The outcomes of variable pay systems: tales of multiple costs and unforeseen consequences

Cox, Annette

doi:10.1080/09585190500220697

Cited by 19 publications

(18 citation statements)

References 23 publications

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“…For instance, soon after the implementation of the variable PFP plans, the company decided to introduce rules and regulations with respect to stealing others' sales and keeping hot customers warm from the end of one quarter to the next quarter in order to time sales strategically to maximize the variable PFP payout. Such unintended effects of variable PFP plans have been observed elsewhere (e.g., Cox, 2005;Kerr, 1975;Pfeffer, 1998).…”

Section: Discussionmentioning

confidence: 96%

“…If, on the other hand, lack of effort is an organization-wide problem, an alternative to relying on variable PFP to increase effort could be to train managers to satisfy psychological needs by providing more information about organizational goals and how their role helps fulfill these objectives, and by creating a sense of belonging (e.g., Baard, Deci, & Ryan, 2004;Meyer & Gagné, 2008 Compared with the efforts many organizations invest in fine-tuning their pay systems to solve problems associated with a lack of motivation or effort and retention issues, perhaps the most surprising observation based on our results is how weakly the variable pay variables are associated with the dependent variables. This is why some authors (e.g., Cox, 2005) argue that the costs and unforeseen consequences of variable pay (e.g., management time and administration, perceived unfairness, etc.) might not be worth the time, effort and money.…”

Section: Practical Implicationsmentioning

confidence: 99%

“…With the exception of case studies (e.g. Beer & Cannon, 2004;Cox, 2005;Lazear, 2000) and studies of the relation between performance, pay growth, and turnover (Harrison et al, 1996;A. Nyberg, 2010;Salamin & Hom, 2005;Trevor, Gerhart, & Boudreau, 1997), we are not aware of any field studies that have been able to take into account the dynamic effects of variable PFP.…”

Section: Limitations and Strengthsmentioning

confidence: 99%

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Do you get what you pay for? Sales incentives and implications for motivation and changes in turnover intention and work effort

et al. 2016

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This study investigated relations between pay-for-performance incentives designed to vary in instrumentality (annual pay-for-performance, quarterly pay-for-performance, and base pay level) and employee outcomes (self-reported work effort and turnover intention) in a longitudinal study spanning more than two years. After controlling for perceived instrumentality, merit pay increase, and the initial values of the dependent variables, the amount of base pay was positively related to work effort and negatively related to turnover intention, where both relationships were mediated by autonomous motivation. The amounts of quarterly and annual pay-for-performance were both positively related to controlled motivation, but were differently related to the dependent variables due to different relations with autonomous motivation.

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Section: Discussionmentioning

confidence: 96%

Section: Practical Implicationsmentioning

confidence: 99%

Section: Limitations and Strengthsmentioning

confidence: 99%

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Do you get what you pay for? Sales incentives and implications for motivation and changes in turnover intention and work effort

et al. 2016

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“…Au nom de la fidélisation, ces jeunes bénéficieraient de plus d'avantages que les plus anciens, créant de la sorte une forme de ghettoïsation générationnelle au sein de l'organisation (Pichault et Pleyers, 2012). De plus, la mise en place de ces systèmes de GRH différenciés et individualisés augmenterait considérablement la complexité du travail du gestionnaire ainsi que les coûts de gestion des imprévus (Cox, 2005 ;Gilbert, 2011), ce qui ajouterait son lot de frustrations, surtout lorsque de telles pratiques s'avéreront au bout du compte injustifiées.…”

Section: Resultsunclassified

Le phénomène « génération Y » : symbole d’une plainte existentielle ?

Luc

Fleury

2017

remest

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“…Organisations often underestimate the time and effort that need to be consumed by managers to implement and administer a new variable pay system (Cox, 2005).…”

Section: Do a Proper Benchmarking And Analysismentioning

confidence: 99%

Current practice with regard to short-term incentive schemes for middle managers

Grigoriadis¹,

Bussin

2007

SA j. hum. resour. manag.

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Background to the study The use of pay-for-performance, and in particular the use of incentive schemes has increased dramatically since 1987 in Fortune 1000 corporations (Lawler, 2003), and in a recent survey of reward practices conducted by WorldatWork, it was reported that approximately 66% of companies in the United States use variable pay beyond their executive levels. This is an increase from 59% in 1995 (Wilson, 2003).Historically, high-performing employees could expect to receive bigger salary increases than their lower-performing peers, especially when annual merit increases were averaging higher as a result of increasing inflation, but today, it has become increasingly more difficult to differentiate between the salaries of individual employees based on high or low performance. In order to supplement these merit increases, many companies have started implementing pay-for-performance incentive schemes (Orens and Elliot, 2002).There is thus globally a trend towards implementing performance-based incentive schemes, and in particular an increase in the use of incentive schemes for employees other than executives. In South Africa, variable pay and in particular incentive schemes have been implemented successfully for executives and sales staff across organisations, whereas most often, middle managers do not reap the benefits of such incentive programmes.The focus of this study therefore was to determine what the current practice is with regard to short-term incentive schemes for middle managers, as very little empirical research has been done in this regard. Short-term incentive schemes in particular are defined as incentive schemes where the measurement period is around one year and payments are in cash e.g. profit share, gain share, commission and bonus scheme (Bussin, 2003). Commission schemes were, however, excluded from this study as they are mainly used for sales employees, and a need existed to determine what the incentive scheme practices are with regard to non-sales middle management employees.Middle managers are considered to be those employees at around the Paterson D-Band level. When looking at a traditional hierarchical organisation, middle managers are those employees below senior managerial level and above the supervisory or junior management level. The professional specialists often fall into this employee category.Motivation/rationale for the study There is a lack of empirical research and literature on the problem, and a pressing need in the market exists for this research. The reasons for focusing on middle managers are that they are often the group of employees where little emphasis is placed on the manner in which their rewards are structured. This research has aimed to address this knowledge gap with specific reference to the South African market. Literature on short-term incentive schemesThe literature on short-term incentive schemes is contradictory. There are proponents as well as sceptics to be found in the literature. Research has more often than not found that incentives do not mo...

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The outcomes of variable pay systems: tales of multiple costs and unforeseen consequences

Cited by 19 publications

References 23 publications

Do you get what you pay for? Sales incentives and implications for motivation and changes in turnover intention and work effort

Do you get what you pay for? Sales incentives and implications for motivation and changes in turnover intention and work effort

Le phénomène « génération Y » : symbole d’une plainte existentielle ?

Current practice with regard to short-term incentive schemes for middle managers

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