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Motivation
Motivation, pay satisfaction, of front-line
and job satisfaction of front-line employees
employees
161
Carolyn Stringer
University of Otago, Dunedin, New Zealand
Jeni Didham
Westpac, Sydney, Australia, and
Paul Theivananthampillai
University of Otago, Dunedin, New Zealand

Abstract
Purpose – This paper aims to explore the complex relationships between intrinsic and extrinsic
motivation, pay satisfaction and job satisfaction at the retailer that uses a pay-for-performance plan for
front-line employees.
Design/methodology/approach – This paper draws on a single organization case study across
seven stores, and uses a survey, archival documents, open-ended questions and researcher interaction
with employees and managers.
Findings – The results provide some support for the complementary nature of intrinsic and extrinsic
motivation. Intrinsic motivation was positively associated with pay and job satisfactions, whereas
extrinsic motivation was negatively associated with job satisfaction, and not associated with pay
satisfaction. The qualitative insights indicate that pay fairness is important, and those who perceived
pay was not fair generally made comparisons with others or felt that pay did not reflect their effort.
It is also found that the majority of employees perceived that goals were clear.
Research limitations/implications – The dominance of extrinsic motivation without including
behavioural, social, and psychological factors in agency theory research is questioned. The research
finds no support for “crowding out”, but rather finds some evidence of “crowding in” where intrinsic
motivation is enhanced, to the detriment of extrinsic motivation.
Practical implications – The findings highlight that managers should enhance both intrinsic and
extrinsic motivation, and pay employees well to increase job satisfaction.
Originality/value – Few studies examine incentives for front-line employees, and there is evidence
that minimum wage employees can have high intrinsic motivation. Perceptions of pay fairness can
vary across motivation levels, age, and gender.
Keywords Incentives (psychology), Motivation (psychology), Intrinsic motivation, Pay satisfaction,
Job satisfaction, Employees
Paper type Case study

The authors would like to thank Professor Ralph Adler, Dr Rosalind Whiting, Associate
Professor David Lont, Professor Roger Willett, Dr Michael Falta, Sriyalatha Kumarasinghe, and Qualitative Research in Accounting &
Management
seminar participants in the Department of Accountancy and Business Law at the University of Vol. 8 No. 2, 2011
Otago for their insightful comments. The authors are also grateful for the comments provided by pp. 161-179
q Emerald Group Publishing Limited
Associate Professor Keith T. Jones and the participants of the 2008 American Accounting 1176-6093
Association Conference in Los Angeles. DOI 10.1108/11766091111137564
QRAM 1. Introduction
8,2 No other incentive or motivational technique comes close to money[1].
Such a quotation reflects the dominant view in the management accounting literature that
pay-for-performance incentive systems have a motivational effect. In fact, some authors
assert that the primary aim of incentives is to enhance extrinsic motivation by satisfying
162 an individual employee’s needs indirectly through means of pay and bonuses (Anthony
and Govindarajan, 2007; Kunz and Pfaff, 2002). The link between pay-for-performance
and extrinsic motivation is explicit in the agency theory literature. Extrinsic motivation is
the importance placed on external rewards, such as bonuses and promotion (Van Herpen
et al., 2005), or the threat of wage cuts or dismissal (Frey, 1997). In an agency theory
context, incentive contracts designed to encourage extrinsic motivation are held to be
indispensable (Osterloh et al., 2002). Similarly, expectancy theory argues that linking
incentives to performance motivates employees to increase their effort and performance
(Jenkins et al., 1998; Lawler, 1973; Vroom, 1964).
The literature has shown that remuneration issues play a critical role in organizations;
however, there has been little advice that companies could use in terms of when certain
incentive system designs have been more (or less) appropriate (Heneman et al., 2002a;
Merchant, 1989; Merchant et al., 2003). The need for more theoretical development is
important because the use of pay-for-performance plans is growing (Broadbent and
Cullen, 2005; Lawler, 2000), and there is a trend to increasing variable pay as a percentage
of total remuneration (Heneman et al., 2002b). Another gap in the literature has been that
most of the economics-based incentives research has been at the chief executive officer
level, and few studies have examined incentives at the business unit or for front-line
employees (Kominis and Emmanuel, 2005; Merchant et al., 2003; Prendergast, 1999).
A challenge to the view that pay increases motivation comes from cognitive evaluation
theory, which argues that incentive pay has a negative effect on intrinsic motivation – a
“crowding-out” effect (Gagne and Deci, 2005). However, research findings into the
crowding-out effect have been mixed (Kunz and Pfaff, 2002). To explain the mixed results
from the crowding-out studies, self-determination theory argues that it depends on the
extent to which individuals feel autonomy (i.e. their actions are self-determined) or that
they are being controlled, such as where pay is linked to achieving specific outcomes (Deci
and Ryan, 2008). There are also implications for pay-for-performance plans where pay is
perceived as inequitable (Adams, 1965), as individuals are continually making
comparisons between themselves and others (Festinger, 1954).
Understanding the design implications of incentive systems is important to our
understanding of employee motivation and whether these incentive systems are related to
satisfaction. The motivation for this paper comes from calls for future management
accounting research to address three issues. First, we are challenged to examine the design
implications of pay-for-performance plans at lower levels in organizations (Kominis and
Emmanuel, 2005, 2007; Merchant et al., 2003). Second, we seek to understand more about
the relationship between extrinsic and intrinsic motivation (Kominis and Emmanuel, 2005,
2007; Kunz and Pfaff, 2002). Third, we draw on the organizational psychology and human
resource literatures to develop the existing management accounting literature further
(Kominis and Emmanuel, 2005).
The purpose of this paper is to examine employee motivation, pay satisfaction and job
satisfaction for a retailer that uses a pay-for-performance plan for front-line employees.
The survey data have been used to examine four research propositions. We find no Motivation
significant association between extrinsic motivation and pay satisfaction, which of front-line
questions the rudiments of the agency theory. Intrinsic motivation is positively
associated with pay satisfaction. This suggests the “crowding-out” effect may be employees
overstated (Kunz and Pfaff, 2002). We find that extrinsic motivation and job satisfaction
are negatively associated. Finally, intrinsic motivation is positively associated with job
satisfaction. 163
We make four contributions to the literature. First, we find some evidence to suggest
that intrinsic and extrinsic motivation may be complementary. Almost half the sample
of employees highly rate elements of both intrinsic and extrinsic motivation. This
combination of high intrinsic and extrinsic motivation, coupled with the negative
association between pay and extrinsic motivation, challenges the agency theory
argument that extrinsic rewards are necessary to ensure employees do not minimize
their effort (i.e. shirk) (Bonner and Sprinkle, 2002). The potential for intrinsic and
extrinsic motivation to be complementary has been discussed in the management
accounting literature (Dermer, 1975; Kominis and Emmanuel, 2005, 2007; Kunz and
Pfaff, 2002; Ronen and Livingstone, 1975). The second contribution is the positive
association between pay and intrinsic motivation, which suggests that the
“crowding-out” literature may have overstated the case that extrinsic rewards have a
negative impact on intrinsic motivation (Kunz and Pfaff, 2002). Our third contribution is
finding that intrinsic motivation increases job satisfaction, whereas extrinsic motivation
decreases job satisfaction. This is consistent with the “crowding-in” argument
(Frey, 1997). The fourth contribution is that perceptions of pay unfairness cut across
levels of motivation, age, and gender and are generally based on comparisons with other
employees or feelings that pay did not reflect an individual’s effort.
The literature section is followed by a description of the case study and survey, then
the discussion and analysis of the quantitative and qualitative results, and finally the
conclusions.

