Industry

WORKPLACE ORGANIZATION
Performance-based pay linked to less worker output

Mark Reutter, Business Editor
(217) 333-0568; mreutter@uiuc.edu

5/1/2001

Photo by Bill Wiegand Michelle Kaminski, a professor at the Institute of Labor and Industrial Relations, has been studying performance-based pay, a subject that until now has received very little attention.

CHAMPAIGN, Ill. -- Over the last two decades, American companies have implemented many new organizational practices on the shop floor, ranging from performance-based pay to the use of employee teams.

"Management justifies these practices on the grounds of improving a company's competitiveness and productivity; my question was how do these practices affect employee safety and injury rates," said Michelle Kaminski, a professor at the Institute of Labor and Industrial Relations at the University of Illinois. Very little empirical work has been done in this area, she added.

Her study, published last month in the Journal of Occupational Health Psychology, sampled 86 companies engaged in metal fabricating, machinery and plastics. The firms averaged 151 employees, 22 percent were unionized and most were located in the Midwest.

She found that performance-based pay was associated not only with higher injury rates but, surprisingly, with lower productivity. The opposite was true with in-house training programs. Organizations with training courses showed increases in productivity and lower injury rates.

About half of the sampled firms had employee teams responsible for various shop-floor practices, including job rotation, training and safety awareness. "The use of teams was significantly associated with a lower injury rate," Kaminski said, "but was unrelated to increases in productivity."

The results indicate that teams may be especially important to improving safety in small workplaces, she said. "It appears that teams give workers the opportunity to solve safety problems that management alone might not have the resources or personnel to solve."

Kaminski said her findings have relevance to the regulation of safety and health matters. Although there are many laws on the books regarding worker safety, there are few government inspectors. For the most part, the Occupational Safety and Health Administration (OSHA) concentrates on large factories and on employee complaints.

The UI scholar argues that the way work is organized may affect the well-being of employees as well as the bottom-line for management.

For example, the added cost of performance-based pay – including individual payments for higher production and cash awards for employee suggestions – does not appear from this sample to be justified by either overall productivity or improved safety.

"The combined results call into question the current popularity of performance-based pay," Kaminski said. "Performance-based pay creates worse conditions for workers on one measure, and it doesn’t really appear to benefit stockholders. Instead workers might benefit from a higher base rate of pay."