Control Implications of Worker Identification with Firm Sales Success

Abstract:     
There has been increasing interest in firms in which workers strongly identify with their firm's success. It would seem apparent that such identification by workers should be considered as an integral element of the firm's control systems. However, much of the literature on the myriad forms of firm culture has focussed on its symbolic and psychological characteristics as opposed to its economic consequences. As a result many economists, and the mangers who design control systems, have chose to concentrate on such "hard" controls as pay-for-performance and not on how worker identification with the firm can alleviate control problems. In this paper we use analytic models to study the control implications of high commitment human resource systems where workers identify with the success of their firm. We show that such identification can help alleviate control problems by encouraging information sharing, even when that is at the expense of worker slack.

Keywords: adverse selection, monetary and non-monetary compensation, firm culture, worker behavior

JEL Classification: M40, M46, M12, M14, J33, D82, C72

Accepted Paper Series