Another example - consider the relationship between the different forms of
compensation and security.
Normally, security is thought of in terms of job security.
Due to drastic reductions in middle-management layers during the downsizing decade
This chapter focuses on pay-for-performance plans.
There are a wide variety of pay-for-performance plans incentive plans, variable-pay
plans, compensation at risk, earnings at risk, success sharing, etc. Sometimes these
names are used interchangeabl
Is the structure of the organization sufficiently decentralized to allow
different operating units to create flexible variation on a general pay-forperformance plan?
Standards, from an operational perspective, are the key to designing a pa
In examining the impact of pay on group performance, a number of recent
studies provide strong evidence that pay for performance has a direct impact on
a. Companies that pay for performance have stronger earnings.
b. Companies like
Evidence suggests that organizations that use fair procedures and supervisors who are
viewed as fair in their allocations of rewards are perceived as more trustworthy and
command higher levels of commitment.
Some research even suggests employee sati
Critics of Kohns research point out two flaws in his conclusions:
a. First, the pragmatics of business demands some jobs be performed that
are not the most intrinsically interesting.
b. Second, his studies frequently looked at people in isolation. I
Besides money, other rewards also influence the decision to stay (retention) in a
company. The results of a recent study focused on rewards that were important to
a. Work variety and challenge (50 percent).
b. Development opportu
1. Recent research suggests that job candidates look for organizations with reward
systems that fit their personalities.
2. Evidence also suggests that talented employees are attracted to companies that
have strong links between pay and performance.
The Matter of Subsidiary Autonomy
The degree of autonomy given subsidiaries raises issues of:
The agency problem
The Evolution of Strategy - Changes in Strategy over Time
Exhibit 10.2 indicates that variable pay is commanding a larger share of total
compensation for all employee groups.
Does Variable Pay Improve Performance Results? The General Evidence
Pay-for-performance plans those that introduce variability into