The International Journal of Human Resource Management 7:1 February 1996

Attitudes to pay systems: an exploratory study within and across cultures

Aminu Mamman, Mohamed Sulaiman and Alfadli Fadel

Abstract The present study investigates employees' preferences for criteria that are used in pay systems, namely, performance, cost of living, tenure, educational qualification, collective bargaining, skill, market rate, responsibility and special demands. The study also explored variation and similarities of employees' preferences for the criteria across four countries, namely Australia (N - 162), Indonesia (N = 100), Malaysia (N = 129) and Hong Kong (N = 39). The results indicate that the respondents prefer multiple criteria to determine their pay. Preferences for length of service and educational attainment were found to he significantly different across countries, particularly between Australian and Asian samples (Indonesian and Malaysia). This variation is, in part, attributed to cultural differences. Other variables, such as age, educational qualification, position, and industry sector, have been found to be significant correlates of preference for pay systems. Implications for reward management have been discussed. Keywords Pay systems, attitudes to pay systems, comparative study of attitudes to pay systems. Despite the importance of pay systems vis-d-vis the current model of managing human resources (i.e. HRM model), surprisingly few studies have investigated employees' preferred criteria for pay systems. One manifestation of this relative neglect is the paucity of evidence on (1) the criteria employees prefer to determine their pay, (2) what distinguishes employees who prefer certain criteria, such as performance, skill, market forces and responsibility, from those who prefer criteria such as tenure, educational qualification and collective bargaining, and (3) the similarities and differences in preference for pay systems across societies. Although distributive justice and social comparison researchers have provided us with theoretical frameworks and empirical evidences that help in understanding employees' preferred principles of reward distribution (e.g. Adams, 1963; Deutsch, 1975; Goodman, 1974; Greenberg, 1986; Leung and Bond, 1982, 1984; Landy et al., 1980; Leung and Iwawaki, 1988; Leventhal et al., 1980; Kahanoff, 1991; Leung and Park, 1986; Murphy-Berman et al, 1984; Patchen, 1961; Tomblom and Foa, 1983; Rodrigues, 1982), recently experts called for more research in other areas of reward distribution (Baron and Cook, 1992). The present study is an attempt to fill the gap in the existing literature by exploring similarities and differences in employees' attitudes to pay systems within and across four countries, namely, Australia, Hong Kong, Malaysia and Indonesia. The sample was chosen to enable us explore demographic, national/cultural and organizational variables that might impinge on employees' preferences for pay systems. Figure 1 is a schematic representation of some of the variables considered in this study. 0985-5192 Routledge 1996

102 Aminu Mamman, Mohamed Sulaiman and Alfadli Fadel

ORGANIZATIONAL FACTOR - Industry/Sector - Pay system - Occupation

EMPLOYEE FACTOR - Sex - Age - Position - Education

EMPLOYEE PREFERENCE FOR PAY SYSTEM

NATIONAL FACTOR - Cuiture - Industriai relations system

Figure 1 A schematic representation of some variables that may relate to employee preference for pay system considered in this study.

Theoretical background and hypotheses

The importance of employees' attitudes to pay systems has long been appreciated. For example, some researchers have investigated employees' attitudes to hourly rates versus fixed rates (e.g. Davies, 1948; Farh et al. 1991b; Hickson, 1963; Kahn, 1952) and others have investigated the criteria employees prefer to determine their pay or pay increases (e.g. Dorstein, 1985; Fosh, 1978; Lawler, 1966; Mamman, 1990). Also, some researchers have investigated the criteria managers use in pay systems and pay increases (e.g. Alexander and Barrette, 1982; Bartol and Martin, 1988, 1989, 1990; Dyer et al., 1976; Freedman and Montannari, 1980; Fossum and Fitch, 1985; Murray and Gandz, 1980). Referents used in the evaluation of pay have also been investigated (e.g. Finn and Lee, 1972; Hills, 1980; Richard et al., 1987). Similarly, the relationship between absenteeism and 'exchange ideology' has been explored (e.g. Witt, 1991; Witt and Broach, 1993; Witt and Wilson, 1990). Still, some researchers focus their attention on the organizational determinants of pay systems (e.g. Agarwal, 1981; Balkin and Gomez-Mejia, 1984; Reynolds, 1982; Trahan et al., 1991). These and many other studies have helped in developing theoretical approaches that attempt to explain employees' attitudes to pay systems. The following paragraphs review some of the literature in this field. Many commentators hail the performance-based pay system as one of the most appropriate and effective systems of reward distribution. This is based on the argument that employees will perform at higher levels when their pay is tied

