When it comes to performance related pay, commentary often focuses on the positive effects it can have on employee and organizational performance. But is there a downside? A Finnish study sought to investigate the role that pay for performance can have on employee innovation. The results indicated that reward for innovation related behaviours can stunt radical innovation, while it can have a moderate positive effect on incremental innovation.
Key Topics: Performance related pay; Innovation
When it comes to eliciting the best from their employees, companies are increasingly moving toward pay for performance reward strategies, which focus on rewarding employees’ job skills, knowledge, competencies and productivity. A recent Malaysian study sought to understand factors influencing perceived unfairness of such reward practices and found that elements such as effective communication, participation, and performance appraisals can have a significant impact on perceived fairness by employees.
Key Topics: Job satisfaction, Performance appraisal, Performance based reward
With companies constantly striving for competitive advantage, continued innovation is central to the success of many companies. A Chinese study examined innovative employee behavior across multiple industries and the role of contextual and dispositional factors in this behavior. The study found that innovation job requirements and employee intrinsic interest in innovation had a significant impact on employee innovative behavior, and furthermore that reward could play an important role in eliciting innovative behavior.
Key Topics: Perceived innovation job requirement; Innovative behavior; Intrinsic interest in innovation; Rewards
Gender pay gaps continue to persist in many countries, despite direct intervention by governments, regulators, and companies alike. So why does this apparent gender pay inequality continue? A recent German study examined some of the underlying mechanisms relating to perceptions of fair pay and found that both men and women held the belief that lower pay for women was fair. These beliefs appear to be formed and ‘legitimized’ based on people’s experiences of pay inequality in their own occupations and experiencing more value placed on the input of men in the workplace.
Key Topics: Gender pay gap; Fair compensation; Performance evaluation; Pay inequality
Given the importance of innovation to many companies, the optimal performance of Research & Development employees can be critical to business success. While past research indicates that there is a strong link between monetary rewards and employee performance, this relationship is less clear when it comes to generating employee innovation. A multi-year study in Japan assessed the effect of rewards on the innovation outcomes of Research & Development employees. The study found that, while the relationship differed depending on company size, generally financial reward had a negative impact on employee innovation.
Key Topics: Innovation; Pay-for-performance; Extrinsic reward; R&D employees
CEO compensation packages are becoming increasingly standardized, for various reasons, including the growing influence of external bodies on company boards of directors. A study of US CEOs over a 7-year period, which examined the relationship between CEO compensation effectiveness and their tenure, found that the motivation inducing effects of different compensation components differed depending on how long CEOs had been in their role. The results suggest that standardization of CEO compensation is not an optimal compensation strategy for companies to follow.
Key Topics: CEO tenure; CEO compensation; Shareholder returns; Performance-based compensation
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