* Academy of Management Review2000, Vol. 25. No. 4, 864-872.

NOTE

GROUP PAY-FOR-PERFORMANCE PLANS:THE ROLE OF SPONTANEOUS GOAL SETTING

ELAINE C. HOLLENSBEJAMES P. GUTHRIE

University of Kansas

Despite the increasing popularity of group pay-for-performance plans, relatively littletheory exists regarding the dynamics of these plans. We integrate goal setting, payplan characteristics, and group factors to explain and predict the effectiveness ofwhat we call "open-goal" group pay plans. We introduce spontaneous goal setting asa process explanation and propose antecedents that affect a group's propensity to setgoals, the goal level chosen, and goal commitment. Finally, we discuss implicationsof our propositions for future research.

Many firms have implemented group-basedpay-for-performance plans—a trend that islikely to continue (Flannery, Hofrichter, & Plat-ten, 1996). In a recent survey Gross (1995) foundthat 51 percent of companies either had grouppay programs or were considering institutingthem. This trend is supported by impressiveresults, including increased productivity (Han-sen, 1997; Kaufman, 1992), teamwork (Hatcher& Ross, 1991), pay satisfaction (Welbourne &Cable, 1995), group communication (Hanlon &Taylor, 1991), and decreases in grievances(Hatcher & Ross, 1991) and monitoring costs(Cooke, 1994). Group pay plans take on manynames and forms, including profit sharing,gainsharing, team incentives, goal sharing,achievement sharing, winsharing, and resultssharing (Belcher, 1996; Lissy, 1993; McNutt,1990; Schuster & Zingheim, 1993).

The defining characteristic of group pay-for-performance plans is that compensation variesas a function of performance achieved by agroup of employees. As we define it, a "group ofemployees" consists of any number of individu-als engaged in interdependent work for interde-pendent rewards. In practice, groups under payplans vary from small to plant wide, with thelatter often comprising multiple, interdependent

We presented an earlier version of this work at the 1999annual meeting of the Academy of Management in Chicago.We thank two anonymous reviewers for their many usefulcomments and suggestions.

subgroups. Although much is known about howgroup pay plans are structured, little is knownabout how and why they are successful (Hatcher& Ross, 1991). As put succinctly by authors of arecent review, current practice regarding grouprewards has "moved ahead of its basis in em-pirical research" (DeMatteo, Eby, & Sundstrom,1998: 142).

In previous work authors have linked specificgroup pay plans to motivational theories (seeWelbourne & Gomez-Mejia, 1995, for a review),identity theory (Welbourne & Cable, 1995),equity (Cooper, Dyck, & Frohlich, 1992), agencytheory/organizational justice (Welbourne,Balkin, & Gomez-Mejia, 1995), and Deutsch's the-ory of cooperation (DeMatteo et al., 1998; Hatcher& Ross, 1991). However, although researchershave recently begun to study the linkagesamong individual incentives, goal setting (e.g..Lee, Locke, & Phan, 1997), and behavioral choice(e.g., Sundby, Dickinson, & Michael, 1996), noauthors have examined possible linkages be-tween group pay plans and goal setting. Wedelineate why and how goal setting offers anexplanation for the effectiveness of group payplans, as well as insight into areas for futureresearch.

As explained below, for some forms of grouppay plans—those in which predetermined goalsare specified—the role of goal setting is fairlyintuitive. However, even when group pay planshave no predetermined goals or targets, webelieve goals and goal setting still play a vital

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role. A principal proposal is that in these latterplans, referred to here as "open-goal" plans, thepromise of rewards motivates group members tospecify and pursue challenging performancegoals, even when none formally exists. Borrow-ing from Locke and Latham (1990), we describethis behavior as "spontaneous" goal setting,and consistent with Locke and Latham (1990), weconceptualize spontaneous goal setting as aprocess in which goals are set not as part of apay plan architecture but, rather, by group mem-bers stimulated by the prospect of financial re-wards.

The particular focus of this work is specifyingthe role of spontaneous goal setting in open-goal plans. We begin by presenting a brief treat-ment of goal-setting theory as applied to groupsettings. This is followed by a general descrip-tion of group pay-for-performance plans. Wethen develop propositions relating group factorsand group pay plan characteristics to goal set-ting within groups.

