6 Pay and Performance: Individuals,Groups, and Executives

Abstract

In this chapter, we address three pay for performance (PFP) questions. First, what are the conceptual mechanisms by which PFP influences performance? Second, what programs do organizations use to implement PFP and what is the empirical evidence on their effectiveness? Third, what perils and pitfalls arise on the way from PFP theory to its execution in organizations? We address these questions in general terms, but also highlight unique issues that arise in PFP for teams and for executives. We highlight the fact that research and practice in the area of PFP requires one to deal with a number of trade‐offs. For example, strengthening PFP links can generate powerful motivation effects, but sometimes these are in unintended and unanticipated directions, resulting in undesirable effects. In addition, there are also trade‐offs in deciding the degree of emphasis to give to individual versus team performance and to results versus behaviors in PFP plans. What all this means is that, as in other areas of management, “one best way” advice (e.g., do or do not use individual PFP plans) or “sound‐bite” conclusions (e.g., PFP does not exist; PFP does or does not motivate) are rarely valid, but rather depend on the circumstances and the organization. In the realm of executive pay, we question the current conventional wisdom in the management literature that there is little or no PFP. We close the chapter with a discussion of our key conclusions and suggestions for what we think would be the most interesting and useful future research areas. We encourage the management literature, which has increasingly become interested in the concept of evidence‐based management, to execute this concept more effectively in its research and when talking or writing about pay.     

Vietnam’s economy: Achievements and perspective

In last several years, Vietnams economy has reached significant achievements. Those are clearly seen by analyzing economic growth, economic structure transformation, trade and investment and Vietnams economy competitiveness. However, in the process of development, Vietnams economy is still facing many difficulties and challenges. Vietnam is accelerating speed of innovation process, is active and quicker in international economic integration in order to complete the economic – social objectives in the period of 2001–2005 with annual average economic growth rate of 7.5%.     

Residential Mortgages and Public Policy: What to do with Fannie and Freddie?

The current debate on U.S. housing policy focuses on the role of the government in supporting the mortgage market. Existing organizations (Fannie Mae/Freddie Mac) are in conservatorship status, and Congress is considering alternative structures and guarantees including the Johnson‐Crapo bill, to provide catastrophic insurance in support of the coverage from private companies. The resolution of this issue is complicated by the various activities involved in the issue—investment securities, public policy, macroeconomics, accounting, and insurance. This article reviews the impact of these activities on U.S. housing, with a discussion of the feasibility of creating a catastrophic insurance program similar to that of the Federal Deposit Insurance Corporation. The federal government has successfully operated catastrophic insurance programs in support of private sector initiatives, and this experience—while certainly not perfect—may be a reasonable approach to the current Fannie/Freddie dilemma.     

Dirty looks: Politicians’ appearance and unethical behaviour

Over half of British Members of Parliament (MPs) were found to have overclaimed on their expenses in the 2009 expenses scandal. We conducted an exploratory analysis of whether the facial appearance of the MPs (N = 636) is associated with overclaiming, as research has found that facial appearance is correlated with behavioural outcomes. Participants (N = 4,727) previously unfamiliar with the MPs made trait ratings (physically attractive, charismatic, criminal, competent, financially greedy, honest, likeable, organised, physically dominant, and sincere) of each politician’s face. The latent factor structure indicated the traits could be grouped into the three broad factors identified in previous work: criminality (the traits criminal, financially greedy, and physically dominant), attractiveness (the traits physically attractive, charismatic, honest, likeable, and sincere), and competence (competent and organised). We found more attractive MPs tended to overclaim less, as did more criminal-looking MPs. But more competent-appearing politicians tended to overclaim more. We relate these findings to theories of moral licensing and moral consistency and discuss the limitations and context-specific nature of our findings.     

Logistic Game™: learning by doing and knowledge-sharing

The aim of this article is to define a new simulation game in operation management called Logistic Game?. The main objectives are to introduce a new simulation game approach in solving the different correlated subsystems based on ‘visual interactive learning’ and to verify its positive effects on the learning process with respect to the usual simulation games. The game is based on an inside plant virtual supply chain simulation and copes with the educational challenges of teaching Industrial Logistics in a new, effective way. By applying a visual interactive simulation package, the game creates a virtual dynamic scenario directly visible by participants, with an improvement of experimentation and conceptualisation phases, and offers several logistic decisions and their strategic links from a holistic point of view. The challenge goes beyond a pure theoretical setting and students learn strategies and gain experience directly by operating in a virtual supply chain and sharing knowledge. The Logistic Game has been used to train more then 300 students since December 2006 in three different Italian workshops and has been designed to encourage the employment selection process by the companies involved.     

Agencification and Location: Does Agency Site Matter?

