The Impact of Evaluation and Reward Systems on Organizational Commitment: The Combined Effects of Sub-Systems and the Moderating Role of Age

This paper examines the effects of evaluation and reward systems, key components of performance-based HRM, on employees’ organizational commitment. Specifically, the research addresses three questions, using five years of data from the Korean Human Capital Corporate Panel (HCCP). First, the study explores which appraisal and reward systems enhance employee commitment. To this end, we categorize the appraisal system into performance and competency evaluations, and the reward systems into individual and group performance pay. The analysis reveals that competency evaluations and group performance pay positively impact organizational commitment. Second, the study examines whether a HR system that combines multiple subsystems has a more positive or negative impact on organizational commitment compared to focusing on a single subsystem. The combination of performance and competency evaluations slightly increased organizational commitment, although this increase was not statistically significant. In contrast, combining individual and group performance pays actually decreased organization commitment, with the implantation of group performance pay being the most effective. This suggests that while performance and competency evaluations can be well-aligned, combining individual and group incentive systems creates confusion and stress, demotivating employees. Lastly, the study analyzes how the effectiveness of each HR system varies with employee age. As employee age increases, the effects of competency evaluation and individual performance pay on organizational commitment also increase, whereas the effects of individual performance pay decrease. Additional analyses using tenure and managerial status as moderating variables showed similar results. As employees advance in their careers and their responsibilities and managerial requirements increase, there is a growing preferences for HR systems that help them effectively manage their teams and departments rather than those based solely on individual performance. Drawing on insights from these findings, we discuss academic and practical implications for human resource management.