factors that may stimulate workplace bullying (e.g., Fox & Stallworth, 2005;
Hoel, Glaso, Hetland, Cooper, & Einarsen, 2010; Strandmark & Hallberg, 2007 ). Interestingly, research suggests that work design
and stress are associated with increased bullying behavior (Aquino & Thau, 2009; Hoel et al., 1999). In terms of work design, some
research has investigated whether team autonomy levels are associated with workplace bullying (e.g., Arthur, 2011). To illustrate,
Arthur (2011) found that low team autonomy was associated with higher levels of bullying. Similarly, Baillien, De Cuyper, and De
Witte (2011) found that employees with high levels of autonomy were less likely to experience bullying behaviors. Ayoko (2007)
found that individuals within groups that experience high task conflict were also more likely be subjected to bullying behaviors.
Notably, several researchers have also suggested that when work design is structured in a way that promotes competitive
behavior among employees, they will become more likely to engage in bullying (e.g., Aquino & Thau, 2009; Hoel et al., 1999;
Lutgen-Sandvik et al., 2007; Salin, 2003).
While researchers have found that being subjected to bullying can result in increased stress (e.g., Nielsen, Matthiesen, &
Einarsen, 2008), employees who experience increased stress may also become more likely to bully (De Cuyper, Baillien, & De
Witte, 2009; Fox & Stallworth, 2010; Hoel et al., 1999). To explain, stress often triggers negative emotions that employees may
cope with by engaging in individual-directed counterproductive work behavior (Fox & Spector, 2006). We discuss this in more
detail shortly.
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Salin (2003) argued that the reward system in organizations may be structured in a way that encourages bullying behavior
among employees. For instance, Salin (2003) contends that when promotion systems reward employees for manipulating or
harming another employee, such practices will stimulate bullying behavior in the organization. Salin (2003) also mentions that
systems in which employees are ranked in relation to one another may elicit bullying among competing employees. We seek to
expand on this latter assertion by exploring the conditions under which performance-enhancing compensation practices may
indirectly encourage bullying behavior.
4. The role of performance-enhancing compensation practices in stimulating bullying behaviors
Based on the foregoing reviews of the positive and negative effects of performance-enhancing compensation practices and
workplacebullying, we develop a typology of compensation consequences drivenby three keyfactors in this literature: compensation
design, value of the rewards/costs of non-achievement of expectations, goals and targets, and scarcity of rewards (see Fig. 1 below).
While there are certainly other variables that can be used to explain the unintended consequences of compensation systems, such as
biological and physiological effects of money (Bevilacqua & Singh, 2009; Lea & Webley, 2006), we focus on thesethree because of two
key reasons. First, these variables have been consistently considered in previous research, though not together. Second, they mirror
similar variables in the bullying literature thathave been reported as drivers of victimization pressures,viz., poor work/compensation
design, individual-level competition over scarce resources, and high stress.
We use the term “compensation design” broadly to encompass the strategic orientation of the performance-enhancing
compensation practices, or the fit between employee compensation/rewards and organizational strategy and culture; that is, the
“wholeness” of the compensation system (Lawler & Rhode, 1976). An organization's pay system should take into consideration its
strategy, structure, and the broader environment (that is, there should be both internal and external fit), as well as employees'needs and expectations. If this is done effectively, it increases the likelihood of improved employee and organizational
performance (Lawler, 2000). If not, it will most likely result in dysfunctional and unintended outcomes, captured in Quadrants 1
and 3 of the typology (Low Performers' Paradise and Toxic Zone).
As explained above, the value of the rewards is also an important consideration in theorizing on the unintended consequences
of individual-level pay systems, including those that are performance-enhancing. The net value of a reward (valence) takes into
consideration the actual value of the rewards, minus the costs incurred in their attainment. In the context of this typology,
we posit that these costs will be both economic (e.g., time spent) and psychological (e.g., stress). In addition to the potential loss
of income, costs for non-achievement can also include fear of “punishment” from the organization (e.g., through non-promotion)
for rewards' non-achievement when the rewards are viewed as proxies for goals/targets and outcomes. Employees may risk
considerable costs in trying to achieve the rewards. High perceived costs for non-achievement will likely result in a stressful
environment that can trigger unintended, negative consequences, including bullying.