Two decades of New Public Management have placed agencifiction high on the agenda of administrative policy-makers. However, agencification (and de-agencification) has been one of the enduring themes of public administration. Agencies organized at arm’s length from ministerial departments have fairly often been located outside of the capital or political centre. Although practitioners tend to assign some weight to central versus peripheral location as regards political-administrative behavior, this relationship has been almost totally ignored by scholars in the field. In this paper, based on a large-N elite survey, we show that agency autonomy, agency influence and inter-institutional coordination seem to be relatively unaffected by agency site. This study also specifies some conditions under which this finding is valid.     

3 Merger and Acquisition Transactions and Executive Compensation: A Review of the Empirical Evidence

Abstract

The purpose of this paper is to review the existing empirical evidence and provide an integrative framework for the growing body of literature that is situated at the intersection of two highly debated topics: merger and acquisition (M&A) activities and executive compensation. The proposed framework structures the literature along two dimensions, such as M&A phases and firm's role in a M&A deal, allowing us to identify three main streams of research and five different conceptualizations of causal relationships between M&A transactions and executive compensation. Making a comprehensive review of empirical studies conducted to date we aim at shedding more light on the current and emerging knowledge in this field of investigation, discussing the inconsistencies encountered within each stream of research and suggesting promising directions for further exploration.     

‘Clock-watching and box-ticking’: British local authority planners,professionalism and performance targets

The speed of the statutory planning system has concerned UK Governments for decades. The Labour Government of 1997–2010 placed particular emphasis on increasing the efficiency of public services through performance targets. Whilst the subsequent Coalition Government of 2010–2015 removed many targets, those measuring the speed of planning application processing were kept. These performance targets have important potential implications in terms of the autonomy and space for discretionary judgement traditionally seen as intrinsic to the professional nature of planning. Empirical material exploring how British local authority planners responded to these targets suggests they have both restricted and empowered professionals and, whilst changes to practice have occurred, professional identities have remained more resilient. This contradictory picture highlights the importance of considering the role of frontline professionals in implementing reforms.     

Perceptions of politics and organizational cynicism: An attributional and leader–member exchange perspective

As the political perspectives of organizations gain acceptance, leadership is increasingly viewed as a political process. While some researchers have begun to shun the notion that politics should be viewed as necessarily bad and undesirable, it is still commonly seen as a negative attribute of the organizational environment. Moreover, organizational members who perceive themselves to be working in negative political environments may develop cynical attitudes toward the organization. The purpose of this paper is to provide insight into the role that attributions play in eliciting negative cognitive and affective reactions to the political environment. We argue that because the quality of the leader–member exchange (LMX) is often central to these reactions, LMX theory and research possess considerable promise for enhancing our understanding of these processes. We explore attributional processes in detail, with special attention to (a) how these attributional processes occur within a leader–member relationship and (b) how attributions ultimately impact perceptions of politics, as well as organizational cynicism.     

‘Management Standards’ and work-related stress in the UK: policy background and science

In the late 1990s, the Health and Safety Commission, as the lead authority in the UK responsible for Health and Safety at Work, conducted an extensive consultation exercise to elicit views about how work-related stress should be tackled. The Commission subsequently decided that regulation was not justified and opted for an approach with four strands. One of these was to work with stakeholders to develop clear, agreed standards of good management practice. This paper describes and discusses the rationale behind a standards-based approach that is essentially based on a method of controlling hazards. The Management Standards approach uses a taxonomy of six stressors that has evolved out of extensive research carried out on behalf of the UK's Health and Safety Executive (HSE) and in conjunction with stakeholders, and a three-phase risk assessment methodology. Further developmental work on the standards (which are to be subjected to public consultation) and associated measurement tools is described in a companion paper in this issue of Work & Stress (Cousins, Mackay, Clarke, Kelly, Kelly, & McCaig, ). The emphasis is on prevention towards reducing stress in the UK working population. We review current thinking on models of work stress, consider evidence linking workplace psychosocial factors and various health and organizational outcomes, and examine the effectiveness of organizational interventions. We argue that the literature supports an approach that aims to move organizational states (represented by the current situation) to more desirable ones (represented by the six Management Standards), and that this is an effective ‘population’ based approach to tackling workplace stress and promoting individual and organizational health.     

ABMT and breast cancer: what have we learned?

The debate regarding the efficacy of and insurance coverage for ABMT for breast cancer has been raging since the widespread dissemination of ABMT in the early 1990s. Underlying the debate was the expectation that the results of randomized clinical trials would finally provide scientific data to resolve the frequently emotional controversy. Unfortunately, the results of these eagerly awaited trials failed to show a significant impact in patients with either metastatic breast cancer or those at high risk for metastatic disease. ABMT, as it is now offered, will not provide the breakthrough that was anticipated or a substantial benefit to the majority of patients. Research on ABMT may have evolved from the initial expectation that the trials would confirm a positive to more modest expectations that trials will disprove a negative. The promising results of early trials still require confirmation through randomized controlled trials, and participation in such clinical trials is vitally important.     

Medicare private contracting: increasing patient choice and access?

Congress modified the Medicare program through the Balanced Budget Act of 1997 to expand patient choices for payment to physicians and certain other practitioners by allowing private contracting. This represents a shift in policy that has broad consequences for health care financing and program integrity. The effect of private contracting on quality and access to care remains unknown. Quality and access should be the most important measures of its success or failure. Out of pocket costs to seniors and vulnerable patients must also be watched closely.     