GOAL-SETTING THEORY AS APPLIED TOGROUP SETTINGS

Goals affect performance by directing atten-tion and action, mobilizing effort, and motivat-ing individuals to develop goal-attainmentstrategies (Locke, Shaw, Saari, & Latham, 1981).In groups goals likely cause members to workboth "smarter and harder" in cooperative pur-suit of the goals. Locke and Latham define agoal as "a specific standard of proficiency on agiven task, usually within a time limit" (1990: 26)."Goal difficulty" specifies a particular level ofproficiency as measured against a standard.Goal-setting theorists most often propose a lin-ear relationship between goal difficulty andperformance (Locke, in press; Locke & Latham,1990; Q'Leary-Kelly, Martocchio, & Frink, 1994); incases in which subjects reach the limits of theirability with difficult goals, however, this rela-tionship levels off (Locke & Latham, 1990). Basedon its equivalent in individuals, a group's goalcommitment is its "attachment to or determina-tion to reach a goal" (Locke & Latham, 1990: 125).Locke, Latham, and Erez (1988) identify goalcommitment as an antecedent to performance,as do others (Wofford, Goodwin, & Premack,1992).

We accept as a given the basic tenets of goal-setting theory regarding goal difficulty or level

and commitment and do not restate them here.Rather, we hope to move beyond standard goal-setting propositions in examining group pay-for-performance plans using a goal-settingframework.

GROUP-BASED PAY-FOR-PERFORMANCEPLANS

In some pay-for-performance plans both thereward structure and the performance goals arespecified prior to performance. Goal-sharingpay plans are a prototypical example (Belcher,1996). In goal sharing, goals are established foreach performance metric in the plan, and groupmembers receive the associated bonus if thegoal is achieved. Along with goals, bonusamounts are specified in advance so that em-ployees understand what they will receive forgoal achievement. With bonuses yoked to spe-cific targets, employee groups are motivated toperform to the target. As Belcher states, "In es-sence, the message sent by the goal-sharingplan is, 'If you achieve this goal, you will receivethis amount of money'" (1996: 71).

Although it has not been applied in prior the-oretical or empirical treatments of group-basedpay plans, goal-setting theory has a relativelystraightforward application in group pay plans,such as goal sharing, in which predeterminedtargets or goals exist. That is, prescriptions re-garding the architecture and effects of predeter-mined-goal plans such as goal sharing emanatefairly directly from the goal-setting literature.When we move into the realm of open-goalgroup pay plans, however, the relevance ofgoal-setting theory requires more developmentand discussion.

In contrast with predetermined-goal payplans such as goal sharing, open-goal planshave no performance goals per se. Instead,these plans have a pay formula that communi-cates to plan participants how performance willtranslate into rewards. Although the incentiveformula for groups might incorporate a "thresh-old," this threshold, if used at all, is not a goal inthe traditional sense. Instead, thresholds simplyestablish the minimum performance necessaryfor groups to begin to earn bonus. As such, whenutilized, thresholds are typically established atfairly modest levels (Belcher, 1996; Gross, 1995).Thus, under open-goal plans, groups are per-forming, in essence, under a "do-your-best" goal

866 Academy of Management Review October

situation, in that performance goals are notspecified (hence, the designation of these plansas "open-goal"). Since goals are not part of theplan architecture, goals come into play oniy ifgroups set them spontaneously—that is, on theirown in response to financial incentives.

By way of illustration, gainsharing provides awell-known example of an open-goal group payplan. Although the basic premise of gainsharingplans consistently involves bonus payout basedon performance, plans differ in the formula usedto calculate performance gains. Typically,however, rewards are calculated by comparingproductivity or efficiency (output versus input)during a particular time period against a history-based standard (i.e., the threshold). A key differ-ence between open-goal plans (such as gain-sharing) and predetermined-goal plans (such asgoal sharing and its relatives) is that with theformer, reaching the threshold target does notearn incentive money; rather, it defines thestarting point whereupon participants can be-gin to earn bonus money. Increased levels ofperformance above the threshold result in in-creased levels of reward.

A specific open-goal example is the group payplan utilized at Nucor, a steel manufacturer,where groups of twenty-five to forty hourly work-ers participate in an incentive system and re-ceive weekly bonuses based on steel tonnageproduction above a threshold. There are nospecified performance goals and no maximum;workers earn larger bonuses based on amountof quality steel produced (Iverson, 1993; Woker,1998).

