bias that may be introduced when designs do not allow for sorting eVects. In fact,
the lower eVects sizes for laboratory studies reported by Jenkins et al. ( 1998 )may
partly be attributable to this phenomenon. Lab studies or simulations are needed
that allow subjects to ‘sort’ into diVerent pay conditions in order to more precisely
elucidate the contributions of sorting versus incentive eVects.
In addition to observing increases in mean productivity, Lazear ( 1999 ) also
documents increased dispersion around the mean following the introduction of
the Safelite incentive plan. According to Lazear, once the incentive system was
implemented, workers performed closer to their actual abilities, leading to both
higher and more dispersed performance. This is mindful of discussions of ‘typical’
versus ‘maximum’ performance (Sackett et al. 1988 ). The use of intense pay-
for-performance schemes may partially mimic ‘maximum performance’ conditions.
If pay-for-performance practices have the potential to draw employees closer to
‘maximum’ performance, then these schemes may also have signiWcant implications
for employee selection. SpeciWcally, these pay plans may call for increased emphasis
on ability or dispositional selection criteria, as opposed to behavioral criteria.
Group-based pay-for-performance plans are arguably more complex than plans
based on individual performance and, as such, more research is needed toXesh out
our understanding of the eVects and eVectiveness of various plan features. For
example, as noted earlier, evidence suggests that group-based pay plans are eVective
despite the potential negative impact on the most able employees (Hansen 1997 ;
Park et al. 1994 ; Weiss 1987 ). What precise mechanisms are at work here? Prelim-
inary evidence suggests that the mutual monitoring and peer pressure under
group-based pay plans may serve to raise the performance of below-average and
average employees so as to oVset any losses among the top performing employees.
What is the magnitude of the eVect on top performers? What design elements will
most eVectively cause top performers to maintain their contributions? While
research evidence suggests that larger incentives and rewards for individual con-
tributions to group performance may counteract this problem (Long 2000 ), much
more research is needed on these and other group pay phenomena.
17.3 Effects of Pay Structure
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Inequality, rather than want, is the cause of trouble.
(Chinese saying)In this section, I review research related to two aspects of pay ‘structure’—pay
dispersion and pay basis. In terms of dispersion, pay structures can range from
remuneration: pay effects at work 351