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.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 17745.
Date of creation: Jan 2012
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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)
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