Top PDF The Rise of Individual Performance Pay

The Rise of Individual Performance Pay

The Rise of Individual Performance Pay

firms are more likely to use individual performance pay, but not group pay, and Grund and Sliwka (2007) find that individual performance appraisal, such as performance pay, is more common at higher levels of organizations. These studies are supported by research showing that the returns to skills are increasing (see e.g. Junk et al. 1993). Human capital is to a larger extent paid its marginal product, and individual performance pay is a way to that (Lemieux et al. 2007). Group-based incentive schemes (as in partnerships), are still quite common in certain high-skilled professional service industries such as law, accounting, investment banking and consulting, but researchers have noted that there is a trend away from equal sharing partnerships towards productivity-based ”eat what you kill” partnerships (Levin and Tadelis, 2005) One explanation for the increased use of individual performance pay is that advances in information and communication technology has made it easier to measure individual performance (Lemieux et al. 2007). A question then is whether it is has become relatively more easy to asses the perfor- mance of high-skilled workers. There is apparently no evidence that this is the case, in fact, MacLeod and Parent (1999) find that incomplete incen- tive contracts based on looser performance assessments are more common among highly educated. Barth et al. (2006) suggest that one should expect a positive relationship between human capital and individual performance pay because the quality and effort of high-skilled workers have larger impacts on productivity than the quality and effort of other groups of workers. They
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Pay and performance in Italian football

Pay and performance in Italian football

At player level, our research question requires that we have data on individual performance metrics and our source does supply these. There are numerous measures available and Table 1 reports descriptive statistics for performance metrics per minute played broken down by position. Outfield productivity measures comprise goals scored, shots on target, total shots, assists, fast breaks, fouls against a player, successful passes, useful 1 through passes, useful crosses, useful dribbles, recovered balls and lost balls. These measures are all as presented to us by Paninidigital. Specific measures for defenders are available to us including
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The Design of Performance Pay in Education

The Design of Performance Pay in Education

The presence of school fixed effects in the Israeli VAM models used to create teacher performance measures implies that the performance of each teacher is being measured relative to the average performance of teachers in her school. This convention creates a clear incentive for teachers to sabotage the work of their peers. Sabotage may not have been a problem in a short-lived experiment where teachers may or may not have fully understood the construction of per- formance metrics. However, the Jacob and Levitt (2003) results suggest that one should not assume that teachers are unwilling to engage in such behaviors when permanent incentive schemes create clear incentives for such malfeasance. Systems that involve individual incentive pay but no direct competition among teachers working in the same school are less problematic, but education authorities may still prefer to have teachers compete in teams. The persons who may possess the best information about how a particular fifth grade math teacher in a given school can improve are the other fifth grade math teachers in the same school. Incentive systems should encourage these teachers to share this information rather than withhold it. Thus, it makes sense to allow all the teachers who teach a given subject in a particular grade to compete as a team against teachers in other schools that serve similar communities and students. These teams are often so small that free riding should not be a huge concern and peer monitoring should be quite effective. The majority of incentive schemes described in Table 1 are team incentive schemes, and all of the team incentive plans did generate improvements in measured achievement.
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Performance Related Pay Coverage in the UK

Performance Related Pay Coverage in the UK

We assume that the objective of the firm is to maximise profit. This requires that workers compensation structure is such that they are willing to supply their labour time in the first instance. Given labour supply, the firm then selects the most appropriate compensation structure to maximise profits. Thus the firm maximises net surplus given increased effort but subtracting both the fixed and variable costs of designing and implementing a PRP system. For time-rate workers, monitoring ensures that workers supply a minimum effort level, although at the level of the individual she may choose to supply more effort (E>E min ). As
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Confronting Objections to Performance Pay: A Study of the Impact of Individual and Gain sharing Incentives on the Job Satisfaction of British Employees

Confronting Objections to Performance Pay: A Study of the Impact of Individual and Gain sharing Incentives on the Job Satisfaction of British Employees

As formalized in Pouliakas (2007), the above prediction may not necessarily hold in the presence of imperfect labour mobility, since it requires time for the sorting behaviour described by Lazear (1986; 2000) to take effect. Belfield and Marsden (2003), for instance, report a significant experimentation and learning-by-doing process in the implementation of suitable compensation strategies by managers, with a significant proportion of workplaces operating ‘wrong’ remuneration schemes, in the sense that they do not match the conditions of their monitoring environment. In this case, the introduction of PRP schemes by firms may be associated with lower mean JS, given that for those agents for whom the marginal cost of effort is dear compensation schemes which reward performance will be less attractive. In contrast, Heywood and Wei (2006) have emphasised that PRP generates the maximum surplus for workers, as it allows them to put forth infra-marginal effort that achieves a more complete optimization of their utility compared to other payment arrangements.
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Pay for performance: will dentistry follow?

