Skip to main content
SpringerLink
Log in

Group-based pay-for-performance plans and firm performance: The moderating role of empowerment practices

  • Published:
Asia Pacific Journal of Management Aims and scope Submit manuscript

Abstract

As the popularity of group-based pay-for-performance plans persists, compensation researchers are exploring the conditions under which these plans contribute to the financial performance of firms. Based on a sample of 1,933 employees from 415 companies in South Korea, we found that group-based pay-for-performance plans enhance both objective and subjective measures of firm performance. Furthermore, consistent with the contingency perspective of fit, we found that empowerment practices positively moderate the relationship between group-based pay-for-performance plans and firm performance. These findings suggest that empowerment can enhance the effectiveness of such pay plans. We discuss implications for research and practice.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Figure 1
Figure 2
Figure 3

Similar content being viewed by others

References

  • Adithipyangkul, P., Alon, I., & Zhang, T. 2011. Executive perks: Compensation and Corporate Performance in china. Asia Pacific Journal of Management, 28: 401–425.

    Google Scholar 

  • Ahearne, M., Mathieu, J., & Rapp, A. 2005. To empower or not to empower your sales force: An empirical examination of the leadership empowerment behavior on customer satisfaction and performance. Journal of Applied Psychology, 90: 945–955.

    Article  Google Scholar 

  • Arthur, J., & Aiman-Smith, L. 2001. Gainsharing and organizational learning: An analysis of employee suggestions over time. Academy of Management Journal, 44: 737–754.

    Article  Google Scholar 

  • Bae, J., & Lawler, J. J. 2000. Organizational and HRM strategies in Korea: Impact on firm performance in emerging economy. Academy of Management Journal, 43: 502–517.

    Article  Google Scholar 

  • Banker, R. D., Lee, S.-Y., Potter, G., & Srinivasan, D. 1996. A contextual analysis of performance impacts of outcome-based incentive compensation. Academy of Management Journal, 39: 920–948.

    Article  Google Scholar 

  • Baron, J., & Kreps, D. 1999. Consistent human resource practices. California Management Review, 41: 29–53.

    Article  Google Scholar 

  • Beersma, B., Hollenbeck, J. R., Humphrey, S. E., Moon, H., Conlon, D. E., & Ilgen, D. R. 2003. Cooperation, competition, and team performance: Toward a contincengy approach. Academy of Management Journal, 46: 572–590.

    Article  Google Scholar 

  • Bhagat, R.S., McDevitt, A.S., & McDevitt, I. 2010. On improving the robustness of Asian management theories: The era of globalization. Asia Pacific Journal of Management, 27: 179–192.

    Google Scholar 

  • Carpenter, M. A., Geletkanycz, M. A., & Sanders, W. G. 2004. Upper echelons research revisited: Antecedents, elements, and consequences of top management team composition. Journal of Management, 30: 749–778.

    Article  Google Scholar 

  • Chenevert, D., & Tremblay, M. 2009. Fits in strategic human resource management and methodological challenge: Empirical evidence of influence of empowerment and compensation practices on human resource performance in Canadian firms. International Journal of Human Resource Management, 20: 738–770.

    Article  Google Scholar 

  • Choi, J., Park, K., Chae, C., Hong, S., Min, J., Kim, S., Sohn, H., Kim, K., Choi, K., & Kim, K. 2005. Human capital corporate panel report (2005) the HCCP 2005 index report. Seoul, KR: KRIVET.

  • Cohen, J., Cohen, P., West, S. G., & Aiken, L. S. 2006. Applied multiple regression/correlation analysis for the behavioral sciences. Mahwah, NJ: Lawrence Erlbaum Associates.

    Google Scholar 

  • Colquitt, J. A., Noe, R. A., & Jackson, C. L. 2002. Justice in teams: Antecedents and consequences of procedural justice climate. Personnel Psychology, 55: 83–109.

    Article  Google Scholar 

  • Conger, J. A., & Kanungo, R. N. 1988. The empowerment process: Integrating theory and practice. Academy of Management Review, 13(3): 471–482.

    Google Scholar 

  • Cooke, W. N. 1994. Employee participation programs, group-based incentives, and company performance: A union-nonunion comparison. Industrial and Labor Relations Review, 47: 594–609.

    Article  Google Scholar 

  • Datta, D., Guthrie, J. P., & Wright, P. M. 2005. Human resource management and labor productivity: Does industry matter?. Academy of Management Journal, 48: 135–145.

    Article  Google Scholar 

  • DeMatteo, J., Eby, L., & Sundstrom, E. 1998. Team-based rewards: Current empirical evidence and directions for future research. In G. R. Ferris (Ed.). Research in organizational behavior: 141–183. Oxford: Elsevier Science.