Looks and Labor: Do Attractive People Work More?

Using the German General Social Survey (ALLBUS) 2008, I investigate how looks affect an individual's labor supply decision. My results are, by and large, in line with predictions derived from the neoclassical model of labor supply. Applying regular probit, bivariate probit, Tobit and Heckman selection regression models, I find that good looks go hand in hand with higher employment probabilities and more hours of market work. Furthermore, physical attractiveness is positively associated with spousal income and spousal employment. Hence, beauty appears to affect labor supply decisions both directly and through the marriage market.     

Emotional labor and leadership: A threat to authenticity?

Building on the emotional labor and authentic leadership literatures, we advance a conceptual model of leader emotional displays. Three categories of leader emotional displays are identified: surface acting, deep acting and genuine emotions. The consistency of expressed leader emotions with affective display rules, together with the type of display chosen, combines to impact the leader's felt authenticity, the favorability of follower impressions, and the perceived authenticity of the leader by the followers. Emotional intelligence, self-monitoring ability, and political skill are proposed as individual differences that moderate leader emotional display responses to affective events. We also look at followers' trust in the leader and leader well-being as key outcomes. Finally, we explore the influence on leader emotional labor of contextual dimensions of the environment, including the omnibus (national and organizational culture, industry and occupation, organizational structure, time) and discrete (situational) context. Directions for future research are discussed.     

Health and well-being of older workers: comparing their associations with effort–reward imbalance and Pressure,Disorganisation and Regulatory Failure

Work organisation has well-established associations with health. This study compares the associations of Pressure, Disorganisation and Regulatory Failure (PDR) and effort–reward imbalance (ERI) with health and well-being among older workers. Participants were 714 Australian workers aged 45–65 (56.3% female), with a mean age of 54.6 years (SD = 5.0) and a mean of 34.7 working hours per week (SD = 13.9). Hierarchical regression analyses tested the strengths of the associations of both ERI and PDR with work–life conflict and mental health. Independent variables were entered in blocks: demographic characteristics (age and gender), working hours and then ERI or PDR (measured using the four subscales: financial pressure, reward pressure, disorganisation and regulatory failure). Compared to ERI, the PDR subscales collectively accounted for slightly less variance in work–life conflict and slightly more variance in mental health. The PDR subscales also accounted for extra variance in both dependent variables when ERI was included in the model. These findings indicate that PDR is a promising construct that includes elements of work organisation not addressed by ERI.     

Equator Principles: Bridging the Gap between Economics and Ethics?

The hypothetical conflict between self‐interest, corporate interest, and the common good is one of the hottest debated issues in business ethics. This article focuses on a particular corporate social responsibility approach within the field of sustainable (project) finance, which has the potential—given that certain reform measures are adopted—to overcome the alleged trade‐off between self‐interest and the common good. The approach is labeled as the Equator Principles (EPs) framework, which celebrated its tenth anniversary and the formal launch of the third generation of the EPs (EP III) in 2013. The article shows how companies can theoretically be both profitable and socio‐environmentally responsible by adhering to the EPs. The article proceeds as follows: Before moving on to the EPs, section 2 defines the key terms self‐interest and common good. Section 3 then analyzes the EPs from a business ethics perspective. Section 4 shows how the EPs can help in solving the potential trade‐off between self‐interest and the common good—provided that the EPs are substantially revised. These required reform steps are discussed in section 5. The article ends with a summary of the main findings.     

Organizational Environments and Performance: A Linear or Nonlinear Relationship?

The external circumstances that organizations confront are an important influence upon their prospects of success. The resources available within the environment, the multiplicity of stakeholder demands to be addressed and the rates of change in these, each have serious implications for organizational functioning. Nevertheless, it remains conceivable that the effects of different dimensions of the environment are not straightforwardly positive or negative, but may follow nonlinear patterns posing very different challenges at different levels. To draw lessons for public organizations seeking to understand how best to respond the circumstances that they face, this paper examines linear and nonlinear effects of different dimensions of the organizational environment on the performance of over 500 organizations using both objective and subjective measures of the environment. Strong support is found for the presence of linear relationships between each environmental dimension and type of measure and performance, but no evidence of statistically significant nonlinear environmental effects. The theoretical and practical implications of the findings are discussed.     

Accountability in Voluntary Partnerships: To Whom and for What?

This paper contributes to the understanding of accountability in collaborative governance by presenting views of practitioners from partnerships formed between K-12 public schools and private and nonprofit organizations in the United States. It focuses on two questions: what do partnership practitioners see the partnerships as being accountable for? And to whom do they see the partnerships as being accountable? The findings suggest that partnership participants reveal more of client-based and results-oriented views of accountability. They are more directly concerned about professional accountability and accountability to the partners. A concentric-circles model is then developed to illustrate the accountability relationships in partnerships.