PERFORMANCE BASED PAY MANAGEMENT AS A DETERMINANT OF PROCEDURAL JUSTICE
DOI:
https://doi.org/10.37134/jcit.vol8.3.2018Keywords:
Performance based reward management, Communication, Participation, Procedural justiceAbstract
The main objective of this study is to examine the relationship between performance based pay management (i.e., communication and participation) and procedural justice. A survey methods were used to collect selfreport survey of employees in currier service company. The SmartPLS path model analysis revealed two main findings: first, communication was significantly correlated with procedural justice. Second, participation was significantly correlated with procedural justice. These findings demonstrate that the ability of managers to properly implement performance based pay management may invoke feelings of procedural justice among employees in the organization. This study provides three important implications: first, this study may serve great potential for understanding the effect of communication and, participation in strengthening perception of procedural justice among employees in the organization. Second, the survey questionnaire used in this study had satisfactorily met the standards of validity and reliability analyses. This may lead to produced accurate and reliable research findings. Third, this study may serve as a guide for practitioners to enhance the effectiveness of organization’s performance based pay management as an important instrument to motivate employee in supporting organization’s pay system, objectives and strategies. In addition, discussion, implications and conclusion are described.
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References
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Azman, I., Fuad, Z. M., & Aimi, A. (2015). Administrator’s role in performance based reward as a determinant
of employee outcomes. Management & Marketing Journal, 13(1), 92–110. Retrieved from
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Azman, I., & Mohd Ridwan, A. R. (2016). Performance-based reward administration as an antecedent of job
satisfaction: A case study of Malaysia ’ s fire and rescue agencies, 7(7), 107–118.
Azman, I., & Mohd Ridwan, A. R. (2017a). Managers’ roles in performance based reward enhancing employees’
feelings of procedural justice. KINERJA, 21(2), 145–158.
Azman, I., & Mohd Ridwan, A. R. (2017b). Performance-based reward administration enhancing employees’
feelings of interactional justice. Studies in Business and Economics, 12(1), 5–18. http://doi.org/10.1515/sbe-
2017-0001
Azman, I., Ridwan, A. R. M., & Zalina, I. (2016b). Sub theme: Human resource management performance based
pay management as a determinant of sub theme: of extrinsic and intrinsic job, 104–114.
Barclay, D., Higgins, C., & Thompson, R. (1995). The partial least squares (PLS) approach to causal modeling:
Personal computer adoption and use as an illustration. Technology Study, 2(2), 285–309.
Biddle, B. J. (1986). Recent developments in role theory. Annual Review of Sociology, 12(1), 67–92.
Brebels, L., Cremer, D. De, & Dijke, M. Van. (2016). Using self-definition to predict the influence of procedural
justice on organizational- , interpersonal- , and job / task-oriented citizenship behavior, 40(3), 731–763.
http://doi.org/10.1177/0149206311410605
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publications.
Dar, Z., & Raja, N. S. (2014). Empirical study on the role of Procedural Justice in Performance appraisal on
Turnover Intentions Mediating role of Organizational Politics, 16(1), 141–145.
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equation modeling. Journal of the Academy of Marketing Science, 40(3), 402–413.
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latent variables using partial least squares path modeling. Structural Equation Modeling: A Multidisciplinary
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approach. International Journal of Business and Management, 6(11), 170–181.
http://doi.org/10.5539/ijbm.v6n11p170
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between participation in pay systems and personal outcomes. Jurnal Kemanusiaan, 9, 83–96.
Martocchio, J. J. (2016). Strategic compensation: A human resource management approach (8th ed.). Boston, US:
Pearson Education Limited.
Milkovich, G., Newman, J., & Gerhart, B. (2014). Compensation (4th ed.). New York: McGraw-Hill International.
Newman, J. M., Gerhart, B., & Milkovich, G. T. (2017). Compensation (12th ed.). McGraw-Hill International.