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to their performance (Camman and Lawler, 1973; Greene and Podsakoff, 1978; Lawler, 1971; Mannheim and Angel, 1986). Some researchers demonstrate through empirical research that, by nature, many people are more likely to reward performance than any other criteria (Dyer et al., 1976; Fossum and Fitch, 1985; Leung and Iwawaki, 1988; Sullivan et al., 1987). Implicit to this school is the view that employees prefer their pay to be determined first and foremost by performance. Despite this widely held view however, empirical evidence regarding the outcomes of performance-based pay systems is far from conclusive (Kohn, 1993). For example, Pearce et al. (1985) reported that managerial compensation based on performance had no effect on organizational performance. And some evidences indicate that some employees prefer a fixed rate system to an incentive pay system (e.g. Davies, 1948; Kahn, 1952; Farh et al., 1991b; Jacques, 1961; Hickson, 1963; Schwab and Wallace, 1974). Also, studies show no consistent effect of incentive pay systems on subsequent performance (Heneman, 1992). In a nutshell, there are studies which appear to support the proposition that employees prefer a performance-based pay system (e.g. Campbell, 1984; Dale, 1959; Farh et al., 1991b; Greene and Podsakoff, 1978; Heneman, 1992; Lawler, 1966; Rath, 1960; Terborg, 1976; Vroom, 1964; Wyatt and Marriot, 1956) and there are studies which do not seem to support it (Davies, 1948; Farh et al., 1991; Fosh, 1978; Heneman, 1992; Mamman, 1990; Schwab and Wallace, 1974). It seems that preference for performance as a criterion for pay systems is contingent on many factors. For example, evidence indicates that people who have high ability tend to prefer performance-based pay systems more than those who have low ability (Farh et al., 1991b). Membership of trade unions has also been found to influence preference for a performancebased pay system. Unionists have been found to be less supportive of incentive pay schemes because they fear favouritism and discrimination (Gomez-Mejia and Balkin, 1992; Kohn, 1993; Slichter et al., 1960). Given that accurate and objective measurement of employees' performance can depend on the nature of the tasks, it can be argued that preference for performance as a criterion for pay determination would vary with the nature of the job of the employees. For example, given that their tasks are more amenable to measurement, manual employees are more likely to prefer a performance system than non-manual employees. Based on the above observations it can be hypothesized:
Hypothesis 1: There will be a significant difference between private and publicsector employees in preference for performance as a criterion for pay determina-

tion. We expected that respondents from the private sector will rank performance higher than will those from the public sector. This is based on the assumption that a performance-based pay system is more likely to be used in a competitive market situation such as in the private sector (Gomez-Mejia and Balkin, 1992). Therefore, people who prefer a performance-based pay system are more likely to be attracted to the private sector than to the public sector. Jacques (1961) nominated responsibility (time-span-of-discretion) as one such universally applied standard of evaluation of pay. In a particular study, Jacques concluded that employees whose work carried the same maximum time span of discretion, whatever their field of work, mentioned similar salary level as a fair return for the work they do (Jacques, 1956: 45). He argues that there is evidence not only that people are powerfully influenced by feelings of fairness with

104 Aminu Mamman, Mohamed Sulaiman and Alfadli Fadel respect to differential payment, but that, in a most remarkable way, they share common norms of what constitutes equitable payment. Jacques (1956, 1961) makes the point that 'fair pay' is that which individuals intuitively feel to he correct for the level of responsibility they are carrying. Despite this evidence however, it can be argued that some people may view the physical effort they expend on their job as being as important (even more important) as the decision they take when carrying out the tasks. Thus, preference for responsibility as a criterion for pay systems could be influenced by factors such as occupation, job level and position in the organizational hierarchy. Jacques' work leads to the next hypotheses: Hypothesis 2: There will be a significant difference in employees' preference for responsibility across organizational levels. Those at the higher level will rank responsibility higher than will those at the lower level. This is because higherlevel jobs carry wider span of discretion than lower level jobs. Hypothesis 3: There will be a significant difference in employees' preference for responsibility between the sexes. It is expected that male respondents will rank responsibility higher than will female respondents. This is based on the assumption that women are more likely to occupy positions with a narrower span of discretion than men. To equity and social comparison theorists (e.g. Adams, 1963; Homans, 1974; Jacques, 1961; Patchen, 1961), the significance of absolute level of pay or the criterion used to determine the pay is secondary to the perceived equity of pay visd-vis the input (e.g. performance, skill) and/or others' pay. In other words, it is the distributive aspect of the pay system (relative) as well as the exchange aspect (input-reward relationship) that influences attitudes to pay. Proponents of this school argue that, since organizations are social institutions, rewards and the system that determines them are evaluated on the basis of social comparison (Katz and Kahn, 1978). Indeed Bowey et al. (1986) argue that disputes regarding pay are often manifestations of more complex issues related to fairness and equity rather than lack of satisfaction with reward for effort. In fact, employees and their employers usually evoke the notion of intemal and external comparison (market rate) when negotiating or discussing pay (Gomez-Mejia and Balkin, 1992). And evidence indicates that people make multiple comparisons when evaluating their rewards (Fin and Lee, 1972; Heneman et al., 1978; SchoU et al., 1987). Based on these observations, it can be assumed that: Hypothesis 4: The samples will prefer multiple criteria to determine their pay. This is because people use multiple criteria to evaluate the equity of their pay. To some, preference for pay systems is influenced by the perception of the potential ofthe system to fulfil employees' expectations (Austin, 1977). Thus, the choice of pay system is viewed as a pragmatic process (Goodman, 1974; Katz and Kahn, 1978; Lawler, 1981; Narayan, 1976). As Katz and Kahn (1978: 340) argue, 'When wages are so low that employees can barely eke out an existence, they evaluate their pay in terms of how well it meets their physical needs: whether or not it is a living wage. As pay increases to meet their needs, they soon use other standards, such as equity with respect to their inputs or with respect to what others receive.' Thus, rather than sticking to a particular

