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

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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.

6 A.-K. Samnani, P. Singh / Human Resource Management Review 24 (2014) 5–16



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.

7 A.-K. Samnani, P. Singh / Huma n Resou rce Managemen t Review 24 (201 4) 5–16



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.




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.




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.




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




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.




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




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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Performance-Enhancing Compensation Practice and Employee Productivity