2. Literature
2.1 Motivation and pay satisfaction
The philosophy behind pay-for-performance plans draws upon reinforcement theory
that suggests that pay be linked to performance by setting specific targets and then
rewarding individuals for achieving these targets (Heneman, 1992; Skinner, 1953).
Agency theory is based on compensation contracts designed to balance trade-offs
between risk and incentives for individuals and groups in order to align the interests of
managers and shareholders (Eisenhardt, 1989; Jensen and Meckling, 1976). Agency
theory focuses on extrinsic rewards that are tangible and quantifiable (Merchant et al.,
2003). Actions are rewarded and punished, and so this determines employees’ actions
and effort and performance (Jensen and Murphy, 2004; Kreps, 1997). Therefore, pay is a
powerful lever to influence extrinsic motivation (Locke et al., 1980).
This gives rise to the following research proposition:
P1. The association between pay satisfaction and extrinsic motivation is positive.
The other form of motivation, intrinsic motivation, captures the aspects of doing work
for its own sake (Osterloh and Frey, 2002; Ryan and Deci, 2000b), provides psychological
benefits of well-being (Ryan and Deci, 2000b), accomplishment (Dermer, 1975),
QRAM increasing responsibility (Herzberg, 2003), self-actualisation (Kunz and Pfaff, 2002), and
8,2 is self-sustaining (Osterloh and Frey, 2002). A number of authors argue that money is a
poor motivator and can actually impede intrinsic motivation, such as reducing creativity
and innovation (Amabile, 1998; Frey and Osterloh, 2002; Herzberg, 2003; Kerr, 1975;
Kohn, 1993). In fact, the specific focus on extrinsic motivation may distract attention
from the task; this has been termed the “hidden cost of rewards” (Lepper and Greene,
164 1978). This view has been incorporated in the “crowding theory” (Frey and Jegen, 2001).
When an activity is intrinsically appealing (e.g. challenging), the positive effects can be
undermined if extrinsic rewards are also linked to the activity (Frey and Osterloh, 2002)
and crowd out intrinsic motivation (Lee and Whitford, 2007). This crowding out has
been further elaborated under the cognitive evaluation theory, which proposes that pay
(extrinsic motivation) can erode intrinsic motivation, and this in turn reduces
performance (Gagne and Deci, 2005; Kunz and Pfaff, 2002).
This leads to the research proposition:
P2. The association between pay satisfaction and intrinsic motivation is negative.