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criterion as the most preferred, employees choose a pay system on the basis of its potential to achieve certain objectives. In line with the above argument, Belcher and Atchison (1976) posit that individuals will emphasize those criteria which are most advantageous to themselves. For example, employees would prefer salient characteristics of their jobs as the most relevant criteria to be rewarded. Lawler (1966) also argued that there is tendency for employees to weigh heavily on those things in which they excel, such as skills or a recent incident of effective performance. Similar views were expressed elsewhere (Farh et al., 1991b; Fox, 1974). Studies have confirmed the utility of this thesis. For instance, Andrew and Henry (1963) reported that individuals with higher educational attainment attached more importance to education in pay evaluation than do those with lower education. This finding was replicated by Fosh (1978). Evidence also suggests that, in the choice of criteria for a pay system, individuals with low ability tend to choose a fixed rate pay plan while individuals with high ability tend towards a performance-based plan (Farh et al., 1991b). A study by Dorstein (1985) also lends support to the instrumental thesis. The study found that while blue-collar workers appear to emphasize the unpleasant physical aspects of their work, such as hard work and unpleasant working conditions, white-collar workers prefer pay allocations to be determined first and foremost by educational attainment, degree of responsibility and authority. London (1976) also reported that perception of factors to be used in departmental reward is influenced by the attributes of the subjects. Given this argument and empirical evidence, we hypothesized that: Hypothesis 5: There will be a significant difference between older and younger employees in preference for length of service as a criterion for a pay system. It is expected that older respondents will rank length of service higher than will younger respondents. This is in line with evidence which indicates that employee benefits increase in value with the tenure of the employee (Bergmann et al., 1983). We assume that older employees will have longer tenure than younger employees, therefore they will view tenure as one of their salient characteristics. Hypothesis 6: There will be a significant difference between respondents in preference for educational attainment as a criterion for a pay system. It is expected that people with high educational qualifications will rank education higher than will those who have lower educational qualifications. Hypothesis 7: Preference for cost of living will vary across organizational levels. We assume that people at the lower end of the organizational hierarchy are more likely to prefer cost of living because they are more likely to have lower pay. Hypothesis 8: There will be a significant difference in preference for collective bargaining between public- and private-sector employees. It is expected that public-sector employees will rank collective bargaining higher than will privatesector employees. This is based on the assumption that trade union influence will be higher in the public sector than in the private sector in the countries under study. For example, in Malaysia, private-sector wages are bilaterally or unilaterally fixed without union involvement (Aminuddin, 1990).

106 Aminu Mamman, Mohamed Sutaiman and Alfadli Fadet To many, employees' attitudes and behaviour in an organizational setting will depend very much on the nature and content of the contract of employment. Belcher (1974) argues that organizations' practices with respect to pay provide some information on the contributions that are recognized and rewarded. Implicit to this approach is that employee preference or lack of it for a particular system of reward distribution is almost irrelevant since employees are aware of the pay system when they join the organization (Belcher and Atchison, 1976). Attitudes of employees to pay systems, therefore, can best be explained by looking at the contract of employment. According to proponents of this school, contracts, whether they are employee-related or job-related or occupation-related, specify the duties of the employee to be performed in retum for certain benefits. Indeed, in many organizations where the traditional method of pay system is still in place (i.e. job evaluation), employee preferences for reward system are almost irrelevant (Gomez-Mejia, 1992; Mahoney, 1989a; O'Neil, 1994). Under the job evaluation system what determines an employee's pay is first and foremost the position of the job in the job hierarchy not employees' preferences or performance. From this analysis we hypothesized that: Hypothesis 9: There witt be a significant difference between private- and pubticsector respondents in preference for market rate as a criterion for pay system. It is expected that private-sector respondents will rank market rate higher than will public-sector respondents. This is based on the assumption that market forces are more likely to influence pay system in the private sector than in the public sector, therefore people who prefer market rate would be attracted to the private sector. Up to this point, employee attitudes to pay systems are viewed from a 'rational' perspective. Thus, when faced with the decision to choose among criteria for reward distribution, employees will choose criteria that are perceived to yield maximum satisfaction (Farh et al, 1991b; House et al, 1974; Mitchell, 1974; Peters, 1977; Vroom, 1964). However, whether employees prefer performance, responsibility, effort, market rate or any other criterion may not be reducible to purely rational or organizational factors. Employees' cultural backgrounds provide us with another attributional factor to analyse these attitudes, hence the cultural approach. Many researchers argue that the norms and values of the society are among the key factors that help in explaining employees' attitudes to pay systems (Adams, 1963; Homans, 1974; Jasso and Rossi, 1971; Kuethe and Levenson, 1964; Madden, 1963; Weick et al, 1976). According to Adams (1963), the standards of pay evaluation are derived from prevailing social norms and values, and 'in a given society there is usually enough invariance in fundamental beliefs and attitudes to make reasonably accurate general predictions' (Adams, 1963: 425). Homans (1974), on the other hand, emphasizes socio-cultural differentiation within societies and maintains that variations in conceptions regarding standards of pay evaluation are to be expected because of variations in social experience, social background and sub-cultural values. Others are of the view that custom and practice will influence what is reasonable for the employer to demand of the employee and vice versa (Child, 1985; Lupton and Bowey, 1974). Some commentators argue that American cultural forces that emphasize short-term orientation have conditioned employees and managers to disfavour long-term performance