    Google Scholar 

  • Deutsch, M. 1949. A theory of cooperation and competition. Human Relations, 2: 129–152.

    Article  Google Scholar 

  • Ellemers, N., Gilder, D. D., & Haslam, S. A. 2004. Motivating individuals and groups at work: A social identity perspective on leadership and group performance. Academy of Management Review, 29: 459–478.

    Google Scholar 

  • Gerhart, B., & Rynes, S. L. 2003. Compensation: Theory, evidence, and strategic implications. Thousand Oaks, CA: Sage.

    Google Scholar 

  • Gerhart, B., Trevor, C. O., & Graham, M. E. 1996. New directions in employee compensation research. In G. R. Ferris (Ed.). Research in personnel and human resource management: 143–203. Stamford, CT: JAI Press.

    Google Scholar 

  • Gerhart, B., Wright, P. M., McMahan, G. C., & Snell, S. A. 2000. Measurement error in research on the human resources and firm performance relationship: Further evidence and analysis. Personnel Psychology, 53: 855–872.

    Article  Google Scholar 

  • Gibson, C. B., Benson, G. S., Porath, C. L., & Lawler, E. E. 2007. What results when firms implement practices: The differential relationship between specific practices, form financial performance, customer service, and quality. Journal of Applied Psychology, 92: 1467–1480.

    Article  Google Scholar 

  • Gomez-Mejia, L. R., & Balkin, D. B. 1989. Effectiveness of individual and aggregate compensation strategies. Industrial Relations, 28: 431–445.

    Google Scholar 

  • Guthrie, J. P. 2000. Alternative pay practices and employee turnover. Group & Organization Management, 25: 419–439.

    Article  Google Scholar 

  • Hambrick, D. 2007. Upper echelons theory: An update. Academy of Management Review, 32(2): 334–343.

    Article  Google Scholar 

  • Hambrick, D. C., & Mason, P. A. 1984. Upper echelons: The organization as a reflection of its top managers. Academy of Management Review, 9: 193–206.

    Google Scholar 

  • Harrison, D. A., Price, K. H., Galvin, J. H., & Florey, A. T. 2002. Time, teams, and task performance: Changing effects of surface- and deep-level diversity on group functioning. Academy of Management Journal, 55: 1029–1045.

    Google Scholar 

  • Heneman, R. L., Ledford, Jr., G. E. & Gresham, M. T. 2000. The changing nature of work and its effects on compensation design and delivery. In R. L. Rynes & B. Gerhart (Eds.). Compensation in organizations: 195–240. San Francisco: Jossey-Bass.

    Google Scholar 

  • Hollensbe, E. C., & Guthrie, J. P. 2000. Group pay-for-performance plans: The role of spontaneous goal setting. Academy of Management Review, 25: 864–872.

    Google Scholar 

  • Huang, X., Iun, J., Liu, A., & Gong, Y. 2010. Does participative leadership enhance work performance by inducing empowerment or trust? The differential effects on managerial and non-managerial subordinates. Journal of Organizational Behavior, 31: 122–143.

    Article  Google Scholar 

  • Huselid, M. A. 1995. The impact of human resource management practices on turnover, productivity, and corporate financial performance. Academy of Management Journal, 38: 635–672.

    Article  Google Scholar 

  • Jackson, S. E., & Schuler, R. S. 1995. Understanding human resource management in the context of organizations and their environments. Annual Review of Psychology, 46: 237–264.

    Article  Google Scholar 

  • Kirkman, B. L., & Rosen, B. 1999. Beyond self-management: Antecedents and consequences of team empowerment. Academy of Management Journal, 42(1): 59–74.

    Article  Google Scholar 

  • Kirkman, B. L., Rosen, B., Tesluk, P. E., & Gibson, C. B. 2004. The impact of team empowerment on virtual team performance: The moderating role of face-to-face interaction. Academy of Management Journal, 47: 175–192.

    Article  Google Scholar 

  • Lepak, D. P., & Snell, S. A. 2002. Examining the human resource architecture: The relatioships among human capital, employment, and human resource configuration. Journal of Management, 28: 517–545.

    Google Scholar 

  • Mathieu, J., Gilson, L. L., & Ruddy, T. M. 2006. Empowerment and team effectiveness: An empirical test of an integrated model. Journal of Applied Psychology, 91: 97–108.

    Article  Google Scholar 

  • Mathieu, J., Maynard, M. T., Rapp, T., & Gilson, L. 2008. Team effectiveness 1997–2007: A review of recent advancements and a glimpse into the future. Journal of Management, 34: 410–747.

    Article  Google Scholar 

  • Miles, R. E., & Snow, C. C. 1978. Organizational strategy, structure, and process. New York: McGraw-Hill.

    Google Scholar 

  • Milkovich, G. T., & Newman, J. M. 2008. Compensation. Burr Ridge, IL: Irwin McGraw-Hill.

