Incentive pay configurations: bundle options and country-level adoption
| Published date | 04 April 2016 |
| Date | 04 April 2016 |
| DOI | https://doi.org/10.1108/EBHRM-02-2015-0004 |
| Pages | 49-66 |
| Author | Nicholas R. Prince,J. Bruce Prince,Bradley R. Skousen,Rüediger Kabst |
| Subject Matter | HR & organizational behaviour,Global HRM |
Incentive pay configurations:
bundle options and
country-level adoption
Nicholas R. Prince
College of Business and Technology,
University of Texas at Tyler, Tyler, Texas, USA
J. Bruce Prince
College of Business Administration,
Kansas State University, Manhattan, Kansas, USA
Bradley R. Skousen
Management Department, University of Illinois,
Urbana-Champaigne, Champaign, Illinois, USA, and
Rüediger Kabst
Faculty of Business Administration and Economics,
Universität Paderborn, Paderborn, Germany
Abstract
Purpose –Organizations worldwide are faced with the challenge of motivating and retaining
employees. In addressing this challenge, organizations may use a variety of incentive pay practices to
align employee behavior with organizational objectives. The purpose of this paper is to empirically
identify the incentive pay practice configurations or bundles adopted by private sector firms across 14
different countries from several geographic regions. The patterns of incentive pay configuration
adoption for each country are evaluated.
Design/methodology/approach –Cluster analysis, ANOVA, and multilevel random-intercept
logistic modeling are utilized on firms from the 2009 CRANET HRM survey.
Findings –Phase I of this study empirically identifies four different configurations (contingent
rewarder, incentive minimizer, incentive maximizer, and profit rewarder) derived from three
incentive pay practices (individual bonus, team bonus, and profit sharing practices) that firms
adopt. Phase II evaluates adoption rates by country and finds striking differences in incentive
configurations that firms avoid or adopt. Some countries have clear adoption prefere nces
(e.g. Denmark, Sweden, Japan, and France). In other countries firms employ a variety of
incentive bundles (e.g. USA, UK, and Germany) and seem to be less constrained by country-based
institutional factors.
Research limitations/implications –Incentive practices are typically studied independent of the
configurationof practices that firms select.This research helps us understandthe typical bundles in use.
Practical implications –Organizations worldwide are faced with the need to motivate employees.
This research maps the incentive bundles preferred in each of 14 countries.
Social implications –Employees in different countries come to work with expectations about pay
and these shape their perceptions of incentive fairness.
Originality/value –Research on incentives has tended to focus independently on specific practices
and ignore the reality that organizations generally select multiple practices. This research identifies the
combinations of incentive practices generally used and does so with firms from 14 countries
from various world regions. These results also offer a map of the incentive bundles preferred in
each country.
Keywords International human resource management, Promotion and compensation
Paper type Research paper
Evidence-based HRM: a Global
Forum for Empirical Scholarship
Vol. 4 No. 1, 2016
pp. 49-66
©Emerald Group Publis hing Limited
2049-3983
DOI 10.1108/EBHRM-02-2015-0004
Received 25 February 2015
Revised 17 July 2015
Accepted 27 July 2015
The current issue and full text archive of this journal is available on Emerald Insight at:
www.emeraldinsight.com/2049-3983.htm
49
Incentive pay
configurations
1. Introduction
Incentive pay practices are a human resource (HR) practice used by organizations to
align employee motivation and behavior with desired organizational outcomes
(Dulebohn and Werling, 2007; Kerr, 1975; Gerhart et al., 2009; Nyberg et al., 2013).
To align employee motivation and behavior, organizations choose from a variety of
incentive pay practices (i.e. individual and team bonus pay, and profit sharing). While
these practices can be used in isolation, Rynes et al. (2005) observe that most
organizations use combinations of incentive practices. Combinations of HR practices
implemented to work in concert with one another are referred to as a configuration or
bundle (Delaney and Huselid, 1996). Configurations of HR practices is an imp ortant
understudied phenomenon (Toh et al., 2008; Delaney and Huselid, 1996; Gooderham
et al., 2006). This is also responsive to growing practitioner interest in compensation
and rewards and where the practitioner-academic gap is increasing (Lange 2013;
Deadrick and Gibson, 2009).
Despite increased interest, empirical findings remain unclear about how incentive
practices vary across institutional contexts. Research summarized by de Waal and
Jansen (2013) emphasize that incentive practices have neither a consistent positive nor
negative effect on organizational performance. They found that when a reward
structure is perceived as being fair it leads to higher performance and that employee
attitudes toward incentive pay practices vary significantly across countries. Research
based on an institutional theory perspective suggests that values and norms differ
between countries and may lead to different patterns of incentive pay practices (North,
1990; Gooderham et al., 1999, 2006). Institutional differences create varying
expectations that organizations must meet to achieve desired outcomes (Kostova and
Roth, 2002). Organizations adopt institutionally accepted practices to gain legitimacy
which facilitates access to resources and attainment of organizational goals. What is
seen as a “fair”and appropriate incentive configuration in one country may be seen as
questionable in another.
The purpose of this study is to identify the incentive pay practice configurations
used by organizations and to examine how their adoption varies across countries. We
examine these issues in two research phases. In the first phase, we draw on incentive
pay and HRM configuration-related research to provide a conceptual basis to identify
expected incentive pay practice configurations using three different incentive pay
practices: individual bonus pay, team bonus pay, and profit sharing. In the second
phase, we draw on HRM research and institutional theory to develop and empirically
test hypotheses regarding the potential relationships between configuration patte rns
and country context use in private sector firms from 14 countries spanning fou r
continents. This study extends current understanding of the incentive pay
configurations that organizations adopt and provides useful information to HR
practitioners regarding the country-based preferences for different incentive
configurations. We conclude our study with a discussion of both the theoretical and
practical implications of the empirical findings and present avenues for future research.
2. Phase I: incentive pay practice adoption patterns
2.1 Incentive pay practices
Incentive pay practices are compensation practices used by organizations to selectively
attract, motivate, and retain employees by linking compensation to desired outcomes
(Nyberg et al., 2013).Incentive pay practices augmentan employee’s base pay and tend to
be calculated based on performance at three different levels within an organization
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