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pay systems (Fombrun, 1984; Gomez-Mejia and Welboume, 1991). On the whole, few will doubt the influence of societal values and norms on employees' attitudes to various aspects of their job. The following section presents theoretical propositions and hypotheses that may help in explaining the role of culture on employees' attitudes to pay system. Collectivism-individualism This refers to the extent to which the culture encourages group as opposed to individual concerns, or vice-versa. It pertains to the degree of integration between the individual and the society (Hofstede, 1980). Among the key features of the coUectivistic orientation is the importance attached to loyalty and 'saving face'. Thus, coUectivists would not take to a system that may create disharmony and loss of 'face'. Therefore, it can be argued that, compared to individualists, collectivists will score low on preference for individualized performance-based pay systems. This is because coUectivists attach greater importance to the views others hold of them (Bond and Hwang, 1986); therefore if their performance does not result in high pay they will lose face. Also, emphasis on loyalty to the group would ensure that coUectivists score high on preference for length of service. Empirical evidence indicates that in a communal setting people are more likely to prefer equality than equity as a criterion for distributing resources (Deutsch, 1975; Greenberg, 1983; Peterson, 1987; Schwinger, 1980; Vanyperen and Buunk, 1991; Wagstaff et al., 1993). Similarly, evidence indicates that allocators of reward vary their distributive principles according to the context or goals that they are seeking. Equity is the preferred principle when productivity is emphasized and equality is chosen when harmony is the goal (Deutsch, 1975; Goodman, 1974). Because the coUectivists have a communal orientation and therefore are likely to view the employment situation from a 'communal' point of view (Hofstede, 1991), and given that societal harmony is ranked very highly in coUectivist enterprises (Redding and Wong, 1993), it seems reasonable to argue that employees from coUectivist cultures will prefer criteria which will not create competition (e.g. seniority, qualification) rather than performance. Indeed, Kohn (1993: 58) argues that 'the surest way to destroy cooperation . . . is to force people to compete for rewards or recognition or rank them against each other. For each person who wins, there are many others who carry with them feelings of having lost.' Desire for uniqueness Social scientists argue that the need for uniqueness is culture specific (McAlister and Pessemier, 1982; Snyder and Fromkin, 1980). According to Snyder and Fromkin (1980) the need for uniqueness is significantly influenced by (a) the lack of concern regarding others' reactions to one's ideas, action, etc., (b) a person's desire not always to foUow 'traditional' rules and (c) a person's willingness to defend his/her beliefs publicly. Research reported elsewhere supports this point of view (Bums and Krampf, 1991). In a society where there is a high need for conformity, the need for uniqueness expressed in the form of individual performance is likely to be low. For example, it has been argued that, in a coUectivist culture, individual achievement is often de-emphasized and sometimes suppressed in the interest of interpersonal harmony and group cohesion (Farh et al., 1991b;

108 Aminu Mamman, Mohamed Sulaiman and Alfadli Fadel Hofstede, 1991). Commenting on Chinese culture, Pye (1982) argues that Chinese tradition is opposed to individual glorification and views individual aggrandizement as a threat to the collective good of the society. And evidence indicates that individuals are inclined to behave according to the group norms especially if penalties are involved (Bell et al., 1989; Dawes et al, 1977). Similarly, evidence suggests that, where there is high need for conformity, individuals tend to 'toe the line' in their attitudes and behaviour towards reward distribution (Birjulin et al., 1993; Smith and Bell, 1992). Thus, it would seem reasonable to argue that cultures that tolerate individual uniqueness will tolerate pay systems that encourage individual performance and vice-versa. Power distance Hofstede (1991) describes power distance as the extent to which the less powerful members of institutions and organizations within a country expect and accept that power is distributed unequally. Thus, in a culture characterized by large power distance, employees accept inequalities of rewards based on 'predetermined' criteria such as age and seniority (Lincoln and Kalleberg, 1990). And employees from large power distance cultures tend to put a high premium on organizational hierarchy (Child and Markoczy, 1993; Pennings, 1993). Child and Markoczy argue that 'respect for authority favours centralised decision-making. Chinese loyalties are vertical in direction, and this is said to reflect the high acceptance that Chinese people have of hierarchy' (1993: 619). Thus, it would seem reasonable to argue that employees from such cultural background will score high on a preference for responsibility as a criterion for pay determination given that they revere and tolerate people who hold positions of high authority. Also, it could be argued that employees from a low power distance culture will prefer performance over responsibility and seniority. Indeed, Hofstede (1991) maintains that the salary range of top and bottom jobs in low power distance cultures is small compared to large power distance countries. This difference could be attributed to the relative predominance of performance-based pay systems in small power distance countries. Because in small power distance countries superiors and subordinates consider each other as existentially equal, and a subordinate today could be the boss tomorrow (Hofstede, 1991), employees and managers would tolerate a reward system that allows the subordinate to earn more than his/her boss. Whereas the concept of 'losing face' in collectivist culture (Redding and Wong, 1993) will not favour a reward system that allows a subordinate to be paid more than his/her boss. Thus, a performance-based pay system which is likely to bring about 'disparity' in pay between the boss and subordinate will not be ranked very highly. Uncertainty avoidance Hofstede describes uncertainty avoidance as 'the extent to which the members of a culture feel threatened by uncertain or unknown situation' (1991: 113). People with strong uncertainty avoidance will exhibit preference for clearly laid down rules while people from weak uncertainty avoidance society feel less comfortable in a structured environment. Weak uncertainty avoidance results in tolerance for high achievement orientation, while in strong uncertainty avoidance societies individuals are motivated by security and belongingness.