Pay for performance: will dentistry follow?

Other important issues in developing outcome indicators are the availability of valid, reliable treatment information and the cost of data collection. Data is valuable as long as it accurately measure clinical reality i.e. actual oral health status, risk factors, diagnoses, treatment, and side effects. Missing data in patient records makes the calculation of performance measures based on dental records difficult [79]. Currently, many dental offices use paper records and collect electronic data only for reimbursement purposes. Assessing performance based on electronic claims infor- mation would therefore provide an incomplete picture of clinic activity and thereby limit quality of care informa- tion [80]. It may be possible to assess at a practice level the proportion of patients who receive dental sealants, but the diagnostic information on the type of caries and appropriateness of treatment for a particular patient would not be available in claims data. Modifications of the claims codes could address this issue to some extent, but such modifications are not easy to implement and uptake may be variable if reimbursement is not directly tied to the new codes. Absent robust administrative data systems, other performance evaluation methods have been tested [79]. While many MCOs justify the cost of medical records abstraction required to participate in the voluntary Healthcare Data Information Set (HEDIS) pub- lic reporting program, the high costs of data abstraction would be a barrier to implementation for individual prac- tices. It will likely be several years before a Universal Elec- tronic Medical Record is adopted and even longer for its dental equivalent. In the meantime, dental P4P program designers must weigh the imperfections of claims data against the feasibility of primary data collection modeled on HEDIS.
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Sickness absence, performance pay and teams

Sickness absence, performance pay and teams

While one uses the phrase “complete compensation”, it is important to note that this necessarily does not mean that all pay is compensated fully. First, for workers operating under a performance pay regime based on individual performance, bonuses will often not be compensated. If the absence is detrimental to team performance, then bonuses can be lost also under a regime with team incentive devices. Thus under performance-pay it is hard to talk about full compensation. Close to 50% of Norwegian private sector workers operate in 2003 under a regime of performance pay (Barth et al., 2008a), thus a substantial proportion of Norwegian workers cannot be said to experience complete compensation. Furthermore, when you are absent from work you loose out on opportunities at work providing other extra pay, for instance overtime payment. Finally, certain non-wage elements are not compensated fully.
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Directors' Influence on Pay-Based Performance

Directors' Influence on Pay-Based Performance

process of how directors are actually rewarded remains to be elusive, exclusive and opaque (Zakaria 2012). It was also noted that such a remuneration structure has not changed over the years although share option plans and other long term plans have changed (Zakaria 2012). As an example, in 2011, Standard Chartered disclosed that its executives directors have target performance awards that were originally set with reference to market and individual experience levels (Standard Chartered 2011). Nevertheless, these individual experience levels have remained stagnant because the directors’ target was not associated with their basic salaries. Although firm performance should be linked to the directors’ performance therefore, their remuneration, it appears that there have been mixed results concerning this association. Conyon (1997), for instance, found that the directors’ pay was very closely linked to sales growth. This finding may create an issue for the shareholders because sales are perceived to be short-term performance measures. In this regard, it may create incentives for the directors to adjust sales in order to receive better remuneration. Due to this possibility, it is thus crucial to monitor the company’s performance and to also take an initiative in understanding how the directors’ remuneration was derived, based on the link of pay-performance.
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Pay-for-performance for healthcare providers

