This paper aims to examine the validity of contingent reward and its relationship to extra effort and to further advance understanding of the leader/follower performance reward relationship.
The concept of contingent reward has largely remained unchanged since 1985. Consequently, the items of contingent reward were examined in terms of their content validity that was guided by transactional leadership theory, re‐formulated path‐goal theory of leadership, and negotiation theory. Three new contingent reward factors were identified (i.e. framing, clarifying, and rewarding). These were examined using one‐factor congeneric measurement models. Valid factors were identified using a high‐order confirmatory factor analysis to further confirm the structural validity of the three new factors of contingent reward. Finally, structural equation models were calculated to examine the relationships among contingent reward factors and extra effort.
Three distinct factors of contingent reward were identified and their relationships with extra effort was consistent with the integrative negotiation strategies where each factor formed part of a negotiation process. Contingent reward (framing) initiates the negotiation process and directly loads on contingent reward (rewarding and clarifying); contingent reward (framing) did not directly load on to extra effort. Contingent reward (rewarding) supports the negotiation process by loading directly on contingent reward (clarifying). The negotiation process is completed with contingent reward (clarifying) directly loading on extra effort. These three contingent reward factors form a simple negotiation process that highlights several important aspect of the leader/follower reward performance relationship.
This study uses a cross‐sectional design that means that its findings may not be generalisable to other populations. However, the findings of this study should encourage researchers to appreciate that common leadership behaviour, like contingent reward, may have more complex interrelationships with outcome factors such as extra effort than previously expected.
Leaders should view their use of contingent reward behaviours in terms of a process rather than simply exhibiting a single clarifying contingent reward type behaviour. In other words, leaders need to establish the boundaries (i.e. framing), acknowledge involvement (i.e. rewarding), and then elucidate mutual outcomes (i.e. clarifying). This process should enable leaders to negotiate greater flexibilities and create more momentum within their leader/follower performance reward relationships.
This paper challenges the foundation ideas and empirical pedigree of contingent reward and incorporates advances in theories such as the reformulated path‐goal theory and interpret the behaviours in a broader multi‐disciplinary context, i.e. integrative negotiation strategies.
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