行政院國家科學委員會專題研究計畫 成果報告
薪資策略與組織績效─構型觀點之驗證
計畫類別： 個別型計畫
計畫編號： NSC92-2416-H-006-041-
執行期間： 92 年 08 月 01 日至 93 年 07 月 31 日 執行單位： 國立成功大學國際企業研究所
計畫主持人： 史習安
報告類型： 精簡報告
處理方式： 本計畫涉及專利或其他智慧財產權，2 年後可公開查詢
中 華 民 國 93 年 10 月 6 日
行政院國家科學委員會補助專題研究計畫成果報告
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薪資策略與組織績效---構型觀點之驗證
Compensation Strategy and Firm Performance — Configurational Perspective
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計畫類別：●個別型計畫
計畫編號：NSC 92－2416－H－006－041 執行期間：92 年 8 月 1 日至 93 年 7 月 31 日
計畫主持人：史習安
本成果報告包括以下應繳交之附件：
□赴國外出差或研習心得報告一份
□赴大陸地區出差或研習心得報告一份
□出席國際學術會議心得報告及發表之論文各一份
□國際合作研究計畫國外研究報告書一份
執行單位：國立成功大學國際企業研究所
中 華 民 國 93 年 10 月 5 日
行政院國家科學委員會專題研究計畫成果報告
國科會專題研究計畫成果報告撰寫格式說明 Preparation of NSC Project Reports 計畫編號：NSC 92－2416－H－006－041 執行期限：92 年 8 月 1 日至 93 年 7 月 31 日
主持人：史習安 國立成功大學國際企業研究所
Abstract
From a configurational perspective, this study examines the existence of ideal-type of compensation strategy and its influence on firm performance. By examining empirical evidence collected from 136 Taiwanese firms, the authors find the similarity of a firm’s actual compensation strategy to the ideal type ones, based on its corporate strategy, corporate structure, and corporate culture have a positive impact on the firm performance. This study’s contribution is mainly in empirically examining the framework of configurational perspective as well as in embracing the various contingency factors to provide a more complete vision of the strategic impact of compensation strategy on firm performance.
Keyword: Strategic Compensation; Configuration Theory;
Corporate Strategy; Corporate Structure; Corporate Culture; Corporate Core Competence
Introduction
Through the design of the composition of pay packages, the basis of pay, and the administrative framework of pay structure, compensation strategies communicate an organization’s philosophy, values, and practices to its employees [12]. Appropriately designed compensation strategies contribute greatly to the shaping of employee attitudes and behaviors that are needed for achieving organization objectives.
Empirical evidence shows that organizations whose compensation strategies are aligned with the contingent contexts will outperform those who do not [1,5,6].
Studies investigating the relationship between HRM and firm performance generally take three perspectives-- universalistic, contingency, and configurational perspective [2]. Very few strategic researches approached that issue through the configurational perspective. This study tries to examine the relationship between compensation strategy and firm performance by taking a configurational perspective. Our study has four purposes. Firstly, we try to examine whether the similarity of a firm’s actual compensation strategy to the ideal type will have a positive impact on the firm
lead to better firm performance. The third objective of this study is to investigate the ideal-fit between compensation strategy and corporate structure. We attempt to verify whether the resemblance of a firm’s actual compensation strategy to its ideal type, according to its corporate structure, will have a positive influence on firm performance. The investigation of the ideal-fit of compensation strategy and corporate culture and its influence on firm performance is the fourth objective of this study. We attempt to find out if the closeness of a firm’s actual compensation strategy with the ideal type, which is determined on the basis of corporate culture, will lead to superior firm performance.
2. Literature
Compensation Strategy
Compensation is the reward that organizations give their employees for their contribution to the organization. It is an important function of human resource management. Compensation strategy can be defined a set of pay choices available to management [6]. Gomez-Mejia and Welbourne [7] proposed two strategic compensation patterns, labeled as mechanistic and organic compensation strategies respectively. In an empirical research of 243 firms on their pay choices by Gomez-Mejia [5], the factor analysis of the data also suggested two major strategic compensation patterns. The two distinct compensation patterns are label “algorithmic” and “experiential.”
There has been some empirical evidence showing that organizations that match their compensation strategy with corporate strategy will result in better firm performance than those who do not [6]. The effort to align compensation strategy with corporate strategy has been an important challenge for compensation professionals [10,12]. The configurational argument of ideal-type is based on the holistic pattern of practices
compensation strategy and the one of ideal-type compensation strategy has a positively relationship with organizational performance.