Pay-for-performance for healthcare providers

of the three clinical conditions and for most individual measures). The third found that differ- ences between intervention and control hospitals in their improvement on a composite score for incentivized and non-incentivized measures were not statistically significant. Intervention hospitals had greater improve- ment on three individual measures (two incentivized, one unincentivized). There were no statistically sig- nificant differences in improvements in inpatient mortality between the two groups. Overall, the authors conclude that there remains a substantial gap in the knowledge as the most rigorous evidence (a 2 to 4 per- centage point improvement beyond the improvement seen in control hospitals) comes from a single program. However, the effect of P4P without PR remains unknown and the studies only provide evidence on a few clinical conditions. Petersen et al. (2006) identified seventeen studies that addressed the question whether explicit financial incentives can improve the quality of care. Five of the six physician-level incentives and seven of the nine group-level incentives found partial (five) or positive effects (two) of the financial incentives on measures of quality. Among the studies on group-level incentives, two RCTs found that the incentives for preventive health services had no effect compared with the control group. One of the two studies investigat- ing incentives at the “payment-system level” found a positive effect on access to care (which was incentiv- ized), while the other found evidence of selection. Overall, the authors conclude that there are few informa- tive studies of explicit financial incentives for quality and that this literature suggests some positive effects of financial incentive programs. Rosenthal and Frank (2006) included six studies, four of which were RCTs. The authors conclude that the empirical foundation of P4P in health care is weak. Most studies found no effect with only two positive findings (one study found a 4 percentage point improvement in immunization rates from baseline relative to the control group. Another found a 7.9 and 5.9 percentage point difference between intervention and control groups in identification of smokers and providing quit smoking advice to smokers, respectively, though no significant impact was found on smoking cessation rates). The authors suggest that the limited effectiveness may have been due to small dollar amounts per patient and small shares of eligible patients involved, as well as small sample sizes and the short time period over which the effect of the inter- vention was studied (in one study the impact of P4P was assessed over an eight month period). Sabatino et
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The rise in pay for performance among higher managerial and professional occupations in Britain: eroding or enhancing the service relationship?

The rise in pay for performance among higher managerial and professional occupations in Britain: eroding or enhancing the service relationship?

subjected to combinations of individual and group incentives. Growth in organisational PFP (profit- sharing and employee share ownership schemes) did not grow, however. They found that the well- known pay premium to PFP was relatively similar across occupational classes and found no adverse effects of PFP on work demands and work strain. On the surface, these findings imply the rise in PFP in the 1990s neither eroded nor enhanced the service relationship. Nonetheless, the trend towards greater PFP prevalence in higher managerial and professional occupations and associated premium may have come at the expense of other traditional elements of the service relationship such as opportunities for promotion and job security, but this thesis remains untested.
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Performance Pay, Training and Labor Mobility

Performance Pay, Training and Labor Mobility

who are less likely to change jobs (Loewenstein and Spletzer (1997)). For workers with a high separation probability, firms may need an alternative instrument to boost productivity. One such instrument is profit sharing. Data for different countries have shown that if workers are being paid a profit-related pay productivity increases by 2-6 percent (Ewing (1996); Cahuc and Dormont (1997); Booth and Frank (1999); see Prendergast (1999) for an overview). Even though profit sharing can be applied to stimulate effort on the part of all workers, individual workers’ productivity is less targeted than with individual training and free-riding is a potential risk. Hence, the choice for training versus profit sharing as a means of increasing productivity may depend on (unobserved) worker characteristics.
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Performance Pay and Stress : An Experimental Study

Performance Pay and Stress : An Experimental Study

9 Forty subjects (in two sessions of 20 subjects each) were invited to the Scottish Experimental Economics Lab (SEEL) at the University of Aberdeen to generate the data. The students were recruited using the Online Recruitment System for Economic Experiments (ORSEE) database of potential subjects which is maintained by SEEL. Students were given details about the broad parameters of the experiment and the procedure of the cortisol sample testing. The subjects were also advised, in line with standard cortisol testing protocols, to abstain from eating, drinking caffeine, smoking or taking exercise two hours before the commencement of the experiment. To this effect reminders were sent via email 24 hours before the experiment was scheduled to take place. The two experimental sessions took place at 1500 hours on the Monday and the Wednesday of the same week to control for the known diurnal patterning of cortisol production and to standardise the experience of participants. Saliva samples and subjective stress reports were obtained before and after participation in the experiment. These provide the objective and subjective the stress measures for the individual subject, respectively.
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The Regulation of Women's Pay: From Individual Rights to Reflexive Law?

The Regulation of Women's Pay: From Individual Rights to Reflexive Law?

