Effectiveness of Individual and Aggregate Compensation Strategies

Authors

  • LUIS R. GOMEZ-MEJIA,

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    • *The authors' affiliations are, respectively, Management Department, College of Business, Arizona State University, and Department of Strategy and Organization Management, College of Business Administration, University of Colorado

  • DAVID B. BALKIN

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    • *The authors' affiliations are, respectively, Management Department, College of Business, Arizona State University, and Department of Strategy and Organization Management, College of Business Administration, University of Colorado


Abstract

Based on a sample of 175 scientists and engineers, this study shows that individual-based rewards (either in the form of merit pay or individual bonuses) are perceived as less effective than aggregate incentive strategies for R & D workers. The pay effectiveness measures used here include pay satisfaction, propensity to leave, project performance, and individual performance. All things considered, team-based bonuses are perceived as the most effective rewards in an R & D setting. The findings also indicate that employees with a low willingness to take risks are more likely to experience withdrawal cognition if they work for a firm that relies on variable compensation.

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