2.2 Motivation and job satisfaction

The relationship between an employee’s motivation and job satisfaction is now
examined. A number of researchers (Heneman et al., 1988; Igalens and Roussel, 1999;
Pool, 1997) have concluded that work motivation and job satisfaction should be treated
separately, so that factors of influence can be more readily identified and to allow for
better understanding. Herzberg’s (2003) motivation-hygiene theory identifies intrinsic
motivators (e.g. achievement, recognition, the work itself) and hygiene factors which
tend to be extrinsic factors (e.g. company administration, supervision, salary).
Herzberg’s view is that these motivators lead to job satisfaction because they satisfy an
individual’s need for self-actualisation (Maslow, 1954; Tietjen and Myers, 1998).
Expectancy theory, as developed by Porter and Lawler (1968), argues that a
pay-for-performance system influences job satisfaction (Ferris, 1977; Igalens and
Roussel, 1999). Supporting this view, Pool (1997) examines the relationship between
work motivation and job satisfaction and finds significant positive association
indicates that as work motivation increases, job satisfaction increases. In relation to
extrinsic motivation, a positive association with job satisfaction has also been found
(Moynihan and Pandey, 2007; Wright and Kim, 2004).
While the dominant argument has been for a positive association between extrinsic
motivation and job satisfaction, Frey (1997) argues for a “crowding-in” effect. Intrinsic
motivation can increase as a result of work enhancement programs that have increased
work morale (Frey, 1997). When employees’ enjoyment of their job increases, intrinsic
rewards may undermine the extrinsic motivation (Frey, 1997). The proponents of
self-determination theory argue that pay-for-performance can have a positive effect on
intrinsic motivation by being supportive and encouraging employee autonomy and
self-esteem (Deci and Ryan, 2008; Gagne and Deci, 2005). However, self-determination
theory remains silent on whether extrinsic motivation will decrease, if intrinsic
motivation increases.
This leads to the research proposition:
P3. The association between extrinsic motivation and job satisfaction is positive.
Having examined extrinsic motivation, our attention moves to intrinsic motivation. Motivation
The findings of the studies of self-determination theory suggest that supportive work of front-line
environments, which encourage intrinsic motivation, will result in increased job
satisfaction and more effective performance (Gagne and Deci, 2005; Deci and Ryan, employees
2008; Kunz and Pfaff, 2002). When pay-for-performance systems link individual and
organizational performance, employees can see their work is important, which in turn
increases their job satisfaction because they are able to fulfil high-order needs, such as 165
self-esteem (Wright and Kim, 2004).
This leads to the research proposition:
P4. The association between intrinsic motivation and job satisfaction is positive.
Having identified four research propositions, our study will explore two further issues:
pay fairness and goal clarity. These issues will not be formulated into research
propositions but be used to provide further insights into extrinsic and intrinsic
motivation and job satisfaction.

2.3 Pay fairness and goal clarity

Pay fairness is an important issue in the design of pay-for-performance systems. Equity
theory (Adams, 1965) draws on social comparison theory (Festinger, 1954), and research
suggests that perceptions of fairness are often based on social comparisons (Austin et al.,
1980). Employees often make equity judgments based on comparisons with others who
may be co-workers, or based on other similarities, such as organizational status
(Greenberg et al., 2007). The problem is that an individual’s perceptions of inequities in
pay can have a detrimental impact on an employee’s motivation and performance
(Cowherd and Levine, 1992; Ryan and Deci, 2000a; Merchant et al., 2003). For example,
the perception that one was overpaid or underpaid lowers intrinsic motivation (Carr et al.,
1996). However, only a few studies have examined intrinsic and extrinsic motivation
with pay fairness (Van Herpen et al., 2005; Zapata-Phelan et al., 2009).
Another important element in the design of pay-for-performance systems is goal
clarity. Goal clarity has been held to be important, as it leads to increases in motivation
(Emmanuel et al., 2008; Latham and Baldes, 1975; Locke and Latham, 1990). However,
it is difficult to design clear goals that are ambitious and relevant (Igalens and Roussel,
1999). The combination of well-specified and clear goals is important, as employee
behaviours that are associated with specific organizational goals can increase firm
performance (Boswell et al., 2006; Marginson and Ogden, 2005), and can also give
greater intrinsic meaning to the individual’s job (Boswell et al., 2006; Hackman and
Oldman, 1976).