The debate over the role CSR provides an illustration of this point. In principle, CSR can be quite effectively integrated into a reflexive approach to regulation. CSR involves an appeal to companies to go ‘beyond compliance’ since by doing so they can better preserve their competitiveness and prepare themselves to deal with future shocks. The business case for CSR intersects with the regulatory argument for limiting the role of the law to that of providing a framework which will reward those organisations which can most effectively internalise their social costs. One of the regulatory techniques associated with this approach is the use of disclosure rules and reporting requirements to generate a flow of information about the way in which companies handle the issue of externalities. This issue has appeared on the policy agenda in the UK as a result of the protracted debate over the introduction of a statutory ‘operating and financial review’ (‘OFR’) which would require large companies to produce annual reports on how they were dealing with various aspects of their social and environmental performance. The somewhat diluted form of this provision which was eventually brought into force by the Companies Act 2006, the ‘business review’, is, despite the changes made after the government abandoned the OFR in 2005, a measure with the potential to stimulate processes of benchmarking and peer review, when coupled with the active participation of social actors in the evaluation process. Changes in pensions law have also been introduced with the aim of stimulating a greater interest in social and environmental issues on the part of institutional investors; legislation requiring pension funds to disclose their voting policy and to state the extent to which social, ethical and environmental investment matters are taken into consideration, came into force in the UK in 2001. The Association of British Insurers has taken the view that this requirement has had a ‘significant and wide-ranging impact on the investment community…[and has] added significantly to the growing Socially Responsible Investment (SRI) movement’ (ABI, 2001: 13). These measures can therefore be seen as ‘capacity building’ mechanisms in the sense identified by reflexive theory.
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The Role of Intent in the Rise of Individual Accountability in AML-BSA Enforcement Actions

The Role of Intent in the Rise of Individual Accountability in AML-BSA Enforcement Actions

Department has not prosecuted a single employee of HSBC—no executives, no directors, no AML compliance staff members, no one. By allowing these individuals to walk away without any real punishment, the Department is declaring that crime actually does pay. Functionally, HSBC has quite literally purchased a get-out-of-jail-free card for its employees for the price of $1.92 billion dollars.”).

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Performance-vested Stock Options and Pay-Performance Sensitivity

Performance-vested Stock Options and Pay-Performance Sensitivity

sensitivity (PPS), a measure of interest alignment between owners and managers (Jensen and Murphy 1990; Garen 1994; Aggarwal and Samwick 1999; Conyon et al. 2000b). We attempt to answer two research questions: first, is PVSO compensation associated with greater interest alignment between managers and shareholders, and second, what is the role of vesting-target difficulty in this relationship? The study focuses on the UK because listed firms in the UK disclose more detailed information on managerial compensation compared to firms in the US, an advantage that helps our investigation. Based on a dataset of 4,238 individual-level observations from 1,383 executive directors in the largest 244 UK non-financial firms from 1999 to 2004, we find that the presence of PVSO schemes in managerial compensation contracts is associated with a higher level of pay-performance sensitivity compared with the case where PVSOs are absent, which suggests a better alignment of owner and manager interests through the use of PVSOs. Furthermore, PVSOs exhibit a higher level of PPS relative to their traditional counterparts (TSOs). In addition, we find that target difficulty influences pay-performance sensitivity in the sense that stricter performance targets cause lower interest alignment.
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No Pay for Sexist Performance: How Gender Disparities in Healthcare Hurt Hospitals’ Pay for Performance Reimbursements

No Pay for Sexist Performance: How Gender Disparities in Healthcare Hurt Hospitals’ Pay for Performance Reimbursements

Part I of this Note examines the existing gender disparities in healthcare, especially in the areas of cardiovascular disease, pain management, and cancer. Part II analyzes pay for performance reforms in the ACA. First, Part II looks at the Affordable Care Act generally. Then, Part II turns to the Medicare reforms in the ACA, focusing on the Hospital Readmissions Reduction Program and the Hospital Value-Based Purchasing Program. Part III integrates gender-based disparities in healthcare and pay for performance reforms, proposing solutions at both the legislative and ground-based levels. The Note argues that if hospitals prompted their physicians to consider, for example, the differences in how women and men present with heart attacks, the hospitals’ scores on pay for performance quality measures would rise. 25
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EFFECTIVENESS OF PAY-FOR-PERFORMANCE AND FIXED-PAY PRACTICES: AN ASSESSMENT OF PAY SATISFACTION, COMMITMENT AND TURNOVER INTENTION

EFFECTIVENESS OF PAY-FOR-PERFORMANCE AND FIXED-PAY PRACTICES: AN ASSESSMENT OF PAY SATISFACTION, COMMITMENT AND TURNOVER INTENTION

