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In this paper, we review the literature on pay variation (e.g., pay dispersion, pay compression, pay range) in organizations. Pay variation research has increased markedly in the past two decades and much progress has been made in terms of understanding its consequences for individual, team, and organizational outcomes. Our review of this research exposes several levels-related assumptions that have limited theoretical and empirical progress. We isolate the issues that deserve attention, develop an illustrative multilevel model, and offer a number of testable propositions to guide future research on pay structures.

Following the formation of the first cooperative creamery in Denmark in 1882, the number of creameries adopting this particular organisational form grew rapidly over the next 20 years. These cooperatives had to delegate the running of the creamery to a professional manager leading to potential incentive problems. This paper documents the extensive use of performance related pay. Three findings stand out. Firstly, the creameries’ awareness of the incentive problems. Secondly, the incentive contracts used were often quite complex and sometimes non-linear. Thirdly, contract terms often varied over time, even within individual creameries.

Explained pay dispersion theory (Shaw, Gupta, & Delery, 2002) contends that the consequences of pay dispersion depend on two critical contingencies: (1) the presence of legitimate or normatively acceptable dispersion-creating practices, and the (2) identifiability of individual contributions. In this chapter, the first 20 years of empirical evidence and theoretical offshoots of this theory are reviewed. Other recent studies on the outcomes of horizontal and vertical pay dispersion are also evaluated. The review concludes with an evaluative summary of the literature and the identification of several potential fruitful areas for future research.

This chapter explores the relationship between performance-related pay (PRP) and productivity in the Italian economy. It contributes to the literature in two main ways. First, it provides estimates for the PRP – productivity relationship based on a nationally representative sample of manufacturing and services companies (other studies on Italy are more limited in scope, since they focus on specific sectors). Second, it addresses the question of firms' heterogeneity, an aspect so far not examined in relation to PRP in Italy. We use a two-step approach. In the first step, we estimate a classical production function using longitudinal data on the balance sheet variables of Italian firms over the period 2002–2005. In the second step, we regress the distribution of the firm-specific fixed effects on dummy variables for the presence of PRP and unions, as well as on control variables for the year 2005. The most important results are that the adoption of PRP is positively and uniformly correlated with productivity throughout the whole distribution and that the presence of trade unions has a positive association with firms' unobserved productivity across all quantiles, being significantly higher for the best performing firms (those placed at the highest quantile of the productivity distribution).

This chapter describes the spread of new work and pay practices in Danish private sector firms during the last two decades. The data source is two surveys directed at firms and carried out ten years apart. The descriptive analysis shows that large changes in the way work is organised in firms have occurred during both decades, whereas the progression of pay practices predominantly took place in the nineties. There is considerable firm heterogeneity in the frequency of adoption of the practices. In particular, the prevalence of both incentive pay and work practices is higher in multinational companies and firms engaged in exporting.

Using the NBER Shared Capitalism Database comprised of over 40,000 employee surveys from 14 firms, we investigate worker attitudes toward employee ownership, profit sharing, and variable pay. Specifically, our study uses detailed survey questions on preferences over profit sharing, forms of employee ownership like company stock and stock option ownership, as well as preferences over variable pay in general, to explore how preferences for these different types of output-contingent pay vary with worker risk aversion, residual control, and views of co-workers and management. Our key results show that, on average, workers want at least a part of their compensation to be performance-related, with stronger preferences for output-contingent pay schemes among workers who have lower levels of risk aversion, greater residual control over the work process, and greater trust of co-workers and management.

Creativity and innovation have been buzzwords of managerial discourse over the last few decades as they contribute to the long-term survival and competitiveness of firms. Given the non-linear, causally ambiguous, and intangible nature of all innovation-related phenomena, management scholars have been trying to uncover factors that contribute to creativity and innovation from multiple lenses ranging from organizational behavior at the micro-level to strategic management at the macro-level. Along with important and insightful developments in these research streams that evolved independently from one another, human resource management (HRM) research – especially from a strategic perspective – has only recently started to contribute to a better understanding of both creativity and innovation. The goal of this chapter is to review the contributions of strategic HRM research to an improved understanding of creativity at the individual-level and innovation at the firm-level. In organizing this review, the authors rely on the open innovation funnel as a metaphor to review research on both HRM practices and HRM systems that contribute to creativity and innovation. In the last section, the authors focus on more recent developments in HRM research that focus on ambidexterity – as a way for HRM to simultaneously facilitate exploration and exploitation. This chapter concludes with a discussion of future research directions.

The introduction of performance-related pay with performance management in the state school sector of England and Wales represents a considerable change in the school management system. After 2000, all teachers were subject to annual goal setting performance reviews. Experienced teachers were offered an extended pay scale based on performance instead of seniority, and to gain access to the new upper pay scale, teachers had to go through a ‘threshold assessment’ based on their professional skills and performance. This paper reports the results of a panel survey of classroom and head teachers which started in 2000 just before implementation of the new system, and then after one and after four years of operation. We find that both classroom and head teacher views have changed considerably over time, from initial general scepticism and opposition towards a more positive view, especially among head teachers by 2004. We argue that the adoption of an integrative bargaining approach to performance reviews explains why a growing minority of schools have achieved improved goal setting and improved pupil attainments as they have implemented performance management. Pay for performance has been one of the measures of organisational support that head teachers could bring to induce changes in teachers’ classroom priorities. We argue that the teachers’ case shows that a wider range of performance incentives than previously thought can be offered to employees in such occupations, provided that goal setting and performance measurement are approached as a form of negotiation instead of top-down.

The relationship between work and family has long been the subject of lively debate in the political, public, and academic arena. Employers in the hospitality industry should carefully consider the work–family balance of their employees because maintaining a good balance will result in lower costs, lower sick rates, and lower staff turnover. The term “balance” refers to the way in which work interferes with life at home and how home life interferes with work. It includes both the positive and negative effects that work has on the family domain and vice versa. As research on the psychological contract approach to the employment relationship is scarce with regard to work–family interference, it became the subject of this study. The results demonstrate that psychological contract measures, in particular time commitment, can explain work–family conflict, while job content can explain work–family enrichment. In addition, the study revealed that with the appearance of gender as a moderator, different additional factors may play a role in work–family enrichment and work–family conflict. Furthermore, it revealed that family structure is not a predictor for work–family interference. This paper discusses managerial implications and offers recommendations for further research.

This chapter analyzes the determinants of adoption of sharing arrangements by companies. Using propositions from agency and strategic human resource management frameworks predicting the adoption of sharing arrangements, we test the relationships with a large international dataset. The study finds that adoption of sharing arrangements is related to human capital investments, individual incentives, involvement practices, and human resource management practices and that adoption is affected by country differences.