Sridhar N . Ramaswami & Jagdip Singh Antecedents and Consequences of Merit Pay Fairness for Industrial Salespeople

How do salespeople make judgments of merit pay fairness? By what mechanisms do fairness judgments influence the performance and commitment of salespeople? Using equity and social exchange theories, the authors examine these questions for industrial salespeople who work in a Fortune 500 firm and provide four key findings. First, of the three dimensions of fairness judgments, they find the interactional fairness dimension to be relatively more important than procedural or distributive fairness in influencing job outcomes of salespeople. Second, supervisory behaviors have significant influence in shaping salespeople’s fairness judgments, particularly judgments of distributive and interactional fairness. Third, the results underscore the contrasting mediating role of trust in supervisor and job satisfaction. Although trust in the supervisor is important in reducing salespeople’s opportunistic behaviors, the authors find job satisfaction to be important in enhancing their loyalty to the organization. Fourth, salespeople’s job performance is influenced directly by extrinsic factors such as fairness of current rewards and potential for rewards. In addition, the authors outline implications for theory and practice.