We believe the success of groups in open-goalplans, such as at Nucor and other companies(e.g., Johnson, 1996), is largely due to goal settingin response to incentives. As such, our focus ison "spontaneous" goal setting as a mechanismfor understanding the effectiveness of group payplans. Further, we propose that group and payplan characteristics will influence this sponta-neous goal-setting process.^

INTEGRATION OF GOAL-SETTING THEORYAND GROUP PAY PLANS

Having briefly discussed goal-setting theoryas it applies to groups and key characteristicsof group pay plans, we now integrate the twoareas and identify factors that influence sponta-neous goal setting in open-goal plans. We beginwith a discussion of incentive intensity.

Group Pay Plan Incentive IntensityThe literature on incentives and goal setting

shows that much of the effect of incentives isthrough their influence on goal setting. Locke etal. (1981) suggest that rewards might affect per-formance by influencing three different aspectsof goal setting. First, they suggest that incen-tives might affect the level at which goals areset. Second, they propose that the prospect ofmonetary rewards might induce a greater de-gree of spontaneous goal setting. Finally, theysuggest that money might affect the degree towhich people commit to goals. We discuss in-centive intensity as the payout level and fre-quency of a group pay plan. Plans with greaterand more frequent bonus payout have greaterincentive intensity.

Payout level. Payout level refers to theamount an employee can earn under the grouppay plan. Although research on individual payplans shows that reward size is correlatedwith pay satisfaction and motivation (Wagner,Rubin, & Callahan, 1988), little research existson groups. In field studies of gainsharing(Kim, 1996; Zenger & Marshall, 1995), scholarshave found that larger levels of bonuses con-tingent on group performance are associatedwith greater performance. DeMatteo et al. pro-pose that the payout level in team rewardsmust be "a noticeable increment," and theypoint to the strong need for research on theappropriate size of rewards (1998: 155).

' As pointed out by a reviewer, another interesting dis-tinction across group pay-for-performance plans is whetherthey are "capped" or "uncapped." Fixed pay plans, such asgoal sharing, are capped by their very nature, in that bo-nuses cannot exceed the amount to be paid if the plan'sgoals are met (Belcher, 1996). Open-goal plans, however,might or might not be capped. If they are capped, limits areoften invoked to act as a safeguard against flawed plan

design or employee "windfalls" resulting from extraordinaryevents with maximum payout amounts typically set fairlyhigh. Regardless of whether or not open-goal plans containcaps, the more important feature is that they consistently donot contain predetermined goals. The only goal setting thattakes place is "spontaneous": employees self-setting goalsin response to the incentive formula. Thus, caps, per se, arenot the issue; the issue is the presence (fixed goals) orabsence (open goals) of predetermined goals.

2000 HoUensbe and Guthrie 867

Payout frequency. Payout frequency is the fre-quency with which incentive pay is distributedto group members—a feature that varies amongpay plans. For example, if they are linked toprofits, incentives are often distributed on anannual basis. In other plans, such as gainshar-ing, incentives might be paid more frequently,often on a monthly basis, although plans varyfrom this standard (Lawler, 1990; Schuster &Zingheim, 1992). In the language of expectancytheory (Vroom, 1964), more frequent payouts andclose temporal links between behaviors and re-wards will increase instrumentality beliefs. Yet,little is known about how payout frequency in-teracts with other group pay plan components toaffect performance.

A primary assertion in goal-setting theory isthat incentives lead to increased performancethrough increasing commitment to incentivegoals (Locke & Latham, 1990; Yukl & Latham,1978). Riedel, Nebeker, and Cooper (1988) foundthat incentive pay significantly influences indi-viduals' tendency to commit to goals and thatthe positive influence of incentives is magnifiedas incentive size increases—a finding sup-ported by Locke and Latham (1990). Similarly, wesuggest that groups will feel more commitmentto goals when the payout is greater and morefrequent.

Although extant research supports the effectof incentive intensity on goal commitment, in itthere is an assumption that a goal has been set,which, by definition, is not true of the rewardstructure in open-goal plans. We argue that inthe absence of formally designated goals, incen-tives will positively influence the valence of per-formance outcomes, which, in turn, will affectthe propensity of groups to set goals and thelevel of goals that are set. This relationship isinferred from equivocal evidence provided by alimited number of individual-level studies. Al-though in some of these studies (Terborg, 1976;Terborg & Miller, 1978; Wright, 1990) researchershave found no incentive-spontaneous goal-setting relationship, others have. Specifically,Riedel et al. (1988) and Saari and Latham (ascited in Locke & Latham, 1990) provide evidencethat incentives increase the likelihood of thisspontaneous goal setting. In addition, researchby Locke and Shaw (1984) and Riedel et al: (1988)supports the positive effect of incentives on goallevel. In sum, what emerges from the research issupport for the following proposition.

