Organizational rewards: considering employee need in allocation

Purpose – The purpose of this study is to investigate how employee need relates to rewards and employee perceptions of fairness within an organization in the USA using a pay-for-performance system. Design/methodology/approach – To evaluate the presence of a relationship between employee need and reward allocation in a pay-for-performance system, a questionnaire was administered to a sample of 292 employees from two departments at an academic medical center. Findings – The findings highlight the positive relationship between employee need and reward allocation that remains when controlling for employee performance evaluation ratings. Findings further show that employee communication with the manager about need explains this relationship. Research limitations/implications – The findings make two important contributions to research on reward allocation and performance management. First, the results show employee need is related to the allocation of rewards in organizational settings outside of collectivistic cultures or developing countries. Second, by demonstrating the role of employee communication with managers about need within the relationship between employee need and reward allocation, the paper provides a more detailed understanding of additional factors related to compensation decisions in a pay-for-performance system. Originality/value – Little research has explored the relationship between employee need and reward decisions at an individual level in organizational settings within individualistic cultures. The findings from this study address this gap by establishing the presence of this relationship in a pay-for-performance reward-based organization with service-based values. This finding is timely due to the current economic downturn experienced by organizations, and thereby the level of employee need observed in Western individualistic cultures.