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Job Satisfaction, Job Performance, and Effort: A Reexamination Using Agency

Theory

Article in Journal of Marketing · February 2006

DOI: 10.1509/jmkg.2006.70.1.137

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 Markus Christen, Ganesh Iyer, & David Soberman

Job Satisfaction, Job Performance,

and Effort: A Reexamination Using
Agency Theory
The objective of this article is to clarify ambiguities in the literature regarding the relationships among three key
constructs of work relationships: effort, job performance, and job satisfaction. The relationship between job perfor-
mance and job satisfaction is of central interest to research in organizational psychology. However, empirical
research in that area finds that the link between these constructs is weak at best. A negative effect of effort on job
satisfaction is consistent with agency theory, but there is limited empirical evidence to support this assumption.
Moreover, some studies have found a positive effect of effort on job satisfaction. Using a model that incorporates
the main constructs from agency theory and organizational psychology, the current study finds a negative, direct
effect of effort and a positive, direct effect of job performance on job satisfaction. The authors show that conflicting
findings in the literature are the result of inconsistency in both the measurement and the definition of constructs
across studies that do not fully account for all the relationships between constructs. The current findings empha-
size the need to distinguish clearly between factors that represent employees’ inputs in a work relationship (i.e.,
effort) and those that represent their outputs (i.e., job performance). The article also demonstrates the importance
of properly accounting or controlling for all key variables to eliminate biases that can arise in empirical research on
work relationships.

here is an extensive body of research in organiza- assumption that effort is costly to an agent and therefore

T tional psychology that considers the role of job satis-

faction in managing effective work relationships.
Similarly, job satisfaction is a widely studied construct in
reduces the agent’s utility (or job satisfaction).
The objective of this article is to develop a model of
work relationships to investigate the relationship between
marketing research on sales force (Brown and Peterson job satisfaction and its key determinants, job performance
1993), retail store managers (Lusch and Serpkenci 1990), and effort. The premise is that a complete understanding of
and service workers (Boyt, Lusch, and Naylor 2001). This job satisfaction and work relationships must be predicated
research examines the antecedents of job satisfaction and, on a theory of how effort affects job satisfaction and the
in particular, the effects of job performance, effort, and the way that effort affects the relationship between job perfor-
compensation structure. However, findings in this literature mance and job satisfaction. To this end, we draw on both
about the relationships between job satisfaction and these agency theory and organizational psychology. We consider
antecedents have been inconsistent and even controversial. a role of effort that is consistent with a principal–agent
For example, despite the finding that people derive intrinsic model (Holmstrom 1979): When compensation and other
value from work, the relationship between job performance factors are controlled for, effort is a cost for an agent. We
and job satisfaction has been found to be inconsistent and then embed this cost in a job satisfaction model (Porter and
weak (Brown and Peterson 1993; Iaffaldano and Muchinsky Lawler 1968) to clarify the relationships between job satis-
1985). Similarly, studies that examine the effect of effort on faction and its key antecedents. A clear understanding of
job satisfaction find that it has a positive effect (Brown and these relationships is important to design employment con-
Peterson 1994). This second finding appears to contradict tracts that optimize firm performance, while providing sat-
the logic of the equally large literature on agency relation- isfactory incentives and compensation for an employee.
ships in economics and marketing, which is based on the When we consider the three constructs of job satisfac-
tion, job performance, and effort jointly, we find a strong
positive effect of job performance on job satisfaction, a
Markus Christen is Associate Professor of Marketing (e-mail: markus.
result that has long been hypothesized in marketing and
christen@insead.edu), and David Soberman is Associate Professor of
Marketing (e-mail: david.soberman@insead.edu), INSEAD. Ganesh Iyer organizational psychology but has received weak empirical
is Associate Professor of Marketing, Haas School of Business, University support (Iaffaldano and Muchinsky 1985). In addition,
of California, Berkeley (e-mail: giyer@haas.berkeley.edu). The authors when we account for the moderating effect of job perfor-
contributed equally to this research, and their names are listed in alpha- mance, we find that effort has a strong negative effect on
betical order. The authors are deeply grateful to Ray Serpkenci for provid- job satisfaction, a result that supports the theoretical
ing the data used in this study. They also thank Erin Anderson, Andy assumption of empirical studies of contracts, such as sales
Mitchell, Gary Russell, Rick Staelin, and the participants of the joint
INSEAD/ESSEC/HEC seminar and the Marketing Science conference at
force compensation plans (e.g., Lal, Outland, and Staelin
the University of California, Los Angeles, for their comments. 1994). Both omitted variables and construct definition prob-
lems explain why some previous research has found a posi-

© 2006, American Marketing Association Journal of Marketing

ISSN: 0022-2429 (print), 1547-7185 (electronic) 137 Vol. 70 (January 2006), 137–150
tive effect of effort on job satisfaction. The result of our employee’s job performance affects his or her job satisfac-
model and analysis is consistent with the agency theoretic tion) became the focus of research in the area (Lawler and
view of effort. At the same time, we recognize the manner Porter 1967). Although the idea that an employee’s job per-
by which other determinants of job satisfaction mediate the formance affects his or her job satisfaction is consistent
impact of effort on job satisfaction. with several psychological theories, such as intrinsic moti-
Another important factor that must be incorporated into vation theory (Deci and Ryan 1985), few studies have found
a model of work relationships is compensation. Agency support for it (Iaffaldano and Muchinsky 1985). Similarly,
theory makes a distinction between fixed compensation organizational studies of the sales force in marketing invari-
(e.g., salary) and variable compensation that depends on ably find that the relationship between job performance and
output (e.g., bonuses based on individual or firm perfor- job satisfaction is weak (Bagozzi 1980; Brown and Peterson
mance). The agency theoretic prediction is that fixed com- 1993). As Brown and Peterson (1993) note, if the effect of
pensation should have a significant effect on job satisfaction job performance on job satisfaction is insignificant, firm
but not on effort, regardless of an employee’s risk prefer- actions designed to increase job performance should not
ence. Our results support this prediction. have a direct effect on job satisfaction and related out-
In addition to an examination of fixed salary, our data comes, such as employee turnover.
set enables us to examine a common compensation variable Conversely, there seems to be consensus that many
that has received little attention in the literature: corporate- antecedents of job satisfaction and job performance are
wide profit-sharing plans tied to overall firm performance. common (e.g., effort, compensation, quality of supervision,
This type of compensation is interesting because in a large clarity of job responsibilities). Consequently, it is essential
organization, it is neither fixed nor affected solely by the to account for both direct and indirect effects of common
individual employee’s performance. We find that these antecedents to reach the conclusion that the effect of job
profit-sharing plans have a significant effect on both job sat- performance on job satisfaction is insignificant.
isfaction and effort. The literature suggests that the antecedents of job satis-
This article is relevant to researchers in marketing and faction can be categorized into personal characteristics, role
management who are interested in the relationship between perceptions, and organizational variables (Brown and Peter-
job satisfaction and job performance. The results counter son 1993). A typical job satisfaction model appears in
previous findings that there is no relationship between the Figure 1.
two factors. Job performance has a direct and positive effect It is intuitive that effort and compensation are critical
on job satisfaction when we properly account for effort. determinants for the viability of any employment situation.
Effort has a positive effect on job performance and, thus, a An employee will not be willing to exert effort unless he or
positive, indirect effect on job satisfaction. she is paid, and the employer will not be willing to pay
Next, the article demonstrates the problems of omitted unless the employee works. A contract needs to be individ-
variables and unclear construct definitions in researching ually rational (i.e., both parties must expect to be better off
work relationships within organizations. Findings about the by engaging in the work relationship). However, few, if any,
relationship among effort, job performance, and job satis- studies include the employee’s effort as an antecedent of job
faction can be unclear or inconsistent with received theory satisfaction (Brown and Peterson 1994). One exception is
when key constructs are omitted or lumped together. This that of Clark and Oswald (1996), who use job satisfaction
suggests the need for empirical research to distinguish as a proxy for utility. They find a negative (albeit weak)
clearly between factors that are inputs (i.e., effort) and those
that are outputs (i.e., job performance).
We next provide a summary of the relevant literature, FIGURE 1
beginning with a discussion of the relationship between job A Typical Job Satisfaction Model
performance and job satisfaction in marketing and organiza-
tional psychology. We follow this summary with a discus-
sion of the effect of effort as it is purported in agency Job Firm
+
theory. On the basis of the literature review, we then set performance performance
forth several hypotheses. We describe our empirical model +
and discuss the data and estimation approach. After we pre- _
Job
sent the estimation results, we conclude with a discussion of factors
the implications of our findings and highlight several (+)
important issues for further research. Problems +
with role
_
perceptions
Literature Review
Job
The Relationship Between Job Performance and satisfaction
Job Satisfaction
The idea that satisfied employees are more productive held
Notes: Signs indicate the direction of effects according to the litera-
through the 1970s. However, it was difficult to obtain sup- ture (Brown and Peterson 1993). Parentheses indicate a
port for the view that job satisfaction has a significant effect hypothesized relationship that has not been confirmed by
on job performance. As a result, the reverse (that an empirical results.