Proposition 1: Incentive intensity inopen-goal group pay plans will aiiectspontaneous goal setting and goalcommitment. Groups ieceiving alaigei poition oi theii pay contingenton peiioimance and moie iiequentpayouts will display a gieatei piopen-sity to set goals spontaneously, willset more diiiicult or chaJJenginggoals, and will be more committed tothe goals they set.

Group-Level InfluencesWe propose several group-level influences on

goal setting and goal commitment in a grouppay environment, including collective (group)efficacy, group size, interdependence, and groupperformance norms.

Collective (group) efficacy. Collective efficacyis a group's perception of its ability to performsuccessfully in a particular situation (Durham,Knight, & Locke, 1997; Prussia & Kinicki, 1996).Many authors have documented the importanceof efficacy in achieving performance (Durham etal., 1997; Gist, Schwoerer, & Rosen, 1989; Prussia& Kinicki, 1996), as well as the effects of perfor-mance on subsequent efficacy (Silver, Mitchell,& Gist, 1995). Consistent with research on indi-vidual efficacy, collective efficacy should influ-ence goal commitment.

If a group is stimulated by the prospect ofincentives, collective efficacy also might affectthe group's propensity to set goals and thechoice of goal level in open-goal plans. There isa host of studies indicating a robust relationshipbetween self-efficacy and chosen goal level inindividuals (see Locke & Latham, 1990, for a re-view). Durham et al. (1997) extend this finding togroups and report that team efficacy influencesteam-set goal difficulty. Thus, research supportsthe conclusion that efficacy levels affect goalchoice or goal level; intuitively, it seems likelythat the propensity to set goals would also beinfluenced by efficacy. Groups with high levelsof collective confidence would more likely spec-ify goals as a step toward earning incentives(i.e., efficacy would promote spontaneous goalsetting).

Group size. Group pay plans create and de-pend on peer communication and prosocial be-havior (Hanlon, Meyer, & Taylor, 1994); these be-haviors are more likely in smaller groups.

868 Academy of Management Review October

Heightened coordination demands in largergroups (Gladstein, 1984) might diminish the timeavailable for cooperative maintenance work.Further, members of small groups might have aclearer line of sight between performance andrewards (Vroom, 1964).

Studies show that social loafing and freeriding increase as the size of the group in-creases (Jackson & Harkins, 1985; Karau & Wil-liams, 1993). This has been described as a 1/nproblem (where n = group size) in which thedirect returns to group members are diluted by afactor of 1/n (Hansen, 1997; Kruse, 1993). As thegroup grows larger, reward dilution and freeriding increase. Thus, individuals in largergroups generally will be less committed togroup goals. In smaller groups, in which behav-ior can be monitored, commitment to groupgoals is enhanced.

We also speculate that group size might affecta group's propensity to set goals and the level ofgoals chosen. Motivated by the prospect of earn-ing greater rewards, smaller groups in an open-goal plan may more easily identify ways to co-operate and share information and workload.Members of small groups also might have fewerconcerns about free riders. Thus, in contrastwith larger groups, smaller groups might en-gage in goal setting more often and set morechallenging goals.

Interdependence. Interdependence is a defin-ing characteristic of groups. Three types of in-terdependence are relevant here—task, reward,and goal interdependence—and they exist bothwithin and between groups. Changing technol-ogy and the flattening of hierarchies have con-tributed to greater task interdependence withingroups and between groups. The prevalence ofgroup pay has contributed to interdependencein outcomes received (Wageman & Baker, 1997),and efforts to link workgroup goals with organ-izational strategy (Terpstra & Rozell, 1994) de-pend on goal interdependence as well (Wage-man, 1995).

Interdependence is functional to the extentit relies on clear coordination of tasks andoptimal integration of the work among differ-entiated units (Thompson, 1967), as well ascoordination and integration of rewards andgoals within and between groups. Functionalinterdependence might increase the motiva-tional properties of the work and the efficiencywith which work is performed (Campion, Med-

sker, & Higgs, 1993); thus, it might also affecta group's commitment to meeting grouppay plan goals. Alternatively, dysfunctionalinterdependence might hamper group and or-ganizational effectiveness. This might beparticularly true when between-group task in-terdependence and within-group reward inter-dependence exist, which might lead to compe-tition between teams (DeMatteo et al., 1998;Mohrman, Mohrman, & Lawler, 1992).

