The Performance Effects of Pay Dispersion on Individuals and Organizations

Abstract

Pay distribution research is relatively scarce in the compensation literature, yet pay distributions are viewed as critically important by organizational decision makers. This study is a direct test of the relationship between one form of pay distribution—pay dispersion—and performance conducted in a field setting where individual and organizational performance could be reliably observed and measured. Findings suggest more compressed pay dispersions are positively related to multiple measures of individual and organizational performance.