Performance variation, which refers to the extent to which one’s performance deviates from its overall level and trend, has been a crucial but long ignored aspect of employees’ dynamic performance profile. In this study, we propose a theoretical model that relates aa compensation practice—individual pay-for-performance (PFP) intensity (i.e., marginal gains in pay employees derive from increased individual performance)—to the variation of employee performance. We examined how individual PFP intensity is associated with employee performance variation as well as how the association between individual PFP intensity and employee performance variation varies by employees’ job experience and organizational position. To test the theoretical model, we collected longitudinal data from 1,056 individuals over 12 months (a total of 11,566 observations) at a commercial bank in China. The main results of this study reveal a significant negative effect of individual PFP intensity on performance variation, which was stronger among employees who rank higher in the organization. We discuss the implications for theory and practice on dynamic performance and compensation and offer future research directions.
