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Attitudes towards benets among entrepreneurial employees

Shawn M. Carraher
Texas A&M University, Department of Marketing and Management Commerce, Kingsville, Texas, USA

Attitudes towards benets

Received January 2002 Revised October 2002 Accepted November 2002

Darren E. Hart
Victorias Secret, Columbus, Ohio, USA and

Charles E. Carraher, Jr
Florida Atlantic University, Boca Raton, Florida, USA
Keywords Benets, Compensation, Pay structures, United States of America Abstract The dimensionality of a multi-dimensional questionnaire the Attitudes Towards Benets Scale (ATBS) was examined using a principal components analysis with an orthogonal rotation and multiple-group conrmatory factor analysis for a sample of 851 employees of entrepreneurial organizations in the USA. As previously found by Hart and Carraher, it is found that the questionnaire contains three separate dimensions of attitudes towards benets.

Within this paper we examine the dimensional structure of an instrument that examines attitudes towards benets within a sample of employees from entrepreneurial organizations. Currently the cost of benets average about 28 percent of total compensation costs for small to medium sized businesses and can account for up to 50 percent of total compensation for other employers (Herz et al., 2000). This represents an annual expenditure of over $1 trillion by employers in the USA $14, 724 per full time employee, on average (Milkovich and Newman, 2002). Additionally, while the costs of benets to the employer have increased dramatically over the last 30-50 years, there is solid evidence that employees tend to grossly underestimate the cost of the benets which they receive (Convey, 2000; Kerr, 1999). It would appear that instead of perceiving benets as an added form of compensation, most employees perceive them as a right, and thus, not an added form of compensation (Milkovich and Newman, 2002). If employees do not value their benets with a value at least equivalent to their costs, then the employer may, in fact, be wasting money by providing those benets as when employees do not value their benets at a value equal to or greater than their costs, the money might be better used as a direct payment to facilitate the attraction, retention, and satisfaction of those employees as organizations seek to link human resource practices to the organizational bottom line (Clark, 1999). Therefore, as a rst

Personnel Review Vol. 32 No. 6, 2003 pp. 683-693 q MCB UP Limited 0048-3486 DOI 10.1108/00483480310498666

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step, determining the extent to which employees value their benets is important. Even if an employee undervalues a benets package, this does not necessarily indicate that employees will be dissatised with their benets. The absolute value of benets packages can be relatively easily calculated and communicated to employees to remedy the problem of undervaluation; however, establishing levels of satisfaction and the perceived importance of benets is a more complex issue because they involve perceptual phenomenon (Carraher and Buckley, 1996; Lambert, 2000; Sparrow and Cooper, 1998). Assuming that employees consider nonpecuniary outcomes when determining satisfaction (Gomez-Mejia et al., 1995; Lewis, 2000), it is possible that as has been suggested, benets may have the ability to attract and retain employees (Heneman and Berkley, 1999), and perceived dissatisfaction with benets may result in general job dissatisfaction, higher levels of absenteeism, lower levels of performance, and higher turnover rates and intentions (Cooper, 1999; Lee, 2001) and less organizational commitment (Yousef, 2001). The extent to which this may occur is unknown. An additional factor that may intervene between an individuals cognitive assessment of the importance of a benets package and their subsequent satisfaction or dissatisfaction is the ease of replacement of a benet package. It is logical to assume that if an individual receives a benets package from an organization, benets are important to that individual, and it would be difcult for that individual to obtain a job with better benets; then that individual would be less likely to be dissatised with a poor benets package than if it is perceived that the benets would be easy to replace (Lambert, 2000). A 2001 state survey of small business owners in New York found that the rising cost of health insurance was their primary concern of doing business. Of those surveyed 63 percent cited health insurance costs as the most serious problem facing them (Coons, 2001). Small businesses are competing in a global marketplace for employees and face the difcult task of providing competitive benets to employees in a cost effective manner (DiFiore, 2000; Simmons, 2001) while attracting employees with the needed knowledge, skills, and abilities (Heneman and Berkley, 1999) while still trying to remain protable. Research with small, medium, and large businesses, alike has found that employee benets can play a strategic role in enhancing organizational performance and protability for small businesses with benets as diverse provision of nancial counseling (Joo, 2000), gainsharing plans (Mangel and Useem, 2000), and work-family benets such as extime, job sharing, allowing part-time work, compressed workweeks, and childcare (Meyer et al., 2001). Heneman and Berkley (1999) found that many small businesses were so successful with their benet and compensation packages that they had statistically signicantly more applicants per vacancy than larger rms and therefore the attitudes of

