Abstract
Variable remuneration is an integral part of the management process, utilised to motivate participants to achieve business objectives. Many employers are actively seeking ways of increasing the value of variable remuneration in the employment process for the perceived benefits it would have for the business and participants. Over the past decade variable remuneration has become a significant component of the employment offer that contributes to the attraction and retention of highly sought-after employees. It has grown in importance, but simultaneously has also become a major employment cost.
In the absence of a validated generic methodology, the variable remuneration methodologies applied by employers are intuitive and most often lack any scientific basis. The purpose of the study was to design and validate a variable remuneration methodology that will allow managers, or scheme designers, to develop variable remuneration schemes that will be able to deliver outcomes that
would be attributable to the variable remuneration scheme and not to factors outside the control of the scheme participants or within the greater organisational context.
Based on a literature survey covering three bodies of knowledge; motivational theory, variable remuneration concepts, and the variable remuneration life cycle, propositions regarding variable remuneration were formulated. These propositions were converted into 99 items making up a questionnaire dealing with variable remuneration constructs. The questionnaire was applied to thirty different types of variable remuneration schemes in a bank assurance group. Six hundred and thirty two scheme participants completed the questionnaire that assessed the thirty schemes. Independently from the scheme assessments, scheme owners and/or designers evaluated scheme outcomes.
First and second order factor analyses were performed on the variable remuneration scheme questionnaire that produced three adequately determined factors. The factors had highly acceptable internal reliabilities. These factors were: Congruency, Instrumentality and Performing. The respective relationships between the Independent Variables: Congruency, Instrumentality and Performing, the Moderator Variables: Scheme Type and Job Level and the Independent Variable: Scheme Outcome, were investigated by means of Analysis of Variance (ANOVA), Multiple Analysis of Variance (MANOVA), Analysis of Co-Variance (ANCOVA) as well as Multiple Regression Analysis.
An empirically determined generic variable remuneration methodology was arrived at, consisting of three constructs and eleven dimensions, which explained 34,5% of the variance of variable remuneration scheme outcomes and is depicted in the figure below.
Prof. Theo Veldsman
Prof. Gert Roodt