Psychological Empowerment and Monetary Compensation: The Mediating Role of Intrinsic Motivation in the Banking Industry of Developing Country

Abstract

Psychological empowerment (PE) and monetary compensation are necessary rudiments of stimulation for individuals to utilize their potential and exert full efforts. This particular research aims to assess the influence of PE and monetary compensation on work performance and the mediation effect of intrinsic motivation between PE and work performance among employees of commercial banks. Data was collected from employees of different commercial banks located in the federal capital territory (FCT) Islamabad and Rawalpindi city of Punjab, Pakistan, through a questionnaire, and structural equational modeling (SEM) was executed on a sample of 388 employees to test the hypotheses. We used AMOS for data analysis and the results exposed that PE and monetary compensation positively significantly affect the work performance of individuals, but monetary compensation is a stronger predictor than PE. Similarly, intrinsic motivation exhibited partial mediation between the association of PE and monetary compensation with work performance among commercial bank employees. Current research provided the theoretical and practical implications for organizations, particularly in the banking sector. This research extends the PE and expectancy theory and the combination of both theories is recommended in the context of psychological autonomy and financial remuneration. Moreover, organizations should provide performance-based rewards and enhance individual empowerment to make decision-making for better work performance.