Research and Insights Archive

Research and Insights from the Center for Effective Organizations

Performance Measure Properties and Incentive System Design

Michael Gibbs (University of Chicago), Kenneth A. Merchant (USC), Wim A. Van Der Stede (London School of Economics), and Mark E. Vargas (University of Texas) analyze effects of performance measure properties (controllable and uncontrollable risk, distortion, and manipulation) on incentive plan design, using data from auto dealership manager incentive systems

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National Differences in Performance-Dependent Compensation Practices: The United States vs. The Netherlands

This paper by E. Pieter Jansen (University of Groningen), Kenneth A. Merchant (USC), and Wim A. Van Der Stede (London School of Economics) describes the findings of a study aimed at providing an international replication of a U.S.-based study by Gibbs et al. (2004, 2006) focused on the performance-dependent compensation practices of firms in the automobile retailing industry.

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Employment Horizon and the Choice of Performance Measures: Empirical Evidence from Annual Bonus Plans of Loss-Making Entities

Michal Matejka (University of Michigan), Kenneth A. Merchant (USC), and Wim A. Van Der Stede (London School of Economics) examine the extent to which the presence of employment horizon issues affects the relative emphasis on financial versus nonfinancial performance measures in annual bonus plans.

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CEO Compensation: What Board Members Think

Edward E. Lawler III (CEO) and David Finegold (Rutgers University)
Survey data were gathered from 660 board members of the largest publicly traded corporations. They think that CEO compensation is too high in many corporations.

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Performance Measure Properties and Incentives

Michael Gibbs (University of Chicago), Kenneth A. Merchant (USC), Wim A. Van Der Stede (London School of Economics), and Mark E. Vargus (University of Texas) provide a comprehensive empirical analysis of incentive design, focusing on effects of performance measure properties (controllable and uncontrollable risk, distortion, and ma-nipulation).

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The Importance of Worker Value Added: Detroit’s Real Lesson for American Industry

James O’Toole and Edward E/ Lawler III (CEO) explain that manufacturing productivity is greatly determined by the design of jobs and how workers are rewarded.

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The Strength of Occupation Indicators as Proxy for Skill

In this paper, Alec R. Levenson (CEO) and Cindy Zoghi (US Bureau of Labor Statistics) consider whether inter-occupational wage differentials that are unexplained by measured human capital are indeed due to differences in often-unmeasured skill.

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Trends in Jobs & Wages in the U.S. Economy

In this chapter, Alec R. Levenson (CEO) reviews the changes in the U.S. labor market over the past four decades, focusing on the economic trends that have had the greatest impact on work as viewed from the employee’s perspective: wages, hours, job stability, and demographics.

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Reward Systems, Motivation and Organizational Change

Edward E. Lawler III (CEO) and Christopher G. Worley (CEO) argue that organizational excellence is about change. We would not have said this in the 1970s, 1980s, or perhaps even in the 1990s. Today it almost goes without saying.

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Performance Measure Choice and Target Setting in Loss-Making Firms

Kenneth A. Merchant (USC), Wim A. Van Der Stede (USC), and Michal Matejka (University of Michigan) examine the choice of performance measures and performance target difficulty in CEO annual bonus plans in loss-making firms.

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Measuring the Impact of a Managerial Competency System: Does Identifying and Rewarding Potential Leaders Improve Organizational Performance?

Alec R. Levenson (CEO), Wim A. Van Der Stede (USC), and Susan Cohen (CEO) discuss how the use of competency systems to evaluate, reward, and promote managers has become commonplace in large organizations in recent years.

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Searching for Pay Equity: The Role of Pay Compression on Individual-Level Outcomes

Pay compression occurs when employees with more seniority receive pay rates nearly equal to newer employees. Based upon equity theory, Amy B. Henley (University of Texas), George S. Benson (University of Texas), and Gary C. McMahan (University of Texas) hypothesize that pay compression will influence employee perceptions of pay equity.

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