3. The case study

3.1 The case organization
This case study has been conducted at a retailer that is a large and fast-growing
non-food retailer in Australasia[2]. The selection criteria for the case study were
purposive in that it required an organization to have a pay-for-performance plan for
front-line employees (Ferreira and Merchant, 1992; Miles and Huberman, 1994), and the
researchers could gain access to the organization (Anderson and Widener, 2007;
Eisenhardt and Graebner, 2007). Another reason why this organization was selected
QRAM was that one of the researchers worked in the organization on a part-time basis for five
8,2 years, and so was able to provide further insights into the pay-for-performance system.
This retailer pays a performance incentive payment (bonus) to all permanent
employees, both part time and full time. The fact that this payment extends to the shop
floor level is interesting, as well as its magnitude, which is equivalent, on average, to
one week’s pay every six months for every employee. An internal company document
166 states that the performance incentive payment is designed to reward people for
achieving pre-established goals. The bonus is paid pro rata on the number of hours
worked per week[3]. A period of three months is enforced before a team member is
eligible to receive this payment.
In calculating the bonus payment, a maximum potential payment is set for a
full-time employee working a 40-hour week. Deductions are made from this maximum
potential payment based on the percentage of achievement of organizational, store,
department, and individual goals. Goals relating to the performance incentive payment
range from very broad companywide goals and standards to specific individual
appraisals. An example of a companywide goal is the expectation that for every
1 percent over the targeted earnings before interest and tax (EBIT), an extra 2 percent
is added to the potential incentive payment. Alternatively, for every 1 percent below
the targeted company EBIT, 1 percent is deducted from the potential payment. Store
goals relate to such measures as the budgeted sales figures, as well as the wage budget.
Included in the goals to be assessed by area are the amount of write-offs and shrinkage.
Departmental goals are also important, and, in the service department, such goals as
the number of deleted lines and voided sales are considered. An individual
performance-based appraisal is also conducted between the departmental manager and
each employee for every bonus period.
In addition to fixed pay and bonuses, employees receive a number of other benefits.
These benefits include a staff discount (including extended family), a day off on their
birthday and a range of social activities (e.g. weekends away).

3.2 Sample
The survey data were collected using a sample of the retailer employees in seven stores
in two regions. Participants were chosen based on accessibility and availability
(Champion, 2002). The main advantage of this convenient sample was to achieve a
larger response rate, so that each store was visited by one of the researchers, rather
than posting the questionnaire. One area manager acted as a liaison for the researchers
and enabled access to five stores in his region.

3.3 Data collection

We used a survey to collect quantitative data and had access to archival documents
regarding bonuses, structure of the incentive program, as well as open-ended comments
from employees at the retailer. In addition, one of the researchers worked part time at the
retailer and was able to observe the pay-for-performance scheme, as well as having
informal conversations during her work and while she was administering the survey.
Distributing the questionnaire involved a visit by one of the researchers to each store.
Front-line employees were advised of the purpose of the questionnaire, given instructions
on filling it out and were encouraged to ask questions. Special emphasis was placed on the
fact that the survey was completely anonymous and confidential. In some stores,
the questionnaire had to be left for a few days, as employees were busy. Those stores Motivation
where the questionnaires were filled out while one of the researchers was on site had a of front-line
larger response than those stores where the questionnaires were left for several days.
In each store, we established an area for all shop floor employees to fill out the employees
questionnaire. This was to ensure that the employees felt comfortable in providing a
reply without the risk of a manager or another staff member reading their responses.
Employees were given the opportunity to complete the questionnaire during work 167
time. Several sealed boxes were located on site. The first box was utilised for completed
responses to ensure they remained confidential. Another box was made available for
those who did not wish to fill out the survey. A slip was provided with the
questionnaire for those individuals who wished to express their reasons for not taking
part, in order to provide a check on non-response bias. The final box was limited to
slips referring to feedback. The opportunity to receive a copy of the results was given
to all employees.
In total, 91 completed responses were obtained. The 17 percent response rate for this
survey was calculated based on the total number of all employees employed at each
store. See Table I for demographic details.

3.4 Instruments
We used three established instruments. The short form Minnesota Satisfaction
Questionnaire was used to measure job satisfaction (Weiss et al., 1967), Vroom’s (1964)
model by Nadler and Lawler (1977) and the Pay Satisfaction Questionnaire (PSQ)
developed by Heneman and Schwab (1985) were used to measure pay satisfaction. The
descriptive statistics for the variables are shown in Table II.
The correlation matrix in Table III identifies the Cronbach’ alpha as the leading
diagonal, and the correlation between constructs lie below that diagonal[4]. As the
matrix highlights, the Cronbach’ alphas are all above 0.8, which Nunnally (1978) views
as excellent. Furthermore, the Cronbach’ alphas are higher than the correlation
between constructs, which supports that each of the constructs are reliable and have
high discriminant validity. Table III shows that each of the variables are reliable and
also that they are distinct from each other.

Gender
Female 60 (66)
Male 29 (32)
No details 2 (2)
Age
15-24 40 (44)
25-34 18 (20)
35-44 16 (18)
Over 45 14 (15)
No details 3 (3)
Type
Full time 60 (66)
Part time 26 (29)
No details 5 (5)
Table I.
Note: Percent values are represented in parenthesis Demographic details
QRAM 3.5 Analysis of constructs
8,2 The three constructs: pay satisfaction, motivation (intrinsic and extrinsic), and job
satisfaction were initially examined as distinct from one another, as they were all
measured through separate instruments (Igalens and Roussel, 1999).
Pay satisfaction. The PSQ was adapted from Heneman and Schwab (1985) to include
four questions on bonuses. The mean score for all items was calculated for each
168 respondent within the sample, and these were then combined to gain an overall mean
of 3.1 for the total sample. Analysing the individual scores shows that the majority
(87 percent) of employees were neither “very satisfied” nor “very dissatisfied” with
their compensation package (ratings between 2 and 4). While this is not an ideal
situation, one store manager noted that:
[. . .] it is very difficult to satisfy individuals with regard to pay, to hear that so many of the
employees are not dissatisfied, but rather neutral, is not a disappointing result.
Work motivation – intrinsic and extrinsic. Analysis of the work motivation construct
was calculated using the questions of ratings of importance of intrinsic and extrinsic
rewards adapted from Nadler and Lawler (1977). Factor analysis shows that ratings of
importance for pay, bonuses and benefits loaded onto one factor categorised as extrinsic
motivation[5]. The importance of feeling good, gaining new skills and abilities,
job security, chances to learn new things, promotion, accomplishment, freedom, praise
from supervisor and friendship loaded onto a factor termed intrinsic motivation. Praise
from supervisors loaded on both factors and was added to the intrinsic factor.
The purpose of this analysis was not only to examine the research propositions but also
to enable an understanding of the qualitative comments by classifying the intrinsic and
extrinsic motivations of employees.
Job satisfaction. A mean job satisfaction score was calculated for each individual, and
using this analysis, an overall job satisfaction score of 3.5 was then available for the
whole sample. This is an outcome which illustrates that, in general, employees are
moderately satisfied with their job. Those mean scores equal to or over 4.0 were deemed
“very satisfied” (22 percent), those less than or equal to 2.0 were “very dissatisfied”

