The effect of pay for performance on work attitudes in the private, public, and nonprofit sectors: A panel study from South Korea

Abstract

The purpose of this study is to examine the differing effects of pay for performance on organizational commitment and job satisfaction in the public, private, and nonprofit sectors. Using data from the Korean Labor and Income Panel Study, this research found that pay for performance has a positive relationship with job satisfaction and organizational commitment in the private sector, a negative relationship with job satisfaction in the public sector, and a negative relationship with organizational commitment in the nonprofit sector. Points for practitioners When organizations in the public and nonprofit sectors begin adopting policies to increase extrinsic motivation, managers and scholars should carefully consider the negative effects of monetary incentives on job satisfaction and organizational commitment. The public sector emphasizes public values and public interests, which explains the significant effect of pay for performance on job satisfaction; meanwhile, the fact that the nonprofit sector focuses on organizational missions and goals, stakeholders, and employee motivation explains the positive effect of pay for performance on organizational commitment.