Managerial compensation and incentives in for-profit and nonprofit hospitals

Managerial talent, motivation, and self-selection into public management

“…Hence, condition (2) is sufficient to ensure that dm dα > 0. The signs of (33), (34), and (35) follow accordingly.…”

“…In line with our theory, Preston (1989) finds that the non-profit wage penalty is higher for managers and professionals than for sales and clerical workers, and her results support the hypothesis that the wage difference is partially driven by selection. Lastly, Roomkin and Weisbrod (1999) show that top executives in for-profit hospitals receive both larger total income and larger incentive pay than their counterparts in non-profit hospitals, but the difference is smaller at lower levels in the hierarchy.…”

Determinants of compensation: A study of pay, performance, and gender differences for fundraising professionals

“…Is the pay-performance relationship for fundraisers significant for bonus, for salary, or both? Studies comparing for-profit and nonprofit organizations have found that nonprofits paid greater base salaries, lower bonuses, and lower total compensation than for-profits, ceteris paribus (Roomkin and Weisbrod, 1999;Weisbrod, 1983). However, for fundraisers, where the measure of performance is objective and measurable (as is primarily the case in for-profit firms), there may be a more contingent relationship between performance and bonus because it is a reliable way to reward achievement of goals.…”

Does Organization Ownership Matter? Structure and Performance in For-Profit, Nonprofit and Local Government Nursing Homes

“…They find that NP organizations are less likely to offer promotions, and the promotions that they do offer are less likely to be based on job performance or merit. Furthermore, echoing the findings of Roomkin and Weisbrod (1999) and Bertrand, Hallock and Arnould (2005) for hospital executives, DeVaro and Brookshire (2007) find that NP workers are less likely to receive commissions on sales, bonuses and profit sharing than their FP counterparts. These results are weakly consistent with our results, in that the weak differences between FP on the one hand and NP and LG homes on the other hand, although in the predicted direction, are weaker than those found in other industries most likely because there are few pay-for-performance opportunities in the nursing home environment.…”

“…Top executives may share in profits or own stock, and in turn they may proffer lower-level employees incentives that promote profit-enhancing behavior. In contrast, NP and LG organizations have broad and often complex objectives concerning various facets of the product and, akin to the problem of incentives in multi-tasking situations (Holmstrom and Milgrom, 1991), cannot offer their executives simple incentive schemes to pursue these objectives (Roomkin and Weisbrod, 1999), 12 which, in turn, lowers executives' motivation to manage as well as their ability to proffer lower-level employees incentives that induce effectively desirable behavior in a multi-objective environment. Consequently, FP firms will tend to rely more on variable financial incentives than their NP and LG counterparts.…”