How Changes in Compensation Plans Affect Employee Performance, Recruitment, and Retention: An Empirical Study of a Car Dealership

• 成果类型: Article
• 署名作者: Ho, Joanna L. Y.; Lee, Ling-Chu; Wu, Anne
• 署名单位: University of California System; University of California Irvine; National Chengchi University
• 刊物名称: CONTEMPORARY ACCOUNTING RESEARCH
• ISSN/ISSBN: 0823-9150
• DOI: 10.1506/car.26.1.6
• 发表日期: 2009
• 页码: 167-+
• 关键词: self-selection; incentives; turnover; IMPACT

摘要

Prior studies have examined how changes to a more performance-sensitive incentive scheme influence employees' compensation and performance. However, there are examples from practice (e.g., Sears) of companies changing to more performance-sensitive incentive schemes. This study reports that a change from a performance-sensitive (commission-based) scheme to a less performance-sensitive (base salary plus commission) scheme hurts employee performance. Also, we extend prior research by examining how employees with different levels of ability are affected by the compensation plan change. Further, we explore selection effects concerning employee recruitment and retention. We use performance data for 4,392 employees of a Taiwanese car dealership over a 56-month period. Our results show that higher-performing employees were affected by the compensation plan change more than lower-performing employees. Also, we find that a dismissal threat did not improve the performance of the poorest performers. Consistent with the predictions of selection effects, our results indicate that the less performance-sensitive plan retained fewer higher-performing salespersons and led to the recruitment of lower-performing sales staff. We also find that the greater the compensation loss for an employee, the more likely he or she is to leave the dealership. However, the decrease in individual productivity did not translate into lower overall company performance. Further analysis suggests that the company may have taken several steps (e.g., hiring more employees, changing the sales mix) to mitigate the losses resulting from lower individual productivity.