Combining Individual and Collective Employee Incentives to Enhance Organizational Performance

Maja Klindžić, Lovorka Galetić

Abstract


A large body of literature provides empirical evidence of a
positive relationship between reward practices and performance.
However, little has been said about different combinations of
individual and group incentives as drivers of organizational
competitiveness. This paper examines bundles of nine individual
and group PFP practices and their joint effect on selected financial and non-financial indicators of organizational performance (OP). Our empirical research study included 61 middleand large-sized companies in Croatia in order to analyze the aforementioned relationships. The categorical principal
component analysis generated two factors of PFP practices that
were subsequently used as independent variables in a multiple
regression analysis. The first PFP bundle consisted of individual
subjectively-based bonus and two shared-ownership practices
and was found to positively influence non-financial indicators of
OP, i.e. quality of services or products and innovativeness. The
second factor consisted of individual performance appraisal and
profit-sharing and it positively influenced financial indicators of
OP, i.e. productivity and, to a lesser extent, profitability.
Implications for theory and practice are also discussed.


Keywords


compensation management; pay for performance (PFP); individual bonus; group bonus; bundles of PFP practices; organizational performance

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Copyright (c) 2020 Maja Klindzic, Lovorka Galetić

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Print ISSN 1330-0288 | Online ISSN 1848-6096