多元薪酬偏好及其影響：以非營利與營利組織為例 - 政大學術集成

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(1)International Master’s Program in International Studies National Chengchi University 國立政治大學國際研究英語碩士學位學程. Variable Pay Preferences Between Sectors: Nonprofit and For-profit Applicant Attraction to Differing Compensation Systems 多元薪酬偏好及其影響：以非營利與營利組織為例. BY THOMAS RYAN BARNETT Advisor: Dr. Pai-Po Lee. THESIS Submitted in partial fulfillment of the requirements for the degree of Master of International Studies in the Graduate College of Chengchi University in Taipei. June, 2015.

(2) Variable Pay Preferences Between Sectors: Nonprofit and For-profit Applicant Attraction to Differing Compensation Systems 多元薪酬偏好及其影響：以非營利與營利組織為例 by THOMAS BARNETT 巴奈特 APPROVED BY. ______________________________________. Committee Member. ______________________________________. Committee Member. ______________________________________. Committee Member. ______________________________________. Thesis Advisor. ______________________________________ Program Director. International Master’s Program in International Studies NATIONAL CHENGCHI UNIVERSITY June 4th 2015. i.

(3) ABSTRACT. One of the more contentious developments in the nonprofit sector has been the growing relevance of incentive plans that link pay with performance outcomes. Invoking the same repurposed applications of Spence’s signaling theory (1974) used in prior person-organization (P-O) fit literature, this study assumes that advertising pay-for-performance (PFP) has a signaling effect in which organizational values are communicated to job seekers. Prospective applicants are thought to make initial application decisions based on the perceived (in)congruence between their personal values and those of the organization. Empirical support for this process has been demonstrated repeatedly in for-profit sector contexts, but the conceptual intersection between applicant attraction in the nonprofit sector and advertised PFP measures has been virtually left untouched. This leaves an open empirical question as to whether PFP incentive offers significantly affect applicant attraction in the third sector. This experiment compares nonprofit and for-profit sector applicant attraction to randomized job descriptions with various bonus incentive offers. It is expected that nonprofit applicants, hypothesized as more intrinsically motivated and allocentric (collectivistic) than private sector workers, are comparatively less attracted to employment that entails individual PFP incentives relative to for-profit applicants. It is further hypothesized that nonprofit applicants are less likely to expect performance bonuses if incentives of that sort are not explicitly mentioned in a job posting.. ii.

(4) ACKNOWLEDGEMENTS I would like to express my sincere appreciation for the innumerable people that assisted me throughout the entire process. My thanks are due first to the Taiwan Ministry of Education (MOE) for the generous financial support, without which surely this project would not have been possible. My advisor, Dr. Pai-Po Lee, and committee members Yeh-Chung Lu and Dr. Tony Shih took the time to make numerous invaluable contributions to the project. I would also like to acknowledge Feng Wei-Chi, Kuo Kai-Yuan, Lin Chia-Hao, Chen Mei-Ting for their research assistance with the non-profit job postings. Chafie Wei was absolutely indispensible in moving the process along on the administrative end. My father, sister and Edward Prokop always encouraged me from afar and never questioned that I was working toward something worthwhile. And perhaps most importantly, I am continuously in awe at Chung Yi-Chun for her unwavering support and assurance. She was everything for me at any time.. iii.

(5) TABLE OF CONTENTS CHAPTER 1: INTRODUCTION ............................................................................. 1 1.1 Research Background................................................................................... 1 1.2 Research Questions ...................................................................................... 6 1.3 Research Purpose and Potential Significance .............................................. 7 1.4 Thesis Outline .............................................................................................. 10 CHAPTER 2: LITERATURE REVIEW .................................................................. 11 2.1 Primer on Nonprofit Organizational Characteristics ................................... 11 2.2 Pay-for-performance in the Nonprofit Sector .............................................. 12 2.3 PFP Theoretical Foundations - Microeconomics and Social Psychology ... 14 2.4 Contributions from Social Psychology ........................................................ 16 2.5 Performance Bonuses and the Potential Signaling Void ............................. 32 CHAPTER 3: METHODOLOGY ............................................................................ 36 3.1 Participants ................................................................................................... 37 3.2 Manipulation and Procedure ........................................................................ 37 3.3 Measures ...................................................................................................... 40 CHAPTER 4: RESULTS AND DISCUSSION ........................................................ 43 4.1 Socio-demographic Descriptive Statistics.................................................... 44 4.2 Hypothesis 1 ................................................................................................. 44 4.3 Hypothesis 2 ................................................................................................. 47 4.4 Hypothesis 3 ................................................................................................. 49 4.5 Additional Statistical Results ....................................................................... 52 4.6 Hypothesis 4 ................................................................................................. 57 CHAPTER 5: CONCLUSIONS AND RECOMMENDATIONS ............................ 59 5.1 Limitations ................................................................................................... 65 REFERENCES .......................................................................................................... 68 APPENDIX A: SURVEY QUESTIONNAIRE ........................................................ 79. iv.

(6) Chapter 1 Introduction Chapter 1 provides an overview of the current study, beginning with three subsections together comprising the introductory research background. The first subsection touches on the growing relevance of nonprofit organizations worldwide, followed by a discussion on the trending use of pay-for-performance (PFP) incentives in the nonprofit sector. The third subsection introduces the research issue and research questions driving the study. Section 1.2 poses the research questions, while section 1.3 details the research purpose and potential significance of the study. The final section outlines the structure of the entire study. 1.1 Research Background Growing Relevance of Nonprofits Coinciding with the close of the Cold War era, nonprofits in the last few decades have carved out a distinct reputation as the preferred entities through which the state and for-profit firms “fill the gaps” in society. 1 If it is indeed true that philanthropy is the “market for all those people for whom there is no other market coming,” 2 the exponential growth in domestic and transnational nonprofits is a testament to the international community’s endorsement of the sector. 3 Worldwide registration of International Non-governmental Organizations (INGOs) doubled more than twice over from 1960 to 1996, 4 with particularly robust growth in the transnational and disaster relief aid. As the 20st century drew to a close, P.J. Simmons noted in a 1998 edition of Foreign Policy that “…there is widespread agreement that [NGO] numbers, 1. Twigg, John. "Filling Gaps and Making Spaces: Strengthening Civil Society in Unstable Situations." 2005, 116. http://baringfoundation.org.uk/wp-content/uploads/2014/10/Fillinggaps.pdf. 2 Pallota, Dan. "The Way We Think about Charity Is Dead Wrong." Speech, TED, November 11, 2013. http://www.ted.com/talks/dan_pallotta_the_way_we_think_about_charity_is_dead_wrong?language=en. 3 Cooley, Alexander, and James Ron. "The NGO Scramble: Organizational Insecurity and the Political Economy of Transnational Action." International Security 27, no. 1 (2002): 6. doi:10.1162/016228802320231217. 4 Ibid., 10.. 1.

