Managerial Compensation Based on Organizational Performance: A Time Series Analysis of the Effects of Merit Pay
Open Access
- 1 June 1985
- journal article
- research article
- Published by Academy of Management in The Academy of Management Journal
- Vol. 28 (2) , 261-278
- https://doi.org/10.5465/256200
Abstract
Performance-contingent compensation is a widely accepted means for rewarding managers, but there are no rigorous empirical tests of its effectiveness. This study reports the results of a longitudinal analysis of the effects of lying managerial pay to organizational performance in the Social Security Administration. A Box-Jenkins time series procedure was applied to organizational performance data available two years before and two years after the implementation of a new compensation system. Statistical analyses indicated that the merit pay program had no effect on organizational performance, suggesting that merit pay may be an inappropriate method of improving organizational performance.Keywords
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