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This research presents between-group pay dispersion (BGPD) as a novel form of pay dispersion and presents and tests a process model that shows when and how BGPD affects organizational performance. Deviating from previous research that has mainly focused on the effects of job level-based vertical pay dispersion, this research investigates the effect of BGPD, job content-based vertical pay dispersion, on organizational performance. Building on the idea that pay system consistency affects employees¡¯ shared, common perceptions about what behaviors are expected and rewarded (Bowen & Ostroff, 2004; Balkin & Gomez-Mejia, 1990), the authors hypothesize that BGPD produces desirable outcomes when it is aligned with within-group pay dispersion (WGPD), because of enhanced distributive justice climate and the resulting intergroup helping and good-performer retention. Supportive evidence is found in a large, multisource data set that involves 4,234 front-line employees, 1,974 group leaders, and 303 senior managers from 205 branches in China. Conceptual, theoretical, and practical implications are discussed.

cgrace2@ceibs.edu