Decoupling Compensation Practices from Human Resource Management

Aino Tenhiälä and Timo Vuori

International Studies of Management & Organization, 2012, vol. 42, issue 1, 7-23

Abstract: Organizations have two main types of reasons for adopting compensation systems: internal, effectiveness-related reasons and external, legitimacy-related reasons. This study examines if external motives decouple compensation practices from human resource (HR) management and how decoupling is related to internal and external outcomes for organizations. In an empirical test of Finnish companies based on survey responses from 137 HR managers, we find that decoupling takes place in organizations. There is no evidence of detrimental effects of decoupling on the internal effectiveness of compensation and mixed results considering the effect of decoupling on a firm's reputation. We conclude that researchers should not underestimate the prevalence and effects of symbolic motives in compensation development.

Date: 2012
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DOI: 10.2753/IMO0020-8825420101

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