Merit Pay Incentive Plans and Faculty Motivation at Liberal Arts Colleges

Abstract

This study examined faculty behavior under merit pay Plans at four liberal arts colleges to determine whether there was a relationship between faculty motivation (effort) and the degree to which institutional pay plans and individual expectancies conformed to Lawler's theory of the conditions necessary for an effective monetary incentive structure (Lawler 1971, 1981, 1990). These conditions are: 1) A perception that performance and merit awards are linked; 2) Monetary rewards are highly valued; 3) Award size is large enough to make an impact; and 4) Information about rewards are publicly disclosed. The study proposed the question: Is there an association between motivation levels among faculty subject to merit pay plans and the presence of the theory conditions, or do other factors relate to faculty motivation? Using questionnaires to faculty, statistical correlation techniques tested for associations between reported faculty behavior and Lawler's four theory conditions. Lawler's theory did not apply to this group of faculty. The reward size condition showed the expected positive association, however, contrary to theory hypothesis, the perception of the pay-performance link was negatively related. Of the faculty characteristics examined, faculty with higher salaries and those with tenure reported less willingness to give additional effort to most activities. The faculty had highly inaccurate perceptions of the actual merit payments awarded to others at their institutions. The perception of the strength of the pay-performance link indicated that faculty believe the determination of reward recipients is unpredictable with respect to one's performance. These faculty members valued monetary rewards, yet responses to merit pay in the form of greater effort was weak. The stronger response to merit pay by the faculty at the non-merit pay institution suggests that familiarity with a merit pay system in practice breeds a more skeptical attitude because it has not proven as equitable or fruitful in operation as the faculty expect in the abstract. The findings suggest a need to look more closely at the role of intrinsic rewards, the perceived pay-performance relationship factor, and the process of determining rewards.