138 / Journal of Marketing, January 2006

effect of effort on job satisfaction. However, because job positive effect on job satisfaction (Brown and Peterson
performance is omitted, its role as a potential mediator of 1994).
the effect of effort on job satisfaction is not considered. An objective of the article is to resolve the inconsis-
Many studies treat effort as part of job performance, tency between theoretical arguments and empirical find-
which is defined broadly as an aggregate construct of effort, ings. Our interest is to confirm empirically that the relation-
skill, and outcomes that are important to the employee and ship between job satisfaction and effort is negative, because
outcomes that are important to the firm (e.g., Behrman and it is the basis for much of the research on contracts and job
Perreault 1984; Lusch and Serpkenci 1990; Walker, design. To accomplish this objective, we rely on prior
Churchill, and Ford 1977). Similar to the work of Bagozzi research in economics that has established job satisfaction
(1978), a few studies use a narrow definition of job perfor- as a good proxy for utility (Clark and Oswald 1996; Fried-
mance based on actual sales or other objective productivity man 1978) to untangle the direct and indirect effects of
measures. However, these studies do not include effort as a effort on job satisfaction (e.g., through compensation or job
separate construct. performance). The total effect of effort should indeed be
We argue that it is important to define effort as distinct positive, otherwise an employee would be better off not
from job performance. From the perspective of an working.
employee, job performance and effort are different. Effort is Our conjecture is that the primary impediment to find-
an input to work, and job performance is an output from ing a negative relationship in previous empirical studies is a
this effort. From a firm’s perspective, effort and job perfor- problem of omitted variables. Given that employment situa-
mance may be difficult to distinguish, and effort is often tions are typically subject to a problem of moral hazard,
inferred from the output produced (the possibility of high employers use a combination of outcome-based control
effort and low output or low effort and high output is often (e.g., performance-based contracts) and behavior-based
not considered). This may explain the inclusion of effort in control (e.g., monitoring) to prevent employees from exert-
the definition of job performance. Some studies include ing minimal effort (Anderson and Oliver 1987), but these
work motivation as an antecedent to job satisfaction, but controls also affect employees’ job satisfaction.1 As a result,
motivation (“I want to work hard”) is not the same as it is essential to account for the effect of these controls
exerted effort (“I did work hard and spent a lot of time and when estimating the valence and strength of the relationship
energy”). between effort and job satisfaction. For example, in situa-
The implications of either neglecting effort or consider- tions with incentive pay, which employers often use to com-
ing it a part of job performance for the empirically observed pensate sales people, high effort (though costly) may lead to
relationship between job performance and job satisfaction strong job performance and, thus, high compensation. This
can be significant. If effort is costly for an employee, ignor- would increase job satisfaction and largely mitigate the neg-
ing effort can bias the estimated effect of job performance ative effect of costly effort on job satisfaction. A model that
on job satisfaction (because effort should increase job per- does not account for the indirect path (through compensa-
formance). Failing to control for effort induces a negative tion) by which effort affects job satisfaction would find that
spurious correlation, which may reduce or even hide a true the direct effect of effort on job satisfaction is either
positive effect of job performance on job satisfaction. Simi- insignificant or even positive. A key requirement to identify
larly, by including effort in the measure of job performance, the direct effect of effort on job satisfaction is to account for
negative and positive aspects can nullify each other, yield- the indirect paths through which effort can affect job satis-
ing an effect for job performance that is again biased toward faction (especially those created by the employer’s control
insignificance. system). Next, we summarize the preceding discussion with
In summary, the existing job satisfaction research in a set of hypotheses and then propose a model of job satis-
marketing and organizational psychology is likely ham- faction that incorporates an agency relationship and the key
pered by an omitted-variables bias and imprecise definitions antecedents of job satisfaction into a comprehensive
of job performance. The objective of this article is to under- framework.
stand this relationship within a framework that overcomes
these problems.
Hypotheses
The Impact of Effort on Job Satisfaction The first hypothesis addresses the relationship between job
If effort is costly for an employee, it should have a negative, performance and job satisfaction. By treating job perfor-
direct effect on job satisfaction. This implies that there is a mance as distinct from effort and accounting for the direct
conflict of interest between the employer, who wants the effect of effort on job satisfaction, we expect the following
employee to work hard, and the employee, who wants the relationship:
salary with the minimum possible effort. This conflict is the H1: All else being equal, an employee’s job satisfaction
basis for the literature in economics on the relationship increases with his or her job performance.
between principals and agents (Hart and Holmstrom 1987;
Holmstrom 1979). Nevertheless, aside from the previously
mentioned study by Clark and Oswald (1996), there is little 1Moral hazard is a contracting problem between a principal and
direct empirical evidence that effort is a cost that makes an agent when an agent expends effort that only he or she observes
employees less happy. Moreover, studies of job satisfaction and the effect of effort on output is uncertain. Consequently, the
that include effort as an antecedent tend to find that it has a agent will not choose an efficient level of effort.

