Engellandt A, Riphahn RT (2011)
Publication Language: English
Publication Type: Journal article, Original article
Publication year: 2011
Publisher: Industrial & Labor Relations Review
Book Volume: 64
Pages Range: 241-257
Journal Issue: 2
URI: http://www.lsw.wiso.uni-erlangen.de/userfiles/team/riphahn/bonus33b.pdf
We investigate the effect of performance evaluation styles on effort. We use panel data on 4080 employees in an international company. The company applies two performance based remuneration mechanisms, both based on subjective evaluations: an individual "surprise" bonus and a more structured system, where salary is affected by the degree to which an individual reached personalized targets. We hypothesize that effort is higher in departments where (i) individual performance evaluations are more flexible over time (less favoritism), (ii) surprise bonuses are used more frequently (higher pay-performance sensitivity). The hypotheses are tested using paid and unpaid overtime work as effort indicators. Both hypotheses are supported. The estimated effects are substantial, increases in rating flexibility or bonus payments by one standard deviation above the mean increase mean overtime hours by more than 20 percent. The findings are robust and suggest that surprise bonuses and flexible performance evaluations over time provide effective incentives.
APA:
Engellandt, A., & Riphahn, R.T. (2011). Evidence on Incentive Effects of subjective Performance Evaluations. Industrial & Labor Relations Review, 64(2), 241-257.
MLA:
Engellandt, Axel, and Regina Therese Riphahn. "Evidence on Incentive Effects of subjective Performance Evaluations." Industrial & Labor Relations Review 64.2 (2011): 241-257.
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