(7) influence and reach are at unprecedented levels,” partly because “the UN and nationstates are depending more on NGOs to get things done.” 5 Nonprofits at present are harnessing the dynamics of globalization to their advantage, but along with the acceleration of benefits fueled by technology and globalization, these potent global forces have likewise begun to shape organizational structures and behaviors in the third sector. 6 Pay-for-performance in the Nonprofit Sector For-profit management practices and techniques are now ubiquitous in many nonprofits, including marketing analysis, budgeting techniques and other forms of professionalization (i.e. adhering to for-profit procedural standards) in accounting, monitoring, and evaluation. 7 Perhaps one of the more contentious developments has been the introduction of incentive plans that link performance outcomes with pay— arrangements rather uncommon in the sector until recently. But within the last couple of decades, organizations of all stripes have adopted the “incentives revolution” 8 embraced by a number of academic disciplines. 9 No longer exclusive to the for-profit and public sectors, pay-for-performance (PFP hereafter) plans are no longer altogether uncommon in nonprofit organizations. 10 According to one nonprofit recruiting agency, about 25% of the third sector now offer pay-for-performance 5. Simmons, P. J. "Learning to Live with NGOs." Foreign Policy, September 22, 1998, 112. http://www.jstor.org/discover/10.2307/1149037?uid=3739216&uid=2134&uid=2&uid=70&uid=4&sid=2110625 1876891. 6 Lindenberg, Marc, and J. P. Dobel. "The Challenges of Globalization for Northern International Relief and Development NGOs." Nonprofit and Voluntary Sector Quarterly 28, no. 4 (1999): 7-8. doi:10.1177/089976499773746401. 7 Speckbacher, G. "The Use of Incentives in Nonprofit Organizations." Nonprofit and Voluntary Sector Quarterly 42, no. 5 (2013): 1007. doi:10.1177/0899764012447896. 8 Miller, Gary J, and Whitford, Andrew. "The Principal's Moral Hazard: Constraints on the Use of Incentives in Hierarchy." Journal of Public Administration Research and Theory: J-PART 17, no. 2 (2007): 214. doi:10.1093/jopart/mul004. 9 Cadsby, C. B., F. Song, and F. Tapon. "Sorting And Incentive Effects Of Pay For Performance: An Experimental Investigation." Academy of Management Journal 50, no. 2 (2007): 387. doi:10.5465/amj.2007.24634448. 10 Theuvsen, Ludwig. "Doing Better While Doing Good: Motivational Aspects of Pay-for-Performance Effectiveness in Nonprofit Organizations." VOLUNTAS: International Journal of Voluntary and Nonprofit Organizations 15, no. 2 (2004): 118. doi:10.1023/B:VOLU.0000033177.16367.e3.. 2.

(8) schemes to their upper management. 11 Because nonprofits have historically operated under a unique set of statutory constraints, including one of “nondistribution” prohibiting individuals from diverting donor dollars for personal enrichment, 12 the trending use of PFP plans in the sector is garnering significant academic interest. 13 For example, support for the actual motivational effectiveness of PFP is generally mixed. Considerable speculation surrounds the transferability of these incentive plans to a sector where financial gain is less often prioritized. 14 However, nonprofits pose a similar rationale for implementing these measures as private sector companies, in which the primary benefits to the organization are twofold—motivating existing employees and serving as something of a personnel sorting mechanism. Although research on the latter is less developed according to Gerhart and Rynes, early empirical work suggests that these sorting influences may be equally as crucial. 15 The filtering effect is thought to impact both existing employees and the workforce as a whole, not only communicating organizational values internally, but also signaling to potential applicants in the hopes of attracting top performers. Pay-for-performance and Recruitment Attracting and retaining the best human capital has become a primary objective for virtually all organizations in the modern era, 16 and it stands to reason that these organizations take notice of how sorting effects impact the recruitment process. An enormous amount of time and resources are poured into the recruitment process. 11. Rocco, James E. "DRG - Making Incentive Compensation Plans Work in Non-Profit Organizations." http://www.drgnyc.com/tips/incentive.html. 12 Hansmann, H. B. "The Role of Nonprofit Enterprise." The Yale Law Journal 89, no. 5 (1980): 838. 13 Barragato, Charles A. "Linking For-Profit and Nonprofit Executive Compensation: Salary Composition and Incentive Structures in the U.S. Hospital Industry." Voluntas: International Journal of Voluntary and Nonprofit Organizations 13, no. 3 (2002): 302-03. Accessed November 12, 2014. 14 Speckbacher, 1006-025 15 Gerhart, Barry A., and S. Rynes. Compensation: Theory, Evidence, and Strategic Implications. Thousand Oaks, CA: Sage, 2003. 260. 16 Backhaus, Kristin B. "An Exploration of Corporate Recruitment Descriptions on Monster.com." Journal of Business Communication 41, no. 2 (2004): 115. doi:10.1177/0021943603259585.. 3.

(9) precisely because organizations are acutely aware that success is at least partly attributable to the attraction, selection and retention of high-quality workers. 17 Across industries and sectors, companies are prioritizing the human resources aspect of the organization in the belief that human capital is vital to their competitive advantage. 18 Reflecting this reality is a corollary increase in the amount of research dedicated to recruitment topics in the last 30 years, 19 including organizational attraction theory and job search theory. Out of social psychology came one of the more salient theoretical strands regularly employed by the two interrelated disciplines–the importance of a congruence between personal characteristics and the characteristics of the company. A large body of seminal management and academic literature measure fit on a variety of cross-level constructs, 20 including person-organization (PO) fit, a more concentrated variant that is part of the wider person-environment (P-E) construct. P-O fit posits the significance of organizational values that facilitate or frustrate perceived fit with individuals. 21 From this premise, numerous studies generally begin with the assumption that individuals experience varying levels of attraction to different jobs and organizational cultures based on a perceived fit, resulting in a sorting effect before the initial application decision. Studies in this academic vein often look to uncover the influences responsible for attraction and subsequent patterns of self-selection into various positions, including recruiter. 17 Ployhart, R. E. "Staffing in the 21st Century: New Challenges and Strategic Opportunities." Journal of Management 32, no. 6 (2006): 869. doi:10.1177/0149206306293625. 18 Turban, Daniel B., and Daniel W. Greening. "Corporate Social Performance And Organizational Attractiveness To Prospective Employees." Academy of Management Journal 40, no. 3 (1997): 658. doi:10.2307/257057. 19 B Breaugh, J. "Research on Employee Recruitment: So Many Studies, so Many Remaining Questions." Journal of Management 26, no. 3 (2000): 430. doi:10.1016/S0149-2063(00)00045-3. 20 Billsberry, Jon. "Attracting for Values: An Empirical Study of ASA's Attraction Proposition." Journal of Managerial Psychology 22, no. 2 (2007): 134. doi:10.1108/02683940710726401. 21 Robert, C., and S. A. Wasti. "Organizational Individualism and Collectivism: Theoretical Development and an Empirical Test of a Measure." Journal of Management 28, no. 4 (2002): 545. doi:10.1016/S0149-2063(02)001435.. 4.

(10) personalities, 22 job description content, 23 organization website design, 24 organizational image, 25 and most relevant to this study–worker motivation. The effects of compensation systems on perceived attraction have been examined extensively in the literature, and prior authors found that pay and even bonus-related incentives are decisive sorting variables among for-profit firms many times over. 26 In fact, research suggests that PFP incentives are understood by applicants as one of the more obvious links between pay systems and organizational priorities. 27 In the absence of other information about organizational characteristics, applicants tend to view PFPs as particularly strong indicators. Research taking into account an applicant’s attitudinal and motivational dispositions in relation to performance bonuses, however, is far less pervasive. Studies concerning the private or public sector dominate the literature, and similar studies have yet to be replicated concerning the trending use of PFPs in the nonprofit labor force. The conceptual intersection between nonprofit applicant attraction and PFP measures has been virtually left untouched, leaving an open empirical question as to whether PFP schemes can significantly affect applicant attraction in the third sector. Utilizing the personorganization (P-O) fit approach to applicant attraction, the present study seeks to add a measure of insight to this research gap by observing the differences in attraction to. 22. Turban, Daniel B., Monica L. Forret, and Cheryl L. Hendrickson. "Applicant Attraction to Firms: Influences of Organization Reputation, Job and Organizational Attributes, and Recruiter Behaviors." Journal of Vocational Behavior 52, no. 1 (1998): 24-44. doi:10.1006/jvbe.1996.1555. 23 Backhaus, 115. 24 De Goede, Marije E. E. De, Annelies E. M. Van Vianen, and Ute-Christine Klehe. "Attracting Applicants on the Web: PO Fit, Industry Culture Stereotypes, and Website Design." International Journal of Selection and Assessment 19, no. 1 (2011): 51-61. doi:10.1111/j.1468-2389.2010.00534.x. 25 Tom, Victor R. "The Role of Personality and Organizational Images in the Recruiting Process." Organizational Behavior and Human Performance 6, no. 5 (1971): 573-92. doi:10.1016/S0030-5073(71)80008-9 26 For further examples, see Cadsby et al. (2007) Lazear (2000), and Paarsch and Shearer (1999) 27 Kuhn, Kristine M. "Compensation as a Signal of Organizational Culture: The Effects of Advertising Individual or Collective Incentives." The International Journal of Human Resource Management 20, no. 7 (2009): 1635. doi:10.1080/09585190902985293.. 5.