As with group efficacy and size, interdepen-dence also might affect a group's propensity toengage in goal setting and the level of goalsset within open-goal environments. In a func-tionally interdependent group, it is more likelythat the optimal coordination and integrationrequired to set goals exist. Tjosvold (1988)found that collective interdependence resultsin positive expectations, exchange of informa-tion and resources, productivity, cohesion, andmorale. These effects would likely promptgroups to set challenging goals, based on theavailability of expanding group resources.

Group performance norms. Group norms arethe group's shared beliefs or the standardsthat guide members' behaviors (Jehn, 1997;Johnson & Johnson, 1991); they also indicatewhat level of performance is appropriate andpossible (Locke & Latham, 1990). Group normsare known to influence commitment to lowgoals in the form of restriction of output (Roeth-lisberger, 1982). Alternatively, strong normsmight produce commitment to high goals(Locke & Latham, 1990).

The effect of group norms on goal commit-ment might be particularly profound in open-goal plans, where no formal goals exist. Asgroups under open-goal plans face nonspe-cific goals, group norms are more likely toemerge to enable the group to cope with un-certainty (Schein, 1990) and to exert a greaterinfluence over behavior. Group norms alsomight affect a group's propensity to set goalsspontaneously, as well as the level of thosegoals. Groups with strong norms supportingachievement would be more likely to specifychallenging goals. Based on this discussion ofgroup influences, we propose the following.

Proposition 2: Chaiacteiistics ofopen-goal groups will affect sponta-neous goal setting and goal commit-ment. Smallei groups with higher

2000 HoUensbe and Guthrie 869

coiiecfive efficacy, functional inter-dependence, and strong group per-formance norms will display agreater propensity to set goals spon-taneously, will set more difficult orchallenging goals, and will be morecommitted to the goals they set.

Group Performance FeedbackAs a final proposition, we suggest that perfor-

mance feedback influences the propensity ofgroups in open-goal group pay plans to set chal-lenging goals and to remain committed to them.Under group pay plans, performance feedbackis often available or provided separately fromactual reward distribution. For example, a run-ning record of groups' performance might beposted with regular updates provided. In studiesat the individual level, researchers have foundthat introduction of performance feedback is"enough to almost guarantee 'spontaneous goalsetting' " (Locke & Latham, 1990: 188). Basic rein-forcement theory indicates that feedback is mostlikely to influence behavior when it is providedfrequently and in temporal proximity to perfor-mance.

If we extend this finding to groups in open-goal plans, we should find that frequent, timelyperformance feedback affects goal setting, withperformance feedback acting as a catalyst forcontinued revision of goals oriented toward thepossibility of future rewards. Frequent, timelyknowledge of results gives group members astandard to exceed that "could increase the va-lence of high or improved performance" (Locke &Latham, 1990: 122) and leads groups in open-goal pay environments to set higher goals. Asan extension of goal-setting research, we pro-pose the following.

Proposition 3: Performance feedbackin open-goal groups will affect spon-taneous goal setting and goal commit-ment. Groups receiving frequent,timely feedback will display a greaterpropensity to set goals spontaneously,will set more difficult or challenginggoals, and will be more committed tothe goals they set.

IMPLICATIONS FOR THEORY DEVELOPMENT:TOWARD A RESEARCH AGENDA

We have presented spontaneous goal settingas a process explanation for the effectiveness ofopen-goal group pay plans. Portions of our ar-gument are grounded in extant research, butother aspects suggest avenues for future empir-ical examination. In open-goal plans specificperformance targets are not paired with incen-tives; instead, workgroups find themselves inessentially a "do-your-best" goal situation. Along line of goal-setting research pieces on in-dividuals strongly suggests that "do-your-best"goals are less effective in raising performancethan are specific, challenging goals. Our prop-ositions help explain the apparent contradictionbetween the effective practice of using open-goal pay plans (e.g., in firms such as Nucor) andresearch supporting the inferiority of open-ended goals. We suggest the apparent contra-diction is illusory in that intense incentives,when paired with particular group characteris-tics, will stimulate groups to formulate ambi-tious performance goals. Our propositions offerguidance on conditions associated with suc-cessful open-goal pay plans, but they also raisemany issues.

For example, we offer spontaneous goal set-ting as a process mechanism underlying thesuccess of open-goal group pay plans. We out-line antecedents in open-goal environmentsthat might lead groups to spontaneously setchallenging goals and remain committed tothem. As with most theoretical propositions,ours are speculative and suggest questions forfuture research. For example, how exactly dogroups in open-goal pay plans engage in spon-taneous goal setting? Moreover, how is "groupgoal setting" defined? What role do individualdifferences, such as personality, play in groupgoal setting? Are extrinsically motivated indi-viduals (Amabile, Hill, Hennessey, & Tighe,1994) more likely to promote group goal settingin the context of incentives?

