Does Linking Worker Pay to Firm Performance Help the Best Firms Do Even Better?
AbstractThis paper analyzes the linkages among group incentive methods of compensation, labor practices, worker assessments of workplace culture, turnover, and firm performance in a non-representative sample of companies: firms that applied to the “100 Best Companies to Work For in America” competition from 2005 to 2007. Although employers with good labor practices self- select into the 100 Best Companies firms sample, which should bias the analysis against finding strong associations among modes of compensation, labor policies, and outcomes, we find that in the firms that make more extensive use of group incentive pay employees participate more in decisions, have greater information sharing, trust supervisors more, and report a more positive workplace culture than in other companies. The combination of group incentive pay with policies that empower employees and create a positive workplace culture reduces voluntary turnover and increases employee intent to stay and raises return on equity. Finding these effects in the non-representative “100 Best Companies” sample strengthens the likelihood that the policies have a causal impact on employee well-being and firm performance.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 17745.
Date of creation: Jan 2012
Date of revision:
Contact details of provider:
Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
Web page: http://www.nber.org
More information through EDIRC
Find related papers by JEL classification:
- J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
- J53 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Labor-Management Relations; Industrial Jurisprudence
- J54 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Producer Cooperatives; Labor Managed Firms
- J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs
- M50 - Business Administration and Business Economics; Marketing; Accounting - - Personnel Economics - - - General
- M52 - Business Administration and Business Economics; Marketing; Accounting - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects
- M54 - Business Administration and Business Economics; Marketing; Accounting - - Personnel Economics - - - Labor Management
- P12 - Economic Systems - - Capitalist Systems - - - Capitalist Enterprises
- P13 - Economic Systems - - Capitalist Systems - - - Cooperative Enterprises
- P17 - Economic Systems - - Capitalist Systems - - - Performance and Prospects
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-01-25 (All new papers)
- NEP-BEC-2012-01-25 (Business Economics)
- NEP-HRM-2012-01-25 (Human Capital & Human Resource Management)
- NEP-LAB-2012-01-25 (Labour Economics)
- NEP-LMA-2012-01-25 (Labor Markets - Supply, Demand, & Wages)
- NEP-LTV-2012-01-25 (Unemployment, Inequality & Poverty)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Hubler, Olaf, 1993. "Productivity, Earnings, and Profit Sharing--An Econometric Analysis of Alternative Models," Empirical Economics, Springer, vol. 18(2), pages 357-80.
- Akerlof, George A, 1982. "Labor Contracts as Partial Gift Exchange," The Quarterly Journal of Economics, MIT Press, vol. 97(4), pages 543-69, November.
- Fudenberg, Drew & Maskin, Eric, 1986. "The Folk Theorem in Repeated Games with Discounting or with Incomplete Information," Econometrica, Econometric Society, vol. 54(3), pages 533-54, May.
- Derek C. Jones & Takao Kato & Jeffrey Pliskin, 1999.
"Profit Sharing and Gainsharing: A Review of Theory, Incidence, and Effects,"
- Derek C. Jones & Takao Kato & Jeffrey Pliskin, 1994. "Profit Sharing and Gainsharing: A Review of Theory, Incidence, and Effects," Economics Working Paper Archive wp_125, Levy Economics Institute, The.
- Norman Frohlich & John Godard & Joe A. Oppenheimer & Frederick A. Starke, 1998. "Employee versus conventionally-owned and controlled firms: an experimental analysis," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 19(4-5), pages 311-326.
- Michael J. Handel & Maury Gittleman, 2000.
"Is there a Wage Payoff to Innovative Work Practices?,"
- Michael J. Handel & Maury Gittleman, 1999. "Is There a Wage Payoff to Innovative Work Practices?," Economics Working Paper Archive wp_288, Levy Economics Institute, The.
- Omar Azfar & Stephan Danninger, 2001. "Profit sharing, employment stability, and wage growth," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 54(3), pages 619-630, April.
- Edmans, Alex, 2011. "Does the stock market fully value intangibles? Employee satisfaction and equity prices," Journal of Financial Economics, Elsevier, vol. 101(3), pages 621-640, September.
- Chris Doucouliagos, 1995. "Worker participation and productivity in labor-managed and participatory capitalist firms: A meta-analysis," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 49(1), pages 58-77, October.
- Welbourne, T. & Mejia, L.G., 1995. "Gainsharing: A Critical Review and A Future Research Agenda," Papers 95-10, Cornell - Center for Advanced Human Resource Studies.
- Douglas L. Kruse, 1993. "Profit Sharing: Does It Make a Difference?," Books from Upjohn Press, W.E. Upjohn Institute for Employment Research, number ps, October.
- Hart, Robert A & Hubler, Olaf, 1991. "Are Profit Shares and Wages Substitute or Complementary Forms of Compensation?," Kyklos, Wiley Blackwell, vol. 44(2), pages 221-31.
- Derek C. Jones & Panu Kalmi & Antti Kauhanen, 2010. "Teams, Incentive Pay, and Productive Efficiency: Evidence From A Food-Processing Plant," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 63(4), pages 606-626, July.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().
If references are entirely missing, you can add them using this form.