Job Satisfaction, Job Performance, and Effort / 139

 In the context of our organizational setting, we show Model
how null effects can be found by adopting approaches used
The firm’s objective is to maximize financial performance
in previous job satisfaction studies.2
within the business unit or department affected by the
H2: All else being equal, omitting effort as a separate employee’s job performance. Similarly, the employee maxi-
antecedent of job satisfaction, either by excluding it from mizes job satisfaction. Business unit performance is
the model or by combining it with job performance, assumed to be, in part, a result of the employee’s job per-
reduces the effect of job performance on job satisfaction.
formance, which is determined by the employee’s effort and
The next three hypotheses are based on the existence of ability. Our data consist of the performance and satisfaction
a typical agency relationship between the firm and an of store managers in a retail chain, so the relevant business
employee. unit for each employee is a store. The firm (in our case, the
retail chain) controls compensation and promotion opportu-
H3: All else being equal, job performance increases with an
employee’s effort and ability. nities and can influence other aspects of the job (e.g.,
H4: All else being equal, firm performance increases with an responsibilities). The idea is that these variables potentially
employee’s job performance. influence both the employee’s job satisfaction and the
employee’s willingness to work hard. We summarize the
A basic assumption of agency theory is that effort is model in Figure 2.
costly to an agent. By defining effort as an input and by The model translates into a system of four equations
considering indirect paths through which effort affects job that represent (1) the relationship among store performance,
satisfaction, we hypothesize that effort should be costly for SPi; the employee’s job performance, JPi; and the
an employee: employee’s effort, MEi (Equations 1–3) and (2) the relation-
H5: All else being equal, an employee’s job satisfaction ship between job satisfaction, JSi, and relevant aspects of
decreases with his or her effort. the employee’s work situation, including effort and job per-
formance (Equation 4):
Our last hypothesis posits a direct implication of the
agency model for fixed compensation (i.e., compensation (1) SPi = α1 + βJP1JPi + ε1i,
that does not change with an employee’s output).
(2) JPi = α2 + βME2MEi + βMA2MAi + ε2i,
H6: All else being equal, fixed compensation has a significant,
positive effect on an employee’s job satisfaction but no
significant effect on the employee’s effort. (3) MEi = α3 + βC3Ci + βPS3PSi + γj3Xji + δk3Yki + ε3i,
and
(4) JSi = α4 + βME4MEi + βJP4JPi + βC4Ci + βPS4PSi + γj4Xji
2The positive effect of job performance on job satisfaction + δk4Yki + ε4i,
appears at odds with standard agency theory. However, a positive
effect may be consistent with a model of repeated interactions where Ci is employee i’s perception of compensation and
between a principal and an agent. PSi is a dummy variable indicating participation in the

FIGURE 2
Proposed Model of Job Satisfaction and Store Performance

Ability +
Job + Store
+ performance performance
+ Effort
Profit
sharing – +
+
Fixed
compensation +
Job
satisfaction
Job factors

Problems with
role perceptions

Notes: Signs indicate the direction of hypothesized effects. The dashed lines indicate relationships included in the model without specifying
hypotheses.

140 / Journal of Marketing, January 2006

profit-sharing plan. Following the literature, we divide the mate. Together with the compensation variables, they repre-
aspects of the job into job characteristics, Xji, and role per- sent the job’s core characteristics (Fried and Ferris 1986).
ceptions, Yki. Job characteristics include the employee’s We define “job autonomy” as the degree to which the firm
perception of the job’s attractiveness, the job’s autonomy, provides independence and discretion to the employee in
the quality of supervision, and the social climate at the work fulfilling his or her role. We define “job attractiveness” as
place. Role perceptions refer to the employee’s perception the degree to which a job is exciting, challenging, and pro-
of his or her responsibilities in terms of clarity, degree of vides a sense of accomplishment. We define “supervisory
overload, and degree of conflict. The nine β parameters are feedback” as the extent to which the employee receives
estimated to assess our hypotheses. We subsequently define information about his or her performance. Supervisory
and describe the four endogenous constructs and the key feedback is important because it often has psychological
exogenous factors (we discuss measurement issues in the value for an employee. It is also a key element of the firm’s
“Data and Estimation” section). control system. Finally, we define the variable “social cli-
The store performance equation (Equation 1) reflects a mate” as the degree to which there is a good working rela-
vertical relationship in which the employee (in this case, the tionship among the employees within the store. We use the
store manager) performs different tasks to generate outputs employee’s perception of these factors because perceptions
for the firm (the retail chain), and SPi is a measure of a are the primary drivers of the effort taken and satisfaction
store’s financial performance. The summary construct, JPi, received (see, e.g., Judge, Bono, and Locke 2000).4
is a measure of the employee’s job performance. We define We include three role perception variables, Yki (k = 1,
this as a qualitative assessment of a store’s performance …, 3): role ambiguity, role conflict, and role overload.
relative to targets and objectives set for that store (as sum- These are known to have significant, negative effects on
marized by a supervisor). We treat job performance as an both job performance and job satisfaction (Brown and
intermediate outcome variable (between effort and store Peterson 1993). We do not have a direct interest in the effect
performance), but our framework also recognizes that other of these variables, but we include them in the model
factors affect store performance.3 because of their acknowledged importance in explaining
The job performance equation (Equation 2) reflects the job performance and job satisfaction. We define “role ambi-
idea that the employee’s job performance, JPi, is a function guity” as a combination of uncertainty about the relation-
of his or her effort, MEi. Consistent with the work of Camp- ship between action and output and a lack of clear direc-
bell and Pritchard (1976), we define effort as the amount of tions and behavioral requirements from the supervisor
energy and time an employee puts into the job. Employees (Rizzo, House, and Lirtzman 1970). We define “role con-
are not endowed with the same ability to perform the job, flict” in terms of the congruency of various job responsibil-
MAi (ability refers to an employee’s skill and knowledge ities (i.e., the degree to which goals, objectives, and respon-
related to the specific duties of the job). This should also sibilities of a position conflict with one another; Rizzo,
have a significant effect on observed job performance. House, and Lirtzman 1970). Role conflict can arise from
The effort equation (Equation 3) reflects the assumption inconsistent demands from different role partners (e.g.,
that effort, MEi, is influenced by various job factors, some supervisors, coworkers, customers) on the employee; incon-
of which the firm controls. The set of job factors included in gruencies with personal values; conflicts among different
Equation 3 consist of compensation, Ci; access to the profit roles; and conflicts among time, resources, and demands
sharing plan, PSi; four job characteristics, Xji; and three role (role overload). Because the workload of the employees in
perception factors, Yki (we elaborate on these characteristics our data set is high and a distinctive job attribute, we
and factors subsequently). We used a dummy variable to include “role overload” as a separate factor.
indicate an employee’s participation in the profit-sharing To complete the model specification, we include inter-
plan (29% of the store managers in the sample were cepts, α
, and error terms, ε
i, for each of the
= 1, …, 4
included in the plan). equations to account for unobserved factors and random
Finally, the job satisfaction equation (Equation 4) is measurement error. We also add a set of variables that cap-
based on the assumption that an employee’s job satisfaction ture store and store manager characteristics for control and
is a function of his or her job performance, his or her effort, identification purposes. We provide details in the discussion
and the job characteristics and role perceptions that affect of our estimation approach. Next, we describe the data set
his or her effort (see the discussion of Equation 3). and discuss measurement and estimation issues.
Our model includes four job factors, Xji (j = 1, …, 4),
that are standard in the literature: job autonomy, job attrac-
tiveness, quality of supervisory feedback, and social cli- Data and Estimation
Data Set
3When the performance of a firm depends on various other We use data that Lusch and Serpkenci (1990) collected for
exogenous factors, it is important to control for bad (good) out-
their study of the effect of personal difference variables on
comes, even when a manager’s job performance is high (low).
Therefore, eliminating job performance from the model and using
only store performance could give a misleading result for the 4Effort and job satisfaction may also be affected by promotion
effect of effort. If the most talented and hardest working store opportunities. A factor analysis of the data (see the “Data and Esti-
managers were assigned to the worst-performing stores to improve mation” section) indicates that “promotion” cannot be identified
them, it might be possible to find a negative effect of effort on independently of compensation. Thus, we exclude promotion as an
store performance. independent factor from the analysis.