(11) various types of incentive bonus between both nonprofit and for-profit sector applicants. 1.2 Research Questions The research questions begin by seeking to reaffirm a fundamental assumption that has been made by numerous scholars as to whether nonprofit applicant motivations and reasons for working in the sector are unlike those in other sectors–specifically the for-profit sector. The first research question is as follows: 1) Do nonprofit applicants prefer more intrinsically rewarding jobs than for-profit applicants? The second question seeks to reaffirm another dispositional aspect of nonprofit applicants. By logical extension, it could be hypothesized that if nonprofit workers are drawn to the third sector altruistically, encased within those altruistic motivations are higher levels of allocentrism (collectivistic sentiments) rather than idiocentrism (individualistic sentiments). The precedent for measuring allocentrism and idiocentrism in an person-organization (P-O) fit context and its significance in organizational attraction is expounded in later sections. The second research question is as follows: 2) Do nonprofit applicants have more allocentric tendencies than for-profit applicants? The third research question is very much concerned with applicant perceptions of fit toward what are thought to be organizational characteristics. Using what might be seen as a repurposed iteration of the person-organization (P-O) fit tradition; the third research question is as follows: 3) Do the hypothesized differences in motivational and attitudinal profiles between nonprofit and for-profit applicants affect their attraction to various bonus incentive systems? 6.

(12) And finally, because advertised incentive bonuses are known to have sorting effects on the workforce as a whole, 28 their explicit mention or lack thereof could have potential implications for applicant self-selection patterns. The strength of these sorting effects may depend on applicant expectations. If applicants generally believe that job descriptions are an accurate representation of the position being advertised, then sorting and self-selection would be more pronounced because the information provided is key to the initial decision to apply. However, if applicants find that employers tend to reveal pertinent information (e.g. bonus incentives) until later in the recruitment process, then the information provided may have less of an impact on the initial application decision. The fourth research question is as follows: 4) Are nonprofit applicants relatively less likely to assume that a position may entail performance bonuses even when a job description may not explicitly mention it? 1.3 Research Purpose and Potential Significance Given the growing importance of nonprofits to U.S. employment, exemplified in the more than 10 million nonprofit sector jobs totaling 10.3% of U.S. private employment, recruitment research in a nonprofit sector context is becoming increasingly relevant. Although similar studies have been widely conducted in the for-profit sector, much of the literature addresses post-interview attraction despite recent evidence suggesting that pre-interview attraction may be a more decisive driver in applicant behavior. 29 The present study seeks to add a measure of insight to these budding developments, examining specifically pre-interview recruitment in the nonprofit sector.. 28. Cadsby et al., "Sorting And Incentive Effects Of Pay For Performance: An Experimental Investigation." Turban, Daniel B. "Organizational Attractiveness as an Employer on College Campuses: An Examination of the Applicant Population." Journal of Vocational Behavior 58, no. 2 (2001): 293. doi:10.1006/jvbe.2000.1765 29. 7.

(13) The purpose of this research is primarily threefold in nature and driven by four interrelated hypotheses. Each hypothesis contributes to the main thrust of the present study, which is to discern whether nonprofit applicants find pay-for-performance incentives less appealing than for-profit applicants. The hypotheses are tested using original survey data collected 173 respondents split between the non-profit and forprofit sector. Along with slight adjustments made by the author, the survey incorporates items and promptings from four previous studies in order to ensure internal validity and overall academic integrity. First, this study intends to lend further empirical insight on nonprofit and for-profit applicant motivational and attitudinal dispositions. The first and second hypotheses address longstanding assumptions that nonprofit workers are more intrinsically driven and possess a more collectivistic mindset relative to for-profit workers, respectively. 30 These initial hypotheses lay the empirical groundwork for the primary purpose of the study–gauging perceived levels of fit between nonprofit workers and organizations offering pay-for-performance incentives. Second, the study is principally intended to make an original contribution to personorganization (P-O) fit research–a theoretical construct that posits the importance of congruence between values held by the individual and values endorsed by the organization. In the context of recruitment, low levels of fit are well documented to have detrimental effects on organizational longevity, whereas high levels of fit are associated with increased organizational longevity. 31 The third hypothesis examines the relationship between personal dispositions and attraction to advertised bonus incentives.. 30. For intrinsic examples, see Leete (2000). For allocentrism and idiocentrism, see Robert and Wasti (2002). Morley, Michael J. "Person-organization Fit." Journal of Managerial Psychology 22, no. 2 (2007): 111. doi:10.1108/02683940710726375. 31. 8.

(14) Third, this study explores applicant expectations in encountering pay-forperformance arrangements in their respective sectors. Testing the fourth hypothesis on applicant expectations is intended to provide further insight on prospective P-O fit both before and after the initial application decision. As discussed previously, a disparity between applicant expectations and the reality of the compensation systems being offered may also lead to low levels of fit and misfit. Drawing on prior literature, the multiple hypotheses form the following conceptual chain of logic: it is expected that nonprofit applicants, hypothesized as more intrinsically motivated and allocentric (collectivistic) than private sector workers, will be less attracted to employment that entails individual PFP incentives relative to forprofit applicants. Moreover, in the event that performance bonuses are not listed in the original job posting, nonprofit sector applicants are further hypothesized to be less likely than for-profit applicants to assume that a position entails performance bonuses. Several authors warn against making generalizations with this type of analysis, 32 especially when using manipulated descriptions rather than real-world job postings. 33 However, the initial results regarding the motivational profile of nonprofit workers may reaffirm assumptions in the academic literature and could potentially inform human resource practices in the third sector. The effects of PFP incentives on personorganization fit may constitute a more novel academic contribution in an area of study that has been virtually uncharted until recently. On a practical level, the attraction results provide insight for recruitment professionals considering the use of. 32 33. For examples, see Bowers (1973), Schneider (1987), Gomes and Neves (2011), Billsbery (2007). Billsbery, 134.. 9.

(15) PFP incentives and for those who may choose to delay disclosing these incentive plans until later in the recruitment process. 1.4 Thesis Outline Chapter 2 proceeds with a literature review, detailing first the growing relevance of PFP plans and then the theoretical underpinnings for the practice. The conceptual foundations upon which the hypotheses were formed are further discussed in subsequent subsections. Chapter 3 lays out the methods for addressing the hypothesis, utilizing original survey data collected from hypothetical applicants within both the nonprofit and for-profit sectors. The fourth chapter reports the results and analysis of the aforementioned survey. The final chapter provides discussion on the results of the previous chapter, further review of the potential implications of these findings, closing remarks on the limitations of this study, and potential avenues for future research.. 10.

