Person‐based reward systems: A theory of organizational reward practices in reform‐communist organizations

Abstract

Abstract A type of organizational reward system based on personal power is described and partially tested. The theory, developed from observations of Hungarian organizations, is grounded in theories of procedural justice and learned helplessness. Person‐based organizational reward systems are characterized by highly valued rewards combined with personalistic criteria for reward distribution. Such organizational reward systems were hypothesized to lead to employee perceptions of organizational unfairness; negative evaluations of others; anxiety; and perceptions of self, collegial and organizational inefficacy. These hypotheses were supported in tests in a sample of three Hungarian state‐owned organizations classified as having person‐based systems and five non‐person‐based organizations (two Hungarian privately‐owned companies, one American state‐owned and two American privately‐owned organizations). In addition, several behavioral effects of person‐based reward systems were proposed: they foster bargaining behavior, withholding of information, avoidance of collaborative tasks, ingratiation and noncompliance with rules.