Job Satisfaction, Job Performance, and Effort / 141

the job satisfaction of retail store managers. This data set is Store manager effort, ability, and job performance. We
based on a survey of a U.S. grocery retailer with more than obtained measures of effort, ability, and job performance
200 supermarkets. It contains typical measures collected for (for each store manager) from two different scales com-
job satisfaction studies and extensive operating and pleted by the district supervisor. The Appendix provides a
accounting information for each store. The stores are uni- summary of the different scale items we used to measure
form in terms of merchandise and layout, and most stores the different constructs in our model. As we show in Table
have 7000 to 10,000 square feet of selling space. Stores are 1, all measures have good reliability properties. Cronbach’s
about equally distributed over metropolitan and rural areas. alpha values range from .81 for ability to .89 for effort.6
Each store is staffed by a store manager and one or more Store performance. The economic outcome of interest
assistant managers. A district supervisor monitors the oper- to the retail chain is store profits. To reduce potential
ations of 10 to 15 stores and reports directly to senior accounting problems, we use a store’s operating profit,
management. which we define as store sales less store operational
The data consist of three individual data sets collected expenses for the current year. To control for store size, we
from three different sources. The retailer provided operating divide the operating profit measure by available store sell-
and financial data for each store for the most recent ing space for the same year.7
three years. District managers (supervisors) completed a Compensation, job factors, and role perceptions. The
survey to provide an assessment of store managers’ perfor- scales that Lusch and Serpkenci (1990) use to measure a
mance, effort, and ability. Store managers completed a sur- store manager’s perception of compensation and job factors
vey on the quality of their work life, which provides the are derived from the job descriptive index (Smith, Kendall,
data for the store managers’ assessment of job factors, role and Hulin 1969). They contain sufficient items to measure a
perceptions, and job satisfaction. This survey also captured store manager’s perceptions of the five factors reliably (i.e.,
several of the store managers’ personal and attitudinal compensation, job attractiveness, job autonomy, supervi-
characteristics. sory feedback, and social climate). Individual store man-
For the statistical analysis, there were 188 usable obser- agers provided answers. Each of the five factors is mea-
vations from 226 stores (18 surveys were not returned, and sured by its respective scores on two to four items based on
20 were eliminated because of missing data). In addition, a five-point Likert scale, ranging from “strongly agree” to
we eliminated 11 observations from store managers who “strongly disagree,” or on a six-point Likert scale, ranging
were at the current job for less than one year, which left us from “definitely yes” to “definitely no.” The scale items
with 177 observations for estimation. appear in the Appendix. Table 1 shows that Cronbach’s
alpha values range from .71 for job autonomy and social
Measurement of Constructs
climate to .85 for compensation. As we previously noted,
Job satisfaction. Locke (1976, p. 1300) defines job sat- we indicated inclusion in the corporate profit-sharing plan
isfaction as “a pleasurable or positive emotional state,” with a dummy variable. Lusch and Serpkenci (1990) mea-
which is “a function of the perceived relationship between sure the three different role factors with a multi-item scale
what one wants from a job and what one perceives it is (see the Appendix). Cronbach’s alpha for these three factors
offering.” In essence, job satisfaction is an overall state that ranges between .69 for role conflict and .80 for role
is derived from experiencing a work situation. Because our overload.
approach embeds a principal–agent structure within a job To ensure that the factors measure unique aspects of a
satisfaction model, we use job satisfaction as a proxy for the store manager’s job situation, we conducted a factor analy-
utility from working (derived by the employee). This sis. An exploratory factor analysis yielded eight factors with
assumption follows other “workplace studies” that have an eigenvalues greater than one. We then conducted a confir-
economic orientation (Clark 1997; Clark and Oswald 1996; matory factor analysis to test the eight-factor solution, and
Friedman 1978).5 we compared it with other possible solutions. Table 2 pro-
There are two general approaches to measure overall vides a summary of various goodness-of-fit indicators for
job satisfaction. The first determines job satisfaction by the different factor solutions. Although the chi-square test sta-
measurement of satisfaction with different job “facets” tistic indicates that the restrictions underlying the eight-
(e.g., Smith, Kendall, and Hulin’s [1969] job descriptive factor solution are significant (which is expected given the
index); the second measures overall or “global” job satis-
faction directly (e.g., Hackman and Oldham’s [1975] job
6Effort, ability, and job performance are significantly correlated
diagnostic survey). Research shows that in many cases, the
(see Table 1). Nevertheless, a factor analysis of the data strongly
global approach is superior to the facet approach (e.g., indicated the presence of three factors. For each construct, we
Scarpello and Campbell 1983). As a result, we use a global selected scale items on the basis of the results of the factor analy-
three-item measure of job satisfaction. sis. Moreover, higher correlation hurts efficiency, but estimates are
still consistent.
7Note that unobserved store-specific factors and the retailer’s
strategy can affect both store performance and a store manager’s
5These studies define a worker’s utility function as u = u(y, e, i, effort. This can lead to biased parameter estimates if not properly
j), where y is income, e is effort extended, and i and j are sets of controlled for. By measuring job performance relative to store
individual and job parameters, respectively. In contrast to this objectives, we can account for heterogeneity in profit potential
specification, however, we also include job performance as a across stores. We also include several store characteristics in the
determinant of utility. estimation to mitigate this problem further.