n Range (Likert scale 1-5) Min. Max. Mean SD

Job satisfaction 91 2.95 1.95 4.89 3.5 0.63

Intrinsic motivation 91 2.30 2.7 5.0 4.1 0.56
Table II. Extrinsic motivation 91 3.33 1.67 5.0 4.0 0.81
Descriptive statistics Pay satisfaction 91 4.0 1.0 5.0 3.1 0.72

Job satisfaction Pay satisfaction Intrinsic motivation Extrinsic motivation

Job satisfaction 0.921

Pay satisfaction 0.609 * * (0.000) 0.959
Intrinsic motivation 0.233 * (0.012) 0.208 * (0.024) 0.850
Extrinsic motivation 20.206 (0.050) 2 0.191 (0.07) 0.384 * * (0.000) 0.8550
Table III. Notes: Correlation is significant at: *0.05 and * *0.01 levels (one-tailed); Cronbach’ alphas are reported
Correlation matrix on the diagonal
(1 percent), with neutral responses being obtained for any scores between 2.1 and 3.9 Motivation
(77 percent). Similarly, Cimete et al. (2003) found a mean job satisfaction score of 3.2, of front-line
which they termed “moderate satisfaction”, and is consistent with the findings at this
retailer. A slightly higher mean score of 3.8 was reported by Bodur (2002). employees

4. Results and discussion

4.1 Quantitative results 169
We use correlation analysis to examine P1 and P2, and we use regression analysis to
examine P3 and P4[6].
Motivation and pay satisfaction. Table III shows there was no significant correlation
between pay satisfaction and extrinsic motivation (P1). From agency theory, we would
have expected extrinsic motivation to be significantly associated with pay satisfaction
(Kreps, 1997). One reason we find the lack of significant results could be that retail is a
low-wage industry (Carré and Tilly, 2008; Pacheco, 2007). These employees, while
having varying levels of extrinsic motivation, may find the minimum wage just
enough to live on, without having an impact on their aspirations or expectations.
We find a significant positive correlation between pay satisfaction and intrinsic
motivation (t ¼ 0.208, p , 0.05, Table III), which is contrary to the direction of P2. The
correlation between pay satisfaction and intrinsic motivation warrants closer
examination, as we had expected to find a negative correlation consistent with the
crowding-out literature (Osterloh and Frey, 2002; Ryan and Deci, 2000a). However, the
positive sign may be in line with the self-determination theory argument that extrinsic
rewards can be internalised if they encourage employees’ feelings of autonomy and
self-esteem (Deci and Ryan, 2008; Gagne and Deci, 2005).
Motivation and job satisfaction. We examine the effect of intrinsic motivation,
extrinsic motivation, and pay satisfaction as independent variables on job satisfaction
after controlling for age, sex, store, length of service, and part/full time (Table IV)[7].
We find that pay satisfaction and intrinsic motivation have a positive association
with job satisfaction, whereas extrinsic motivation has a negative association with job
satisfaction (Table IV). The negative sign for extrinsic motivation and job satisfaction
is a surprise (P3), as from expectancy theory we would have expected a positive
association (Ferris, 1977; Igalens and Roussel, 1999; Porter and Lawler, 1968).
Part of the explanation could be the mixed results from prior expectancy theory