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http://doi.org/10.1108/EBHRM-12-2013-0037
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Ringle, C. M., Sarstedt, M., & Straub, D. (2012). A critical look at the use of PLS-SEM in MIS Quarterly. MIS
Quarterly (MISQ), 36(1), iii–xiv. http://doi.org/10.3200/JOEB.79.4.213-216
Risher, H. (2014). Reward management depends increasingly on procedural justice. Compensation & Benefits
Review, 46(3), 135–138. http://doi.org/10.1177/0886368714553775
Rozila, A., & Scott, N. (2015). Fringe benefits and organisational commitment: the case of Langkawi hotels.
Tourism Review, 70(1), 13–23. http://doi.org/10.1108/TR-11-2013-0065
Salim, S. S., & Ismail, A. (2015). Adequacy of pay structure and its impact on personal outcomes. Economica,
11(6), 34–49.
Sekaran, U., & Bougie, R. (2010). Research Methods for Business: A Skill Building Approach. New York: John Wiley
& Sons, Inc.
Shaed, M. M., Ishak, S., & Ramli, Z. (2015). Employee s ’ Participation in Decision Making (PDM): A literature
survey, 13(13), 142–155.
Singh, P. S. P., & Rana, S. (2015). The Impact of Performance Appraisal on Organizational Commitment of Bank
Employees, 4(4), 2964–2967.
Stone, M. (1974). Cross-validatory choice and assessment of statistical predictions. Journal of the Royal Statistical
Society, 36(2), 111–147.
Takao, K., & Naomi Kodaman. (2015). Performance-related Pay and Productivity: Evidence from Japan (15-E-088).
Japan.
Tremblay, M., & Landreville, P. (2015). Information Sharing and Citizenship Behaviors: Mediating the Roles of
Empowerment, Procedural Justice, and Perceived Organizational Support.
http://doi.org/10.1177/2329488414525459
Wahibur, R., & Arif, H. (2012). Transformational leadership and work Outcomes: organizational justice as
mediator. World Review of Business Research, 2(4), 164–171.
Webb, J., Courtney, D., Stefanie, L. H., Laura, K. J., Webb, J., Courtney, D., … Barron, L. G. (2014).
Organizational rewards: considering employee need in allocation. http://doi.org/10.1108/PR-09-2012-0156
Zhang, G., Lee, G., & Zou, X. (2010). The mediating role of procedural justice between participation in decisionmaking and organizational citizenship behavior: An empirical study about Skeleton government civilian
in China. Psychology, 1(4), 300–304. http://doi.org/10.4236/psych.2010.14039
Zhang, Y., Long, L., & Zhang, J. (2015). Pay for performance and employee creativity: The importance of
procedural justice and willingness to take risks. Management Decision, 53(7), 1378–1397.
http://doi.org/10.1108/MD-11-2013-0596
Zou, L., Zhang, J., & Liu, W. (2015). Perceived justice and creativity in crowdsourcing communities: Empirical
evidence from China. Social Science Information, 1–27. http://doi.org/10.1177/0539018415583382
of job. Sains Humanika, 2(2), 11–17.
Auh, S., & Menguc, B. (2013). Knowledge sharing behaviors of industrial salespeople: An integration of
economic, social psychological, and sociological perspectives. European Journal of Marketing, 47(8), 1333–
1355. http://doi.org/10.1108/03090561311324354
Azman, I., Asilah, K. M. N., & Rahmad, R. M. (2016a). Relationship between performance appraisal
communication , procedural justice and job satisfaction. Malaysian Journal of Society and Space, 12(2), 15–26.
Azman, I., Fuad, Z. M., & Aimi, A. (2015). Administrator’s role in performance based reward as a determinant
of employee outcomes. Management & Marketing Journal, 13(1), 92–110. Retrieved from
http://www.mnmk.ro/documents/2015_X1/8-7-1-15.pdf.
Azman, I., & Mohd Ridwan, A. R. (2016). Performance-based reward administration as an antecedent of job
satisfaction: A case study of Malaysia ’ s fire and rescue agencies, 7(7), 107–118.
Azman, I., & Mohd Ridwan, A. R. (2017a). Managers’ roles in performance based reward enhancing employees’
feelings of procedural justice. KINERJA, 21(2), 145–158.