The final dimension in the typology deals with the scarcity of the rewards. While this may be creatively captured in the
“value of the rewards
” dimension, its importance is better reflected as a unique feature; it also helps to better highlight
Compensation Design/
Reward Fit
Costs for Rewards
Non-Achievement
Low High
Scarcity of
Rewards
Low
1. NON-
PERFORMERS’
PARADISE
- low stress
- high performance-
pay satisfaction for
low performers
2. BLISSFUL STATE
- low stress
- high performance-pay
satisfaction Low
High
3. TOXIC ZONE
- high stress
- high individual
competition
4. STARS’ HEAVEN
- high stress
- differential effects for
low and high performers
High
Fig. 1. Typology of compensation consequences.
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characteristics in each of the four quadrants. Rewards that are scarce are generally more valuable, and potentially results in
increased employee effort in attempts to earn them (Lazear, 1995). However, on the flip side, this may also result in high
stress and increased individual-level competition. As with high-valued rewards, employees may be driven to take high risks,
sometimes unnecessarily. This was evident in the recent financial crisis in the United States, when mortgage brokers, among
others, took high risks to gain the associated performance pay, risks that triggered unethical and illegal behavior ( Colander
et al., 2009).
Along with pressures to meet one's own performance demands, individual performance pay systems often represent
“zero-sum” systems (Shaw et al., 2009, p. 1019); this condition is exacerbated when rewards are scarce. In other words,
individuals must often compete with one another for the limited merit-based rewards available. This results in a system in which
performance differentials between employees are exposed in the organization (Shaw & Gupta, 2007). Performance-enhancing
compensation practices are intended to spotlight these differences to retain high performers while inducing low performers to
quit (Gerhart & Rynes, 2003; Shaw et al., 1998). It should be emphasized, however, that not all performance-enhancing
compensation systems are zero-sum based. In fact, there are numerous incentive systems where the rewards vary with
performance, versus fixed by budgets. These include pay systems at all levels — individual, group and organizational.
As illustrated in Fig. 1, interactions of the three factors (costs for rewards non-achievement, compensation design/reward fit, and
scarcity of rewards) result in four quadrants. Quadrant 1 – Low-performers' design, low costs for non-achievement, and an abundance
of rewards provide a blissful combination for most employees, including mediocre performers; thatis, the organization, with perhaps
high cash flow, and non-scarce rewards, tries to satisfy most of its employees. Quadrant 4 – Stars' Heaven– is a mixed bag. While the
costs for non-achievement are high and rewards are scarce – a potentially toxic mix – the rewards are strategic. For stars, this is a
fertile ground for success but low performers will find the environment stressful.
For bullying, the Toxic Zone (Quadrant 3) is the most pertinent. Here the stakes are high, with rewards highly valued and the
costs for non-achievement high; this is combined with scarce rewards, and a misfit between reward design and organizational
strategy. The result for employees is high individual competition and high stress levels, within an organizational culture of
distrust, information hoarding and hiding, and non-cooperation (Connelly, Zweig, Webster, & Trougakos, 2012; Wolfe & Loraas,
2008). We explain these relationships in the conceptual model below. That is, we focus on the characteristics of Quadrant 3 in
developing the conceptual model and propositions.
4.1. Conceptual model
In Fig. 2 (above), we illustrate factors that may be involved in predicting whether employees will engage in bullying behavior
in order to meet short-term productivity goals. In brief, we believe that when performance-enhancing compensation practices
produce zero-sum systems, this can provoke employees to engage in bullying behavior. However, we believe that employees will
more likely engage in bullying – in response to zero-sum systems – when there is high individual competition (that is, among
individual employees) for rewards and when they experience high levels of stress. Because employees are constantly exposed to
short-term incentives when performance-enhancing compensation practices are used (Batt & Colvin, 2011), we argue that their
negative acts toward co-workers will also be ongoing and persistent in order to constantly intimidate them and weaken their
productivity.
