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Design and Implementation of Pay for Performance

Author

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  • Gibbs, Michael

    () (University of Chicago)

Abstract

A large, mature and robust economic literature on pay for performance now exists, which provides a useful framework for thinking about pay for performance systems. I use the lessons of the literature to discuss how to design and implement pay for performance in practice.

Suggested Citation

  • Gibbs, Michael, 2012. "Design and Implementation of Pay for Performance," IZA Discussion Papers 6322, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp6322
    as

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    File URL: http://ftp.iza.org/dp6322.pdf
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    References listed on IDEAS

    as
    1. Randolph Sloof & Mirjam Praag, 2015. "Testing for Distortions in Performance Measures: An Application to Residual Income-Based Measures like Economic Value Added," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 24(1), pages 74-91, March.
    2. Cindy Zoghi & Alec Levenson & Michael Gibbs, 2005. "Why Are Jobs Designed the Way They Are?," Working Papers 382, U.S. Bureau of Labor Statistics.
    3. Pascal Courty & Gerald Marschke, 2004. "An Empirical Investigation of Gaming Responses to Explicit Performance Incentives," Journal of Labor Economics, University of Chicago Press, vol. 22(1), pages 23-56, January.
    4. Levenson, Alec R. & Zoghi, Cindy & Gibbs, Michael & Benson, George, 2011. "Optimizing Incentive Plan Design: A Case Study," IZA Discussion Papers 5985, Institute for the Study of Labor (IZA).
    5. Pascal Courty & Gerald Marschke, 2008. "A General Test for Distortions in Performance Measures," The Review of Economics and Statistics, MIT Press, vol. 90(3), pages 428-441, August.
    6. repec:bla:joares:v:27:y:1989:i:1:p:21-39 is not listed on IDEAS
    7. Srikant Datar & Susan Cohen Kulp & Richard A. Lambert, 2001. "Balancing Performance Measures," Journal of Accounting Research, Wiley Blackwell, vol. 39(1), pages 75-92, June.
    8. George Baker & Robert Gibbons & Kevin J. Murphy, 1994. "Subjective Performance Measures in Optimal Incentive Contracts," The Quarterly Journal of Economics, Oxford University Press, vol. 109(4), pages 1125-1156.
    9. Stephen Eliot Hansen, 2010. "The benefits of limited feedback in organizations," Economics Working Papers 1232, Department of Economics and Business, Universitat Pompeu Fabra.
    10. Jed Devaro & Fidan Ana Kurtulus, 2010. "An Empirical Analysis of Risk, Incentives and the Delegation of Worker Authority," ILR Review, Cornell University, ILR School, vol. 63(4), pages 641-661, July.
    11. repec:eme:rleczz:s0147-9121(2010)0000030007 is not listed on IDEAS
    12. Bengt Holmstrom, 1979. "Moral Hazard and Observability," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 74-91, Spring.
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    Citations

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    Cited by:

    1. Robert Dur & Jan Tichem, 2015. "Altruism and Relational Incentives in the Workplace," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 24(3), pages 485-500, September.
    2. Jan Tichem, 2013. "Leniency Bias in Long-Term Workplace Relationships," Tinbergen Institute Discussion Papers 13-196/VII, Tinbergen Institute.
    3. 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

    Keywords

    incentives; pay for performance; performance measurement; subjective evaluation;

    JEL classification:

    • M52 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects
    • 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
    • L81 - Industrial Organization - - Industry Studies: Services - - - Retail and Wholesale Trade; e-Commerce

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