Performance pay and changes in U.S. labor market dynamics

A shift in the design of labor compensation occurred at around the mid-1980s in the U.S. and deals with an increased role of performance pay in driving the cyclical movements of wages. Using a DSGE model we show that this structural change accounts at least qualitatively for many observed changes in the U.S. labor market dynamics. It generates the disappearance of the procyclical response of labor productivity to non-technology shocks and the reduction of the contractionary effects of technology shocks on hours. Moreover, it is conducive to a drop in the volatility of output, a parallel increase in the volatility of wages and to changes in unconditional correlations consistent with what documented in the U.S. between the pre- and post-1984 periods.     

The management of variable pay in European banking

Banking is a major employer in most large European countries, facing common pressures in terms of competition and technological change. Traditional pay systems have been revised in response to changing business objectives and new forms of work organisation. This paper examines variable pay schemes (VPS) in banking in four countries with very different institutional contexts: Austria, Norway, Spain, and the UK. It finds extensive use of VPS in each case and shared managerial objectives in terms of performance management and cost control. Forms of VPS vary, with Norwegian banks in particular favouring collective forms of bonus, but overall there is a common drive towards individual (merit) pay and multiple bonus arrangements providing increased scope for management discretion. In broad terms, what the case of pay-setting in banking suggests is a course of fading path dependency at national level.     

Social and economic exchange relationships and performance contingency: differential effects of variable pay and base pay

Abstract

In this study, we tested hypotheses derived from social exchange theory by investigating the relationships between employees’ base and variable pay and their social and economic exchange relationships with their employer. In a cross-lagged study of approximately 30 months duration including 488 respondents, the amount of accumulated base pay was positively related to a social exchange relationship, whereas the accumulated amount of variable pay was positively related to an economic exchange relationship. We discuss the theoretical and practical implications of these findings and propose future research on the relationship between pay and social and economic exchange relationships.     

Attitudes to pay systems:an exploratory study within and across cultures

The present study investigates employees’preferences for criteria that are used in pay systems, namely, performance, cost of living, tenure, educational qualification, collective bargaining, skill, market rate, responsibility and special demands. The study also explored variation and similarities of employees’preferences for the criteria across four countries, namely Australia (N = 162), Indonesia (N = 100), Malaysia (N = 129) and Hong Kong (N = 39). The results indicate that the respondents prefer multiple criteria to determine their pay. Preferences for length of service and educational attainment were found to be significantly different across countries, particularly between Australian and Asian samples (Indonesian and Malaysia). This variation is, in part, attributed to cultural differences. Other variables, such as age, educational qualification, position, and industry sector, have been found to be significant correlates of preference for pay systems. Implications for reward management have been discussed.     

Work and pay in small Chinese clothing firms: a constrained negotiated order

Small clothing factories in China represent ideal conditions to find regimes characterised by market despotism. Yet studies of similar firms in other countries suggest that ‘negotiated paternalism’ is a better characterisation and that work relations have a large degree of cross‐national similarity. Using interview data from seven small case firms and 63 employees in 12 small clothing firms in Guangdong province, this article finds important parallels with other countries in terms of pay system and negotiated order. Workers could negotiate relatively high wages, albeit at the cost of very long hours. This situation reflected booming economic conditions, a non‐rationalised production system that left space for individual and informal collective bargaining, and close personal ties between workers and managers. Work relations in small firms are more nuanced than the sweatshop image allows, and extreme exploitation is more likely in Taylorised workplaces run by large corporations.     

Employee preference for performance-related pay: predictors and consequences for organizational citizenship behaviour in a Japanese firm

Research on performance-related pay (PRP) has largely focused on the outcomes of PRP implementation in a Western context. This paper examines the predictors of employee preference for PRP and the consequences for organizational citizenship behaviour (OCB) in Japan where seniority-based pay and teamwork have long been the norm. The sample consists of 155 sales representatives in a large electric appliance manufacturing company that was transitioning from a seniority-based to a PRP-based compensation system. Overall, respondents indicated a preference for PRP over seniority-based pay. The hierarchical regression results indicate that employee preference for PRP is positively and significantly associated with individual competitiveness and occupational commitment, while being negatively and significantly related to organizational commitment and to the age group of employees who joined the labour market prior to the bursting of the economic bubble in Japan. No significant relationship was observed between PRP preference and OCB in the hierarchical regression analysis, although the two are positively and significantly correlated contrary to our expectations. Implications for international human resource management are discussed.     

