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

Journal article


Gooderham, Paul, Fenton-O'Creevy, Mark, Croucher, Richard and Brookes, Michael. (2015). A multilevel analysis of the use of individual pay-for-performance systems. Journal of Management. https://doi.org/10.1177/0149206315610634
AuthorsGooderham, Paul, Fenton-O'Creevy, Mark, Croucher, Richard and Brookes, Michael
Abstract

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 United States. Employing a multilevel 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 human resources as strategically important and firms that are foreign owned. On the one hand, our findings indicate that both cultural and institutional effects at the 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.

Keywordscompensation bonuses and benefits; culture; institutional theory
Year2015
JournalJournal of Management
PublisherSage Publishing
ISSN1557-1211
Digital Object Identifier (DOI)https://doi.org/10.1177/0149206315610634
Open accessOpen access
Page range1 - 26
Publisher's version
Place of publicationUnited Kingdom
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