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Teams, Incentive Pay, and Productive Efficiency: Evidence From A Food-Processing Plant

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  • Derek C. Jones
  • Panu Kalmi
  • Antti Kauhanen

Abstract

By using weekly records on efficiency for four production lines in a Finnish food processing plant during the period 1999-2005, the authors investigated the effects on worker performance once changes in Human Resource Management (HRM) practices were instituted. Using time series methods to estimate structural change models, the authors were able to determine the extent to which specific HR policies - the introduction of teams, company-wide profit-sharing, and a group system of performance-related pay (PRP) - affected workers' efficiency, even though production technology remained the same. As predicted, the authors found that in three of the four production lines, when PRP was added to teams, productivity increased from between 9 and 20 %, highlighting the importance of the complementarity between employee participation and incentive pay.

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Bibliographic Info

Article provided by ILR Review, Cornell University, ILR School in its journal ILR Review.

Volume (Year): 63 (2010)
Issue (Month): 4 (July)
Pages: 606-626

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Handle: RePEc:ilr:articl:v:63:y:2010:i:4:p:606-626

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Cited by:
  1. Artz, Georgeanne M. & Kim, Younjun, 2011. "Business Ownership by Workers: Are Worker Cooperatives a Viable Option?," Staff General Research Papers 34575, Iowa State University, Department of Economics.
  2. Kato, Takao & Kauhanen, Antti, 2013. "Performance Pay and Enterprise Productivity: The Details Matter," ETLA Working Papers 21, The Research Institute of the Finnish Economy.
  3. Long, Richard J. & Fang, Tony, 2012. "Do Employees Profit from Profit Sharing? Evidence from Canadian Panel Data," IZA Discussion Papers 6749, Institute for the Study of Labor (IZA).
  4. Long, Richard J. & Fang, Tony, 2013. "Profit Sharing and Workplace Productivity: Does Teamwork Play a Role?," IZA Discussion Papers 7869, Institute for the Study of Labor (IZA).
  5. Douglas L. Kruse & Joseph R. Blasi & Richard B. Freeman, 2012. "Does Linking Worker Pay to Firm Performance Help the Best Firms Do Even Better?," NBER Working Papers 17745, National Bureau of Economic Research, Inc.
  6. Simone N. Tuor Sartore & Uschi Backes-Gellner, 2012. "Another Effect of Group Diversity: Educational Composition and Workers’ Pay," Economics of Education Working Paper Series 0078, University of Zurich, Institute for Strategy and Business Economics (ISU).

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