As mentioned earlier, workplace bullying refers to ongoing, persistent acts rather than one-off acts; one-off acts suggest other
forms of workplace victimization such as workplace aggression and workplace violence. Therefore, in order to account for these
regular and persistent behaviors, we theorize the effects of performance-enhancing compensation practices to be bullying
behavior rather than other forms of workplace victimization (Tepper & Henle, 2011). In addition, we focus on bullying rather than
abusive supervision in order to account for peer-level bullying. In sum, we contend that performance-enhancing compensation
practices will result in greater levels of bullying between co-workers when individual competition and stress levels are high. We
explain the reasoning behind the choice of these mediators below.
As illustrated in the review above, prior research has pointed toward two important predictors of workplace bullying: work
design and psychological states such as stress (Aquino & Thau, 2009; Hoel et al., 1999; Salin, 2003). As a result, we believe that
individual competition for rewards as an aspect of work design and stress as an individual difference can help explain the
presence of bullying when zero-sum performance-enhancing compensation practices are used. As illustrated in the typology
(Fig. 1), performance-enhancing compensation systems can produce unintended, negative effects, mediated by stress and
individual competition, when reward design is poor, the cost for reward non-achievement is high, and rewards are scarce. This
(+)
(+)
(+)
(+)Perpetrator (+)
Target (-)
Zero-Sum
Performance-
Enhancing
Compensation
Workplace
Bullying Productivity
Stress
Individual
Competition
Fig. 2. Performance-enhancing compensation practices and employee productivity: a conceptual model.
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does not mean that there are no other potential moderators/mediators (for example, an employee's position in the organizational
hierarchy, personality, ethical climate); however, we focus on these because, as the typology illustrates, they may represent a
“deadly combination” (Delery, 1998).
In addition, we believe that individual competition and stress are particularly relevant within the context of pay systems
(and particularly performance enhancing compensation systems). This is because of the potential for zero-sum systems,
which we argue can directly encourage individual competition and produce stress among employees. Finally, our model
suggests that bullying will lead to differential productivity-based outcomes for targets and perpetrators. Targets who
experience bullying will tend to have lower levels of productivity, while bullying perpetrators achieve higher levels of
productivity. This extends Kerr's (1975) argument that the pay system in an organization can ultimately reward those who
engage in counterproductive work behaviors, while punishing those who do not. Below, we explore each of these relationships in
greater detail.
4.2. Zero-sum performance enhancing compensation systems and workplace bullying: the mediating role of individual competition
Performance-enhancing compensation practices tend to expose performance differentials among employees while being
distributed from a limited pool of available incentives (Shaw et al., 2009). As Shaw et al. (2009, p. 1019) argue, “Higher levels of
expectation-enhancing HRM practices decrease the likelihood that employees will share organizational resources and receive
rewards”. They further describe the “zero-sum” nature of such systems; in particular, pay for performance practices (p. 1019).
Several studies that have measured performance-enhancing practices have specifically measured practices that are intended
to reflect a zero-sum system. For example, Batt and Colvin (2011) used two practices to measure performance-enhancing
practices: monitoring intensity (i.e., the extent to which the supervisor monitors employee behavior and productivity) and
individualcommissionpay (i.e., percentage of pay that is at-risk and based on productivity). In addition, Shaw et al. (2009) used three
practices to measure performance-enhancing practices: individual pay-for-performance, performance appraisals (number of times
per year), and monitoring.