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Thus, it can be inferred that, given that they are motivated by a strong desire for security, employees from a strong uncertainty avoidance cultures will avoid any pay system that has some elements of 'risk' (e.g. a performance-based pay system). On the other hand, weak uncertainty avoidance will tend towards a pay system that will guarantee material achievement. Desire for belongingness would tend towards a system that ensures harmony rather than competition. Because people from strong uncertainty avoidance cultures are comfortable with structured situations, it is perhaps reasonable to argue that they will be more com-, fortable with 'structured' pay systems (e.g. systems based on authority and responsibility, seniority, educational attainment, skill, length of service) than pay systems based on individual performance, innovation/entrepreneurship or profit sharing. From the above discussion, the next section presents hypotheses to explore the relationship between culture and employee preference for pay systems. Based on Hofstede's (1980, 1991) seminal work, it is assumed that Asians will tend toward 'collectivism', 'high power distance', 'high uncertainty avoidance' and 'low desire for uniqueness', whereas the Australians will tend toward the opposite end of the spectrums. Hypothesis 10: There will be a significant difference in preference for responsibility between the Australian and Asian samples. It is expected that the Asian respondents will rank responsibility higher than will Australian respondents. Hypothesis 11: There will be a significant difference in preference for performance between the Australian and Asian samples. It is expected that the Australian respondents will rank performance higher than will Asian respondents. This is because Australians have been categorized as individualists with weak uncertainty avoidance (Hofstede, 1980) and have been found to attribute wealth to individual effort rather than family connection, luck or social class (Forgas et al, 1989). Hypothesis 12: There will be a significant difference in preference for length of service between the Australian and Asian samples. It is expected that Asian respondents will rank length of service higher than will Australian respondents. This is because collectivists put a high premium on loyalty. Hypothesis 13: There will be a significant difference in preference for collective bargaining between the Australian sample and the Asian sample. It is expected that the Australian respondents will rank collective bargaining higher than will the Asian respondents. This is because of the low union power and insignificance of collective bargaining in Asian countries (Aminuddin, 1990). Hypothesis 14: There will be a significant difference in preference for educational qualification between the Australian sample and the Asian respondents. It is expected that Asians will rank educational qualification higher than will the Australians. This is because employees from developing countries have been found to value educational qualification very highly (Dore, 1974; Fosh, 1978; Gupta, 1977; Harris and Moran, 1992; Hofstede and Bond, 1988). Method To test the above hypotheses, questionnaires were distributed to a sample of employees. This comprised 420 completed questionnaires from Australia

110 Aminu Mamman, Mohamed Sulaiman and Alfadli Fadel (N=162), Hong Kong (N=39), Indonesia (N=100) and Malaysia (N=129). Some of the Australian respondents are employed in the public (59.5 per cent) and some in the private sector (41.5 per cent). About two-thirds (65 per cent) of the Hong Kongnese respondents are from the private sector. The Indonesian sample is split into equal halves; one half from the private sector, the other half from the public sector. Most of the respondents from Malaysia are from the public sector (90 per cent). On the average, about two-thirds (63 per cent) of the respondents in each country are male. The average educational qualification of the respondents in each country is a bachelor's degree. The samples (four countries) are similar in their average age (Australia, X = 40.1; Indonesia, X = 42.0; Malaysia, X = 39.2; Hong Kong, X = 35.10). On the whole, our analysis revealed that the samples are similar in terms of age, educational qualifications, occupation (salaried staff) and pay system (job-evaluation-based). T'hey are dissimilar in position, the sector they work in and nationality/culture. Therefore, to ensure that we are comparing like with like, we had to control for the effect of sector, nationality and position whenever necessary. The questions were adapted from earlier studies (Mamman, 1990; Porter and Lawler, 1968). Respondents were asked to indicate their preferences in respect of the nine criteria on a Likert-type 5-point scale (highly unimportant = 1 to highly important = 5). The nine items were length of service, educational qualification, skill, market rate, performance, inflation, responsibility, special demands on the job and collective bargaining. The items were chosen because they are widely used in pay systems (Alexander and Barrette, 1982; Dyer et al., 1976; Fossum and Fitch, 1985; Foster and Lynn, 1978; Gomez-Mejia and Balkin, 1992; Landau and Leventhal, 1976; Sherer et al., 1987; Smith, 1983; Torrington and Chapman, 1983). Also included in the questionnaire were questions about respondents' age, sex, position, sector (private or public). An SPSSX factor programme was used to investigate whether preference for pay system is a single construct. The test produced four factors, three of them having eigenvalues greater than .90. All the nine items loaded onto one factor (with eigenvalue of 3.311). Each of the nine items had a factor loading greater than .45. The coefficient alpha was calculated as a measure of internal consistency. The test yielded an alpha of .76.
Results

Effects of demographic and organizational factors on preference for pay system The result of the mean ranking of the nine items is shown in Table 1. As can be seen, responsibility is ranked as the most preferred criterion (X = 4.44). However, when the effect of nationality is controlled, the results seem to suggest that preference for responsibility could be country specific. The Asians (Indonesians, X = 4.44, and Malysians, X = 4.56) ranked responsibility as the most preferred criterion whUe the Australians ranked performance (X - 4.40) as the most preferred. The Hong Kongnese respondents ranked performance and responsibility as equal first (X = 4.43). Hypothesis 1 predicts a significant difference in preference for performance between the public- and private-sector respondents. To test this proposition a multivariate analysis of variance (MANOVA) was performed while controlling for the effect of nationality. The result does not support the hypothesis [F (1,

