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Performance Measurement and Incentive Intensity

Author

Listed:
  • Alberto Bayo-Moriones

    (Universidad Publica de Navarra)

  • Jose E. Galdon-Sanchez

    (Universidad Publica de Navarra)

  • Sara Martinez-de-Morentin

    (Universidad Publica de Navarra)

Abstract

In this study, we examine the performance measurement and the intensity of pay for performance in a sample of manufacturing establishments. First, we carry out a descriptive analysis of the configuration of pay for performance plans. The analysis reveals that the adoption of measures of results, such as productivity, volume or quality, are the most widely used. Second, we perform a regression analysis of the relationship between performance measures and incentive intensity while controlling for a range of factors. According to our estimations, the use of at least one measure of results promotes total incentive intensity as well as the intensity of individual pay for performance. On the contrary, measures of human resource management outcomes, subjective measures and financial measures are not significant, or have a negative effect on the intensity of pay for performance. These findings could be explained by the fact that the measures of results display, on average, good characteristics in terms of uncontrollable risk, controllable risk, impact on firm value, distortion and manipulability. On the contrary, the human resource management outcomes, subjective and financial measures are more problematic regarding some of these properties.

Suggested Citation

  • Alberto Bayo-Moriones & Jose E. Galdon-Sanchez & Sara Martinez-de-Morentin, 2017. "Performance Measurement and Incentive Intensity," Journal of Labor Research, Springer, vol. 38(4), pages 496-546, December.
    • Handle: RePEc:spr:jlabre:v:38:y:2017:i:4:d:10.1007_s12122-017-9259-2
    DOI: 10.1007/s12122-017-9259-2
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    More about this item

    Keywords

    Performance measures; Pay for performance; Incentive intensity; Measure properties;
    All these keywords.

    JEL classification:

    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
    • M12 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Personnel Management; Executives; Executive Compensation
    • M52 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects

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