As Shaw et al. (2009, p. 1019) argue when describing expectation-enhancing practices, “many individual pay-for-performance
and incentive systems are zero-sum systems…larger raises or bonuses to other employees decrease the likelihood that a focal
individual will also receive a large reward”. Therefore, consistent with the way in which recent studies have conceptualized and
tested performance-enhancing practices, we focus our propositions on individual-level performance-enhancing compensation
practices that produce zero-sum systems, such as merit pay, bonuses, and other short-term incentives. Nevertheless, as we noted
earlier, there are many performance-enhancing compensation practices, including those at the individual-level, that are not
zero-sum where the rewards for specific employees do not negatively affect others. In these instances, the incentives vary with
organizational performance, not a fixed pot.
Zero-sum systems can play a key role in directing employee behaviors, when certain assumptions are met/under specificconditions. For instance, when a considerable amount of employee pay is based on their level of productivity, employees will
typically direct their attention toward the outcome being measured and rewarded (Chien et al., 2010). Moreover, employees will
often strive to maximize the amount of rewards attained (McNabb & Whitfield, 2007). We contend in our discussions of the
typology above that there are both economic and psychological costs for employees when these rewards are not achieved; this
raises the stakes, and makes the rewards even more valuable.
When performance-enhancing practices produce zero-sum systems, these practices will likely spark interpersonal
conflict among employees, such as bullying behavior. For instance, Verdasca (2011) reported that one of the top drivers of
bullying in her analysis of 561 responses was interpersonal conflict (e.g., that “some people build up themselves by tearing
others down”), often established through performance appraisal and merit evaluation mechanisms. In other words,
interpersonal conflict will become even more likely when zero-sum systems stimulate high individual competition, such as
the foregoing and in the sales examples mentioned earlier. Notably, workplace bullying researchers have suggested that
highly competitive work environments will more likely result in bullying incidents (Hoel et al., 1999; Salin, 2003). This is
because bullying tactics may then be viewed as a mechanism through which rewards may be derived. Indeed, bullying in theworkplace is often intended to weaken targeted employees through intimidation and widening the perceived power gap
between them (Fox & Stallworth, 2005). Moreover, tournament theory also suggests that when relative performance is
measured, this may stimulate increased competition which can result in risk-taking and aggressive behavior (Gupta, Conroy,
& Delery, 2012).
Weakened employees who have been intimidated through the use of bullying tactics by one or more co-workers may
become less likely to openly compete with the perpetrator(s). Moreover, they may also suffer in the amount of attention they
devote to their work and productivity (De Cuyper et al., 2009; Hoel et al., 1999). This can help facilitate a noted goal of
performance-enhancing compensation practices; namely, the production of winners and losers among employees (see Shaw
et al., 2009).
While the acts of workplace bullying may be associated with feelings of guilt (D'Cruz & Noronha, 2011), the reward system
allows employees to diffuse responsibility for their actions to the organization (cf. Detert, Trevino, & Sweitzer, 2008). In other
words, employees may more likely rationalize their behaviors when the pay system rewards employees for engaging in certain
behaviors, such as bullying. A key condition under which such rationalizations may be made is when there is high individualcompetition. In such conditions, employees will be aware that their rewards will be influenced to some degree by the productivity
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of others. Therefore, when employees are rewarded based on zero-sum systems, bullying behavior will be more prevalent when
individual competition is high.
Proposition 1. Individual competition will mediate the relationship between zero-sum compensation systems and workplace bullying,
whereby zero-sum systems will likely stimulate individual competition, which will tend to result in increased bullying behavior among
employees.
4.3. Zero-sum compensation systems and workplace bullying: the mediating role of stress
Researchers have suggested that performance-enhancing practices can be associated with high levels of stress among employees
(e.g., Batt & Colvin, 2011). One reason why these practices may be associated with higher levels of stress is the greater pressures
placed on employees to perform. Consistentwith how stress has been conceptualized in these studies, we focus on mental stress.This
form of stress can involve foreseeing potential threats to an employee's level of pay. Performance-enhancing compensation practices,
and particularly zero-sum systems, will entail the measurement of productivity, monitoring of productivity to determine pay levels,
and greater reliance on pay for productivity levels. Performance-enhancing compensation practices will also generally mean that
employees are constantly active and concerned about performing (e.g., selling) (Batt & Colvin, 2011). Moreover, productivity may be
determined by a number of factors, someof which may be out of thecontrol of employees (Ambrose & Kulik, 1999). Hence, it is logical
to expect that concerns about these external pressures will engage employees' thoughts and actions.
