Performance-Based Payment Schemes And Managerial PerceptionOf Motivation: A Facitating Relation

In this thesis, I try to answer the following research question: Is the presence of performance-based compensation schemes associated with higher managerial perception of employees’ motivation? I investigate this by implementing a linear probability model, considered the ease of interpretation according to the dichotomous nature of the dependent variable used. Data is taken from the 3 round of the European Company Survey (held in 2013), and contains more than 22000 observations, corresponding to companies across 31 countries. The answer emerging from the analysis is that different kinds of performance-based payment schemes have different impacts on perceived motivation. In particular, after controlling for variables pertaining to a companies’ general characteristics, companies’ workforce characteristics and HR practices, and respondents’ individual characteristics, the following answers emerge; contrary to expectations, payment by results negatively associate with the perceived motivation, while variable extra pay linked to the results of the team/department and variable extra pay linked to the results of the company have the opposite effect. Variable extra pay linked to individual results and variable extra pay in form of shares ownership do not show significant effects.