Working Paper: NBER ID: w17745
Authors: Douglas L. Kruse; Joseph R. Blasi; Richard B. Freeman
Abstract: This paper analyzes the linkages among group incentive methods of compensation, labor practices, worker assessments of workplace culture, turnover, and firm performance in a non-representative sample of companies: firms that applied to the "100 Best Companies to Work For in America" competition from 2005 to 2007. Although employers with good labor practices self- select into the 100 Best Companies firms sample, which should bias the analysis against finding strong associations among modes of compensation, labor policies, and outcomes, we find that in the firms that make more extensive use of group incentive pay employees participate more in decisions, have greater information sharing, trust supervisors more, and report a more positive workplace culture than in other companies. The combination of group incentive pay with policies that empower employees and create a positive workplace culture reduces voluntary turnover and increases employee intent to stay and raises return on equity. Finding these effects in the non-representative "100 Best Companies" sample strengthens the likelihood that the policies have a causal impact on employee well-being and firm performance.
Keywords: No keywords provided
JEL Codes: J33; J53; J54; J63; M50; M52; M54; P12; P13; P17
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| shared capitalist compensation (P13) | employee participation in decisions (M54) |
| shared capitalist compensation (P13) | information sharing (O36) |
| shared capitalist compensation (P13) | positive workplace culture (J29) |
| group incentive pay + employee empowerment policies (J33) | reduction in voluntary turnover (J63) |
| group incentive pay + employee empowerment policies (J33) | increase in employees' intent to stay (M51) |
| group incentive pay + employee empowerment policies (J33) | higher return on equity (G32) |
| shared capitalist compensation (P13) | firm performance (L25) |