Many workplacebullying researchers have suggested thatbullying is more likely to occur in environments thatinvolve highlevels
of stress (e.g., Aquino & Thau, 2009; De Cuyper et al., 2009; Fox & Stallworth, 2010; Hoel et al., 1999). Employees who experience
high levels of stress will often attempt to cope with their stress (Lazarus & Folkman, 1984), through a myriad of mechanisms.Stressor–emotion theory suggests that perceived stressors such as high performance demands can trigger negative emotions, which
may take a number of forms (Fox & Stallworth, 2010). For example, Fox and Spector (2006) suggest that negative emotions in
response to stressors can produce counterproductive work behaviors among employees. Indeed, workplace bullying has been
referred to as a form of counterproductive work behavior (Fox & Stallworth, 2010). Hence, we expect that bullying behavior will tend
to increase as a result of the negative emotions produced by stressors. In other words, bullying can represent a way in which some
employees may release the frustration and negative emotions experienced as a result of greater stress.
Zero-sum systems will indirectly result in bullying behavior when employees experience high levels of stress. To illustrate,
employees who experience high levels of stress will more likely have their thoughts and behaviors clouded by negative emotions
than those who experience low stress. Hence, stress may likely cause employees to behave irrationally because they will typically
feel pressures to quickly respond to stressors (Fox & Stallworth, 2010). We believe that the pressures induced by zero-sum
systems will be particularly salient for employees because their level of pay will be at stake. Pfeffer (1998), for instance, reported
that Highland Stores, an electronics and appliance supplier, eliminated commissions because they encouraged aggressive behavior to
the extent that customers were alienated. In light of this, tournament theory can be extended to suggest that risk-taking andaggressive behavior may increase as a result of zero-sum systems not only as a result of increased individual competition, but also
higher levels of stress.
As illustrated in our typology, stakes are high when the rewards are valuable and the costs for non-achievement are high.
Hence, employees who experience high levels of stress will more likely feel that they are dealing with the pressures associated
with their pay when they engage in bullying behavior toward a key source of their stress (e.g., their co-workers whom they are
ranked in relation to, or their subordinates who they may perceive to be responsible for their performance). Therefore, we believe
that the pressures induced by zero-sum systems will more likely result in increased bullying behavior when such systems have
produced high levels of stress among employees.
Proposition 2. Stress will mediate the relationship between zero-sum systems and workplace bullying, whereby zero-sum systems will
likely stimulate high levels of stress, which will tend to result in increased bullying behavior .
4.4. Workplace bullying and productivity within the context of zero-sum systems
While zero-sum systems produce winners and losers in the organization based on their performance differentials (Shaw et al.,
2009), the ways in which employees emerge as winners or losers in this system might be clouded to some degree by deviant
behaviors. Hence, we believe it is important to explore the possible intermediate mechanisms by which employees may increase
productivity. As our opening discussion illustrated, employees may engage in behaviors that lead to the outcomes that are
rewarded by the system; however, these behaviors may not always represent those that the organization intended ( Kerr, 1975).
In this section, we explore how performance-enhancing compensation practices, through zero-sum systems, can result in higher
productivity when employees engage in bullying behavior.
In explaining the theoretical rationale for earlier propositions and the typology, we contended that two important factors will
mediate the relationship between zero-sum systems and workplace bullying: competition among individual employees and stress.
These two factors were also highlighted as potential outcomes of the interaction among three factors, viz., high costs for rewards'
non-achievement, poor compensation design, and high scarcity of resources/rewards (Quadrant 3 of the typology). Hence, we havespecified key boundary conditions and assumptions under which increased levels of workplace bullying are likely.