Pay-for-Performance compensates an individual’s achievement as compared to the accepted objectives. The logic behind pay for performance is that a part of the salary of employees is paid based on their performance. In this plan of compensation, pay will vary with some measures of individual (merit), team or organizational performance. It is a process that benefits in two way i.e., individual benefits from enhanced rewards and organizations benefit from the cumulative boost in the performance (summers, 2004). Ken Abosch (2010), a compensation consulting practice leader at Hewitt associates said “Base pay is no longer the vehicle for pay for performance”. He also added “every 1 percent a company takes away from base pay spending leads to 2.5 percent to 5 percent available for variable pay. Companies also benefited by the late release of payment (once in 3 months/6 months/12 months) because it increases the cash holding position for a specified period of 3/6/12 months without paying any interest. The Variable pay programs allow employees to feel that they have more control over their bonuses. Skill based pay which focuses on the breadth of the skills an individual possesses; gain sharing involves rewards shared by involved group members for group level improvements in cost savings, productivity and quality. Employee ownership is a form of stock ownership plans in compensation strategy (Richards (2006).
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Pay for performance where output is hard to measure : the case of performance pay for school teachers.

Pay for performance where output is hard to measure : the case of performance pay for school teachers.

One of the key limitations of existing theory is that it has focused on a narrow range of types of output-based pay, such as for semi-skilled workers, sales staff and senior managers, where performance is more easily measured. In his Journal of Economic Literature review of current research on the subject, Prendergast (1999) urged us to look beyond such groups for a wider understanding of pay and incentives for other kinds of employees. In contrast to the former occupations, and like many other public service workers, school teachers, of whom there are nearly half a million in the UK, have proved a challenge for motivation by conventional forms of pay for performance. The nature of their work is ‘imprecise’. It does not comprise a set of well-defined techniques that have to be consistently applied, and there is, at best, a loose relationship between particular actions and their students’ learning (Murnane and Cohen, 1986). In this respect, their work could be said to differ fundamentally from that which has provided the strongest demonstrations of how output-based pay can boost performance, such as Lazear’s windshield replacers at Safelite (Lazear 1996). Not only is their work ‘imprecise’, but frequently it involves a range of different kinds of activities, some of which are more amenable to measurement than others, for example, students’ national test results versus educating future citizens. Their work often involves a great degree of interdependency. Even if one can isolate an individual teacher’s classroom contribution, which many teachers believe improbable, there remain important areas of team-work within schools (Dolton et al 2003). Moreover, the presence of a ‘collegiate ethos’ (Adnett, 2003) diminishes the likelihood that teachers will ‘shirk’ because their effort is hard to measure, and so reduces the relevance of one common argument for tying pay to performance.
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A multilevel analysis of the use of individual pay-for-performance systems

A multilevel analysis of the use of individual pay-for-performance systems

Compensation systems such as individualized pay for performance (I-PFP) schemes for employees represent an important approach to aligning employer-employee interests. However, the adoption of I-PFP is much less common in many countries than in the USA. Employing a multi-level analysis of over 4,000 firms in 26 countries, we explore determinants of its adoption. At the country level we distinguish between cultural and institutional (labor regulation institutions) influences. At the firm level, we distinguish firms that view HR as strategically important and firms that are foreign-owned. On the one hand, our findings indicate that both cultural and institutional effects at country level significantly influence the adoption of I-PFP. On the other hand, senior managers’ agency counts. We find the effect of labor regulation on I-PFP to be mediated by its effects on labor union influence and we find the effects of culture on I-PFP to be entirely mediated by labor regulation and (country level) union influence.
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IN TERMS OF STRATEGIC HUMAN RESOURCES, THE IMPORTANCE OF INDIVIDUAL PERFORMANCE RELATED PAY SYSTEM

IN TERMS OF STRATEGIC HUMAN RESOURCES, THE IMPORTANCE OF INDIVIDUAL PERFORMANCE RELATED PAY SYSTEM

Today, the businesses determine the suitable wage system for themselves and apply it. Some of these systems; (Acar, 2007: 150-191) performance related pay system which is frequently used, ability related pay system, and competence related pay system. The pay system applied in the businesses is to be valid in all the organizations of the businesses and it can be perceived by the employess with ease. At this point, the performance related pay system is commonly preferred because of the fact that it is comprehended both by the employers as well as employees. Performance related pay system is a comprehensive system which can be used to determine the wages of each of the departments of the businesses. Performance related pay system is defined as the system which awards the workers with money who have worked above their normal working levels (Sekizinci Beş Yıllık Kalkınma Planı, 2000: 39). What lies behind the increase of the wage in organizations applying performance related pay system is considered as the award that the workers work hard to earn rather than the right distributed equally to everyone (Barutçugil, 2004: 454).
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