Impact of Compensation on Employee Performance with the Moderating Role of Integrating Style of Conflict Management in the Banking Sector of Pakistan

Abstract

Objective: The study aims to explore the relationship between compensation and performance of the employees in banking sector of Pakistan and explore the moderating effect of integrating style of conflict handling. The purpose of the research is to investigate whether collaborative conflict resolution is a positive or negative influence on the motivational effects of compensation on employee performance.

Methodology: A quantitative research approach was adopted with cross sectional design, structured self-administered questionnaire was used. A total of 500 employees of public, private, Islamic and foreign banks were sampled for data collection across Pakistan. Compensation, employee performance and integrating style of conflict management were measured using validated scales (6 items each). The proposed hypotheses were tested using the hierarchical moderated multiple regression analysis procedure.

Findings: The results showed that compensation positively and significantly predicts employee performance with a beta value of .55 and a p value of < .001, thus supporting Hypothesis 1. The impact of the integrating style of conflict management was also positive and significant, directly affecting the results of the performance (β = .27, p < .001), which proves the hypothesis 2. Notably, the relationship between compensation and performance was moderated by the integrating style such that there was a buffering moderation (ΔR² = .020, p < .001) – but not amplifying as hypothesized. A simple slopes analysis showed that (1) compensation was positively associated with performance at low level of integration (b = .48), and (2) compensation was positively associated with performance at high level of integration (b = .19), indicating a substitution mechanism.

Originality Value: The relevance of this study is originality value; this study is original in the sense that conflict management is considered as a boundary condition as opposed to the status of a direct predictor of performance, which is not explored in the context of banking in Pakistan so far.

Contribution: The results offer important implications for HR professionals and HR managers when considering how compensation systems and conflict resolution climates work together to influence employee performance, which may indicate that HR practitioners and managers can invest in collaborative conflict management to some degree in lieu of compensation increases.

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