Differential effects of autonomy on employee satisfaction and organizational performance depending on the type of financial incentives: evidence from a four-wave panel of Korean companies

Abstract

This study examines the effects of an autonomy-supportive climate on employee satisfaction and organizational performance at the organizational level. It also extends self-determination theory by applying this theory to the differential interaction effects of individual and group incentives with an autonomy-supportive climate on employee satisfaction and organizational performance. Employees may differently utilize autonomy granted to them depending on whether or not they are granted financial incentives and depending on the type of financial incentives granted to them, if any. The hypotheses were tested by moderated mediation models using nationally representative panel data that were collected from 2009 to 2015. The moderation analyses provide evidence that while individual incentives strengthened the effect of an autonomy-supportive climate on employee satisfaction, group incentives weakened that effect. Furthermore, individual incentives resulted in little change to the effect of an autonomy-supportive climate on organizational performance, but group incentives strengthened that effect. Since the results do not identify specific best practices for the combination of an autonomy-supportive climate and financial incentives, this study implies that top management should make strategic choices with regard to which combination of practices they adopt among less or more autonomy-supportive practices and individual or group incentives.