    Google Scholar 

  • Milkovich, G. T., & Wigdor, A. K. 1991. Pay for performance: Evaluating performance appraisal and merit pay. Washington, DC: National Academy Press.

    Google Scholar 

  • Nishii, L. H., Lepak, D. P., & Schneider, B. 2008. Employee attributions of the “why” of HR practices: Their effects on employee attitudes and behaviors, and customer satisfaction. Personnel Psychology, 61: 503–545.

    Article  Google Scholar 

  • Park, H. Y., Ofori-Dankwa, J., & Bishop, D. R. 1994. Organizational and environmental determinants of functional and dysfunctional turnover. Human Relations, 47: 353–366.

    Article  Google Scholar 

  • Peterson, S. J., & Luthans, F. 2006. The impact of financial and non-financial incentives on business unit outcomes over time. Journal of Applied Psychology, 91: 156–165.

    Article  Google Scholar 

  • Petty, M. M., Singleton, B., & Connell, D. W. 1992. An experimental evaluation of an incentive planning the electric utility industry. Journal of Applied Psychology, 77: 427–436.

    Article  Google Scholar 

  • Porter, M. E. 1980. Competitive strategy. New York: Free Press.

    Google Scholar 

  • Rajagopalan, N. 1996. Strategic orientations, incentive plan adoptions, and firm performance: Evidence from electric utility firms. Strategic Management Journal, 18: 761–785.

    Article  Google Scholar 

  • Randolph, W. A., & Sashkin, M. 2002. Can organizational empowerment work in multinational settings?. Academy of Management Executive, 16: 102–115.

    Article  Google Scholar 

  • Schneider, B., Goldstein, H. W., & Smith, B. D. 1995. The ASA framework: An update. Personnel Psychology, 48: 747–773.

    Google Scholar 

  • Seibert, S. E., Silver, S. R., & Randolph, W. A. 2004. Taking empowerment to the next level: A multiple-level model of empowerment, performance, and satisfaction. Academy of Management Journal, 47: 332–349

    Google Scholar 

  • Shaw, J. D., Gupta, N., & Delery, J. E. 2002. Pay dispersion and workforce performance: Moderating effects of incentives and interdependence. Strategic Management Journal, 23: 491–512.

    Article  Google Scholar 

  • Spreitzer, G. M. 1995. Psychological empowerment in the workplace: Dimensions, measurement, and validation. Academy of Management Journal, 38: 1442–1455.

    Article  Google Scholar 

  • Subramony, M. 2009. A meta-analytic investigation of the relationship between HRM bundles and firm performance. Human Resource Management, 48: 745–768.

    Article  Google Scholar 

  • Thomas, K. W., & Velthouse, B. A. 1990. Cognitive elements of empowerment: An “interpretive” model of intrinsic task motivation. Academy of Management Review, 15(4): 666–681.

    Google Scholar 

  • Wagner, III, J. A., Rubin, P. A., & Callahan, T. J. 1988. Incentive payment and nonmanagerial productivity: An interrupted time series analysis of magnitude and trend. Organizational Behavior and Human Decision Processes, 42: 47–74.

    Article  Google Scholar 

  • Wright, P. M., & Nishii, L. H. 2005. Strategic HRM and organizational behavior: Integrating multiple levels of analysis. Working paper no. 07–03, Center for Advanced Human Resource Studies (CAHRS), Cornell University, Ithaca, N.

  • Zenger, T. R., & Marshall, C. R. 2000. Determinants of incentive intensity in group-based rewards. Academy of Management Journal, 43: 149–163.

    Article  Google Scholar 

Download references

Author information

Authors and Affiliations

  1. Department of Management, Dongguk University-Seoul, Seoul, Republic of Korea

    Hyondong Kim

  2. Department of Management, Auburn College of Business, Auburn, AL, 36849, USA

    Kyra L. Sutton

  3. Department of Management, The Hong Kong University of Science and Technology, Clear Water Bay Kowloon, Hong Kong SAR, People’s Republic of China

    Yaping Gong

Authors
  1. Hyondong Kim
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Kyra L. Sutton
    View author publications

    You can also search for this author in PubMed Google Scholar

  3. Yaping Gong
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Hyondong Kim.

Appendix 1

Appendix 1

Table 3 Team empowerment measure.
Full size table

Rights and permissions

Reprints and permissions

About this article

Cite this article

Kim, H., Sutton, K.L. & Gong, Y. Group-based pay-for-performance plans and firm performance: The moderating role of empowerment practices. Asia Pac J Manag 30, 31–52 (2013). https://doi.org/10.1007/s10490-011-9255-7

Download citation

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1007/s10490-011-9255-7

Keywords

Search

Navigation