(16) Chapter 2: Literature Review 2.1 Primer on Nonprofit Organizational Characteristics The third sector is generally distinguished from the others as a space where nonprofits can help overcome market failures by providing essential goods and services without government procurement or for-profit subsidies. Nonprofits in their most potent form can fill in the gaps left by the state and private firms—in some areas existing as the only entities capable of meeting basic public needs. Nonprofits are given special privilege to fill this void primarily through tax exemptions and the unique ability to provide tax-deductions for contributors. 1 Among the advantages associated with these privileges, nonprofit organizations can offer goods and services that may be loss-making for other firms. In this way, some of the more vital needs of society are addressed that might otherwise have been neglected. The term “nonprofit” is not ipso facto in that these entities cannot make a profit, but contrary to their forprofit counterparts, the law precludes the reallocation of resources away from the public good for personal enrichment. Hansmann’s seminal work in 1980 identifies this “nondistribution constraint” as a commitment device that signals trust and reassurance in a way that entities of other sorts are unable to match. 2 Nonprofits depend on this competitive advantage because they generally exist in “…service areas characterized by externalities, uncertainty, information asymmetries, adverse selection and consumer trust.” 3 According to Frumkin and Keating, nonprofits can attribute much of their success to non-distribution constraint signaling and the apparent preference consumers may have for organizations that are not always 1. Frumkin, Peter, and Elizabeth K. Keating. "The Price of Doing Good: Executive Compensation in Nonprofit Organizations." Policy and Society 29, no. 3 (2010): 271. doi:10.1016/j.polsoc.2010.07.004. 2 Hansmann, 858, 863. 3 Frumkin, Peter, and Elizabeth K. Keating. The Price of Doing Good: Executive Compensation in Nonprofit Organizations. Working paper no. 02-11. Northwestern.edu, n.d. 4. Web. 07 July 2014. 4.. 11.

(17) beholden to the profit motive. As nonprofit daycares can attest, “many parents prefer to have their children’s care governed by factors other than the bottom line.” 4 The Internal Revenue Service (IRS) and most other government agencies worldwide have codified the non-distribution constraint by formally restricting excessive pay for nonprofit employees. IRS statutes maintain that compensation should not go beyond the pay structures of similar entities, “the value that would ordinarily be paid for like services by like enterprises under like circumstances.” 5 Punishments for compensation infractions are generally resolved with fines, and in some extreme instances, revoking tax-exempt status. 2.2 Pay-for-performance in the Nonprofit Sector Nonprofits have traditionally been put off by linking pay to performance outcomes (especially increased earnings) for fear of legal repercussions and potentially undercutting public trust in the organization. But in the last few decades, incentive compensation has become common in nonprofits as part of a wider trend toward management techniques previously dominated by the private sector. 6 Many nonprofits have correspondingly taken on something of a for-profit mentality toward the market, reshuffling their organizations to resemble multi-national corporations. However, the push to professionalize is not solely attributable to changing competitive environments. Governments are likewise responsible for shaping nonprofits. Demanding greater levels of accountability from NGOs, for example, typically means more professionalization. But regardless of what compels nonprofits to engage in institutional isomorphism, the academic consensus converges on a. 4. Ibid., 4. "Publication 557." October 2013. http://www.irs.gov/publications/p557/ch05.html#en_US_2013_publink1000200438. 6 Dart, Raymond. "Being “Business-Like” in a Nonprofit Organization: A Grounded and Inductive Typology." Nonprofit and Voluntary Sector Quarterly 33, no. 2 (2004): 290. doi:10.1177/0899764004263522. 5. 12.

(18) reality where for-profit management techniques are here to stay in the third sector. 7 Prescriptive academic literature abound envisions translating business acumen into social utility at the hands of “social entrepreneurs” and more “business-like” organizational strategies. 8 Although business practices were never a completely foreign concept to nonprofits, much of the sector is undoubtedly becoming more business-like than ever before. Without delving too far into the voluminous amount of literature dedicated to defining exactly what being “business-like” means, 9 according to Dart, nonprofit activity broadly defined as “… an interconnected nest of pro-social and voluntaristic values and goals with few references to the means and structures by which these values are enacted” is being infused with business-like practices considered “…to be those characterized by some blend of profit motivation, the use of managerial and organization design tools developed in for-profit business settings, and broadly framed business thinking to structure and organize activity.” 10 Implementing PFP incentives would certainly be categorized as a more business-like shift in organizational motivation techniques, and similar to private firms, nonprofits are well aware of the pressing need to attract high quality human capital. 11 In fact, PFP arrangements have become increasingly common in the repertoire of nonprofit human resources management. 12 Nonprofit executives and higher management most often see merit-based pay, though it is not strictly limited to those at the top. Several authors have argued that the best nonprofit workers should be paid with respect to performance outcomes in order to ensure their attraction and retention. 13 This. 7. Ibid., 290. Ibid., 290. 9 Ibid., 292. 10 Ibid., 294. 11 Letts, Christine, William P. Ryan, and Allen Grossman. High Performance Nonprofit Organizations: Managing Upstream for Greater Impact. New York: Wiley, 1999. 12 Theuvsen, 120. 13 Frumkin, Peter, and Elizabeth K. Keating. The Price of Doing Good: Executive Compensation in Nonprofit Organizations. Working paper no. 02-11. 8. 8. 13.

(19) familiar argument borrowed from pay-for-performance and incentive advocates in the for-profit sector rests upon the assumption that linking pay with performance is an effective motivational tool. 14 Frumkin and Keating point out that implicitly equivocating nonprofit and for-profit organizations constitutes a theoretical bridge too far—the motivational merits of which have yet to convince quite a few scholars. The following section elaborates on the theoretical underpinnings for merit-based incentives and subsequently the trending appearance of PFP arrangements in the nonprofit sector. 2.3 PFP Theoretical Foundations - Microeconomics and Social Psychology Motivation simply defined is having the impetus to do something. An unmotivated individual does not feel compelled to pursue an end, while motivated individuals conversely are active in that respect. 15 It is widely believed that incentives should be used to leverage motivation and typically organizations utilize incentives to stoke motivation, furnish signals for self-selection to the labor force, communicate organizational goals, and channel workers toward those specified goals. PFP policies incentivize individual or group performance through pecuniary rewards. For nonprofit organizations, PFP measures usually take the form of monetary bonuses for achieving qualitative or quantitative organizational goals. Justifications for PFP plans have surfaced in a wide range of disciplines, but are often based in microeconomic and social psychology theory. 16 Microeconomics traditionally centers on explicit incentives and explains merit-based pay in the language of principle-agency and relative price effects for utility maximizing individuals. According to Speckbacher, tensions in this relationship arise because the desired outcome performed by the agent 14. Theuvsen, 120. Ryan, Richard M., and Edward L. Deci. "Intrinsic and Extrinsic Motivations: Classic Definitions and New Directions." Contemporary Educational Psychology 25, no. 1 (2000): 54. doi:10.1006/ceps.1999.1020. 15 16. Theuvsen, 120.. 14.

(20) impacts the principal’s utility. However, in many cases, the principal has very little information beyond the outcome to judge the agent’s performance. Most of the agent’s actions preceding the outcome are unobservable and the principal must also consider other random environmental variables that could have affected the outcome. This ambiguity favors the agent because reduced effort is largely undetectable, and it would appear to be in the agent’s interests to shirk making an effort. Therefore, the principal and agent are assumed to have interests that are at odds with one another. 17 Rather than heightening supervision to resolve these tendencies, incentivizing expected outcomes essentially raises the agent’s opportunity costs for undesirable behavior, consequently saving the principal valuable resources and energy in not having to monitor and evaluate agents nearly the extent that they otherwise would have. 18 Incentives are believed to resolve the classic concerns of principal-agent information asymmetry (in which principal is never completely aware of what the agent intends to do without an round-the-clock supervision) because “…much of the work of controlling subordinate behavior can be left up to the subordinate’s [own] self-interest.” 19 The same goes for the wealth of agency models that emphasize incentive measures designed to induce truth-telling from the agent. 20 Accordingly, proponents in economics and management scholarship are bullish about using incentives to overcome principal-agency dilemmas. 21 However, interpreting incentives through principal-agent dynamics is not without its detractors, 22 of whom often times find the framework wanting without important insights from other. 17. Speckbacher, 1008. Theuvsen, 120. 19 Whitford, 214. 20 Speckbacher, 1009. 21 Rynes Gerhard Parks, 581. 22 Kerr, Steven. "On the Folly of Rewarding A, While Hoping for B." Academy of Management Journal 18, no. 4 (1975): 769-83. doi:10.2307/255378. 18. 15.

