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Matchmaking: the influence of monitoring environments on the effectiveness of performance pay systems

Belfield, Richard and Marsden, David (2002) Matchmaking: the influence of monitoring environments on the effectiveness of performance pay systems. CEPDP, 543. Centre for Economic Performance, London School of Economics and Political Science, London, UK. ISBN 0753015641

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This study uses cross-section and panel data from the 1998 Workplace Employee Relations Survey to explore contextual influences on the relationship between performance-related pay (PRP) and organizational performance. While it finds strong evidence that the use of PRP can enhance performance outcomes, it also determines that this relationship is qualified by the structure of workplace monitoring environments. In addition, it presents evidence that managers learn about optimum combinations of pay system and monitoring environment through a process of experimentation. Lastly, although there exists a robust positive association in these data between use of PRP and pay inequality, it appears that these higher levels of inequality carry no performance penalty.

Item Type: Monograph (Discussion Paper)
Official URL:
Additional Information: © 2002 Richard Belfield and David Marsden
Library of Congress subject classification: H Social Sciences > HB Economic Theory
H Social Sciences > HD Industries. Land use. Labor
Journal of Economic Literature Classification System: J - Labor and Demographic Economics > J3 - Wages, Compensation, and Labor Costs > J33 - Compensation Packages; Payment Methods
M - Business Administration and Business Economics; Marketing; Accounting > M1 - Business Administration > M12 - Personnel Management
Sets: Research centres and groups > Employment Relations and Organisational Behaviour Group
Collections > Economists Online
Research centres and groups > Centre for Economic Performance (CEP)
Identification Number: 543
Date Deposited: 29 Feb 2008

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