Azman, I., & Mohd Ridwan, A. R. (2017b). Performance-based reward administration enhancing employees’
feelings of interactional justice. Studies in Business and Economics, 12(1), 5–18. http://doi.org/10.1515/sbe-
2017-0001
Azman, I., Ridwan, A. R. M., & Zalina, I. (2016b). Sub theme: Human resource management performance based
pay management as a determinant of sub theme: of extrinsic and intrinsic job, 104–114.
Barclay, D., Higgins, C., & Thompson, R. (1995). The partial least squares (PLS) approach to causal modeling:
Personal computer adoption and use as an illustration. Technology Study, 2(2), 285–309.
Biddle, B. J. (1986). Recent developments in role theory. Annual Review of Sociology, 12(1), 67–92.
Brebels, L., Cremer, D. De, & Dijke, M. Van. (2016). Using self-definition to predict the influence of procedural
justice on organizational- , interpersonal- , and job / task-oriented citizenship behavior, 40(3), 731–763.
http://doi.org/10.1177/0149206311410605
Cresswell, J. W. (1998). Qualitative Inquiry and Research Design: Choosing Among Five Traditions. London: SAGE
publications.
Dar, Z., & Raja, N. S. (2014). Empirical study on the role of Procedural Justice in Performance appraisal on
Turnover Intentions Mediating role of Organizational Politics, 16(1), 141–145.
Fornell, C., & Larcker, D. F. (1981). Evaluating structural equation models with unobservable variables and
measurement error. Journal of Marketing Research, XVIII(39–50).
Geisser, S. (1975). The predictive sample reuse method with applications. Journal of the American Statistical
Association, 70(350), 320–328.
Graen, G. B., & Uhl-Bein, M. (1995). Relationship-based approach to leadership: Development of leadermember
exchange (LMX) theory of leadership over 25 years: Applying a multi-level multi-domain
perspective. The Leadership Quarterly, 6(2), 219–247.
Hair Jr., J. F., Hult, G. T. M., Ringle, C. M., & Sarstedt, M. (2017). A Primer on Partial Least Squares Structural
Equation Modeling (PLS-SEM) (2nd Ed.). United States of America: SAGE publications Inc.
Heffernan, M., & Dundon, T. (2016). Cross-level effects of high-performance work systems (HPWS) and
employee well-being: the mediating effect of organisational justice. Human Resource Management Journal,
26(2), 211–231.
Henseler, J. (2012). Why generalized structured component analysis is not universally preferable to structural
equation modeling. Journal of the Academy of Marketing Science, 40(3), 402–413.
http://doi.org/10.1007/s11747-011-0298-6
Henseler, J., & Chin, W. (2010). A comparison of approaches for the analysis of interaction effects between
latent variables using partial least squares path modeling. Structural Equation Modeling: A Multidisciplinary
Journal, 17(1), 82–109. http://doi.org/10.1080/10705510903439003
Henseler, J., Ringle, C. M., & Sarstedt, M. (2014). A new criterion for assessing discriminant validity in variancebased structural equation modeling. Journal of the Academy of Marketing Science, 43(1), 115–135.
http://doi.org/10.1007/s11747-014-0403-8
Ismail, A., Mohamed, H. A.-B., Sahol Hamid, N., Zaidi Sulaiman, A., Girardi, A., & Bin Abdullah, M. M. (2011).
Relationship between performance based pay, interactional justice and job satisfaction: a mediating model
approach. International Journal of Business and Management, 6(11), 170–181.
http://doi.org/10.5539/ijbm.v6n11p170
Ismail, A., Rahman, H. A., & Ismail, W. K. W. (2007). Moderating effect of procedural justice in the relationship
between participation in pay systems and personal outcomes. Jurnal Kemanusiaan, 9, 83–96.
Martocchio, J. J. (2016). Strategic compensation: A human resource management approach (8th ed.). Boston, US:
Pearson Education Limited.
Milkovich, G., Newman, J., & Gerhart, B. (2014). Compensation (4th ed.). New York: McGraw-Hill International.