(21) academic disciplines. 23 For example, as Gibbons notes in “Incentives in Organizations,” principal-agency models assume that performance outcomes can be observed, quantified and measured. Absent these assumptions, merit-based plans “can lead to distorted incentives.” 24 And indeed, incentive theory scholars are inclined to believe, “the social psychology of compensation is important [as well], because if the principal infers wrong motivations about the agent, compensation packages can be misdirected.” 25 Microeconomics is somewhat limited by only distinguishing differing capabilities between individuals, while social psychology considers differing personal qualities. 26 The predictive power of agency theory in particular is frequently called into question, 27 for which more probabilistic and ideational explanations exist. 2.4 Contributions From Social Psychology Measures of Fit The social psychology discipline offers a number of theoretical frameworks to explain the empirically observed effects of incentive schemes on work motivation. 28 An approach with demonstrable empirical validity, and that which forms the foundation of this study, is the perceived importance of objective and/or subjective congruence between the individual and the organization. Many have adopted this line of reasoning, 29 usually under the auspices of Schneider’s attraction-selection-attrition (ASA) framework, which serves as the most widely employed theoretical anchor for. 23 Larkin, Ian, Lamar Pierce, and Francesca Gino. "The Psychological Costs of Pay-for-performance: Implications for the Strategic Compensation of Employees." Strategic Management Journal 33, no. 10 (2012): 1195. doi:10.1002/smj.1974. 24 Gibbons, Robert. "Incentives in Organizations." Journal of Economic Perspectives 12, no. 4 (1998): 115-32. doi:10.1257/jep.12.4.115. as cited in Speckbacher, "The Use of Incentives in Nonprofit Organizations."1009. 25 Arnolds, C.a., and Christo Boshoff. "Compensation, Esteem Valence and Job Performance: An Empirical Assessment of Alderfer's ERG Theory." The International Journal of Human Resource Management 13, no. 4 (2002): 699. doi:10.1080/09585190210125868. 26 Gerhart and Rynes, 260. 27 Larkin et al., 1196. 28 Rynes et al., 581. 29 Gerhart and Rynes, 260.. 16.

(22) applicant attraction research. 30 Billed as part of the interactionist processing metatheory by Ehrhart and Ziegert, 31ASA posits a subjective fit between individuals and organizations whereby different types of applicants are attracted to different types of organizations. In other words, “people make the place” according to Schneider. 32 The emphasized importance of person-organization (P-O) fit in the attraction process is the defining characteristic in theories of this sort, in which “…compatibility between people and organizations [] occur[] when (a) there is a similarity or match of some attribute and/or (b) one entity provides what the other wants or needs.” 33 Applicants will self-select into organizations in congruence with their personal values, thereby shaping and eventually perpetuating the behavior of the organization. Employees unable to find the proper fit within the organization selfselect themselves out, serving to further preserve organizational values. 34 The forerunner to Schneider’s framework is John L. Holland’s eminent theory of vocational personalities and work environments, asserting that vocational choice is relies on the person-environment interaction and that the environment is characterized by the personalities of those who compose it. 35 Prior to Holland’s contribution, Vroom and Tom had already demonstrated the importance of the work environment in attracting individuals. Vroom’s expectancy theory places the instrumental considerations on the part of individuals as a primary behavioral driver, while Tom’s finding confirmed that people gravitate toward organizations who share. 30 The term “attraction research” is employed by Ehrhart and Ziegert (p.907) in Ziegert, Jonathan C., and Karen H. Ehrhart. "Why Are Individuals Attracted to Organizations?" presumably as shorthand for applicant attraction in the workforce. 31 Ehrhart, K. H. "Why Are Individuals Attracted to Organizations?" Journal of Management 31, no. 6 (2005): 906-07. doi:10.1177/0149206305279759. 32 Schneider, Benjamin. "The People Make The Place." Personnel Psychology 40, no. 3 (1987): 450. doi:10.1111/j.1744-6570.1987.tb00609.x. 33 Kristof, Amy L. "Person-Organization Fit: An Integrative Review Of Its Conceptualizations, Measurement, And Implications." Personnel Psychology 49, no. 1 (1996): 1-49. doi:10.1111/j.1744-6570.1996.tb01790.x. as cited in Ziegert, Jonathan C., and Karen H. Ehrhart. "Why Are Individuals Attracted to Organizations?" 906. 34 Schneider, 442. 35 Ibid., 441.. 17.

(23) a similar “personality” to their own. 36 ASA is grounded in the similar epistemological assumptions of Jean Piaget on both cognitive psychology and development— presupposing the inseparability of individuals and their situation. 37 Contrary to the dominant theories of interactional psychology of the late 1960s and early 1970s where circumstances were believed to dictate behavior, 38 Schneider maintains that ASA as a continuously reinforcing cycle characterizes the entire lifespan of an individual’s interaction with a chosen work environment:. In reality the way it looks is a result of the people there behaving the way they do. They behave the way they do because they were attracted to that environment, selected by it, and stayed with it. Different kinds of organizations attract, select and retain different kinds of people, and it is the outcome of the ASA cycle that determines why organizations look and feel different from each other. 39 Although the ASA framework is “purposefully vague” in measuring attraction, 40 Schneider notes that many empirical findings in vocational psychology had already demonstrated the ASA framework at the time. 41 Cable and Judge in a 1996 longitudinal study of 96 job seekers similarly posited a central role for P-O fit in organization attraction and point to a growing body of concurrent empirical work. 42 Ehrhart and Ziegert’s meta-analysis additionally cite numerous studies in attraction. 36. Tom, Victor R. "The Role of Personality and Organizational Images in the Recruiting Process." as cited in Schneider 441 37 Schneider, 439. 38 Ibid., 439-40. 39 Ibid., 440. 40 Ehrhart and Ziegert, 907. 41 Schneider, 441. 42 Cable, Daniel M., and Timothy A. Judge. "Person–Organization Fit, Job Choice Decisions, and Organizational Entry." Organizational Behavior and Human Decision Processes 67, no. 3 (1996): 294. doi:10.1006/obhd.1996.0081.. 18.

(24) research with theoretical components that either directly mention ASA or incorporate a framework under the similarity-attraction paradigm. 43 Intrinsic and Extrinsic Motivation Among the numerous contributions furnished by social psychology, studies revealing the complexities of individual motivation have been indispensible to incentive theory. In many instances, these insights serve as an extension on the principal-agency tradition by probing to what degree the principal understands how best to motivate the agent. 44 Bem’s self-perception theory (1967) along with Ryan and Deci’s Cognitive Evaluation Theory (1985) are widely credited as the theoretical foundations emphasizing the vital role of personality types—specifically the implications of motivation existing in diverse forms. Rynes, Gerhart and Parks find that the influence of Cognitive Evaluation Theory (CET) both in practice and as an important theoretical foundation for other disciplines is growing at an exceptional pace. 45 The widespread proliferation of this framework and a parallel theoretical development in economics has highlighted the need for considering personality variables in relation to incentive research. Findings on the intrinsic enjoyment individuals feel in performing certain tasks have moved incentive theory beyond the plainly visible—shifting the focus from the traditional emphasis on external cues to questions of how to manage intrinsic motivation and the related desire for inducing motivation through implicit incentives. Behavioral economic models previously assumed that non-incentivized work equated to “effort…at the lowest possible level.” 46 Since the input of alternative disciplines came to the fore, incentives literature has found overwhelming evidence “that people engage in many tasks and 43. Ehrhart and Ziegert, 906. Arnolds and Boshoff, 699. 45 Rynes et al., 576-77. 46 Kreps, D. M. "The Interaction between Norms and Economic Incentives: Intrinsic Motivation and Extrinsic Incentives." American Economic Review 87 (1997): 359-64. as cited in Speckbacher 1010 44. 19.

