The Determinants of Incentive Intensity in Group-Based Rewards

Posted: 14 Sep 2000

See all articles by Todd Zenger

Todd Zenger

University of Utah

C.R. Marshall

Upper Iowa University

Multiple version iconThere are 2 versions of this paper

Abstract

Higher-powered incentives have spread to a broader subset of employees within hierarchies, largely through group-based pay plans such as profit sharing, gainsharing, and team-based rewards. Yet, in most organizations, the incentive intensity of group rewards, like the incentive intensity of individual rewards, remains low. This paper explores the determinants of incentive intensity in group-based rewards. We draw upon agency theory for hypotheses and test these with a sample of 663 group-based pay plans. We find that incentive intensity is higher when groups are small, when plans need not measure quality, and when management participation is high. We also find that plans embedded in small firms and plans with longevity have higher incentive intensity.

JEL Classification: J31

Suggested Citation

Zenger, Todd R. and Marshall, C.R., The Determinants of Incentive Intensity in Group-Based Rewards. Available at SSRN: https://ssrn.com/abstract=204229

Todd R. Zenger (Contact Author)

University of Utah ( email )

David Eccles School of Business
1655 East Campus Center Drive
Salt Lake City, UT 84112
United States
801 585-3981 (Phone)
801 581-7939 (Fax)

C.R. Marshall

Upper Iowa University

PO Box 1857
Fayette, IA 52142
United States

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