Job satisfaction t-value

Intercept 1.246 2.235 * * *

Pay satisfaction 0.450 5.274 *
Extrinsic motivation 20.197 2 2.455 * * *
Intrinsic motivation 0.254 2.189 * * *
Gender 0.100 0.834
Age 0.076 1.289 Table IV.
Part or full time 0.207 1.560 Regression analysis: job
Years of service 0.001 0.040 satisfaction with
Store 0.008 0.221 dependent variables –
Adjusted R 2 42.9% pay satisfaction, extrinsic
motivation, intrinsic
Note: Significance at: *p , 0.001, * *p , 0.01 and * * *p , 0.05 levels motivation
QRAM (Kominis and Emmanuel, 2007). An alternate explanation is that this is a type of
8,2 “crowding in” where optimising intrinsic motivation can decrease extrinsic motivation
(Frey, 1997).
The significant positive correlation between intrinsic motivation and job
satisfaction supports P4 (Table IV). This is consistent with self-determination
theory because elements of intrinsic motivation, such as the feeling of well-being and
170 enjoyment, are associated with the satisfaction of doing the job (Deci and Ryan, 2008;
Gagne and Deci, 2005; Kunz and Pfaff, 2002).
Intrinsic and extrinsic motivation. The combination of a positive sign for intrinsic
motivation and a negative sign for extrinsic motivation with job satisfaction in the
correlation and regression analyses also demonstrates that extrinsic and intrinsic
motivation are not additive in leading to job satisfaction. This challenges the view of
prior literature that intrinsic plus extrinsic rewards would result in job satisfaction
(Gagne and Deci, 2005; Porter and Lawler, 1968). Alternatively, the negative sign may
mean that the extrinsic and intrinsic motivation are ends of a continuum; that is,
extrinsic motivation is at one end and intrinsic motivation is at another end, as argued by
self-determination theory (Deci and Ryan, 2008). We identify 42 employees (out of 91)
with both high intrinsic and extrinsic motivation (i.e. four or more out of a five-point
scale)[8]. For employees to score high on both intrinsic and extrinsic motivation would
indicate that these two types of motivation are not ends of a continuum (Deci and Ryan,
2008), or additive (Porter and Lawler, 1968), but may be complementary (Kominis and
Emmanuel, 2005, 2007; Kunz and Pfaff, 2002). We examine this cluster of 42 employees
who are high on both intrinsic and extrinsic motivation to see if this may be explained by
idiosyncratic characteristics, such as gender, age, store, or whether they are full or part
time (Kominis and Emmanuel, 2007; Kunz and Pfaff, 2002). We find no significant
differences[9]. Next, we analyse the qualitative data to provide further insights into
intrinsic and extrinsic motivation.

4.2 Qualitative data and results

In addition to the survey instruments, this paper examines the qualitative comments
from employees regarding goal clarity and pay fairness to gain insights into the
research propositions (see Giraud et al. (2008) for a similar approach). The open-ended
questions included:
.
How clear are the goals set for your department and/or your store?
.
How fair is your wage rate, your bonus payment and/or the benefits you receive?
.
For the amount of pay you receive, how motivated are you?
.
For the amount of work you do, how happy are you with your wage rate, your
bonus payment and/or the benefits you receive?

Out of 91 employees, 77 provided some qualitative comments for at least one of these
questions.
The research protocols used in the data analysis involved several matrices to display
the data, as they are useful to highlight consistency and differences across employees
(Miles and Huberman, 1994). The matrices have been developed so that contrasting
patterns, if any, could be examined (Corbin and Strauss, 1990; Eisenhardt and Graebner,
2007). First, the qualitative comments for each of the questions were typed into a matrix.
Second, the questions relating to pay fairness, goal clarity, and motivation were Motivation
analysed. This involved coding the themes from the qualitative comments as follows: of front-line
.
goal clarity as clear goals/unclear goals; employees
.
pay fairness was coded as fair/unfair; and
.
motivation was coded as motivation has increased/decreased/remained
unchanged. 171
To increase construct validity, two researchers independently coded the qualitative
comments, and coding checks showed that the two raters agreed in over 98 percent of
cases (this is over the 90 percent suggested by Miles and Huberman (1994)). A further
reliability check was undertaken, whereby a random selection of qualitative comments
was re-coded to ensure consistency between raters and over time.
We find that 82 percent of employees who commented perceived that store and
department goals were clear. This may be a result of organizational structures and
processes, such as a visual display of goals in the staff room. As most employees
perceived that their goals were clear, we have focused on employee perceptions of pay
fairness to categorise the groups.
For the high extrinsic/high intrinsic employees who have provided comments, we
find 20 have commented that pay was fair (group 1), while 14 perceived pay was unfair
(group 2). For comparison, we look at the other employees and we find that
17 employees felt that pay was unfair (group 3), whereas 19 employees perceived pay
was fair (group 4) (Table V). We also found no differences between these four groups in
relation to gender, age, store, and full- or part-time employment.
Insights into perceptions of pay fairness in the high intrinsic/high extrinsic motivation
group. Of the 42 employees who have high intrinsic and high extrinsic motivation, we
find that there are two groups within this cluster: those who feel pay was fair (group 1)
and those who feel pay was unfair (group 2). Group 1 includes 20 employees who have
perceived that pay was fair. The insights from employees who perceive that pay was
fair showed that their comments on employee motivation has increased or was
unchanged. These quotes reflect their views and typically they discussed how they
were motivated intrinsically (e.g. challenge, work):
Motivated by the challenges each day brings. Reasonably happy with pay. [Goals] very clear
(Respondent no. 19)[10].
Regardless of what I receive my motivation is always high, i.e. I would love my job on $9 or
$20 per hour. Pay is reasonably fair, although in retrospect feel I do more than the pay scale
I am in allows. I actually feel the goals to some degree are redundant in respect of my dept.
My goals are always to be the top whatever I do. I take pride in my job and performance but
feel some of the goals are very pedantic again that is because the [retailer] is evolving and
branching into different areas, i.e. sales and expertise in specialist areas (No. 55).

