Behavioral Ambidexterity: The Impact of Incentive Schemes on Productivity, Motivation, and Performance of Employees in Commercial Banks

• Published date: 01 December 2015
• Author: Sang Mook Lee,Amir Shoham,Mohammad Faisal Ahammad,Miki Malul
• DOI: http://doi.org/10.1002/hrm.21668
• Date: 01 December 2015

Human Resource Management, December 2015, Vol. 54, No. S1. Pp. S45–S62

© 2015 Wiley Periodicals, Inc.

Published online in Wiley Online Library (wileyonlinelibrary.com).

DOI:10.1002/hrm.21668

Correspondence to: Amir Shoham, Fox School of Business, Temple University, Department of Finance, Alter Hall,

1801 Liacouras Walk, Philadelphia, Pennsylvania 19122, Phone: 215-204-7676, E-mail: amir.shoham@temple.edu

BEHAVIORAL AMBIDEXTERITY:

THEIMPACT OF INCENTIVE

SCHEMES ON PRODUCTIVITY,

MOTIVATION, AND PERFORMANCE

OF EMPLOYEES IN COMMERCIAL

BANKS

MOHAMMAD FAISAL AHAMMAD, SANG MOOK LEE,

MIKI MALUL, AND AMIR SHOHAM

Human resource management systems may serve as an antecedent that enables

fi rms to develop a context for ambidexterity—an ability to pursue contradictory

processes (exploitation versus exploration) within the same fi rm. The aim of this

article is to examine the impact of motivation-enhancing HR practices on the

productivity, motivation, and performance of commercial bank employees to

promote and attain contextual ambidexterity within the organization. The theo-

retical model presented in this article shows how ex-ante incentives (incentives

based on past performance) and ex-post incentives (incentives based on future

performance) affect productivity, motivation, and performance of employees.

The results are tested empirically by analyzing real quarterly data of commercial

bank employees in Israel. The main results show that workers with relatively high

abilities might take advantage of both ex-ante and ex-post incentives. In contrast,

workers with relatively low ability are unable to take advantage of both incen-

tive schemes. Our fi ndings indicate that motivation-enhancing HR practices such

as fi nancial incentives signifi cantly infl uence the productivity and performance

of employees. Our study contributes to the ambidexterity literature by examin-

ing how motivation-enhancing human resource (HR) practices such as incentive

schemes make employees feel the sense of stretch that is essential in building an

ambidextrous organization. © 2015 Wiley Periodicals, Inc.

Keywords: pay for performance, reward systems

S46 HUMAN RESOURCE MANAGEMENT, DECEMBER 2015

Human Resource Management DOI: 10.1002/hrm

HR practices within

the motivation-

enhancing domain

must provide the

compensation

system that includes

incentive pay

and performance

appraisal criteria, as

well as processes

that motivate

employees to work

toward certain goals.

1995). High-involvement HR practices may be

grouped into ability-enhancing, motivation-

enhancing, and opportunity-enhancing domains

(Prieto & Santana, 2012). HR practices within the

motivation-enhancing domain must provide the

compensation system that includes incentive pay

and performance appraisal criteria, as well as pro-

cesses that motivate employees to work toward

certain goals.

The motivation-enhancing HR domain

mostly includes compensation practices and per-

formance appraisal procedures that might direct

employees’ actions toward the accomplishment

of work objectives and lead employees to perceive

their organizations as valuing their contributions

(Subramony, 2009), which compel them to recip-

rocate by holding positive attitudes and engaging

in favorable discretionary behaviors (Sun, Aryee,

& Law, 2007). Compensation systems linking pay

to performance and incentive plans may also sup-

port social climates by clearly communicating

organizational expectations regarding expected

employee behaviors. In addition, performance

appraisals that have a developmental rather than

a controlling focus will increase the perception of

an organizational climate that is safe and nonjudg-

mental (Cabrera & Cabrera, 2005; Gagné, 2009).

HR practices are the primary methods to influ-

ence and shape the skills, attitudes, and behaviors

of individuals to do their work and, hence, achieve

organizational aims (Collins & Clark, 2003).

Although it has been routinely assumed that HR

practices represent a conduit for contextual ambi-

dexterity (Kang & Snell, 2009), the actual mecha-

nisms for contextual ambidexterity linking HR

practices and performance has received limited

research attention. More specifically, consistent

with Patel etal. (2012), we argue that a thorough

evaluation of different high-performance HR prac-

tices, such as incentive schemes, is essential to

comprehend the mechanism linking high-perfor-

mance HR practices to contextual ambidexterity.

Therefore, researchers need to explore how moti-

vation-enhancing HR practices such as different

incentive schemes shape the employees’ behav-

iors and productivity to contribute to an organiza-

tion’s contextual ambidexterity and to improved

performance.

The aim of this article is to investigate the

impact of both ex-ante incentives (incentives

based on past performance) and ex-post incen-

tives (incentives based on future performance) on

the productivity, motivation, and performance

of employees in an organization. Specifically, we

examined how motivation-enhancing HR prac-

tices such as incentive schemes make employees

feel the positive sense of stretch that is essential

One of the critical features of a successful

organization in the 21st century is orga-

nizational ambidexterity. Organizational

ambidexterity can be defined as the

capability to concurrently pursue both

exploration and exploitation, and make changes

resulting from the adoption of multiple, contra-

dictory processes within the same firm (O’Reilly

& Tushman, 2004). Gibson and Birkinshaw (2004)

identified a behavioral model of ambidexterity,

called contextual or behavioral ambidexterity,

which has four elements: stretch, discipline, sup-

port, and trust. However, beyond these general

features, little empirical research has been done

to identify organizational systems that facilitate a

behavioral view of ambidexterity (Lavie, Stettner,

& Tushman, 2010; Simsek, 2009;

Simsek, Heavey, Veiga, & Souder,

2009).

Recently, Patel, Messersmith,

and Lepak (2012) attempted to

address this gap by building on

existing work about the behavioral

perspective to examine the extent

to which a human resource man-

agement system may serve as an

antecedent that enables firms to

develop a context for ambidexterity.

They found that high-performance

work systems were likely to empha-

size alignment and adaptability via

separate HR practices that work in

concert to establish the context of

stretch, discipline, support, and

trust necessary in an ambidextrous

organization (Ghoshal & Bartlett,

1994). However, Patel etal. (2012)

did not directly measure the con-

textual elements of ambidextrous

organization, and recommended

that future researchers should inves-

tigate the relationships between particular HR

practices and the contextual elements needed to

produce organizational ambidexterity. Further,

Patel etal. (2012) suggested that a detailed assess-

ment of different high-performance HR practices,

such as compensation or incentive schemes, was

necessary to understand the mechanism linking

high-performance HR practices to contextual or

behavioral ambidexterity.

High-performance HR practices (Huselid,

1995; Takeuchi, Lepak, Wang, & Takeuchi, 2007)

or high-involvement HR practices (Appelbaum,

Bailey, Berg, & Kallerberg, 2000) contribute to a

firm’s performance by motivating employees to

adopt desired behaviors that collectively contrib-

ute to the benefit of the organization (Huselid,