Environmental commitment and manufacturing excellence: a comparative study within Canadian industry

The development of an environmental policy represents the cornerstone of an environmental management system (EMS), an essential tool that helps companies both systematically manage their environmental obligations and risks, and promote these objectives throughout the entire organization. The implementation of such policies must rest not solely upon the development of specific pollution‐reduction programmes but also upon more encompassing issues dealing with the examination of existing management systems and work procedures. This paper presents the results of a study conducted in 250 manufacturing firms. It examines factors such as manufacturing policies and competitive positioning in their role as driving forces behind environmental commitment. The study's results demonstrate that environmental commitment is often linked to sound management practices. Good relations with both employees and suppliers, participatory management and total quality management programmes appear to be intimately correlated with the existence of an environmental policy. Copyright © 2001 John Wiley & Sons, Ltd. and ERP Environment     

Management of paradox: a comparative study of managerial practices in Korean and Japanese firms

Numerous scholars are recognizing that paradoxes are indigenous to organizational functioning. Managers too are being challenged to do more and spend less, and delegate and know the details. As a corporate objective, neither efficiency nor innovation can be sacrificed. In this paper, we have attempted to capture this emerging trend empirically. Defining management of paradox as ‘managerial practices that realize the simultaneous accomplishment of multiple strategic objectives that are seemingly or actually incompatible,’ this paper explores how organizational capabilities of effectively dealing with paradox can be acquired. Specifically, the paper attempts to address two organizational mechanisms: decision-making structure and human resource practices (HRPs). Propositions deduced from the existing literature were tested with the data collected from 103 Korean firms and 136 Japanese firms. The data indicated that firms have to be multi-talented. It was found that firms that successfully accomplished innovation and efficiency objectives simultaneously were those that were able to mix paradoxical organizational practices: decentralization and control on the one hand and the three HRPs on the other. It was also found that the Japanese corporations were more apt in deploying paradoxical managerial practices than the Korean counterparts. The paper concludes by discussing a few theoretical implications.     

Managed by the other: cultural anxieties in two Anglo-Americanized Swedish firms

This paper reports a study of how the co-workers in two major Swedish companies, Volvo Cars and AstraZeneca, respond to the cultural influences from an American and a British company, derived from an acquisition and a merger at the end of the 1990s. These responses are examined in terms of being ‘cultural anxieties’, a form of emotional coping with ambiguities regarding the future on the part of the co-workers. The paper shows that adapting to an alien culture is not a trivial matter but rather includes a series of re-evaluations of predominant values, norms and beliefs. The paper concludes that the organization culture literature needs to recognize the consequences of cultural changes, the movement from one largely taken-for-granted cultural regime to another, more heterogeneous and complex, and how co-workers cope with such experiences of uprooting enacted and agreed upon cultures.     

Performance Ratings and Career Advancement in the US Federal Civil Service

Abstract

A strong link between performance and rewards in the U.S. federal civil service could raise top performers to positions of power and responsibility and motivate employees to greater productivity. Federal employees, the general population and scholars all express doubts about the strength of that link, however, though few have estimated it empirically. Using random-effects panel data models on a one per cent sample of federal personnel records for 1988–2003, we examine whether performance ratings meaningfully influence promotion probabilities and annual salary increases. With an average annual promotion rate of 17.8 per cent over this period, we estimate that employees with ‘outstanding’ and ‘less than fully successful’ ratings were one-fourth more likely and one-fifth less likely, respectively, to receive promotions than those with ‘fully successful’ ratings. Average salary impacts were smaller but still significant. Patterns held up across agencies and stages of the federal careers. Performance ratings continued to affect career advancement one or two years later. We speculate on whether these links are strong enough to motivate performance and advance the most qualified federal employees.     

Gender pay equity: Exploring the impact of formal,consistent and transparent human resource management practices and information

This article explores the extent to which formalised HR practices can reduce gender bias in pay setting or whether, following Acker (2006), gender bias may still be embedded within formalised HR practices. Detailed investigation of a critical case study of a Chilean finance organisation with a strong commitment to formalised, consistent and transparent pay practices based on individuated information, revealed only a small negative gender effect on pay and no identifiable gender effects in starting salaries, merit pay or promotion. These findings provide some support for the proposition that HR practices focused on job‐related performance (Reskin, 2000) and limiting managerial discretion may facilitate gender pay equity. However, the case also reveals the limits of these policies. Women scored equally well on performance but formalised scores on future potential were higher for men and mattered more. A significant gender effect emerged in promotion to more senior posts. These mixed outcomes suggest that Acker's (2006) proposition still holds.     