142 / Journal of Marketing, January 2006

 TABLE 1
Pairwise Correlation Coefficients and Measurement Properties of Variables

Variables

1 2 3 4 5 6 7 8 9 10 11 12 13 14

1. Compensation
2. Profit sharinga .02
3. Attractiveness .35 –.04
4. Autonomy .38 .00 .42
5. Supervisor .37 .14 .37 .38
6. Social climate .48 .05 .53 .45 .36
7. Role ambiguity –.28 –.03 –.39 –.46 –.46 –.30
8. Role conflict –.11 .05 –.13 .06 –.11 –.12 .40
9. Role overload –.28 .04 –.37 –.24 –.30 –.24 .40 .35
10. Ability .13 .09 –.02 .13 .10 –.03 –.07 –.04 –.16
11. Manager effort .06 .10 –.02 .17 .15 –.06 –.04 .08 –.10 .69
12. Job performance .14 .02 –.07 .08 .11 –.03 –.16 –.05 –.17 .66 .66
13. Job satisfaction .47 .10 .58 .43 .27 .62 –.34 –.16 –.34 .10 .08 .09
14. Store performanceb .06 –.07 –.04 –.13 .01 –.08 –.04 –.10 –.19 .35 .19 .33 –.01

M 1.88 .29 3.74 4.13 2.99 3.54 1.87 2.11 2.75 4.45 4.39 4.30 4.53 56.8
SD .77 .46 .75 .85 .73 .87 .77 .88 .79 .89 .78 1.21 1.19 21.8

Number of scale items 4 1 4 2 4 2 4 3 3 3 5 3 3 —

Cronbach’s α .85 — .75 .71c .73 .72c .79 .69 .80 .81 .89 .88 .67 —
aIndicator variable.
bStore operating profit relative to selling space.
cSimple correlation.

TABLE 2
Goodness-of-Fit Statistics for Different Factor Solutions

Steiger– Chi- Bentler Parsimo-

Number of Lind Square Jöreskog Comparative nious Bollen’s Bollen’s
Factorsa RMSEA (d.f.) GFI Fit Index Fit Index Rho Delta

3 .116 998.7 (321) .696 .695 .559 .575 .698

4 (Overload) .101 918.7 (319) .736 .730 .584 .607 .733
5 (Social climate) .090 810.9 (315) .765 .777 .614 .648 .780
6 (Autonomy) .077 714.5 (310) .793 .818 .638 .685 .820
7 (Supervisor) .062 628.3 (304) .825 .869 .654 .728 .866
8 (Conflict) .049 481.6 (297) .875 .912 .685 .764 .904
9 (Promotion) .048 474.1 (289) .883 .907 .690 .768 .899
aThe three factors are compensation (compensation, promotion, social climate), work (attractiveness, role conflict, role overload), and organi-
zation (autonomy, role ambiguity, supervisor). The subsequent rows indicate higher-factor solutions. The factor that is separated from the pre-
vious solution with fewer factors is in parentheses.
Notes: RMSEA = root mean square error of approximation, and GFI = and goodness-of-fit index.

sample size), its goodness-of-fit increases significantly characteristics added for control and identification pur-
compared with solutions with fewer factors. In addition, the poses. To simplify the exposition, we do not discuss them in
indicators have reasonably high values. detail.8 However, the error terms across the four equations
In summary, we use standard measures for the con-
structs of interest, and they satisfy typical reliability stan-
8We included the following variables in our system of equa-
dards. Because our data contain several five-, six-, and
tions: store performance equation (Equation 1): age of the store,
seven-point Likert scales, we standardized all item number of store employees, tenure of the store manager, and a
responses before creating indicators for estimation. dummy variable for a urban store location; job performance equa-
tion (Equation 2): a series of dummy variables to indicate the
Estimation Approach supervisor; effort equation (Equation 3): a dummy variable for
The model we outlined in the previous section is a triangu- urban store location, tenure, and age of store manager and four
lar system of four simultaneous equations with four personal difference variables we adapted from Lusch and Serp-
kenci’s (1990) study; and job satisfaction equation (Equation 4):
endogenous variables (effort, job performance, job satisfac- four personal difference variables. Thus, for every equation, the
tion, and store performance), ten exogenous variables (a number of exogenous variables is larger than the number of
store manager’s ability, six job factors, and three role per- included endogenous variables, which satisfies the order condition
ception variables), and several store and store manager of identification. The restriction that effort and job satisfaction do

Job Satisfaction, Job Performance, and Effort / 143

are most likely correlated (i.e., the error covariance matrix in job satisfaction studies. These alternative models enable
is not diagonal, that is, the system is not fully recursive). In us to assess H2.
this situation, Lahiri and Schmidt (1978) show that a trian-
gular system can be estimated in the manner of seemingly Effort, Job Performance, and Compensation
unrelated regression models (ignoring the simultaneity) The estimation results for Equations 1–4 appear in Table 3.
with maximum likelihood estimation. This approach yields Rows 2–4 show the results for the direct and indirect effects
consistent and efficient estimates of the error variances, of a store manager’s effort and job performance, Rows 5–6
which is necessary for parameter estimates to be consistent show the results for the compensation variables, Rows 7–10
(Greene 1991).9 show the results for the effects of job characteristics, and
One estimation problem is the possibility that access to the bottom three rows show the effect of role perceptions.
the profit-sharing plan is determined through self-selection First, the effect of job performance on the manager’s job
by the store managers or by the chain. A comparison of satisfaction is positive and highly significant, providing
demographic and personality variables between store man- strong support for H1 (bJP4 = .286, p < .001).10 The data can
agers with and without the plan suggests that enrollment in also be used to refute the idea that happy employees are
the plan was random. A second problem is the possibility of more productive. If we reverse this relationship by adding
random shocks that can simultaneously affect job perfor- job satisfaction to Equation 2 and by removing the effect of
mance and store performance. This can lead to a problem of job performance from Equation 4, we find no significant
contemporaneous correlation in the store performance effect of job satisfaction on job performance (b = .098, p =
equation (Equation 1), which we control for by using instru- .20).
mental variable estimation. Specifically, we use store per- Second, as we proposed in H3, job performance
formance and other available variables lagged by one and increases with both effort (bME2 = .158, p < .05) and ability
two years as instruments. We then use the predicted value of (bMA2 = .387, p < .001). Consistent with H4, store perfor-
store performance to estimate the system of equations. mance increases with job performance (bJPI = 6.67, p <
.001). We also conducted a series of tests to assess the
robustness of our findings with respect to alternative
Results assumptions. For several variables, we tested for nonlinear
We first present the results for our four-equation model, effects on job satisfaction. All were insignificant. The posi-
which yield tests of H1 and H3–H6. We then analyze two tive effect of job performance on store performance is
alternative models to replicate several controversial results robust with respect to different store performance measures
(e.g., net profit, sales per square foot). Because of unob-
not directly affect store performance ensures that the rank condi-
tion is satisfied as well.
9Three-stage least squares estimation can provide more efficient
results by imposing greater constraints on the system. However, 10When our hypotheses make clear directional predictions, we
this makes estimates more susceptible to model specification prob- report the statistical significance based on one-tailed t-tests. We
lems. In any event, the results generated with three-stage least report the significance of effects of other parameters based on two-
squares estimation lead to identical conclusions (the magnitudes tailed t-tests. Estimation details for additional analyses we pre-
of some estimated parameters are different). sented in this section are available on request.