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When bullying does occur, this will tend to have a number of consequences for the target. Targets will feel intimidated by the
perpetrator and will be less willing to openly compete for the outcomes at stake. Because workplace bullying is associated with a
number of physiological and psychological consequences (Mikkelsen & Einarsen, 2001; Vega & Comer, 2005), we posit that
targets will experience greater challenges devoting adequate attention toward their productivity in the organization (Strandmark
& Hallberg, 2007). As mentioned earlier, this will often be the aim of employees who engage in bullying behavior. In sum, being
subjected to bullying behavior will tend to weaken the target's performance on the job.
For the perpetrator, a weaker target will tend to be associated with favorable productivity-related outcomes. As discussed,
performance-enhancing compensation practices typically represent a zero-sum system in which employees' pay will be based on
a relative ranking among them (Shaw et al., 2009). Hence, behaviors that serve to weaken others will also tend to reduce these
other employees' relative ranking. For instance, in a sales environment, bullying tactics toward co-workers may entail less
competition between them for clients. In other words, beyond “outperforming” co-workers in the relative ranking system, bullying
tactics may also mean higher levels of productivity and pay for perpetrators. Hutchinson, Vickers, Wilkes, and Jackson (2009) report
on real-life examples of how perpetuators can gain organizational rewards. One respondent in their study, for instance, reported that
she was bullied into taking extended sick leave only to realize upon her return to the job that her portfolio of work, which had taken
years to develop, was taken by her manager and others who had bullied her; this improved the perpetuators' chances of promotion
and increased pay.
As we have discussed, employees will more likely engage in bullying behavior when conditions are perceived to be favorable
for doing so or when they believe that their stress can be alleviated by subjecting peers to bullying. Hence, when employees do
engage in bullying behavior, they will tend to be doing so in an environment in which bullying is indirectly encouraged and
fostered and/or perceived to be beneficial. Therefore, we believe that employees who engage in bullying behavior will tend to
generate increased productivity, while those who are subjected to bullying behavior will suffer decreased productivity.
Proposition 3. Employees who engage in bullying behavior within the context of zero-sum systems will generate increased
productivity, while those who are targeted will suffer lower levels of productivity.
5. Discussion
For many individuals in the workplace, extrinsic motivation continues to be dominant in explaining their work attitudes
(Milkovich, Newman, & Gerhart, 2011). Consequently, employee behavior will often be guided by the organization's reward
system. This highlights the importance of designing a reward system that directs behaviors toward those most desired by the
organization. Performance-enhancing compensation practices are designed to increase performance in order to benefit the
organization. However, performance-enhancing compensation practices are often associated with a number of pressures
directly affecting employees (Batt & Colvin, 2011).
In our model, we proposed two key mediating variables that can help predict whether the pressures associated withperformance-enhancing compensation practices will stimulate bullying behavior among employees. We proposed that individual
competition for rewards may tend to pressure employees into using bullying tactics to maximize their potential pay. Furthermore,
high levels of stress may induce employees to release their negative emotions in the form of bullying behavior.
When employees who work under performance-enhancing compensation practices engage in bullying, they will typically do so
when the conditions reward them. As a result, employees who engage in bullying will tend to realize higher levels of productivity,
while those who are targeted will suffer lower productivity. Therefore, performance-enhancing compensation practices can result in
situations in which bullying behavior may in fact lead to increased levels of productivity for the perpetrator. This reinforces Kerr's
(1975) argument that organizations may in fact be rewarding behaviors that are not those originally intended. Moreover, such
systems can create conditions under which employees leaving the organization, not because of weak abilities but because co-workers
weakened them. We now discuss the theoretical contributions of our model, offer directions for future research, and highlight
practical implications.