Hypothesis 1: The closer a firm’s compensation strategy resembles the ideal compensation strategy, the better its general performance will be.
Hypothesis 1-1: The closer a firm’s compensation strategy resembles the ideal compensation strategy, the better its market performance will be.
Hypothesis 1-2: The closer a firm’s compensation strategy resembles the ideal compensation strategy, the better its human resource outcome will be.
Company Strategy
Several studies have tried to categorize company strategies. One of the most famous and commonly applied typologies was that of Miles and Snow [11].
Hence, we presume that:
Hypothesis 2: The closer a firm’s compensation strategy resembles the ideal compensation strategy that is congruent with its corporate strategy, the better its general performance will be.
Hypothesis 2-1: The closer a firm’s compensation strategy resembles the ideal compensation strategy that is congruent with its corporate strategy, the better its market performance will be.
Hypothesis 2-2: The closer a firm’s compensation strategy resembles the ideal compensation strategy that is congruent with its corporate strategy, the better its human resource outcome will be.
Company Structure
Burns and Stalker [3] are the first scholars who investigated the relationship between the organization and external environment. By their survey of twenty British corporations, they categorized two extreme types of corporate management, labeled as
“mechanistic systems” and “organic systems”. Under a mechanistic structure, the reward system tended to be seniority-based with emphasis on nonmonetary rewards and a lower percentage of incentive pay to total salary. On the other hand, organizations with an organic structure tended to have a performance-based compensation strategy with more uses of monetary rewards and a higher proportion of incentive pay.
Employee participation was also found more prevailing under an organic structure. Hence, we can
presume that the compensation practices work better under a corporate structure that shares some similar characteristics. Hence, we presume that,
Hypothesis 3: The closer a firm’s compensation strategy resembles the ideal compensation strategy that is congruent with its corporate structure, the better its general performance will be.
Hypothesis 3-1: The closer a firm’s compensation strategy resembles the ideal compensation strategy that is congruent with its corporate structure, the better its market performance will be.
Hypothesis 3-2: The closer a firm’s compensation strategy resembles the ideal compensation strategy that is congruent with its corporate structure, the better its human resource outcome will be.
Company Culture
In a research of corporate culture and reward system, Kerr and Slocum [9] categorized the kind of corporate culture that emerged from the hierarchy-based reward system as “a clan culture.” The other kind of corporate culture that emerged from a performance-base reward system was labeled as “a market culture.” We presume that,
Hypothesis 4: The closer a firm’s compensation strategy resembles the ideal compensation strategy that is congruent with its corporate culture, the better its general performance will be.
Hypothesis 4-1: The closer a firm’s compensation strategy resembles the ideal compensation strategy that is congruent with its corporate culture, the better its market performance will be.
Hypothesis 4-2: The closer a firm’s compensation strategy resembles the ideal compensation strategy that is congruent with its corporate culture, the better its human resource outcome will be.
Methods
Samples were selected from the database of Top 1000 Taiwanese Firms 2002, published by Common Wealth Magazine, Taiwan. A total of 136 useable questionnaires were collected from each responding company’s high-level HR executive, who are asked to express their opinions on a five point Likert scale on the following questions.
Ideal Profile
To test the configurational hypothesis, it is necessary to construct five sets of ideal profiles: ideal compensation strategy profiles, ideal corporate strategy profiles, ideal corporate structure profiles, ideal corporate culture profiles, and ideal core competence profiles. These ideal profiles contain the value of each measure that best characterizes the respective ideal types [4]. We construct the ideal compensation strategy profiles by using the approach suggested by Govindarajan [8]. The ideal profiles of the mixed-type compensation strategy are specified as the mean value for each 15 items measured based on the result of reliability test described in above section.
The experiential compensation strategy is specified as plus one standard deviation from the mean of each item. The algorithmic compensation strategy is specified as minus one standard deviation from the mean of each item.
The same method is used to the construction of ideal corporate strategy profiles, corporate structure profiles, corporate culture profiles, and core competence profiles. In the construction of ideal corporate strategy profiles, the mean value for each seven items measured is specified as the Analyzers.
