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Performance Measurement and Incentive Plans

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  • ANTTI KAUHANEN
  • SAMI NAPARI

Abstract

This paper explores performance measurement in incentive plans. Based on theory, we argue that differences in the nature of jobs between blue- and white-collar employees lead to differences in incentive systems. We find that performance measurement for white-collar workers is broader in terms of the performance measures, the organizational level of performance measurement and the time horizon. The intensity of incentives is also stronger for white-collar employees. All of these findings are consistent with theory.
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Suggested Citation

  • Antti Kauhanen & Sami Napari, 2012. "Performance Measurement and Incentive Plans," Industrial Relations: A Journal of Economy and Society, Wiley Blackwell, vol. 51(3), pages 645-669, July.
  • Handle: RePEc:bla:indres:v:51:y:2012:i:3:p:645-669
    DOI: j.1468-232X.2012.00694.x
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    File URL: http://hdl.handle.net/10.1111/j.1468-232X.2012.00694.x
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    References listed on IDEAS

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    1. Asplund, Rita, 2007. "Finland: Decentralisation Tendencies within a Collective Wage Bargaining System," Discussion Papers 1077, The Research Institute of the Finnish Economy.
    2. Holmstrom, Bengt & Milgrom, Paul, 1991. "Multitask Principal-Agent Analyses: Incentive Contracts, Asset Ownership, and Job Design," Journal of Law, Economics, and Organization, Oxford University Press, vol. 7(0), pages 24-52, Special I.
    3. Michael Raith, 2008. "Specific knowledge and performance measurement," RAND Journal of Economics, RAND Corporation, vol. 39(4), pages 1059-1079.
    4. George Baker, 2002. "Distortion and Risk in Optimal Incentive Contracts," Journal of Human Resources, University of Wisconsin Press, vol. 37(4), pages 728-751.
    5. Fama, Eugene F, 1991. "Time, Salary, and Incentive Payoffs in Labor Contracts," Journal of Labor Economics, University of Chicago Press, vol. 9(1), pages 25-44, January.
    6. Bengt Holmstrom, 1979. "Moral Hazard and Observability," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 74-91, Spring.
    7. Murphy, Kevin J., 2000. "Performance standards in incentive contracts," Journal of Accounting and Economics, Elsevier, vol. 30(3), pages 245-278, December.
    8. Baker, George P, 1992. "Incentive Contracts and Performance Measurement," Journal of Political Economy, University of Chicago Press, vol. 100(3), pages 598-614, June.
    9. Gibbs, Michael & Merchant, Kenneth A. & Van der Stede, Wim A. & Vargus, Mark A., 2004. "Performance Measure Properties and Incentives," IZA Discussion Papers 1356, Institute for the Study of Labor (IZA).
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    Cited by:

    1. Kauhanen, Antti & Salmi, Julia & Torkki, Paulus, 2013. "Performance Measurement in Healthcare Incentive Plans," ETLA Working Papers 18, The Research Institute of the Finnish Economy.
    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. Jaren Haber, 2016. "Institutionalized Involvement: Teams and Stress in 1990s U.S. Steel," Industrial Relations: A Journal of Economy and Society, Wiley Blackwell, vol. 55(4), pages 632-661, October.
    4. Baik, Bok & Evans, John H. & Kim, Kyonghee & Yanadori, Yoshio, 2016. "White collar incentives," Accounting, Organizations and Society, Elsevier, vol. 53(C), pages 34-49.
    5. Kato, Takao & Kauhanen, Antti & Kujansuu, Essi, 2013. "The Performance Effects of Individual and Group Incentives: A Case Study," ETLA Working Papers 19, The Research Institute of the Finnish Economy.
    6. 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.
    7. Kato, Takao & Kauhanen, Antti & Salmi, Julia, 2013. "Empirical Evidence on the Dynamics of Incentive Plans," ETLA Working Papers 20, The Research Institute of the Finnish Economy.

    More about this item

    JEL classification:

    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
    • M52 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects
    • M54 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Labor Management

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