employees of entrepreneurial organizations may differ from those of Attitudes non-entrepreneurial organizations. towards benets In spite of the fact that an attempt has been made to understand better the role of benets, most job and compensation satisfaction scales have failed to include items seeking to assess attitudes towards benets. Heneman and Schwab (1985) were some of the rst to include benet satisfaction as a 685 subscale of a compensation satisfaction questionnaire with their pay satisfaction questionnaire (PSQ). Although the PSQ includes the rst established and readily available benet scale, the stability and generalizability of the PSQs factor structure has not yet been clearly established (Carraher, 1991a, b; Carraher and Buckley, 1996; Carraher et al., 2001) and there has yet to be a consensus as to whether satisfaction with benets should be seen as a uni-dimensional, bi-dimensional, or multi-dimensional construct (Balkin and Griffeth, 1992; Harris, 1994; Miceli and Lane, 1991; Sturman and Short, 2000). Based on the problems associated with the PSQ and the lack of any other acceptable general benets scale, there appeared to be a need to develop a short, valid benets scale which could be used by practitioners and researchers alike. To meet this need the Attitudes Towards Benets Scale (ATBS) was developed by Hart (1990) with a sample of 468 mental health care workers and validated by Hart and Carraher (1995) with a sample of 212 teachers. The ATBS is a multi-dimensional scale that purports to measure not only an individuals level of satisfaction with their benets, but also the perceived importance of benets, and the ease of replacement of a benets package. As stated earlier it is the goal of the current paper to examine the dimensionality of the ATBS with a sample of entrepreneurial employees. Method Measures (1) Attitudes Towards Benets Scale (ATBS). This six-item scale seeks to measure a variety of attitudes towards ones benets. Items 1 through 4 are responded to on seven point scales. Item 1 and item 2 are intended to assess levels of satisfaction with benets. They include the questions How good are the benets you currently receive compared to those received by others in similar organizations? and How satised are you with your current benets package? Item 3 is concerned with the perceived ease of replacement of benets and asks What are the chances you could obtain a similar job with a better benets package than you now receive? Items 4 and 5 are intended to measure the importance of benets to an individual and ask How important is your benets package to you? and Would you trade your benets package for its equivalent worth in cash? (circle Yes or No). The nal item asks What percentage of your salary would you guess your benets

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package is worth? which is answered on a nine-point scale with 5 percent increments ranging from 0 percent to 45 percent and seeks to assess the perceived worth of ones benets package. It is used as a diagnostic question concerning the effectiveness of the communication function of a benets system, and it is believed to be closely related to individuals levels of satisfaction with their benets with satisfaction increasing as perceived worth increases. (2) Pay satisfaction questionnaire (PSQ). The PSQ is an untimed, 18-item instrument that seeks to measure general compensation satisfaction in a multidimensional fashion. The PSQ contains four satisfaction scales satisfaction with pay level, benets, raises, and the structure/administration of a compensation system. The coefcient alpha reliabilities for the four scales are 0.96 (level), 0.93 (benet), 0.72 (raises), and 0.82 (structure/administration) within this sample. Subjects Data were collected from 851 non-managerial employees of 14 large entrepreneurial information services organizations from a Southwestern state in the USA. The subjects were mostly female (81.4 percent). Their average age was 38 years old and their average job tenure was nearly 12 years. The employees are similar to others previously examined in terms of educational levels but different in terms of human resource management and particularly compensation systems as they are more performance oriented than those of the teachers. Analyses and results The ATBS data were analyzed using ve separate principal components analyses (PCA) two full-prole (or full information) analyses and three limited information analyses multiple-group conrmatory factor analysis, and correlation analysis. The rst full-prole PCA employed an orthogonal method (varimax) of rotation and the second used an oblique method (oblimin) of rotation [a full prole analysis involves including all items in a PCA while a limited information PCA involves the inclusion of only prespecied variables within an analysis additional information about limited information PCA is provided by Sethi and Carraher (1993) a similar pattern of results were found by splitting the sample into two samples, each containing seven organizations]. A comparison of the hyperplane counts (six for each method) led to the conclusion that the orthogonal rotation was more appropriate for this data (Gorsuch, 1983). The method used to determine the number of components to retain was Horns (1965) parallel analysis criterion, which is a sample-based adaptation of the eigenvalue greater than one criterion and which Zwick and Velicer (1986, p. 440) found to be the most frequently accurate method. Results were identical with the eigenvalue greater than one criterion and the scree test.