Comments
Pay fair Pay unfair received(n)

High intrinsic/high extrinsic (n ¼ 42) Group 1 (n ¼ 20) Group 2 (n ¼ 14) 34

Other employees (not high/high) (n ¼ 49) Group 4 (n ¼ 19) Group 3 (n ¼ 17) 36 Table V.
Total (n) 39 31 70 Classification of groups
QRAM The pay rate doesn’t motivate the intentionals, more of a small part of a lot of things that
motivate me. Compared to other industries, pay’s great. Goals are very clear now that they
8,2 have been established for me (No. 49).
We also find a group of 14 employees (group 2) who have high intrinsic/high extrinsic
motivation and who perceive that pay is unfair. This was a surprise, as we had
expected to find greater consistency in the responses of the high/high group. Where
172 employees provided reasons, they tended to make comparisons of their pay with other
employees who work less and/or perceived that their pay did not reflect their effort.
These are indicative comments:
I’m motivated not because of the pay cause I believe I’m not paid enough it’s because I love
my job and the ppl [people] in the store. Money is nice but being passionate about my job and
being happy more important. I know ppl in same positions other stores make more money
and work less and sometimes feel it’s not what you know but who. Not fair as I know others
less motivated who make more it sucks. Goals are very clear, crystal in fact (No. 81).
Not fair as I believe team members not achieving goals are getting more $$ wise than myself.
Strange but true! More motivated than I should be! Considering I am aware of other team
members being paid more for the same role I am currently doing. I am not happy. [Goals]
better now than previous goals. They are now more defined to my role & not just the “big
overall” scheme of things (No. 34).
Wage is unfair, not based on your performance when it should be. Not happy for the amount
of work I do & what I should do – should be paid more (No. 38).
Perceptions of fairness from other employees. To provide a comparison, we then
examine the comments of those employees who did not place a high importance on
either intrinsic or extrinsic motivation to see how many held the view that pay was
unfair (group 3) or pay was fair (group 4). Group 3 includes 17 employees who have
provided comments that pay was unfair. Their comments are similar to employees in
group 2 in terms of comparisons of pay to others and pay compared to their effort.
These are illustrative comments:
I would be more motivated if my pay reflected the rate of work I do. I am dissatisfied as I do
other people’s jobs all the time with no financial recognition (No. 4).
Reasonably unfair. I do some of the same jobs as others do sometimes but those skills are not
acknowledged in my pay, and because of the area I work in I get less pay than others. Would
be more motivated if pay scales were fairer (No. 6).
People doing the same or less. But still getting more money. I know some people do a lot less
work but get more pay than me! The amount of work I do, I do not get near enough pay
(always doing something extra!) (No. 91).
Group 4 includes 19 employees who perceived that pay was fair. These comments are
similar to group 1, in that employees’ comments did not show that they were comparing
their pay to other employees, or their contribution to the organization, and these
employees were motivated by a range of factors. In addition, the first comment provides
an explanation for why the goals were clear – they were posted on the wall in the staff
room:
It is consistent among all staff, so I would say it is fair. I think the wage rate is consistent
but would like a little more because after tax it is not a lot. The amount of pay does not
 affect my motivation. [Goals are] very clear, we know what we have to do to reach our goals Motivation
and what our goals are – they (our current success rates) are up on the wall in the staff room
(No. 13). of front-line
employees
I go to work cos [because] I like the job and now I have to pay the bills. Also I’d like to work
more hours but not 6 days a week, so I could get more pay. I don’t get as much pay as I’d like
but I’m really motivated to work as it makes me feel good and so I can work the most hours
I can to get the most pay I can (No. 56). 173
While we find that most employees considered store and departmental goals were clear,
what was surprising was that 40 percent of employees who provided comments felt that
pay was unfair. Clearly, goal clarity was not explaining perceptions of pay fairness.
We found that perceptions of fairness or unfairness cut across motivation levels and
idiosyncratic variables (e.g. age, gender, store, or part- or full-time employment). This
indicates that it is the individual’s perception of fairness that is important. Further, when
employees perceive that pay is unfair, whether employees are highly motivated or not,
there was a tendency to compare to others, or to consider that their pay did not reflect
their contribution to the organization. Again, this is consistent with social comparison
and equity theory (Adams, 1965; Austin et al., 1980; Festinger, 1954; Greenberg et al.,
2007). The advantage of a single case site is that even though employees were on the
same pay-for-performance system, we find they have different perceptions of fairness
regardless of their levels of motivation.