TABLE 3
Estimation Results

Store Store Manager Store Manager Store Manager

Performance Job Performance Effort Job Satisfaction
Parameter (Equation 1) (Equation 2) (Equation 3) (Equation 4)

Intercept (α
) 27.0***0 (4.93) –.495*** (.211) 0.078*** (.213) –.054*** (.051)
Effort (βME
) 0.158*** (.074) –.269*** (.061)
Ability (βMA
) 0.387*** (.073)
Job performance (βJP
) 06.67*** (1.33) 0.286*** (.054)
Compensation (βC
) –.001*** (.087) 0.168*** (.057)
Profit sharing (βPS
) 0.183*** (.109) 0.246*** (.080)
Job autonomy (γ1
) 0.249*** (.079) 0.096*** (.053)
Job attractiveness (γ2
) 0.020*** (.092) 0.476*** (.061)
Supervisory feedback (γ3
) 0.140*** (.080) –.128*** (.060)
Social climate (γ4
) –.204*** (.083) 0.176*** (.056)
Role ambiguity (δ1
) 0.093*** (.091) –.026*** (.060)
Role conflict (δ2
) –.024*** (.054) –.047*** (.031)
Role overload (δ3
) –.119*** (.070) –.083*** (.045)
*p < .10 (two-tailed t-test).
**p < .05 (two-tailed t-test).
***p < .01 (two-tailed t-test).
Notes: Number of observations = 177; total number of parameters estimated (including control variables) = 67. Standard errors are in
parentheses.

144 / Journal of Marketing, January 2006

served contemporaneous effects, we used an instrumented omy (g14 = .096, p < .1), job attractiveness (g24 = .476, p <
store performance variable in our estimations. The actual .001), and good social climate (g44 = .176, p < .01). In addi-
measure of store performance can artificially inflate the tion to the quality of supervisory feedback (g34 = –.128, p <
measured effect of job performance on store performance. .05), the three role perception factors also decrease job sat-
We repeated the estimation with actual store performance isfaction, though at best, their effects are only marginally
and found this to be the case. To determine whether a man- significant (ambiguity: d14 = –.026, p = .67; conflict: d24 =
ager’s job satisfaction depends on the performance of his or –.047, p = .13; overload: d34 = –.083, p < .1).
her store (Ostroff 1992), we added store performance to For the store manager effort equation (Equation 3), we
Equation 4. We found that the effect of store performance found (expected) positive effects of job autonomy (g13 =
on job satisfaction is insignificant (b = .002, p = .21). .249, p < .01) and the quality of supervisory feedback
Third, and most important, we found strong support for (g33 = .140, p < .1). Conversely, job attractiveness has no
H5 (i.e., effort is a “cost” to the store manager; bME4 = significant effect on effort (g23 = .020, p = .83). Notably, we
–.269, p < .001). Finally, the estimate for the effect of com- found that a better social climate is associated with lower
pensation on job satisfaction has the expected positive sign effort (g43 = –.204, p < .05). This finding indicates that in
and is statistically significant (bC4 = .168, p < .01), whereas hierarchical organizations, such as a retail store, excessive
its effect on effort is not significant (bC3 = –.001, p = .99), socialization might interfere with the retailer’s objectives of
as we expected. These two results support H6. We also esti- extracting high effort from the store employees. Although
mated the system with an estimate of the store manager’s the store manager gains satisfaction from positive work
annual salary added to Equations 3 and 4 and found that the relationships, having subordinates that are more than just
results are unaffected. For job satisfaction, the effect of employees (i.e., friends) may interfere with the ability to
actual salary is only marginally significant. manage them. This counters the argument that retailers that
As we previously mentioned, our data set provides us create close working relationships between employees and
with the ability to examine the effects of a compensation store management have higher levels of performance
component that is used frequently in firms but has not been (Dunne and Lusch 1999). Of the three role perception varia-
subject to significant empirical research: corporate-level bles, only the effect of role overload is marginally signifi-
profit-sharing plans. As with other compensation elements, cant (d34 = –.119, p < .1).11 In general, we find that the
access to this plan, which some store managers had, should effect of the role perception variables are weaker than
increase job satisfaction (all else being equal). As we show reported in other job satisfaction studies (Brown and Peter-
in Table 3, we find a positive effect of the profit-sharing son 1993; Lusch and Serpkenci 1990). This difference may
plan on job satisfaction (bPS4 = .246, p < .001). The effect be caused by the exclusion of effort, as was the case in these
of this plan on effort is less obvious. According to agency studies (i.e., the disutility from effort could have been par-
theory, there should be no effect, because the effort of an tially attributed to stress factors).
individual store manager has only a small impact on corpo- As we mentioned previously, we included several varia-
rate profitability. Conversely, arguments in the organiza- bles that were indicative of store and store manager charac-
tional psychology literature suggest a positive effect teristics in the estimation for control and identification pur-
because contingent rewards that depend less directly on a poses. We do not discuss them except for noting that the
person’s own performance are considered less controlling signs of the personal difference variables are consistent
(Deci 1971; Ryan, Mims, and Koestner 1983). We found with Lusch and Serpkenci’s (1990) hypotheses.
that access to the profit-sharing plan leads to greater effort
(bPS3 = .183, p < .05). Therefore, it would be useful to Alternative Models
investigate further the mechanism through which such plans We now examine how the results of our analysis are
affect the agent’s effort. affected by changing the definition of job performance and
By carefully separating input (store manager’s effort) excluding effort as an antecedent from the model (as H2
from output (store manager’s job performance), we find suggests). To test these ideas, we eliminate effort (i.e., the
support for both the importance of intrinsic rewards that effort equation) from the model and add the job characteris-
store managers obtain through job performance (H1) and tic and role perception variables to the job performance
the assumption that effort per se is a disutility or cost for equation. In a first alternate model, we use an “aggregate”
them (H5). Because a store manager’s effort increases job measure of job performance that includes effort and ability,
performance (H3), it has a positive, indirect effect on job as Walker, Churchill, and Ford (1977) advocate and as
satisfaction. However, this positive, indirect effect of effort
(.158 × .286 = .045) is of smaller magnitude than the nega-
tive, direct effect (–.269). This implies that a store manager
must receive compensation for his or her effort. 11We estimated a model that combined the three role perception
variables into a single “job tension” factor. We found a marginally
Other Job Factors and Role Perceptions significant effect on job satisfaction (δ = –.100, p < .1) and an
The estimates for the four job factors and the three role per- insignificant effect on effort (δ = –.096, p = .28). In addition, we
allowed for direct effects of job factors and role perception varia-
ceptions included in the job satisfaction equation (Equation bles on store performance and found no significant effect and no
4) have signs that are consistent with existing research, change in the parameter estimates of interest. However, these fac-
except for the effect of the supervisor, which is negative. A tors could potentially moderate the effect of effort on job perfor-
store manager’s job satisfaction increases with job auton- mance. Such a test is left to further research.

