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Administrative Compensation and Organizational Performance in Texas Nursing Facilities

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Abstract

This study examines the link between compensation and performance by comparing profit-seeking versus nonprofit nursing homes in Texas. Using both cost and profit functions to measure facility performance, that is, resource allocation efficiency by firm management, we find that: (1) the highest paid administrators (profit-seekers) are also the most efficient allocators of firm resources; (2) rural administrators are paid more than their urban counterparts but there is no significant difference in their overall ability to allocate resources; and (3) chain administrators are not compensated more than independent administrators yet are significantly superior in resource allocation. Further, management compensation is strongly influenced by firm size and capacity utilization. These results provide very weak support for the agency theorist's pay/performance paradigm.

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Authors and Affiliations

  1. Department of Maritime Administration, Texas A&M University at Galveston, Galveston, Texas, 77552, U.S.A

    Kris Joseph Knox

  2. Department of Finance and Economics, Southwest Texas State University, 601 University Drive, San Marcos, Texas, 78666, U.S.A

    Eric C. Blankmeyer & J. R. Stutzman

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  1. Kris Joseph Knox
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  2. Eric C. Blankmeyer
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  3. J. R. Stutzman
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Knox, K.J., Blankmeyer, E.C. & Stutzman, J.R. Administrative Compensation and Organizational Performance in Texas Nursing Facilities. Small Business Economics 22, 33–49 (2004). https://doi.org/10.1023/B:SBEJ.0000011571.76505.4c

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  • DOI: https://doi.org/10.1023/B:SBEJ.0000011571.76505.4c

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