Incentive pay configurations: bundle options and country-level adoption

Abstract

Purpose – Organizations worldwide are faced with the challenge of motivating and retaining employees. In addressing this challenge, organizations may use a variety of incentive pay practices to align employee behavior with organizational objectives. The purpose of this paper is to empirically identify the incentive pay practice configurations or bundles adopted by private sector firms across 14 different countries from several geographic regions. The patterns of incentive pay configuration adoption for each country are evaluated. Design/methodology/approach – Cluster analysis, ANOVA, and multilevel random-intercept logistic modeling are utilized on firms from the 2009 CRANET HRM survey. Findings – Phase I of this study empirically identifies four different configurations (contingent rewarder, incentive minimizer, incentive maximizer, and profit rewarder) derived from three incentive pay practices (individual bonus, team bonus, and profit sharing practices) that firms adopt. Phase II evaluates adoption rates by country and finds striking differences in incentive configurations that firms avoid or adopt. Some countries have clear adoption preferences (e.g. Denmark, Sweden, Japan, and France). In other countries firms employ a variety of incentive bundles (e.g. USA, UK, and Germany) and seem to be less constrained by country-based institutional factors. Research limitations/implications – Incentive practices are typically studied independent of the configuration of practices that firms select. This research helps us understand the typical bundles in use. Practical implications – Organizations worldwide are faced with the need to motivate employees. This research maps the incentive bundles preferred in each of 14 countries. Social implications – Employees in different countries come to work with expectations about pay and these shape their perceptions of incentive fairness. Originality/value – Research on incentives has tended to focus independently on specific practices and ignore the reality that organizations generally select multiple practices. This research identifies the combinations of incentive practices generally used and does so with firms from 14 countries from various world regions. These results also offer a map of the incentive bundles preferred in each country.

Impact of national culture on organizations’ use of selection practices

“…Selection practices are one of the first interactions potential employees have with an organization. If organizations are too different and do not fit in with cultural expectations people in a country have, then it will be difficult for them to be successful at building out their workforce as people are attracted and stay at organizations that fit their values (Prince et al , 2016; Schneider, 1987).…”

Designing incentive pay practices to motivate not alienate: why firms adopt different payment practice configurations in different countries

“…This review is of “Incentive pay configurations: bundle options and country-level adoption”, by Nicholas et al (2016). Using firm-level data from the 2009 CRANET survey, the study analyzes the way private-sector companies combine individual bonuses, team bonuses, and profit-sharing to create their preferred bundle of incentive pay practices.…”

The perspectives of variable pay in Croatia

“…The rationale for this research is the claim that extension and replication of pay preferences theory in other contextual environments are important to knowledge accumulation and further theory development (Tsang 2002 after Chiang & Birtch, 2006). The starting point for this paper was the assumption that the implementation of variable pay depends upon numerous factors and that its attractiveness for employees should be examined within country-speciÞ c contexts (see Prince et al, 2016).…”