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257) = .516; p < .473]. Perhaps this is partly because the pay systems in both the sectors are based on the traditional job evaluation system and therefore similar in many respects. Hypothesis 2 predicts a significant difference in preference for responsibility across organizational hierarchy. The result of an analysis of variance (ANOVA) appears to offer strong support to the proposition, (F = 6.67, p < .000). As expected, managers (X = 4.39), supervisors (X = 4.55) and professionals (X = 4.38) ranked responsibility higher than did clerical (X = 4.35) and 'other' (X = 3.78) respondents. However, when the effect of nationality is controlled, there is no significant difference within the Asian samples (Indonesia, F = 1.77, p < .12; Hong Kong, F = 2.13, p < .60; Malaysia, F = .37, p < .77). The result of the Asian response is a partial support to the theoretical proposition that collectivists will share a similar attitude to responsibility due to the high respect they have for hierarchy and authority. Thus, the result offers only a partial support to hypothesis 2. Hypothesis 3 predicts a significant difference between the sexes in preference for responsibility. Controlling for the effect of nationality and sector, a multivariate analysis of variance (MANOVA) was performed to test the hypothesis. The result did not support the hypothesis [F (1,289) = .38, p < .53]. Hypothesis 4 predicts that, given that employees use multiple criteria to evaluate the equity of their reward, the respondents will prefer multiple criteria to determine their pay. As can be seen in Table 1, all the items are considered important by the respondents. Thus, given the opportunity, employees would choose multiple factors to determine their pay. This is consistent with earlier studies (Dorstein, 1985; Fosh, 1978; Mamman, 1989, 1990), and supports the view expressed elsewhere (e.g. Smith, 1983; Torrington and Chapman, 1983). Thus, hypothesis 4 is supported. Hypothesis 5 predicts a significant difference between older and younger respondents in preference for length of service. The preliminary result of the analysis of variance (ANOVA) does not support the hypothesis (F = 2.04, p < .084). However, when the effect of nationality is controlled, the result is significant within the Australian sample (F = 5.i6, p < .000). As expected, older respondents rank length of service higher (X = 4.00) than younger respondents (X = 2.63; X = 2.56; X = 3.00). That the result is not significant within the Indonesian (F = 1.85, p < .14), Hong Kongnese (F = .27, p < .76), and Malaysian (F = .44, p < .84) samples appears to suggest a cultural infiuence. As argued in the previous sections, emphasis on loyalty in the collectivist culture will ensure that Asians will share a similar attitude to tenure. Thus, the result offers only a partial support to the hypothesis. Hypothesis 6 predicts a significant difference in preference for educational attainment across educational levels. Analysis of variance (ANOVA) between the educational groups lends support to the hypothesis (F = 9.06, p < .000). As expected, respondents with higher qualifications ranked educational attainment higher (degree, X = 4.10; postgraduate, X = 3.90) than did those with lower qualifications (school, X = 3.23; high school, X = 3.46). This result replicates a similar study by Andrew and Henry (1963). Therefore, this hypothesis is supported. Hypothesis 7 predicts a significant difference across organizational levels in preference for cost of living. Result of the analysis of variance (ANOVA)

112 Aminu Mamman, Mohamed Sulaiman and Alfadli Fadel Table 1 Mean ranking of preferences for pay systems Groups Items 1 2 3 4 5 6 7 8 9 Length of service Education Skill Market rate Performance Cost of living Responsibility Special demands Collective bargaining 1 3.07(8) 3.56(6) 4.00(3) 3.84(4) 4.43(1) 3.74(5) 4.43(1) 3.23(7) 2.61(9) 2 2.93(9) 3.40(7) 4.21(3) 3.62(5) 4.40(1) 3.65(4) 4.37(2) 3.32(6) 2.99(8) 3
3.80(7) 4.29(4) 4.32(3) 3.70(8) 4.36(2) 4.05(6) 4.49(1) 4.22(5) 3.63(9)

4
3.61(7) 3.75(6) 4.16(3) 3.91(5) 4.42(2) 3.93(4) 4.56(1) 4.51(8) 2.82(9)

All
3.34(8) 3.74(5) 4.21(3) 3.71(6) 4.37(2) 3.83(4) 4.44(1) 3.55(7) 3.03(9)

SD .98 .87 .75 .78 .77 .81 .68 .93

1.05

Group 1 = Hong Kong; Group 2 = Austratia; Group 3 = Indonesia; Group 4 = Malaysia.

supports this proposition (F = 4.90; p < .000). As expected, those at the higher level of the organizational hierarchy ranked cost of living lower (managers, X = 3.24)) than those at the lower level (clerks, X = 4.08; technicians, X = 3.83; supervisors, X = 3.80). However, when the effect of nationality of the respondents is controlled, the result is not significant among the Asian samples (Indonesia, F - 1.77, p < .20; Hong Kong, F = .90, p < .48; Malaysia, F = .05, p < .98). Two reasons can be put forward to explain this result. First, because of the extended family system in the Asian culture (particularly Indonesia and Malaysia), it may be that the higher the employees are on the organizational hierarchy (which implies high pay), the larger will be their economic burden. Therefore, cost of living is likely to have a similar effect across organizational levels. The second reason could be attributed to the wage system. In Australia, wages are annually adjusted to reflect the annual changes in cost of living. Therefore, Australian employees may be more familiar with cost of living as one of the criteria that influence their pay than the other groups. Hypothesis 8 predicts a significant difference in preference for collective bargaining between the private- and public-sector respondents. Multivariate analysis of variance (MANOVA) is significant between the two sectors [F (1,257) = 27.28; p < .000]. As expected, public-sector respondents ranked collective bargaining higher (X = 3.47) than did private-sector respondents (X - 2.80). Therefore hypothesis 8 is supported. Hypothesis 9 predicts a significant difference in preference for market rate between the public- and private-sector respondents. C!ontrolling for the effect of nationality and educational attainment, multivariate analysis of variance (MANOVA) was performed. The result did not support the hypothesis [F (1,257) = 2.47, p < .117]. Preferences for pay systems across countries One of the major aims of this study is to investigate similarities and differences in pay systems across countries. The following reveals the results of the investigation.

