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Performance Measurement and Incentive Intensity

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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.

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Notes

  1. For simplicity, we use the term Firm PfP to refer to the use of pay linked to plant or firm’s performance.

  2. The complete questionnaire is included in Appendix 1.

  3. Information on the sample’s representativeness relative to the population of Spanish manufacturing establishments with 50 or more employees can be found in Bayo-Moriones et al. (2013) or Galdon-Sanchez et al. (2015).

  4. The response rate is similar, or even higher, to the response rates obtained in other surveys that explore managerial and human resource practices in Spain and other contexts (see, for example, Jirjahn and Poustma 2013; Roche and Teague 2011; Camelo et al. 2004 or Bayo-Moriones et al. 2010).

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Acknowledgements

The authors would like to thank the Fundacion BBVA for funding the survey conducted at Spanish establishments. Alberto Bayo-Moriones acknowledges financial support from the Ministerio de Economia y Competitividad (project ECO2013-48496-C4-2R). Jose Enrique Galdon-Sanchez and Sara Martinez-de-Morentin also acknowledge financial support from the Ministerio de Economia y Competitividad (project ECO2015-64330-P).

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Authors and Affiliations

  1. Department of Business Administration and INARBE, Universidad Publica de Navarra, Campus de Arrosadia, 31006, Pamplona, Spain

    Alberto Bayo-Moriones

  2. Department of Economics, Universidad Publica de Navarra, Campus de Arrosadia, 31006, Pamplona, Spain

    Jose E. Galdon-Sanchez & Sara Martinez-de-Morentin

Authors
  1. Alberto Bayo-Moriones
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  2. Jose E. Galdon-Sanchez
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  3. Sara Martinez-de-Morentin
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Corresponding author

Correspondence to Sara Martinez-de-Morentin.

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Appendix 1: Questionnaire

Appendix 1: Questionnaire

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Bayo-Moriones, A., Galdon-Sanchez, J.E. & Martinez-de-Morentin, S. Performance Measurement and Incentive Intensity. J Labor Res 38, 496–546 (2017). https://doi.org/10.1007/s12122-017-9259-2

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