Managing human reources for learning and innovation: a comparative study of Brazilian,Japanese and Korean firms

In this paper we develop a comparative study of the processes of organizational change which leading-edge technology firms are experiencing, particularly in terms of human resources management, which favour the learning and development process of employees and of organizations themselves. It focuses on the telecommunication industry in three countries: Japan, Korea and Brazil where qualitative research was conducted in eleven companies. The outcomes of the field research reveal innovative policies and practices in human resouces management, even though these are specific to each country. The specificities are mainly justified by the stage of development of each industry in the scenary of global competition. Nevertheless, all companies considered already show the traces that are required to consider them as learning organizations.     

Pay disparity in multinational and domestic firms in China: the role of pro-disparity norm

A survey of Chinese employees was conducted in China to examine the antecedents and consequences of a pro-disparity norm concerning the pay disparity associated with expatriate managers and with Chinese managers recruited from distant geographical areas (outside managers). These two groups, especially expatriate managers, tend to receive high salaries. Interactional justice received from outside managers was positively related to pro-disparity norm and task interdependence with them was negatively related to pro-disparity norm, but no significant relationship was found for expatriate managers. When innovative climate was high, interactional justice and task interdependence showed a positive relationship with pro-disparity norm. With regard to consequences of pro-disparity norm, when innovative climate was high, it was positively related to compliance with the requests of expatriate and outside managers and positively related to knowledge sharing with them.     

Pay fairness and intrinsic motivation: the role of pay transparency

The fairness of managerial pay can be judged in terms of its distributive justice properties (‘is my pay fair when compared to others’) and its procedural justice properties (‘is my pay fairly determined’). While both types of justice have been studied extensively in the organizational literature, their relative importance in predicting work-related outcomes is still open to debate. In this paper, we provide field evidence that the relationship between pay justice and managers' intrinsic motivation is moderated by pay transparency, which is the extent to which managers know each other's pay levels. In a homogeneous sample of 139 Slovenian bank managers, we find that procedural justice is a better predictor of intrinsic motivation when pay transparency is low, and that distributive justice is a better predictor of intrinsic motivation when pay transparency is high. These findings that are congruent with fairness heuristic theory (Van den Bos, Lind, Vermunt and Wilke 1997a) suggest the importance of considering pay transparency for understanding and designing fair managerial pay systems.     

Compensation as a signal of organizational culture: the effects of advertising individual or collective incentives

Beyond their impact on current employees, compensation systems are thought to convey important messages about an organization's values and practices to potential hires, but explicit empirical support for this belief is scant. In two experiments, US participants evaluated recruiting advertisements containing simple statements about bonuses, with performance basis manipulated between-subjects in the first experiment and within-subjects in the second. Advertising bonuses based on individual performance caused an organization to be perceived as likely to have a more individualist culture, whereas bonuses based on team or organizational performance led to perceptions of a more collectivist culture. When participants in the second study were asked to choose between hypothetical jobs at organizations with different advertised compensation systems, the relation between individual differences and job preference was contingent on their organizational culture perceptions. In contrast to previous research, no modal preference for individual over collective rewards was observed.     

The equal pay act: Responsibilities and rights

The Equal Pay Act of 1963 (EPA) requires that men and women receive equal pay for equal work. Plaintiffs who claim discrimination on the basis of the EPA may settle out of court, or may bring legal action in the courts. Employers possess specific rights under the law, and can defend themselves against charges of discrimination through a number of “employer defenses.” These defenses involve providing that pay differences are based on seniority systems, merit systems, production systems, or “any other factor other than sex.” This article will also discuss the impact of court decisions that have further honed the responsibilities and rights of both employees and employers under the EPA.     

Import-led technological capability: a comparative analysis of Indian and Indonesian manufacturing firms

This research investigates the critical elements that affect the ability of firms in developing countries to cultivate their technological capability through imported technology. Based on resource-based theory, we propose both internal and external factors contribute to technological capability of the recipient firms. Technology planning and control, market orientation, training and number of technical manpower were the internal factors considered in this study. Government support and national technology infrastructure are the external factors proposed to affect the technological capability of firm. Data collected from Indian and Indonesian manufacturing firms reveals that R&D investment, and availability of technical personnel; the transfer channels; government’s involvement; and the firm’s learning culture are significant contributors to the technology capability process. Also, the acquisition of mature technology just to boost production capacity or improve product quality contributes very little to the development of technological capability.     

超越平衡计分卡的探索:业绩三棱镜与动态多维业绩框架

平衡计分卡的缺陷主要源自于其内在因果关系的不完备。最近出现的两种业绩评价系统试图用不同的方法来超越平衡计分卡:业绩三棱镜改良了因果关系而动态多维业绩框架则完全放弃了因果关系。实际上这两种方法的不同正体现了业绩评价系统构建中规范研究与实证研究的区别与矛盾。