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Performance Measurement and Incentive Intensity

Alberto Bayo-Moriones, Jose E. Galdon-Sanchez and Sara Martinez-de-Morentin ()
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Jose E. Galdon-Sanchez: Universidad Publica de Navarra

Journal of Labor Research, 2017, vol. 38, issue 4, 496-546

Abstract: Abstract In this study, we examine the performance measurement and the intensity of pay for performance in a sample of manufacturing establishments. First, we carry out a descriptive analysis of the configuration of pay for performance plans. The analysis reveals that the adoption of measures of results, such as productivity, volume or quality, are the most widely used. Second, we perform a regression analysis of the relationship between performance measures and incentive intensity while controlling for a range of factors. According to our estimations, the use of at least one measure of results promotes total incentive intensity as well as the intensity of individual pay for performance. On the contrary, measures of human resource management outcomes, subjective measures and financial measures are not significant, or have a negative effect on the intensity of pay for performance. These findings could be explained by the fact that the measures of results display, on average, good characteristics in terms of uncontrollable risk, controllable risk, impact on firm value, distortion and manipulability. On the contrary, the human resource management outcomes, subjective and financial measures are more problematic regarding some of these properties.

Keywords: Performance measures; Pay for performance; Incentive intensity; Measure properties (search for similar items in EconPapers)
JEL-codes: J33 M12 M52 (search for similar items in EconPapers)
Date: 2017
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