Job Satisfaction, Job Performance, and Effort / 145

Lusch and Serpkenci (1990) use. We then estimate this job performance leads to a positive but much smaller effect
same model (without effort) with the “narrow” measure of (b = .136, p < .05).12 These results strongly support H2 and
job performance we used in our original model. This repli- indicate that failing to control properly for the effect of
cates Bagozzi’s (1978) approach. We expect the first alter- effort on job satisfaction leads to results that are biased
nate model to replicate the insignificant effect of job perfor- toward insignificance.13
mance on job satisfaction that Lusch and Serpkenci (1990) Note that the effects of different job factors on job per-
report: The negative and the positive elements in the job formance and job satisfaction are different in the alternate
performance measure should cancel each other out. By models. In particular, when we exclude effort from the job
completely eliminating effort, the second version should performance measure, the results show a negative and sig-
yield a somewhat larger effect of job performance on job nificant effect of job attractiveness and a negative and mar-
satisfaction, but it should still be substantially smaller than ginally significant effect of job autonomy on job perfor-
the one we obtained from the fully specified four-equation
model.
The estimation results shown in the second and third
columns of Table 4 support these conjectures. (To facilitate 12The second alternate model is a nested version of the full

the comparison, we repeated the relevant results from Table model. As a result, we can statistically test the implied restrictions
3 in the first column of Table 4.) Using an aggregate mea- using a chi-square test. The alternate model can be rejected with a
high degree of significance (χ2 = 21.4, degree of freedom = 1).
sure of job performance leads to an insignificant effect of 13We also estimated a model similar to that of Brown and Peter-
job performance on job satisfaction (b = .023, p = .76). This son (1994), which excluded job characteristics, especially the
result is equivalent to the insignificant effect that Lusch and compensation variables. In this case, we found a positive effect of
Serpkenci (1990) report. The use of the narrow measure of effort.

TABLE 4
Estimation Results for Alternate Models

Job Satisfaction Modelsa

Relevant Results Aggregate Job Narrow Job

Parameter from Table 3 Performance Measure Performance Measure

Job Satisfaction
Constant –.054 (.051) –.044 (.066) –.072 (.077)
Effort –.269*** (.061)
Job performance .286*** (.054) .023 (.076) .136** (.062)
Compensation .168*** (.057) .299*** (.085) .239*** (.086)
Profit sharing .246*** (.080) .163 (.121) .166 (.119)
Job autonomy .096* (.061) .285*** (.084) .380*** (.079)
Job attractiveness .476*** (.053) .304*** (.092) .357*** (.092)
Supervisory feedback –.128 (.060) –.081 (.091) –.099 (.089)
Social climate .176*** (.056) .168** (.083) .190** (.083)
Role ambiguity –.026 (.060) .019 (.097) –.026 (.090)
Role conflict –.047 (.031) .026 (.073) –.009 (.054)
Role overload –.083 (.045) .057 (.081) –.040 (.080)

Effort/Job Performanceb
Constant .078 (.213) –.190 (.331) –.630* (.376)
Compensation –.001 (.087) .090 (.075) .186* (.086)
Profit sharing .183* (.109) .289*** (.111) .134 (.126)
Job autonomy .249*** (.079) .166** (.074) –.101 (.081)
Job attractiveness .020 (.092) –.088 (.081) –.195** (.081)
Supervisory feedback .140* (.080) .129* (.078) .052 (.088)
Social climate –.204** (.083) –.213*** (.072) –.107 (.083)
Role ambiguity .093 (.091) .0711 (.063) –.106 (.090)
Role conflict –.024 (.054) –.028 (.072) .045 (.055)
Role overload –.119* (.070) –.096 (.071) –.156* (.080)

χ2 (d.f.) 12.9*** (1) 21.4*** (1)

*p < .10 (two-tailed t-test).
**p < .05 (two-tailed t-test).
***p < .01 (two-tailed t-test).
aWe left the control variables as in the original model.
bBecause the two job satisfaction models did not include effort, the various job characteristic and role perception variables were directly linked
to job performance.
Notes: Standard errors are indicated in parentheses.

146 / Journal of Marketing, January 2006

mance. Again, these results suggest that omitting effort employees’ job satisfaction. As a result, benefits such as
leads to biased estimates. reduced turnover and less absenteeism (a result of higher
job satisfaction) may be useful for justifying the cost of a
policy, even when that policy is directed primarily toward
Discussion improving job performance.
This study was motivated by inconsistencies across differ-
ent studies in the job satisfaction research, including limited Effort, Job Performance, and Job Satisfaction
and contradictory evidence that high levels of effort are Because job satisfaction is a proxy for utility (Clark and
costly for employees. An examination of the literature sug- Oswald 1996; Friedman 1978), a negative relationship
gests that the inconsistencies most likely arise from differ- between manager effort and job satisfaction follows from
ences in construct definitions and a failure to account for the principal–agent framework. Nevertheless, the relation-
effort properly. Effort and compensation are the most ship has proved elusive to empirical validation. Recogniz-
important factors in a vertical work relationship, yet few job ing the different possible paths through which an
satisfaction studies account for both as separate constructs. employee’s effort may affect his or her satisfaction enables
Furthermore, in marketing, the majority of studies examine us to confirm a negative relationship empirically. This find-
the job satisfaction of salespeople (i.e., a context in which ing, combined with the positive effect of job performance
compensation is frequently related to job performance and, on store performance, is consistent with the economic view
thus, effort). The failure to account for effort here (and, that there is an inherent conflict of interest in vertical rela-
thus, the effort–compensation relationship) also biases esti- tionships. When accounting for effort, we also find rela-
mates of the relationship between compensation and job tively weak effects of the role perception variables. Factors
satisfaction. In addition, we were interested in understand- such as role ambiguity and role conflict are considered key
ing the effects of corporatewide profit-sharing plans, which determinants of job satisfaction in the sales force literature
is a relatively unresearched element of the compensation (Brown and Peterson 1993). Because these factors capture
package in many organizations. work-related stress, it is possible that they captured the
omitted effect of effort.
The Relationship Between Job Performance and The positive effect of job performance on job satisfac-
Job Satisfaction tion also has important implications for research based on
The empirical analysis in this article uses data collected for agency theory. In a standard agency model (e.g., Lal, Out-
a typical job satisfaction study, but the model we propose land, and Staelin 1994), it is assumed that job performance
incorporates the basic constructs from an agency relation- can increase job satisfaction only indirectly (through factors
ship and the key antecedents of job satisfaction. In contrast such as compensation or promotion). Our research demon-
to previous models, this framework accounts for both the strates that this standard assumption of agency theory may
direct and the indirect effects of effort (through job perfor- not be justified. The omission of job performance’s effect
mance) on job satisfaction and leads to conclusions that are on job satisfaction has the potential to bias the effect of
significantly different. effort on job satisfaction toward insignificance.14 For exam-
First, we find a significant, positive effect of job perfor- ple, when the effect of job performance is eliminated from
mance on job satisfaction. This contrasts with Lusch and the job satisfaction equation (Equation 4), we obtain a neg-
Serpkenci’s (1990) reported negative (but insignificant) ative but insignificant effect of effort on job satisfaction
effect of job performance, using the same data set. We show (b = –.031, p = .24).15
that not accounting for effort biases the estimated effect of
job performance on job satisfaction, and this can lead to Corporate Profit-Sharing Plan
incorrect conclusions. Second, by changing the model and In general, the literature distinguishes between two types of
construct measures to be consistent with prior studies, we income that employees can earn: fixed compensation,
replicate small or insignificant effects of job performance which is paid to the employee independent of output, and
on job satisfaction and a positive effect of effort on job sat- variable pay, which is paid to the employee contingent on
isfaction, as reported in the existing literature. This supports output. In our data, there is a third type of compensation:
the argument that problems with construct definition can payments that are based on overall corporate performance.
explain inconsistent findings in the job satisfaction litera- Because corporate performance is not known in advance,
ture. This finding also challenges the now widely accepted the expected payment to the employee under this plan is
view about the relationship between job performance and uncertain. In contrast to variable pay, which is directly con-
job satisfaction in organizational psychology and the sales tingent on an employee’s output, the ability of an employee
force literature that the two constructs do not affect each in a large organization, such as a retail chain, to affect the
other. In particular, decades of research have failed to find a level of the expected payoff from a corporate-level plan is
significant or consistent link between job performance and
job satisfaction (Brown and Peterson 1993; Iaffaldano and
Muchinsky 1985). 14This is analogous to the way that the omission of effort’s
A positive effect of job performance on job satisfaction effect on job satisfaction biases the effect of job performance
also has important implications for a firm that wants to toward insignificance.
motivate and retain talented employees. It implies that 15Clark (1997) does not include job performance and also finds
actions to increase job performance can also increase a relatively weak negative effect of effort.