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Hypothesis 10 predicts a significant difference in preference for responsibility between the Asian and Australian respondents. Controlling for the effect of position and sector, the analysis of variance (ANOVA) does not support the hypothesis (F = 1.85, p < .136). This result seems to suggest that culture might not be a significant factor in determining respondents' attitudes to responsibility. This lends support to Jacques' (1961) 'time-span-of-discretion' thesis. Hypothesis 11 predicts a significant difference in preference for performance between the Asian and Australian samples. Controlling for the effect of position and sector, analysis of variance (ANOVA) does not support the hypothesis (F .420, p < .738). Again, this result appears to suggest that attitude to performance as a criterion for pay system might not be culture specific - a partial support to the universal thesis. Hypothesis 12 predicts a significant difference in preference for length of service between the Asian and Australian samples. Controlling for the effect of sector and age of the respondents, the result of the analysis of variance (ANOVA) lends support to this proposition (F = 24.21, p < .000). As expected, Asians (Hong Kongnese, X = 3.07; Indonesians, X = 3.80; Malaysians, X = 3.61) ranked length of service higher than did the Australians (X = 2.93). In fact, the Australians ranked length of service as the least preferred item. This result appears to support the proposition that loyalty as a dimension of culture can influence employees' perceptions of what is worthy of reward. Hypothesis 13 predicts a significant difference in preference for collective bargaining between the Asian and Australian samples. The result of the analysis of variance (ANOVA) seems to support this proposition (F = 12.41, p < .000). However, while the Hong Kongnese (X = 2.61) and the Malaysians (X = 2.81) ranked collective bargaining lower than the Australians (X =2.99), contrary to our expectation, Indonesian respondents ranked collective bargaining higher (X = 3.63) than did the Australian respondents (X - 2.99). This result could be attributed to the current concern by Indonesian workers (and many workers in some Asian countries) for higher wages and better working conditions. Maybe the Indonesian respondents perceive collective bargaining as a means of improving their working conditions. Hypothesis 14 predicts a significant difference in preference for educational qualification between the Asian and Australian samples. Controlling for the effect of educational attainment and sector, the result of the analysis of variance (ANOVA) supports this proposition (F = 16.65, p < .000). As expected, the Asians ranked educational qualification higher (Hong Kong, X = 3.56; Indonesia, X = 4.29; Malaysia, X = 3.75) than did the Australians (X = 3.40). Therefore, this hypothesis is supported. This result supports the argument that people in developing countries attach high importance to educational qualification (Dore, 1974; Fosh, 1978; Harris and Moran, 1992; Hofstede and Bond, 1988).
Discussion

The present study set out to explore similarities and variations of employees' attitudes to pay systems within and across four countries. Before discussing the main findings of the study, it is perhaps appropriate to make the following points. First, the sample is too small (e.g. Hong Kong: N = 39) and diverse confidently

114 Aminu Mamman, Mohamed Sulaiman and Alfadli Fadel to generalize the effect of culture on employee preference for pay systems. Second, although respondents' current pay systems are similar given that they are based on the traditional job evaluation schemes, the predominance of public-sector respondents in the Malaysian sample may affect the result of the analysis. To address these potential problems of the sample distribution, the effect of sector was controlled when viewed as necessary. In any case, the problem of sample distribution appears to be minor (if any). This is because we did not find significant difference between the two sectors vis-d-vis employees' attitudes to most of the nine criteria for pay systems. Indeed, by controlling for the effect of some variables we were able to replicate some of the findings of previous research in this area. As for the size of Hong Kongnese sample, this problem was addressed by not reading too much into the data, even though, as expected, there appear to be a lot of similarities between the Hong Kongnese respondents and the other two Asian samples (Malaysia and Indonesia). The study reveals that, irrespective of cultural background, the respondents prefer multiple criteria to determine their pay. This result supports the argument and research findings which suggest that employees prefer multiple factors to determine their pay (Fosh, 1978; Dittrich and Carrell, 1979; Dorstein, 1985; Fin and Lee, 1972; Lawler, 1966). In line with Jacques' 'time-span-of-discretion' thesis, responsibility was ranked as the most preferred criteria. Perhaps the strongest support from the data is for the argument that employees' preference for pay systems will depend on the situation. There is strong evidence to suggest that employees' preference for pay systems could relate to their age, the sector they work in, position and educational attainment. For example, people with higher educational qualification ranked educational attainment higher than did those with lower qualification. Similarly, those at the lower level of the organizational hierarchy ranked responsibility lower than did those at the higher level. There is no significant difference between the sexes. Thus, gender might not be a significant factor in infiuencing attitudes to pay systems. It was expected that respondents' preferences for criteria for pay systems will vary across cultures. Preliminary analysis shows preference for the nine items varying across the countries. While Indonesians and Malysians ranked responsibility as the most preferred item, the Australians ranked performance as the most preferred. In fact, the Malaysians and Indonesians ranked five of the nine items identically, whereas only three items coincided with the Australians' ranking. The ranking of performance by the Australian sample is in line with the argument that individualists are more likely to rank performance as the most preferred criterion given that individual uniqueness expressed in the form of performance is likely to be tolerated. The ranking of responsibility instead of performance by the Indonesian and Malaysian respondents supports the finding by Abdullah (1992) which indicates that a sample of Malaysian employees do not particularly like an individualized performance appraisal system. To them, the system discourages team work. The Hong Kongnese respondents ranked responsibility and performance as equal first, reflecting the subtle diversity and the socio-economic changes in the Asian countries. It should be pointed out, however, that the ranking of the nine items was not tested for their significance. When this was done, there appears to be no significant difference in preference for performance and responsibility across the samples. As hypothesized, there is a significant difference between the Asian and the

