Teams, Incentive Pay, and Productive Efficiency: Evidence from a Food-Processing Plant

Posted: 15 Nov 2010  

Derek C. Jones

Hamilton College - Economics Department

Panu Kalmi

Aalto University - Department of Economics

Antti Kauhanen

The Research Institute of the Finnish Economy

Date Written: July 1, 2010

Abstract

By using weekly records on efficiency for four production lines in a Finnish food processing plant during the period 1999-2005, the authors investigated the effects on worker performance once changes in Human Resource Management (HRM) practices were instituted. Using time series methods to estimate structural change models, the authors were able to determine the extent to which specific HR policies - the introduction of teams, company-wide profit-sharing, and a group system of performance-related pay (PRP) - affected workers’ efficiency, even though production technology remained the same. As predicted, the authors found that in three of the four production lines, when PRP was added to teams, productivity increased from between 9 and 20 %, highlighting the importance of the complementarity between employee participation and incentive pay.

Keywords: Teams, Incentive Pay, Efficiency

JEL Classification: L23

Suggested Citation

Jones, Derek C. and Kalmi, Panu and Kauhanen, Antti, Teams, Incentive Pay, and Productive Efficiency: Evidence from a Food-Processing Plant (July 1, 2010). Industrial and Labor Relations Review, Vol. 63, No. 4, 2010. Available at SSRN: https://ssrn.com/abstract=1709474

Derek C. Jones (Contact Author)

Hamilton College - Economics Department ( email )

198 College Hill Road
Clinton, NY 13323
United States
315-859-4381 (Phone)
315-859-4477 (Fax)

Panu Kalmi

Aalto University - Department of Economics ( email )

PO Box 1210
FI-00101 Helsinki
Finland

Antti Kauhanen

The Research Institute of the Finnish Economy ( email )

Arkadiankatu 21B
Helsinki, 00100
Finland

HOME PAGE: http://staff.etla.fi/kauhanen/

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