Managers generating meaning for pay : A test for reflection theory

Purpose – The aim of this study is to find out whether managers can facilitate employee understanding of the pay system through a goal‐setting process. The paper draws from Thierry's largely untested Reflection Theory to study employee pay satisfaction. Design/methodology/approach – Based on the theory, it is posited that managerial goal setting improves employee pay satisfaction through increased employee knowledge and perceived meanings of pay. The hypotheses are tested with survey data from one municipal health care organization. Findings – The results of the study show that both knowledge and meanings of pay mediate the effects of goal setting on pay satisfaction. The paper finds support for the somewhat distinguishable roles of instrumental and symbolic meanings of pay. The regression analyses show that the former fully mediates the effect of pay level and the latter fully mediates the effect of goal setting on pay satisfaction. Even though the analyses do not provide evidence that common method variance would explain the results, it remains a potential issue. Research limitations/implications – Future research is needed to establish the dimensionality of meanings – positive as well as negative – a pay system can convey, and to explore the degree to which they can be managed. Practical implications – The results of the study suggest that organizations can promote their ROI of pay systems by paying attention to the employees' interpretations of messages conveyed by the pay system implementation process. More specifically, the results demonstrate that managers can contribute to employee pay satisfaction via a goal‐setting process that informs employees about the functions of the pay system and use the system to give feedback on the job. Originality/value – The study provides a unique but preliminary test for Reflection Theory.