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Australian respondents in preference for educational qualification, length of service and collective bargaining. As expected, the Asians ranked all the three items higher than did the Australians. This variation is attributed to cultural (i.e. in the case of length of service, education) as well as industrial relations system factors (i.e. in the case of collective bargaining). The lack of significant difference between the samples in preference for performance and responsibility appears to support the argument that employees have common preferred criteria for pay system. This seems to suggest that the lack of positive link between incentive pay system and employee productivity as revealed in some studies may have nothing to do with employees' preferences for the system, but is perhaps due to the failure of organizations to administer the system effectively. Indeed, many experts, such as Lawler (1971), have already pointed this out. Many implications (albeit tentative) for managing reward systems can be drawn from these results. First, one can make a strong case for flexible reward systems to accommodate the diversity of employees' attitudes. Indeed, researchers have already argued for the 'customization' of pay systems (e.g. Mahoney, 1989; Milkovich, 1988; O'Neil, 1994). Second, given that employees' preferences for pay system are likely to change with the changes in their circumstances, it could be argued that constant monitoring of employees' attitudes to their current pay system would be necessary to ensure that the system achieves its objectives. This is because preference for pay systems would change with employee's experience, ability, skill, qualification, and standard of living, for example. Third, the diversity of employees' attitudes to pay systems also calls for participative (or at least consultative) reward management. This should enable organizations to incorporate employees' concerns into the reward system. Fourth, it would seem appropriate that organizations should broaden the criteria used in pay systems to accommodate most 'inputs' employees consider relevant to carrying out their tasks and worthy of reward. The message from this study and similar findings elsewhere (e.g. Dorstein, 1985; Lawler, 1966; Mamman, 1990) seems to suggest that employees would like the employer to recognize and reward many 'inputs' that can contribute to the accomplishment of their tasks. Finally, the results of the study appear to have implications for managing reward systems in a diverse work-force. Depending on their cultural backgrounds, it would seem that employees will perceive criteria for pay systems differently. Thus, organizations operating across borders should take these potential differences into account when rewarding their employees. Reward systems in many organizations do not take into account employees' cultural and demographic backgrounds. The growing diversity of the work-force calls for the need to change these practices. It would seem appropriate for organizations not only to design reward systems that encourage valuing diversity, but also a system that accommodates employees' cultural backgrounds as well. Finally, this is an exploratory study; further studies need to address the limitations pointed out at the beginning of this section. Further studies should investigate the impact of employees' abilities, current performance, salary level, nature of contract of employment and the current pay system on employees' preference for pay systems. Recently many approaches to pay systems have been advocated by experts (e.g. strategic pay; total quality pay). Employee attitudes to these novel approaches will need investigation as well. There is a need also to investigate further the effect of employees' psychological backgrounds, including such

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factors as self-esteem, self-efficacy, and locus of control, on preferences for pay systems. Aminu Mamman Graduate School of Business Northern Territory University Box 40146 Casuarina NT, Australia, 0811 Mohamed Sulaiman School of Management, Universiti Sains Malaysia 11800 Minden Penang, Malaysia Alfadli Fadel College of Commerce, Economics & Political Science Kuwait University PO Box 5486-13055 Kuwait Acknowledgement The authors wish to thank David Richards for useful comments. References Adams, J.S. (1963) Towards an Understanding of Inequity', Journal of Abnormal and Social Psychology, 67: 422-36. Alexander, R.A. and Barrett, G.V. (1982) 'Equitable Salary Increase Judgements Based upon Merit and Non-merit Considerations: A Cross-national Comparison', International Review of Applied Psychology, 31(4): 443-54. Andrews, I.R. and Henry, M.M. (1963). 'Management Attitudes towards Pay', Industrial Relations, 3(1): 29^0. Argawai, N. (1981). 'Determinants of Executive Compensation', Industrial Relations, 20: 36-46. Austin, W. (1977) 'Equity Theory and Social Comparison Process'. In Sulls, J.M. (ed.) Social Comparison Process: The Critical and Empirical Perspective. New York: Wiley. Balkin, D.B. and Gomez-Mejia, L.R. (1984) 'Determinants of R and D Compensation Strategies in the High Tech Industry', Personnel Psychology, 37: 635-50. Bartol, K.M. and Martin, D.C. (1988) 'Influences on Managerial Pay Allocations: A Dependency Perspective', Personnel Psychology, 41: 361-76. Bartol, K.M. and Martin, D.C. (1989) 'Effects of Dependence, Dependency Threats, and Pay Secrecy on Managerial Pay Allocations', Journal of Applied Psychology, 74: 105-13. Bartol, K.M. and Martin, D.C. (1990) 'When Politics Pays: Factors Influencing Managerial Compensation Decisions', Personnel Psychology, 43: 599-614. Bass, B.M. (1968) 'Ability, Values, and Concepts of Equitable Salary Increases in Exercise Compensation', Journal of Applied Psychology, 52: 299-303. Belcher, D.W. (1974) Compensation Administration. Englewood Cliffs, NJ: Prentice-Hall. Belcher, D.W. and Atchison, T. (1976) 'Compensation for Work'. In Dubin, R. (ed.) Handbook of Organisation and Society. Stokie, IL.: Rand McNally. Bell, P.A., Peterson, T.R. and Hautaluoma, J.E. (1989) 'The Effect of Punishment Probability on Overconsumption and Stealing in a Commons Dilemma', Journal of Applied Psychology, 19: 1483-95. Birjulin, A.A., Smith, J.M. and Bell, P.A. (1993) 'Monetary Reward, Verbal Reinforcement and Harvest Strategy of Others in the Commons Dilemma', Journal of Social Psychology, 133(2): 207-14. Bond, M.H. and Hwang, K.K. (1986) 'The Social Psychology of Chinese People.' In

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