Cutoff loadings were considered signicant at or above the 0.50 level, which is Attitudes typical in compensation satisfaction research (Carraher and Buckley, 1996; towards benets Heneman and Schwab, 1985). The results of the PCA with a varimax rotation and the multiple-group conrmatory factor analysis are provided in Table I. The multiple-group conrmatory factor analysis was performed in order to further test the perceived dimensionalities of each factor as suggested by 687 Carraher and Scarpello (1993). Nunnally (1978, p. 394) states that the multiple-group method offers the most generally useful approach to testing hypotheses about the existence of factors and when comparing it to maximum-likelihood conrmatory factor analysis he further states that it would be foolish to employ such a complex approach [as maximum-likelihood conrmatory factor analysis] if hypotheses are sufciently clear that they can be tested more simply and directly by the multiple-group method (as discussed by Carraher et al. (2001) and Nunnally (1978, p. 403) goodness of t indexes are typically not reported for multiple-group CFA). The three limited information PCA each utilized a varimax rotation and involved the inclusion of the four PSQ benet items with each of the items from the three components of the ATBS satisfaction with benets (items 1, 2, and 6) in the rst analysis, ease of replacement of benets (items 3 and 5) in the second analysis, and the importance of benets (items 4 and 5 [scored inversely from how it is scored in the ease of replacement scale]) in the third analysis. The results of these three analyses are provided in Table II. The intercorrelation matrix between the three ATBS components, six ATBS items, four PSQ scales, and actual salary are provided in Table III. As can be seen looking at Table I, three factors were retained from the ATBS as was hypothesized. Additionally, the six items loaded approximately as hypothesized on the three factors and looking at the conrmatory factor analysis results, as all of the ps 0.0001, it appears that this is a valid loading pattern with a high probability of being the proper loading for this scale with this data. This provides some evidence for the construct validity of the three
ATBS item BEN1 BEN2 BEN3 BEN4 BEN5 BEN6 Eigenvalues P= Principal 0.85 0.87 20.10 20.01 0.05 0.72 2.098 Components 20.06 20.13 0.17 0.85 0.59 0.19 1.15 Analysis 2 0.19 2 0.07 0.85 0.17 20.58 0.06 1.03 Conrmatory 0.83 0.82 2 0.03 2 0.04 0.09 0.71 0.0001 Factor 0.04 2 0.08 2 0.02 0.76 0.77 0.08 0.0001 Analysis 2 0.09 0.04 0.89 0.09 2 0.60 2 0.01 0.0001

Notes: Italics indicates signicant loadings, p level of signicance for goodness of t of hypothesized factor structures (probability of the items not being part of the same factor

Table I. Principal components analysis and conrmatory factor analysis of ATBS items

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Analysis Items Factor 1 Factor 2 0.04 0.03 20.02 20.02 20.75 0.74 20.09 0.05 20.14 20.08 0.73 0.77 1. PCA of PSQ benet items and ATBS ease of replacement item PSQ2 0.92 PSQ6 0.89 PSQ11 0.90 PSQ15 0.95 BEN3 2 0.06 BEN5 2 0.05 2. PCA of PSQ benet items and ATBS importance of benets items PSQ2 0.92 PSQ6 0.90 PSQ11 0.90 PSQ15 0.95 BEN4 2 0.15 BEN5 0.05 3. PCA of PSQ benet items and ATBS satisfaction with benets items PSQ2 0.91 PSQ6 0.87 PSQ11 0.86 PSQ15 0.94 BEN1 0.75 BEN2 0.90 BEN6 0.54