5. Conclusions
This study examines the implications of a pay-for-performance system on intrinsic and
extrinsic motivation and job satisfaction of front-line employees at a retailer. We find
positive associations between pay and intrinsic motivation and intrinsic motivation
and job satisfaction, while there was a negative association between extrinsic
motivation and job satisfaction. Pay satisfaction had the strongest association with job
satisfaction. The practical implications of this for managers are to pay their front-line
employees well and job satisfaction will be high. While focusing on extrinsic rewards
has merit, future agency theory research needs to draw on behavioural models from
psychology and sociology to recognise the potential of intrinsic, as well as extrinsic
rewards to motivate employees (Frey, 1997; Kreps, 1997; Merchant et al., 2003). We find
pay satisfaction and intrinsic motivation are positively correlated and some evidence
that “crowding in” does occur with intrinsic motivation increasing and extrinsic
motivation decreasing. These findings are in contrast to the focus in the literature on
“crowding out” (Frey, 1997). The relationship between intrinsic and extrinsic motivation
needs to be the focus of future studies.
One of the most interesting findings is that around half of these front-line employees
rate extrinsic and intrinsic motivation as of high importance. In a retail outlet where the
minimum wage is the norm, to find employees that are high on both intrinsic and
extrinsic motivation is a pleasant surprise. This evidence provides support for the
argument in the management accounting literature that intrinsic and extrinsic
motivation could be complementary in organizational settings (Dermer, 1975; Kominis
and Emmanuel, 2005, 2007; Kunz and Pfaff, 2002; Ronen and Livingstone, 1975).
Our findings also are in contrast to the self-determination theory literature that argues
intrinsic and extrinsic motivation are on a continuum from autonomous to controlled
motivation, which necessarily means that employees could not be high on both intrinsic
QRAM and extrinsic motivation (Deci and Ryan, 2008). Future research needs to focus on how
8,2 intrinsic and extrinsic motivation can enhance employee performance at different levels
in organizations (Bonner and Sprinkle, 2002; Merchant et al., 2003).
We find that 82 percent of the employees who provided qualitative comments
considered store and departmental goals were clear, which is pleasing for the retailer.
This is consistent with the literature that clear goals are important to ensure that
174 employees understand what is expected from them; this enables them to focus their effort
and leads to higher levels of motivation (Emmanuel et al., 2008; Latham and Baldes, 1975;
Locke and Latham, 1990). We also find that a substantial number of employees who are
high on both extrinsic and intrinsic motivation, who according to self-determination
theory, exhibit high levels of autonomy, also perceive their pay is unfair. This indicates
that pay fairness and equity are not determined by one’s motivation levels or even goal
clarity. However, the 40 percent of employees who perceived that pay was unfair
generally held views that this was driven by comparisons to others or that pay was not
reflective of their effort. Our findings support social comparison and equity theory
that pay inequities can have important outcomes (Adams, 1965; Festinger, 1954;
Greenberg et al., 2007). Future research is needed to examine perceptions of fairness and
the implications for employee motivation, as few studies have examined these issues in
any depth (Van Herpen et al., 2005; Zapata-Phelan et al., 2009).
There are a number of limitations with this research. This study examines a
pay-for-performance scheme in one organization for front-line employees, and care needs to
be taken when generalizing to other contexts (e.g. managers). However, a single case site is
appropriate when the unit of analysis is at the employee level (Anderson and Widener,
2007). The single site has the advantage of controlling for external factors and enables us to
focus on differences at the employee level (Burney et al., 2009). While single case studies are
useful and rich research sites, the challenge for future research will be to develop multiple
case studies to provide a stronger base for theory building and testing (Yin, 1994; Eisenhardt
and Graebner, 2007). Another limitation is that we were unable to test non-response bias, as
employees were assured anonymity. As a surrogate, we have tested the responses between
the stores where the researcher stayed for the whole time and the stores where
questionnaires had to be left for staff to complete over several days. We find no significant
differences with regard to all the key variables tested in the research propositions.
Despite these limitations, the paper extends our understanding of employee
motivation with regard to the complementary nature of intrinsic and extrinsic
motivation. Future papers are needed that extend this analysis, so organizations can
design incentive systems to leverage the potential of intrinsic and extrinsic motivation
and to take steps to improve employee perceptions of pay fairness.

Notes
1. This quote is from Locke et al. (1980) cited in Currall et al. (2005, p. 620).
2. Further information cannot be disclosed for confidentiality reasons.
3. If a team member leaves before the end of the bonus period, a payment will not be made;
however, if the team member completes the bonus period but leaves before the date of the
payment, the team member will still be eligible to receive the bonus.
4. We have used Spearman’s rho, as the distribution for extrinsic motivation was not normal
and the sample size was larger than 20.
 5. Principal components analysis with Promax rotation was used. Motivation
6. We have used correlation analysis for P1 and P2, as we are not arguing for a causal or of front-line
directional relationship. Pay satisfaction may influence extrinsic or intrinsic motivation and
vice versa (Gardner et al., 2004; Gerhart and Milkovich, 1992). The use of correlation analysis for employees
hypothesis testing has held to be sufficient in prior papers (Merchant, 1990; Giraud et al., 2008).
7. The key assumptions of multiple regression were tested, and there was no evidence of
multi-colinearity and heteroscedasticity and the residual plots were normal. 175
8. There were no employees who could be held as having low intrinsic motivation, that is,
a score of below 2 on the scale.
9. We use the Mann-Whitney U and Wilcoxon W and find no significant difference between the
42 high extrinsic/high intrinsic and the 49 other employees.
10. The number given is attributed to an employee.

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