Although incentives might magnify a group'spropensity to set goals, a more fundamental ex-planation for the emergence of spontaneousgoal setting in groups might lie in the ambiguitythat exists in groups about the definition of ac-ceptable performance. This ambiguity is partlya function of the multiplicity of possible goals ina group. According to Zander (1980), four types of

870 Academy of Management Review Qctober

goals can exist in groups: each member's goalfor the group, each member's goal for himself orherself, the group's goal for each member, andthe group's goal for itself. With no predeter-mined goals, groups in open-goal plans mightset goals spontaneously to allay ambiguityabout appropriate performance. As we suggest,this might be particularly true in groups that aresmall, efficacious, functionally interdependent,and strongly normative. Additionally, whenmore pay is at risk, payouts are frequent, andknowledge of results is timely, conditions areripe for a goal-setting response.

The question of how groups generate goalswhen none exists also poses possibilities forresearch. Essentially, goal generation requiresdecision making to determine future perfor-mance targets. Bayesian analysis indicates thatin conditions in which several courses of actionare possible and a risk-filled set of future pos-sibilities exists, decision making occurs recur-sively (Schmidt & Hunter, 1977; Svyantek,O'Connell, & Baumgardner, 1992). Under theseconditions, a group uses prior information toassess the effects of a current decision. Thisprior information might be based on accumu-lated knowledge of past performance or on theintuition of experts, and it is constantly revisedbased on data accumulated over a series of per-formance trials (Svyantek et al., 1992).

If we apply this analytic approach to open-goal group pay .plans, we can draw parallelsthat might help elucidate how groups generategoals. For example, under open-goal pay plans,conditions exist in which several performancelevels are possible, multiple types of possiblegoals exist, and the design of the reward systementails a set of future possibilities that is riskfilled. Knowledge of results or feedback, as wellas the intuition of group members, serves asprior information in group pay plans. Whentimely, frequent feedback is provided and pay-out entails higher risk and more frequent return,groups have the tools and motivation to recur-sively and consensually assess and reassesstheir performance. Thus, groups can continue toengage in "spontaneous" goal setting: settingand revising goals for future performance basedon these assessments. Unlike in group payplans in which goals are predetermined, static,and less susceptible to feedback, in open-goalpay plans goals are emergent, dynamic, andhighly susceptible to feedback. The latter condi-

tions might allow for Bayesian revision makingof goals in a much more dynamic and complexgoal-setting process.

Research is also needed to help clarify thecontours of the group goal-setting construct it-self. It is unclear, for example, if a goal is setwhen specific performance targets are cogni-tively assessed by individual group members oronly when a goal is discussed and agreed to byall members. Even more so than at the individ-ual level, group goal setting is complex—perhaps best represented as a continuum rang-ing from cognitions to discussions and, finally,to group agreements on performance goals. In-centive intensity and group characteristicsmight play a role, in determining a group's loca-tion on this continuum. The specific nature of therelationship between incentive intensity andpropensity to set goals and goal commitmentrequires investigation. For example, is the rela-tionship linear or, similar to merit pay increases(Mitra, Gupta, & Jenkins, 1995), is there a criti-cal level that must be exceeded beforea reward is viewed as meaningful and, thus, acatalyst for groups to engage in goal setting?Answering questions proposed here is funda-mental to understanding the dynamics of grouppay plans and providing guidance for compen-sation practice.

In conclusion, we believe that spontaneousgoal setting offers a robust explanation forgroup pay plans and provides insight into areasfor future research. The propositions we outlinecontribute a vital first step to understanding thecomplex environment in which group pay plansoperate. In addition, they stimulate interestingtheoretical and practical questions and providea starting point for further empirical work onrefining and more closely specifying proposedrelationships.

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Elaine C. HoUensbe is a doctoral candidate in organizational behavior and humanresource management at the University of Kansas. Her research interests includemotivational aspects of compensation, self-efficacy, identity, and emotion manage-ment.

James P. Guthrie is the Charles W. Qswald Faculty Fellow and an associate professorin the School of Business at the University of Kansas. He received his Ph.D. in humanresource management from the University of Maryland. His current research interestsfocus on reward systems and the relationship between human resource managementpractices and firm effectiveness.