Job Satisfaction, Job Performance, and Effort / 147

also low. The findings show that this type of compensation also demonstrates important omitted variables biases that
has some incentive pay–type effects: It has positive effects can arise in the empirical analysis of work relationships.
on both effort and job satisfaction. This holds even though The most obvious extension is to generalize the findings
increased effort by a store manager is unlikely to affect the to agency relationships in which the incentives in the com-
ultimate payout from the plan significantly. This is useful pensation packages are stronger (i.e., there are variable
because many firms would like to provide incentives to components in the compensation that are directly related to
their employees (with performance-based pay) but cannot the agent’s output). Restricting the analysis to a single
because the impact of an individual employee on output retailer provides a benefit by reducing the potential number
cannot be isolated. Most employees in marketing positions of confounding factors. We also identified an interesting
have a relatively small direct effect on the outcome of their finding about corporatewide profit-sharing plans. However,
brand, business unit, or customer service department. In we cannot determine its relative effectiveness with the
these conditions, profit-sharing plans based on the perfor- available data. An interesting issue for further investigation
mance of the overall organization provide an opportunity to is to determine whether and how different types of employ-
obtain an effect similar to that of performance-based pay for ees respond to pay that is based on overall corporate
the sales force. Thus, although data limitations prevent us performance.
from conducting a detailed analysis of why corporate profit- Similar to any empirical study of complex organiza-
sharing plans act the way they do, our results indicate that tional issues, this study is subject to several cautions. For
these plans can be of significant value in organizations. some of our measures, we use cross-sectional data, and this
limits our ability to control fully for certain unobserved
effects. In addition, it limits our ability to test the direction
Summary and Further Research of causality. To the extent possible, we make use of covari-
This article attempts to clarify ambiguities in the literature ates and test for reverse relationships. We have also exer-
about the relationships among effort, job performance, and cised care to reduce potential problems pertaining to mea-
job satisfaction. Using a model with variables that are surement errors, sampling bias, and incomplete model
important for both agency theory and organizational psy- specification. That being said, the study has two method-
chology, we find a negative, direct effect of effort and a ological aspects that differentiate it from other studies.
positive, direct effect of job performance on job satisfac- First, we use individual-level data to test an individual-level
tion. We show that conflicting findings in the literature are a model, as Lal, Outland, and Staelin (1994) suggest. Second,
result of inconsistency in both the measurement and the we use multiple sources of information to measure the vari-
definition of constructs across studies that do not fully ous constructs, thus reducing the problem of common
account for all the relationships among constructs. This method bias and common source bias. This enables us to
suggests that some results in the sales force literature shed new light on the determinants of job satisfaction and
regarding job satisfaction, such as the strong effect of role provide insights that are important both for researchers in
perception variables, should be reexamined. This article this domain and for organizations.

APPENDIX
Scale Items to Measure Model Constructs

Compensation Role Conflict

I am paid fairly for the work I do.a Having to decide things that affect the lives of individuals
that you know.c
My pay is better than that for similar jobs in other firms.a
Feeling that you may not be liked and accepted by the
Salary and wage increases are given to those who do a
people you work with.c
good job.a
Feeling that you do things on the job that are against your
Do you feel your pay is as high in comparison with what
better judgment.c
others get for similar work in other companies?b

Job Attractiveness Role Overload

After a day’s work, I really feel like I have accomplished Feeling that you have heavy a workload, one that you can’t
something.a possibly finish during an ordinary workday.c
I am in a “dead-end” job. (R)a Thinking that the amount of work you have to do interferes
with how well it gets done.c
I am often bored with my job. (R)a
Feeling that your job tends to interfere with your family life.c
Do you find your work challenging, exciting, and giving you
a sense of accomplishment?b

148 / Journal of Marketing, January 2006

 APPENDIX
Continued

Job Autonomy Effort

I have a lot to say about how to do my job.a Takes responsibility in his work.d
How satisfied are you with the amount of control you have Readily assumes responsibility.d
in your work?f
Makes an effort to improve his managerial skills.d
Works long hours when necessary.d
Level of motivation.e

Supervisory Feedback Ability

Management is quick to criticize poor performance. (R)a Can cope with pressure or strain on the job.d
No one ever says “you’ve done a good job.” (R)a Decision-making ability.e
Do you feel you do not know what your supervisor thinks of Knowledge of trade area.e
you, how he evaluates your performance? (R)b
Tolerance for pressure.e
Do you feel free to offer suggestions concerning policies
and procedures affecting your operation?b

Social Climate Job Performance

Working for Winn’s is like being a part of a family.a Fails to meet to target goals set for the store. (R)d
The people here are proud to work for Winn’s.a Achieving the target sales volume.e
Achieving the target gross profit.e

Role Ambiguity Job Satisfaction

Being unclear on just what the scope and responsibilities of How satisfied are you with your general work situation?f
your job are.c
Would you advise a friend looking for a new job to take one
Feeling that you are not fully qualified to handle your job.c similar to yours?b
The fact that you can’t get enough information to carry out I just hate to get up in the morning to go to work.a
your job.c
Not knowing just what the people you work with expect of
you.c

Source: Based on instruments that Lusch and Serpkenci (1990) use.

aMeasured on a five-point Likert scale, ranging from “strongly agree” to “strongly disagree.”
bMeasured on a six-point Likert scale, ranging from “definitely yes” to “definitely no.”
cMeasured on a five-point Likert scale, ranging from “never bothered” to “bothered nearly all the time.”
dMeasured on a five-point Likert scale, ranging from “strongly disagree” to “strongly agree.”
eMeasured on a seven-point Likert scale, ranging from “very satisfied” to “very dissatisfied.”
fMeasured on a six-point Likert scale, ranging from “extremely satisfied” to “extremely dissatisfied.”
Notes: R = reverse coded.

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