Does Linking Worker Pay to Firm Performance Help the Best Firms Do Even Better?
This 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.
|Date of creation:||Jan 2012|
|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
References listed on IDEAS
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.:
- Hart, Robert A & Hubler, Olaf, 1991. "Are Profit Shares and Wages Substitute or Complementary Forms of Compensation?," Kyklos, Wiley Blackwell, vol. 44(2), pages 221-231.
- Michael J. Handel & Maury Gittleman, 1999.
"Is There a Wage Payoff to Innovative Work Practices?,"
Economics Working Paper Archive
wp_288, Levy Economics Institute.
- Michael J. Handel & Maury Gittleman, 2000. "Is there a Wage Payoff to Innovative Work Practices?," Macroeconomics 0004032, EconWPA.
- Chris Doucouliagos, 1995. "Worker Participation and Productivity in Labor-Managed and Participatory Capitalist Firms: A Meta-Analysis," ILR Review, Cornell University, ILR School, vol. 49(1), pages 58-77, October.
- Fudenberg, Drew & Maskin, Eric, 1986. "The Folk Theorem in Repeated Games with Discounting or with Incomplete Information," Econometrica, Econometric Society, vol. 54(3), pages 533-554, May.
- 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.
- George A. Akerlof, 1982. "Labor Contracts as Partial Gift Exchange," The Quarterly Journal of Economics, Oxford University Press, vol. 97(4), pages 543-569.
- 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.
- 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.
- Derek C. Jones & Takao Kato & Jeffrey Pliskin, 1999. "Profit Sharing and Gainsharing: A Review of Theory, Incidence, and Effects," Macroeconomics 9903010, EconWPA.
- Omar Azfar & Stephan Danninger, 2001. "Profit-Sharing, Employment Stability, and Wage Growth," ILR Review, Cornell University, ILR School, vol. 54(3), pages 619-630, April.
- Hubler, Olaf, 1993. "Productivity, Earnings, and Profit Sharing--An Econometric Analysis of Alternative Models," Empirical Economics, Springer, vol. 18(2), pages 357-380.
- Douglas L. Kruse, 1993. "Profit Sharing: Does It Make a Difference?," Books from Upjohn Press, W.E. Upjohn Institute for Employment Research, number ps, December.
- 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.
- Derek C. Jones & Panu Kalmi & Antti Kauhanen, 2010. "Teams, Incentive Pay, and Productive Efficiency: Evidence from a Food-Processing Plant," ILR Review, Cornell University, ILR School, vol. 63(4), pages 606-626, July. Full references (including those not matched with items on IDEAS)