Table II. Principal components analyses of PSQ benet and ATBS items

factors. Looking at Table II, only the items forming the satisfaction with benets dimension loaded on the same dimension as the four PSQ benet items. This provides evidence that the constructs measured by the ease of replacement and level of importance dimensions are, in fact, distinct constructs from that measured by the PSQ benets scale and that the satisfaction with benets dimension and the PSQ benets scale are measuring approximately the same construct. However, the signicantly lower loading of ATBS item 6 on the factor suggests the possibility that it may be a good idea that it be used as a separate diagnostic question and not be utilized in the construction of a scale. The examination of the coefcient alpha reliablities for items 1, 2 and 6 also give credence to this notion. Together, the three items have a coefcient alpha of 0.70, while excluding item 6 gives the remaining two items an alpha of 0.80. Thus, in the future users of this instrument should consider using the perceived worth item (item 6) as a separate variable. Item 5 also loaded on two of the dimensions ease of replacement and importance of benets although in an inverse fashion for the two dimensions willingness to exchange ones benets for cash is positively related to the ease of replacement of benets, while negatively related to the importance of benets. Hart and Carraher (1995) found a similar pattern of item loadings with their sample of educators.














SAL BEN1 0.01 0.89 0.93 BEN2 20.06 0.69b BEN3 0.01 2 0.23b 2 0.11b 0.90 BEN4 0.08 2 0.02 2 0.12 0.09a 0.93 a BEN5 20.03 0.08 0.08 2 0.13b 0.13b 0.95 BEN6 20.10 0.38b 0.42b 2 0.07 0.05 0.09a 0.88 LEV 20.02 0.32b 0.33b 2 0.10b 2 0.34b 0.00 0.12b BENE 20.06 0.63b 0.84b 2 0.05 2 0.17b 20.03 0.43b 0.45b b b b b b RAIS 20.14 0.36 0.37 2 0.18 2 0.24 0.02 0.25 0.75b 0.49b SA 20.11 0.41b 0.38b 2 0.19b 2 0.25b 0.01 0.22b 0.65b 0.49b 0.70b b b b b b b SAT 20.05 0.84 0.87 2 0.10 2 0.01 0.05 0.72 0.30 0.79 0.39b 0.31b 0.93 EASE 0.03 2 0.06 2 0.13b 0.17b 0.85b 0.58b 0.19b 2 0.29b 2 0.19b 20.21b 20.19b 0.01 0.95 IMP 0.03 0.19b 2 0.070 0.85b 0.17b 20.58b 0.06 2 0.12b 0.02 20.16b 20.20b 2 0.01 0.02 0.90 Notes: 1-tailed signicance:a 0.01,b 0.001. Variable descriptions: SAL Actual salary, BEN1-BEN6 items 1 to 6 on the ATBS, LEV PSQ pay level satisfaction scale, BENE PSQ benet satisfaction scale, RAIS PSQ raise satisfaction scale, SA PSQ structure/administration satisfaction scale, SAT ATBS satisfaction with benets factor, EASE ATBS ease of replacement factor, IMP ATBS importance of benets factor

