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Author: | Schwab, D. P. Olson, C. A. |
Title: | Merit pay practices: implications for pay-performance relationships |
Journal: | Industrial and Labor Relations Review
1990 : FEB, VOL. 43:3, p. 237-255 |
Index terms: | JOB PERFORMANCE PAYMENT BY RESULTS MONTE CARLO TECHNIQUE MEASUREMENT SIMULATION |
Language: | eng |
Abstract: | A Monte Carlo simulation is used to examine how the relationship between pay and performance is affected by the pay system, measurement error in appraising performance, the consistency of true performance over time, and the rules governing promotion decisions. It was found that conventional merit systems achieve a considerably better link between pay and performance than does a bonus system with periodic adjustment in base wages. One surprising finding is that even very substantial error in the measurement of performance has only modest effect on the pay-performance correlation. The simulation procedure is described. A number of statistical tables are presented. |
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