Incentive pay configurations: bundle options and country-level adoption

Organizations worldwide are faced with the challenge of motivating and retaining employees. In addressing this challenge, organizations may use a variety of incentive pay practices to align employee behavior with organizational objectives. The purpose of this paper is to empirically identify the incentive pay practice configurations or bundles adopted by private sector firms across 14 different countries from several geographic regions. The patterns of incentive pay configuration adoption for each country are evaluated.

Cluster analysis, ANOVA, and multilevel random-intercept logistic modeling are utilized on firms from the 2009 CRANET HRM survey.

Phase I of this study empirically identifies four different configurations (contingent rewarder, incentive minimizer, incentive maximizer, and profit rewarder) derived from three incentive pay practices (individual bonus, team bonus, and profit sharing practices) that firms adopt. Phase II evaluates adoption rates by country and finds striking differences in incentive configurations that firms avoid or adopt. Some countries have clear adoption preferences (e.g. Denmark, Sweden, Japan, and France). In other countries firms employ a variety of incentive bundles (e.g. USA, UK, and Germany) and seem to be less constrained by country-based institutional factors.

Incentive practices are typically studied independent of the configuration of practices that firms select. This research helps us understand the typical bundles in use.

Organizations worldwide are faced with the need to motivate employees. This research maps the incentive bundles preferred in each of 14 countries.

Employees in different countries come to work with expectations about pay and these shape their perceptions of incentive fairness.

Research on incentives has tended to focus independently on specific practices and ignore the reality that organizations generally select multiple practices. This research identifies the combinations of incentive practices generally used and does so with firms from 14 countries from various world regions. These results also offer a map of the incentive bundles preferred in each country.