(25) activities because they enjoy them. Tasks that are inherently satisfying create an intrinsic reward for those performing them.” 47 Deci and Ryan’s widely employed and empirically substantiated Self-Determination Theory (SDT), a theoretical extension of CET, presupposes that individuals have a wealth of potential for intrinsic motivation that can either be facilitated or undermined by environmental factors. Furthermore, the authors found that motivation resembles nothing like “a unitary phenomenon.” 48 People differ in not only in the quantity of motivation they have, but also the type and how the interplay of those variables affects their performance. While intrinsic enjoyment is characterized by the inherent enjoyment of performing a certain task, extrinsic motivation, on the other hand, is characterized by instrumentality, of “attain[ing] a separable outcome.” 49 And unlike intrinsic motivation, according to Deci and Ryan’s subtheory of Organismic Integration Theory (OIT), extrinsic motivation is further partitioned into four overlapping and yet distinct forms (see figure 1). Figure 1. 47 Fehr, Ernst, and Armin Falk. "Psychological Foundations of Incentives." European Economic Review 46, no. 45 (2002): 687-724. doi:10.1016/S0014-2921(01)00208-2. as cited in Speckbacher, 1010. 48 Ryan and Deci, 54. 49 Ryan and Deci, 60.. 20.

(26) The most pronounced distinction between the four is autonomous versus controlled motivation. More autonomously held values tend to fall closest to actual intrinsic enjoyment. The closest form of extrinsic motivation on Deci and Ryan’s continuum is integrated regulation, 50 although the MAWS (Gagné et al. 2010) subscales used in this study omit measures of integrated regulation because it is apparently difficult to psychometrically distinguish from identification. 51 Congruence between external requirements and one’s personal values and needs necessitates integration of this sort, “the more one internalizes the reasons for an action and assimilates them into the self, the more one’s extrinsically motivated actions become self-determined.” 52 However similar to intrinsic motivation this absorption of values may seem, the integration is nonetheless achieved in pursuit of a separable outcome. The instrumentality has yet to be completely removed from the beliefs and actions of the individual. Further along the motivational continuum lies identification—a less autonomous form of motivation. With identification comes the interpretation of values having a personal significance, typically in relation to the pursuit of an end. For example, finding satisfaction in joining a speech club because it may hone one’s public speaking skills for corporate presentations. Falling under the subcategory of more “controlled” motivations is introjected regulation. Regulation is still internally driven, however, it largely originates from external forms of pressure, such as guilt, anxiety and pride. The least autonomous of the motivational forms is external regulation. Behaviors stemming from this form of motivation are induced by various external rewards and punishments. Imposing PFP is typically associated with external regulation, the. 50. Italicized in the original by Ryan and Deci (2000). Gagné et al., 631. 52 Ryan and Deci, 62. 51. 21.

(27) furthest motivational form from intrinsic enjoyment according to Deci and Ryan’s continuum. 53 Motivation Types and Reward Systems Years before Cognitive Evaluation Theory was formally introduced, the exceptional theoretical distance between intrinsic motivation and external regulation had already been explored by scholars in a number of disciplines. That is, external regulation measures were found to have a “crowding-out” or adverse effect on intrinsic motivation, 54 including performance-based rewards. 55 Though studies to the contrary have since found “crowding-in” and “crowding-neutral” effects, 56 ensuring that CET enjoys only mixed empirical support, a meta-analytic survey suggests that, “virtually every type of expected tangible reward made contingent on task performance does, in fact, undermine intrinsic motivation.” 57 On the whole, studies tend to find that external regulation is detrimental to already existing intrinsic motivation. While it may be true that PFP could potentially engender numerous and overlapping motivational forms, its primary use as an external inducement for behavior carries important practical implications. Contrary to the prevalent external rewards-driven ethos of behavioral psychologists in the 1950s, 58 the motivation types harbored in the individual a priori became increasingly relevant, particularly with regard to the design of external incentive plans. From that, social psychology has had quite a bit to say on “implicit” and “explicit” incentives tailored for different types of motivation. 59 Implicit incentives exist almost. 53 Deci, Edward L., and Richard M. Ryan. "Self-determination Theory: A Macrotheory of Human Motivation, Development, and Health." Canadian Psychology/Psychologie Canadienne 49, no. 3 (2008): 182. doi:10.1037/a0012801. 54 Theuvsen, 125. 55 Ibid., 125. 56 Ibid., 125. 57 Ryan and Deci, 59. 58 Ryan and Deci, 62. 59 Simon, H. "A Formal Theory Model of the Employment Relationship." Econometrica 19, no. 3 (1951): 293-305.. 22.

(28) part and parcel with human interaction in the workplace as a set of immaterial rewards and punishments for individual behavior, also understood as “informal agreements secured by reputation and trust.” 60 Potential for promotion, private and public recognition, enhanced job-related autonomy and even praise or admonition from superiors serve as examples of implicit incentives. Explicit incentives have a more formal basis for motivating employees. Typically, these terms are contractual and take the form of material rewards and punishments. Merit-based pay falls in the latter category of organizational incentives, as external and material measures meant to induce higher levels of effort. Person-Organization Fit and Applicant Sorting The study of PFP as a whole is characterized by two interconnected processes— incentive effects on employee motivation and a sorting effect in which PFP policies impact the attraction, retention and selection practices of an organization. 61 Gerhart and Rynes note that the latter is likely to have significant implications, and although other disciplines within psychology are beginning to recognize the importance of sorting effects, 62 economics has not produced nearly as much research on the subject. 63 One of the few exceptions remains Edward P. Lazear’s economic models in “Salaries and Piece Rates” (1986) outlining these sorting tendencies, which were later substantiated in a 2000 by the same author. 64 Sorting and selection through PFP is generally understood to shape the workforce by communicating certain signals about the nature of the organization. Potential applicants interpret these signals differently from one another (due to risk perception among other things) and choose whether to doi:10.2307/1906815 as cited in Speckbacher, 1021 60 Speckbacher, 1007. 61 Rynes et al., 582. 62 Gerhart and Rynes, 260. 63 Ibid., 260. 64 Lazear, Edward P. "Performance Pay and Productivity." American Economic Review 90, no. 5 (2000): 1347-348. doi:10.1257/aer.90.5.1346.. 23.

(29) approach the organization or not (self-select) should there be a vacancy. Organizations use these incentives as a means to filter unsuitable candidates out of consideration before a resume is even sent. 65 If it is true that an information asymmetry exists regarding an applicant’s true abilities (as it does in practice) whereby the organization has no idea how productive (s)he will be at the outset, payfor-performance measures can bring highly skilled and motivated individuals to the fore by offering the potential for considerable earnings. Workers who realize their own low motivation and/or low productivity levels should be repelled from PFP measures and remain content with a fixed salary. 66 PFP sorting effects have been empirically observed throughout the entire ASA process, beginning with attraction. Placing PFP as a primary driver of applicant sorting has already occurred to Cadsby, Song and Tapon in a 2007 study that found more productive employees are attracted to pay-for-performance plans, while more risk-averse employees are more likely to prefer fixed compensation. 67 These results mirror the findings of the Lazear study seven years previously, and though more research is needed on the sorting effects of PFP specifically, the academic consensus on sorting and selection seems to be that different individuals respond strongly to different compensation schemes. The Motivational Orientation of Nonprofit and For-profit Applicants Because varying levels of intrinsic and extrinsic motivation are clearly contextdependent and have much to do with the relationship between individual dispositions and external inputs, it has naturally been asserted that certain jobs attract more intrinsically motivated individuals relative to others. A similar line of reasoning has even extended to differences between entire organizations, industries and even. 65. Rynes et al., 582. Lazear, Edward P. "Salaries and Piece Rates." The Journal of Business 59, no. 3 (1986): 412-14. doi:10.1086/296345. 67 Cadsby et al., 387. 66. 24.

