Relative importance of referents on pay satisfaction: A review and test of a new policy-capturing approach

Two approaches for estimating the relative importance of various referents in affecting pay satisfaction are reviewed. The first approach uses the most frequently reported referents by the respondents as the most important referents. The logic of this approach is questioned because frequency of using a referent is different from his/her relative importance. The second approach uses a policy-capturing method by which respondents are asked to evaluate their pay satisfaction when compared to various referents. The respondents' overall pay satisfaction is then regressed on these evaluations. This approach may have the problem of the common method effect (i.e. the problem of common method variances between predictors and criterion) and the dominance effect (i.e. higher measurement errors for referents with narrower pay ranges). hn alternative policy-capturing approach that minimizes these two limitations is suggested. Data from a sample of 106 bank clerks show that the use of the above three approaches can result in three different conclusions. Because some important methodological Limitations are avoided in this new policy-capturing approach, and given the reasonable results derived from it, we conclude that this new approach should be considered for future research on pay referent selection.