Does Linking Worker Pay to Firm Performance Help the Best Firms Do Even Better?

Douglas Kruse, Joseph R. Blasi and Richard Freeman

No 17745, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: 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.

JEL-codes: J33 J53 J54 J63 M50 M52 M54 P12 P13 P17 (search for similar items in EconPapers)
Date: 2012-01
New Economics Papers: this item is included in nep-bec, nep-hrm, nep-lab, nep-lma and nep-ltv
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Citations: View citations in EconPapers (11)

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