5.1. Theoretical contributions and avenues for future research
We focused specifically on individual-level performance-enhancing compensation practices to understand how such practices may
be associated with undesirable consequences. While researchers have examined the relationship between performance-enhancing
practices and employee turnover (e.g., Batt & Colvin, 2011; Shaw et al., 2009), we explored how performance-enhancing
compensation practices may be associated with bullying behavior in the workplace. This extends our understanding of the unintended
consequences associated with performance-enhancing compensation practices, while illustrating how serious these consequences
may be (i.e., bullying). Future research should test our model and investigate further potential consequences that may advance our
understanding of how employees engage in counterproductive work behavior in their efforts to achieve desired outcomes andgain the
associated rewards. Furthermore, the variables considered in the typology are most likely not exhaustive; thus, researchers are
encouraged to expand on this framework. For instance, researchers canexamine how the fairness and effectiveness of the mechanisms
used to measure employee performance can be incorporated, including performance appraisals and employee monitoring.
There has also been limited attention devoted to how pay systems may stimulate bullying behavior in organizations. As aresult, we shed important light on this critical area of research. Since pay systems represent an important driver of employee
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behavior, researchers should focus greater attention on how other aspects of the reward system may be influencing employees to
engage in bullying behavior. Along with performance-enhancing compensation practices, researchers may also investigate
whether bullying behaviors are directed toward free-riders in group pay systems, high performers in systems that increase
productivity standards based on previous performance of co-workers, and low and/or high performers in pay systems that are
transparent to all employees about worker performance and bonuses.
Finally, this paper also contributes toward our understanding of the antecedents to workplace bullying. As discussed, research
has shed light on work design and individual difference variables as predictors of bullying. However, researchers have not
specifically investigated the role of pay systems in stimulating bullying behavior. Interestingly, our analysis illustrates how
bullying behavior may in fact lead to increased productivity for perpetrators under performance-enhancing compensation
systems (and particularly zero-sum systems). Research should further investigate these situations to understand when bullying
may, in fact, benefit the perpetrator.
5.2. Practical contributions
With high levels of bullying prevalence being reported (e.g., Fox & Stallworth, 2005; Lutgen-Sandvik et al., 2007), along with a
number of associated physiological and psychological consequences for the target (see Vega & Comer, 2005), workplace bullying
may represent a particularly important unintended consequence of zero-sum performance-enhancing compensation practices.
Indeed, our analysis suggests that high performers in such systems, where conditions can be conducive to bullying behavior, may
be those who use illicit means (e.g., bullying) to demonstrate productivity, while those who do not resort to such behaviors will
tend to suffer lower productivity when they are targeted. This leads to a system in which productivity is not necessarily
determined by capability but rather by willingness to use bullying tactics toward co-workers. Therefore, organizations mustbe careful when implementing performance-enhancing compensation systems; they need to identify whether the conditions
are conducive to bullying. To illustrate, when individual competition will be high under a system of performance-enhancing
compensation practices, managers should take a holistic perspective and evaluate whether such a system will be beneficial
considering the potential for bullying; alternatively, they can consider complementing such systems with group and organizational
pay plans whereby the rewards associated with cooperation can be perceived to be higher than those associated with bullying.
Some organizations may find performance-enhancing compensation practices to generate significantly high levels of
performance. Nevertheless, we believe that organizations should also consider ethical concerns. While certain practices may
lead to greater employee performance, the consequence of this greater performance may raise ethical questions that we believe
practitioners should also carefully consider.
6. Conclusion
As competition increases, organizations will seek ways in which they can stimulate higher levels of performance from its
employees in order to remain competitive. Indeed, employee productivity is often directly related to organizational performance.
The organization's reward system can play a critical role in influencing employee performance. However, HRM practitioners and
compensation specialists must consider a number of factors when designing reward systems. Many employees will be motivated
to maximize their pay and performance-enhancing compensation practices can play an important role in helping employees
achieve higher levels of pay. However, we contend that individual competition for rewards and high levels of stress can stimulate
bullying behavior among employees. Ultimately, such conditions can produce a system in which employees who bully will realize
higher levels of productivity than those who are targeted by bullying. Moreover, such a system may present a threat to the
organization's long-term survival when employee productivity is not based on capability but rather, their willingness to use
bullying tactics on co-workers.
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