(30) sectors of the workforce. 68 The relatively recent introduction of PFP to nonprofits necessarily entails a certain friction with the commonly held assumptions about motivation the sector. PFPs constitute an external reward system designed for the extrinsically motivated, and yet these systems have been increasingly adopted by a sector thought to be driven primarily by intrinsically motivated workers. 69 Widely cited literature by Hansmann and Rose-Ackerman theorized the importance of intrinsic motivation for nonprofit employees rather than the prioritization of profit seeking. 70 A number of studies side with Hansman and Rose-Ackerman, empirically. 71 In a Quality of Employment survey dating back to 1977, Mirvis and Hackett found that relative to other sector employees, nonprofit workers reported higher satisfaction on intrinsic indicators and were more likely to value their work over money. 72 A Rawls et al. meta-analysis study similarly concluded that pecuniary rewards were of less value to nonprofit sector employees. 73 Despite the strong diversity of nonprofits, including semi-public and commercialized nonprofits, empirical studies abound have supported the notion that nonprofit employees are generally motivated by factors other than monetary rewards. 74 In light of these and other similar findings, the potential tensions associated with introducing performance-based rewards are of particular interest for motivational scholars. Theuvsen notes that the tensions are not strictly limited to the existing nonprofit workforce, but also recruitment, “...it is unlikely that nonprofit organizations have 68. Chen, C.-A. "Explaining the Difference of Work Attitudes Between Public and Nonprofit Managers: The Views of Rule Constraints and Motivation Styles." The American Review of Public Administration 42, no. 4 (2012): 437. doi:10.1177/0275074011402192. 69 Leete, Laura. "Wage Equity and Employee Motivation in Nonprofit and For-profit Organizations." Journal of Economic Behavior & Organization 43, no. 4 (2000): 424. doi:10.1016/S0167-2681(00)00129-3. 70 Ibid., 428. 71 Theuvsen, 13. 72 Mirvis, Philip H. "The Quality of Employment in the Nonprofit Sector: An Update on Employee Attitudes in Nonprofits versus Business and Government." Nonprofit Management and Leadership 3, no. 1 (1992): 23. doi:10.1002/nml.4130030104. 73 Rawls, James R., Robert A. Ullrich, and Oscar Tivis Nelson. "A Comparison Of Managers Entering Or Reentering The Profit And Nonprofit Sectors."Academy of Management Journal 18.3 (1975): 620. Web. 74 Leete, 428.. 25.

(31) mainly attracted those employees who systematically react to extrinsic rewards, i.e., income maximizers and status-oriented employees.” 75 The central appeal of the nonprofit sector for many, according to Theuvsen, was partly due to the absence of external prods and the relatively egalitarian nature of the organizations. 76 Nonprofit job applicants were therefore attracted intrinsically to the sector. It is on the basis of these and other similar claims that the first hypothesis is asserted–nonprofit applicants are expected to be more concerned with the intrinsic appeal of a job opportunity. Analogously, for-profit applicants are expected to be more concerned with extrinsic appeal of a given job opportunity: Hypothesis 1: Intrinsically satisfying work is more important for nonprofit job applicants than for-profit job applicants. This study gleans insight on non-profit and for-profit applicant motivations using 12 items from the Motivation at Work Scale (MAWS) developed by Gagne et al. An extensive precedent for comparing attitudes and motivation between sectors exists– most of which involve differences between the private and public sector. The nonprofit sector is largely under-researched in this respect, 77 though some examples in addition to the aforementioned literature include the rigorous Vinokur-Kaplan et al. (1994) study comparing job satisfaction and the retention of workers across the three sectors, 78 the Goulet and Frank (2002) study compares organizational commitment between all three sectors, 79 Leete (2000) explores questions of wage-equity between the nonprofit and for-profit sector based upon US Census market labor data, 80 and. 75. Theuvsen, 128. Ibid., 128. 77 Leete, 438. 78 Vinokur-Kaplan, Diane, Srinika Jayaratne, and Wayne A. Chess. "Job Satisfaction and Retention of Social Workers in Public Agencies, Non-Profit Agencies, and Private Practice:." Administration in Social Work 18, no. 3 (1994): 93-121. doi:10.1300/J147v18n03_04. 79 Goulet, L. R., and M. L. Frank. "Organizational Commitment across Three Sectors: Public, Non-profit, and For-profit." Public Personnel Management 31 (2002): 201-10. doi:doi: 10.1177/009102600203100206. 80 Leete, Laura. "Wage Equity and Employee Motivation in Nonprofit and For-profit Organizations." 2000. 76. 26.

(32) Chen (2012) compares work attitudes as a proxy for motivation between public and nonprofit managers. Perhaps because PFPs have not been a particularly prominent fixture in nonprofit compensation systems, existing literature thus far has yet to include the nonprofit sector in addressing the relationship between the motivational and attitudinal characteristics of individuals and their attraction to PFP incentives. This between-subject study of nonprofit and for-profit sector applicants seeks to make an original contribution by reaffirming prior findings on motivation types found within each sector respectively and test for whether these dispositions impact applicant attraction to incentive bonuses advertised in job listings. Value Perspectives - Allocentrism and Idiocentrism As previous research using cross-level constructs (e.g. P-O fit, P-E fit) can attest, revealing the needs and values of individuals is essential to successful employee recruitment and retention practices. Jeavons (1992) considers nonprofit organizations as largely values-driven, and therefore investigating the role that values have to play in the sector is of particular importance. 81 Whether workers are intrinsically or extrinsically motivated at any given time is dependent upon what is valued by the individual. Mason (2006) cites Rokeach’s (1975) definition of a value as, “an enduring belief that a specific mode of conduct or end-state of existence is personally or socially preferable to an opposite or converse mode of conduct or end-state of existence.” Personal values are often understood in the literature as the basis for behavior, gradually reifying feelings of identity with consistent reinforcement. 82 In PO fit literature that measures fit levels with value-based dimensions, the connection between values and predicted behavior is seen as crucial for recruitment and 81. Jeavons, Thomas H. "When the Management Is the Message: Relating Values to Management Practice in Nonprofit Organizations." Nonprofit Management and Leadership 2, no. 4 (1992): 403-17. doi:10.1002/nml.4130020407. 82 Macy, G. "Outcomes of Values and Participation in Values Expressive Non-Profit Agencies." Journal of Behavioral and Applied Management 7, no. 2 (2006): 166.. 27.

(33) management practices in every sector. In addition to studies that have recognized the “humanistic” or intrinsically driven behaviors of nonprofit workers, this study also seeks to reaffirm the collectivistic value set thought to be prevalent in nonprofit workers throughout the third sector. A number of prior studies have similarly measured for allocentric (collectivistic) and idiocentric (individualistic) values in cross-level constructs of fit. In fact, this approach has gained traction in a diverse array of social science contexts.83 Allocentrism is characterized by interconnectedness, interdependence and a strong sense of belonging to a group. More allocentric-minded individuals are capable of consistently placing the needs of the group ahead of individual needs. Idiocentrism understood in terms of self-reliance, independence, stratification and even competition between individuals. More idiocentric-minded individuals are concerned with the meaning of outcomes in relation to themselves. 84 This study uses 8 items from Triandis and Gelfand (1998), which assert that allocentrism and idiocentrism should not be placed dichotomously on a two-dimensional continuum, but instead interpreted as polythetic constructs. In other words, individuals may possess both sets of qualities all at once, but the expression or activation of each tendency is contextdependent. Triandis and Gelfand further posit that allocentrism and idiocentrism (phrased in terms of individualism and collectivism) are vertical and horizontal in nature. This addition is seen by the authors as “a viable and important distinction” to be had. 85 The emphasis lies in the difference between patterns of vertical and horizontal social relationships in which, “generally speaking, horizontal patterns assume that one self is more or less like every other self. By contrast, vertical patterns 83. Triandis, Harry C., and Michele J. Gelfand. "Converging Measurement of Horizontal and Vertical Individualism and Collectivism." Journal of Personality and Social Psychology 74, no. 1 (1998): 118. doi:10.1037//0022-3514.74.1.118. 84 Robert and Wasti, 546. 85 Triandis and Gelfand, 118.. 28.

