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Transforming Incentives : Analysis of Personnel and Employee Output Data in a Large Japanese Auto Sales Firm

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  • Tsuru, Tsuyoshi

Abstract

This paper analyzes the economic consequences of performance-oriented human resource (HR) system reform at Auto Japan (pseudonym), one of the largest Japanese auto sales firms, using personnel and employee output data. The author overviews the three major components of the HR reform: base wages, performance-based pay, and performance rating systems. Then the author examines the productivity effect of the reform. The performance-based pay system was changed from combining a base wage with a simple performance pay system to a scheme kinked around a draw line (representing aggregate base pay) to strengthen incentives. The introduction of the draw formula performance-based pay system raised the productivity of the new car sales staff, but generally failed to raise the productivity of the used car sales staff. The evidence suggests that while Auto Japan's performance-oriented HR system reform, which was typical of reforms instituted among major Japanese firms in the late 1990s, changed the wage structure and grading pattern of employees, it brought only slight improvement in individual productivity.

Suggested Citation

  • Tsuru, Tsuyoshi, 2008. "Transforming Incentives : Analysis of Personnel and Employee Output Data in a Large Japanese Auto Sales Firm," Hitotsubashi Journal of Economics, Hitotsubashi University, vol. 49(2), pages 109-132, December.
  • Handle: RePEc:hit:hitjec:v:49:y:2008:i:2:p:109-132
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    File URL: http://hermes-ir.lib.hit-u.ac.jp/rs/bitstream/10086/16517/1/HJeco0490201090.pdf
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    References listed on IDEAS

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    1. Paarsch, Harry J & Shearer, Bruce, 2000. "Piece Rates, Fixed Wages, and Incentive Effects: Statistical Evidence from Payroll Records," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 41(1), pages 59-92, February.
    2. Oriana Bandiera & Iwan Barankay & Imran Rasul, 2005. "Social Preferences and the Response to Incentives: Evidence from Personnel Data," The Quarterly Journal of Economics, Oxford University Press, vol. 120(3), pages 917-962.
    3. Paul Oyer, 1998. "Fiscal Year Ends and Nonlinear Incentive Contracts: The Effect on Business Seasonality," The Quarterly Journal of Economics, Oxford University Press, vol. 113(1), pages 149-185.
    4. Canice Prendergast, 1999. "The Provision of Incentives in Firms," Journal of Economic Literature, American Economic Association, vol. 37(1), pages 7-63, March.
    5. Amiya K. Basu & Rajiv Lal & V. Srinivasan & Richard Staelin, 1985. "Salesforce Compensation Plans: An Agency Theoretic Perspective," Marketing Science, INFORMS, vol. 4(4), pages 267-291.
    6. Edward P. Lazear, 2000. "Performance Pay and Productivity," American Economic Review, American Economic Association, vol. 90(5), pages 1346-1361, December.
    7. Oriana Bandiera & Iwan Barankay & Imran Rasul, 2007. "Incentives for Managers and Inequality among Workers: Evidence from a Firm-Level Experiment," The Quarterly Journal of Economics, Oxford University Press, vol. 122(2), pages 729-773.
    8. Harry J. Paarsch & Bruce S. Shearer, 1999. "The Response of Worker Effort to Piece Rates: Evidence from the British Columbia Tree-Planting Industry," Journal of Human Resources, University of Wisconsin Press, vol. 34(4), pages 643-667.
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    Cited by:

    1. Owan, Hideo & Takahashi, Shingo & Tsuru, Tsuyoshi & Uehara, Katsuhito, 2014. "Finding Good Managers: An Econometric Case Study of a Large Japanese Auto Dealership," Discussion Paper Series 609, Institute of Economic Research, Hitotsubashi University.

    More about this item

    Keywords

    human resource management; personnel economics; automobile dealership; incentive; performance-based pay; performance rating;

    JEL classification:

    • M12 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Personnel Management; Executives; Executive Compensation
    • M5 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods

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