Attitudes towards benets


Table III. Correlations

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Looking at Table III, six general observations may be noted in particular. First, each of the six ATBS items does have its highest correlation with the factor of which it is a part. This provides additional evidence of the convergent and construct validity of the three factors contained within the ATBS. Second, as the correlations between the three factors are 0.01, 2 0.01, and 0.02, independence between the constructs addressed in the ATBS is suggested. Third, examining the correlations between actual salary and the components of the ATBS indicates that perceptions of the ease of replacement of benets, the importance of benets, and satisfaction with benets, are not signicantly related to salary level. Fourth, examining the one-month test-retest reliabilities which we did one month later with this scale, it appears that the six ATBS items and three scales possess acceptable levels of stability over time (Nunnally, 1978) with the single items having stability estimates of 0.88 to 0.95, while the scales have stability estimates of 0.90 to 0.95. Fifth, it is interesting to note that within this sample satisfaction with pay level and actual pay level are essentially unrelated (r -0.02). This is a rare nding as most studies have found that actual pay level is the best predictor of satisfaction with pay level (Heneman, 1985; Rice et al., 1990) while in this study it is one of the worst. This sample is unique, however, in that only one level of an organization is included while most researchers have failed to control for differences in organizational level (Fiol, 2001; Truss, 2001). Generally, as one advances within an organization, not only will salary increase, but so too will intrinsic satisers and individual expectations which may result in inated correlations between salary and salary satisfaction (Jaques, 1961). We believe that Jaques concepts with respect to felt fair pay may also hold true with felt fair benets and that individuals may have some idea as to what they consider to be fair levels of benets (item 6) and that this may be related to satisfaction with benets although this idea should be explored empirically in future research as the present study was not designed to assess this. Our nal general observation about the correlations in Table III is that the signicantly higher correlations between level, benet, raise, and structure/administration on the PSQ and the satisfaction with benets dimension on the ATBS indicates that not only is the satisfaction with benets dimension measuring satisfaction with benets, but that it is also more closely measuring general satisfaction than are the two other factors of the ATBS. Future research and conclusions There are several directions in which future research should develop. The rst area is with the measurement and dimensionality of attitudes towards benets. This study addresses general attitudes towards benets in a static multi-dimensional fashion. It is also possible that it may be not only a static concept, but also a dynamic concept. If this is true, then are the dynamic dimensions the same as the static dimensions or are they different from the static dimensions? Also, are some dimensions both static and dynamic while others are simply static or dynamic? In terms of general attitudes towards

benets, while our instrument has three dimensions, another by Harris (1994) Attitudes attempts to measure ten dimensions of general benets satisfaction and Balkin towards benets and Griffeth (1992) have developed an instrument which seeks to measure attitudes towards ve specic benets in a multi-dimensional fashion. In a nutshell, we need to decide what exactly constitutes attitudes towards benets. We need more basic research on how individuals conceptualize of attitudes 691 towards benets. From this basic research new instruments should be developed which can measure the dimensions observed. It is likely that no single instrument will be useful in all instances. Factors such as intelligence and reading levels, cognitive complexity, and varying compensation system characteristics could inuence individuals conceptualization of benets and require the use of different survey instruments (Carraher and Buckley, 1996). In the area of experimentation, research could focus on several different areas. One possible area could be the testing of the usefulness of attitudes towards benets as predictors of key organizational variables such as turnover, absenteeism, tardiness, and performance; and general job and life satisfaction. Another area to explore is the relationship of the various aspects of attitudes towards benets to other aspects of satisfaction such as with satisfaction with promotions, supervision, and co-workers and to test whether attitudes towards benets are caused by these other types of satisfaction, cause these other types of satisfaction, or are not related to other types of satisfaction. The area concerning the conceptualization of attitudes towards benets is the one in which we believe the most work should currently be done. A common complaint heard from individuals both involved with benets research and those not involved is that it tends to be atheoretical. We have very little good theory or research guiding us in the area of what attitudes towards benets are, what causes them, and what individual characteristics may moderate them. We need to be active in the development of new theories and seek to identify which old theories may be of interest. Once again, this is where our future research should focus. Miceli and Lane (1991) have provided an excellent example of the type of work that should be done, but more work is necessary and since they did their work over a decade ago little additional work on the dimensionality of satisfaction with benets has been done. In conclusion, this study has examined an instrument that may be used to measure employee attitudes towards benets with an entrepreneurial sample. This instrument was found to contain three independent dimensions as was found by Hart and Carraher (1995) with one of the dimensions tapping classical satisfaction with benets. It is suggested that while three dimensions were observed, owing to low factor loadings and internal consistency, one of the items (item 6) should be used by itself in future uses of the scale and that it be considered as a possible measure of employees felt fair benets (Jaques, 1961). Directions for future research on attitudes towards benets are also suggested.

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Attitudes towards benets