(34) consist of hierarchies, and one self is different from other selves.” 86 For example, a person exhibiting primarily horizontal individualism (HI) may desire to be differentiated from their peers, to be seen as “unique” in some way, with no particular interest in being distinguished in any way. Vertical individualism (VI), on the other hand, is expressed by an individual’s pursuit of recognition and high status. Horizontal collectivism (HC) is characterized by feelings of solidarity with individuals similar to oneself, whereas vertical collectivism (VC) is embodied in a willingness to make personal sacrifices for the sake of the in-group and willingness to submit to the authorities of the in-group. Figure 2 provided by Traindis and Gelfand (1998) furnishes additional examples along with further attributions to previous scholars who have contributed to the individualism and collectivism research paradigm. 87 Figure 2. A long precedent for measuring individual allocentrism and idiocentrism in crosslevel fit analyses exists as well. For example, Macy (2006) measured the humanist (intrinsic), individual and collective dispositions of individuals in determining levels of fit in their working environment. Likewise, Hayden and Madsen (2008) use these three value perspectives to predict job satisfaction and future turnover intentions in 86 87. Ibid., 119. Ibid., 119.. 29.

(35) the nonprofit sector. The rationale in measuring for these conceptual complementarities is captured by Mason (1996) cited in Macy (2006), “People work with nonprofits to fulfill their expressive hunger for relatedness, rootedness, affection, approval, admittance, security, esteem, affiliation and other expressive activities.” 88 The second hypothesis is asserted with this values-based P-O fit paradigm in mind: Hypothesis 2: Nonprofit applicants have a more allocentric mindset when it comes to the workplace compared to the for-profit sector applicants Nonprofit Applicants and Organizational Attraction Far too little is understood about initial application decisions in job search theory, 89 even at a time when human capital is increasingly recognized as the lifeblood of an organization where “…the ultimate cost of failure to attract applicants may be organizational failure.” 90 The immediate implications are financial in that compensation typically constitutes 65% to 70% of total production costs for U.S. firms on top of the substantial resources dedicated to recruitment. 91 Scholars have consequently stressed the importance of the initial application stage in recruitment precisely because it represents one of the earliest manifestations of attraction and preference on the part of the individual. 92 Choices as to whether to pursue employment necessarily entail opportunity tradeoffs. Pursuing a job lead in one instance could very well leave the applicant devoid of opportunities elsewhere. In this sense, organizations could enrich the applicant pool by understanding this decisionmaking process. Although research has shown word-of-mouth to be a very potent. 88. Macy, 165. Barber, Alison E., and Mark V. Roehling. "Job Postings and the Decision to Interview: A Verbal Protocol Analysis." Journal of Applied Psychology 78, no. 5 (1993): 845. doi:10.1037//0021-9010.78.5.845. 90 Ibid., 845. 91 Cadsby et al., 387. 92 Barber and Roehling, 845. 89. 30.

(36) matching tool, 93 organizations also favor recruitment advertising as a means to attract applicants. In fact, the use of well-known online recruitment services (e.g. Monster.com, Indeed.com) has flourished into a multibillion-dollar industry in its own right. 94 Search theory and organizational attraction research is thus tasked with mapping out the influences that precede the initial application decision and frequently explore the role of recruitment advertising in the process. Within the personorganization literature on recruitment especially, the applicant’s interaction with information provided in job listings receives the bulk of attention. Studies on applicant attraction to job listings have explored a range of influences; the most relevant to this study is the impact of salary and benefit offers. Attraction research often invokes Spence’s (1974) signaling theory, which when applied to recruitment holds that in the absence of key information about an organization, applicants will respond strongly to available cues. 95 For example, Gregory et al. (2013) found that even website reflected upon the attractiveness of the organization itself. 96 Based on signaling theory logic, a considerable amount of person-organization cross-level analyses have explored the fit between individuals and perceived organizational culture. This line of reasoning holds that applicants infer about organizational culture with help from various cues within job descriptions. PFP bonuses in particular have been singled out as the “most obvious” indicator to job applicants about the nature of an organization’s culture. 97 As opposed to fixed salary and benefit offers, PFP bonuses consist broadly of merit-based pay for individual performance and/or group. 93 Hu, Changya, Hsiao-Chiao Su, and Chang-I Bonnie Chen. "The Effect of Person–organization Fit Feedback via Recruitment Web Sites on Applicant Attraction." Computers in Human Behavior 23, no. 5 (2007): 2513. doi:10.1016/j.chb.2006.04.004. 94 Backhaus, 116. 95 Kuhn, 1634. 96 Gregory, Christina K., Adam W. Meade, and Lori Foster Thompson. "Understanding Internet Recruitment via Signaling Theory and the Elaboration Likelihood Model." Computers in Human Behavior 29, no. 5 (2013): 1956. doi:10.1016/j.chb.2013.04.013. 97 Kuhn, 1635.. 31.

(37) performance. Kuhn (2009) found that applicant perceptions of organizational culture are influenced by performance bonus information in job listings. Manipulating compensation systems between job descriptions (either fixed-pay, individual incentive bonuses or group incentives) resulted in assumptions being made about the culture of the organization. For example, organizations offering individual bonuses were perceived as having a more individualistic organizational culture. 98 The third hypothesis rests on the assumption that an applicant’s personal allocentric or idiocentric dispositions will mediate attraction to an organization based upon perceived organizational characteristics. These characteristics are presumably signaled by compensation manipulations. Support for sorting effects related to compensation systems is strong, 99 although aside from the Lazear and Cadsby, Song and Tapon studies, mention of PFP incentives specifically as a cause is sparse. 100 An empirical study of this sort considering the nonprofit sector appears nonexistent. The main thrust of this study lies in the third hypothesis to address this research gap: Hypothesis 3: Individual pay-for-performance incentive bonuses are less attractive to nonprofit applicants than for-profit applicants Hypothesis 3.1: Collective pay-for-performance incentive bonuses are more or less equally attractive to nonprofit job applicants and for-profit applicants Hypothesis 3.2: Fixed pay arrangements are more attractive to nonprofit applicants than for-profit applicants 2.5 Performance Bonuses and the Potential Signaling Void An additional sorting mechanism concerning attraction to nonprofit organizations could potentially be the effects of “industry culture stereotypes” posited by De Goede,. 98. Ibid., 1641-1642. Cadsby et al., 387. 100 Kuhn, 1635. 99. 32.

(38) Van Vianen and Khele. Person-industry (P-I) fit is an extension of personenvironment cross-level analyses in which job-seekers are not thought of as tabula rosa before undertaking a job search, but instead have preconceptions about individual companies and the sectors in which these organizations operate. Once again invoking Spence’s (1974) signaling theory, when lacking familiarity with an organization, job-seekers often make assumptions about organizations they encounter by defaulting to industry stereotypes. 101 This mental ‘schemata’ anchors a jobseeker’s perception while searching, 102 influencing the subsequent information learned throughout the process. As nonprofits in the modern era become more professionalized and increasingly consider variable pay of one sort or another, applicants may be surprised to learn that nonprofit positions entail PFP plans. Clarifying the preconceptions held by nonprofit applicants is also a worthwhile pursuit for recruitment and management professionals wanting to avoid low or even nonexistent levels of fit. Chatman and Barsade (1995) define “low fit” as a situation in which an individual feels that an organization does not share the same values. An even more incongruous matching might constitute “misfit” between individuals and the organization–a situation where a set of values strongly endorsed by the individual are thought to be diametrically opposed to those of the organization. 103 Therefore, avoiding situations in which the values of the organization may be misrepresented or concealed from the applicant would seem to be in the best interest of fit. Understanding applicant preconceptions about PFPs between sectors is one way to minimize the potential for situations of low fit or misfit. If PFP plans are not explicitly mentioned in a nonprofit job listing, and assuming nonprofit sector. 101. De Goede et al., 51. Ibid., 52. 103 Robert and Wasti, 548. 102. 33.