Newman, J. M., Gerhart, B., & Milkovich, G. T. (2017). Compensation (12th ed.). McGraw-Hill International.
Nunnally, J. c., & Bernstein, I. H. (1994). Psychological theory. New York: MacGraw-Hill.
Osterloh, M. (2014). Viewpoint: why variable pay-for-performance in healthcare can backfire: Evidence from
psychological economics. Evidence-Based HRM: A Global Forum for Empirical Scholarship, 2(1), 120–123.
http://doi.org/10.1108/EBHRM-12-2013-0037
Proost, K. (2015). Organizational justice as buffer against stressful job demands. http://doi.org/10.1108/JMP-02-
2013-0040
Ringle, C. M., Sarstedt, M., & Straub, D. (2012). A critical look at the use of PLS-SEM in MIS Quarterly. MIS
Quarterly (MISQ), 36(1), iii–xiv. http://doi.org/10.3200/JOEB.79.4.213-216
Risher, H. (2014). Reward management depends increasingly on procedural justice. Compensation & Benefits
Review, 46(3), 135–138. http://doi.org/10.1177/0886368714553775
Rozila, A., & Scott, N. (2015). Fringe benefits and organisational commitment: the case of Langkawi hotels.
Tourism Review, 70(1), 13–23. http://doi.org/10.1108/TR-11-2013-0065
Salim, S. S., & Ismail, A. (2015). Adequacy of pay structure and its impact on personal outcomes. Economica,
11(6), 34–49.
Sekaran, U., & Bougie, R. (2010). Research Methods for Business: A Skill Building Approach. New York: John Wiley
& Sons, Inc.
Shaed, M. M., Ishak, S., & Ramli, Z. (2015). Employee s ’ Participation in Decision Making (PDM): A literature
survey, 13(13), 142–155.
Singh, P. S. P., & Rana, S. (2015). The Impact of Performance Appraisal on Organizational Commitment of Bank
Employees, 4(4), 2964–2967.
Stone, M. (1974). Cross-validatory choice and assessment of statistical predictions. Journal of the Royal Statistical
Society, 36(2), 111–147.
Takao, K., & Naomi Kodaman. (2015). Performance-related Pay and Productivity: Evidence from Japan (15-E-088).
Japan.
Tremblay, M., & Landreville, P. (2015). Information Sharing and Citizenship Behaviors: Mediating the Roles of
Empowerment, Procedural Justice, and Perceived Organizational Support.
http://doi.org/10.1177/2329488414525459
Wahibur, R., & Arif, H. (2012). Transformational leadership and work Outcomes: organizational justice as
mediator. World Review of Business Research, 2(4), 164–171.
Webb, J., Courtney, D., Stefanie, L. H., Laura, K. J., Webb, J., Courtney, D., … Barron, L. G. (2014).
Organizational rewards: considering employee need in allocation. http://doi.org/10.1108/PR-09-2012-0156
Zhang, G., Lee, G., & Zou, X. (2010). The mediating role of procedural justice between participation in decisionmaking and organizational citizenship behavior: An empirical study about Skeleton government civilian
in China. Psychology, 1(4), 300–304. http://doi.org/10.4236/psych.2010.14039
Zhang, Y., Long, L., & Zhang, J. (2015). Pay for performance and employee creativity: The importance of
procedural justice and willingness to take risks. Management Decision, 53(7), 1378–1397.
http://doi.org/10.1108/MD-11-2013-0596
Zou, L., Zhang, J., & Liu, W. (2015). Perceived justice and creativity in crowdsourcing communities: Empirical
evidence from China. Social Science Information, 1–27. http://doi.org/10.1177/0539018415583382
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Published
2018-09-14
How to Cite
Abd Razak, M. R., Ismail, A., & Ali, E. (2018). PERFORMANCE BASED PAY MANAGEMENT AS A DETERMINANT OF PROCEDURAL JUSTICE. Journal of Contemporary Issues and Thought, 8, 19–28. https://doi.org/10.37134/jcit.vol8.3.2018
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