The Prospectors and Defenders are specified as plus and minus one standard deviation from the mean of each item. When it comes to corporate structure, the ideal profiles of the mixed-type corporate structure are specified as the mean value for each six items measured. The organic and mechanistic structure are specified as plus and minus one standard deviation from the mean of each item. As to ideal corporate culture, the ideal profiles of the mixed-type corporate culture are specified as the mean value for each five items measured. The clan-type and market-type culture are specified as minus and plus one standard deviation from the mean of each item.
Configurational Fit
To test the contingent configurational hypotheses, we need to calculate a “fit score” to measure the extent of match between the ideal types and the actual types of the organizations in the sample. Here we use the approach suggested by Govindarajan [8]. Specifically, the degree of fit is measured as the Euclidean distance between the organization’s scores of compensation strategy and the scores of its ideal type counterpart that is appropriate for its organization’s strategy. The
same method is used to calculate the fit scores of each organization to measure the degree of match between the actual compensation types and its corresponding ideal compensation types, identified on the basis of this organization’s structure, and culture respectively.
Findings
The means, standard deviations, reliabilities, and correlations among research variable are presented in Table 1.
By using the approach suggested by Govindarajan [8], we summarize the ideal compensation profiles in Table 2.
To test Hypothesis 1, we first computed the fit score of compensation strategy, i.e. the similarity of the sample firm’s compensation strategy to its ideal compensation strategy. The smaller the score means the closer between sample firm’s actual compensation strategy and its ideal-type compensation strategy. In other words, a smaller fit score indicates a greater similarity of the actual and ideal-type compensation strategy. A hierarchical regression is used to test Hypothesis 1. In the first step of the hierarchical regression, we put in the control variables only. The compensation strategy was then put into the regression in the second step. For the third step of the hierarchical regression, we put in the fit score. Since the fit score is computed as the difference between actual and ideal-type compensation strategy, a negative sign of beta in the regression equation is expected. The results of the hierarchical regression of Hypothesis 1-1, states that the similarity to one ideal-type compensation strategy most similar to a sample firm’s compensation strategy will be positively to organizational market performance, are summarized in Table 3. Hypothesis 1-1 was supported.
Hypothesis 1-2 states that the similarity of a firm’s compensation strategy to its ideal-type compensation strategy will lead to better HR performance. Hypothesis 1-2 was supported.
To test Hypothesis 2, we first computed the fit score of firm’s compensation strategy to its ideal-type compensation strategy, determined by its corporate strategy. Table 5 reported the result of the regression equations. Hypothesis 2-1 was supported.
Hypothesis 2-2 states that the similarity of a firm’s compensation strategy to its ideal-type compensation strategy, determined by its corporate strategy, will lead to better HR performance. The hierarchical regression was used to test Hypothesis 2-2.
The equation models are similar to those testing Hypothesis 2-1. The results of hierarchical regression
corporate structure, the better its general performance will be. As presented in Table 7, compensation strategy presented a positive and significant relationship to market performance. Hypothesis 3-1 was not supported.
Hypothesis 3-2 states that the similarity of a firm’s compensation strategy to its ideal-type compensation strategy that is most appropriate for its corporate structure, will lead to better HR performance.
Table 8 reported the results of hierarchical regression.
Hypothesis 3-2 was supported.
Hypothesis 4, states that the closer a firm’s compensation strategy resembles the ideal compensation strategy that is congruent with its corporate culture, the better its general performance will be. The results in Table 9 show that compensation strategy had a positive and significant relationship with market performance. Table 10 reported the results of hierarchical regression. Hypothesis 4-2 was not supported.
Discussions
This study largely confirms the expectation that the more one firm’s actual compensation strategy resembles the ideal-type compensation strategy, the better its market and HR performance will be.
However, this research did not address the issue of causality, which is often argued in SHRM studies.
Since the causality issue may be better analyzed in a longitudinal manner, this cross-sectional empirical study was not able to examine the causality questions of compensation strategy and other contingent factors.
References
[1] Balkin, D.B., L.R. Gomez-Mejia. 1990.
Matching compensation and organizational strategies. Strategic Management Journal 11 153-169
[2] Becker, B.E., B. Gerhart. 1996. The impact of human resource management on organizational performance: Progress and prospects. Academy of Management Journal 39 (4) 779-801.
[3] Burns, T., G.M. Stalker. 1966. The Management of Innovation. Welwyn Garden City, Tavistock Publications Ltd.
[4] Doty, d.H., W.H. Glick, G.P. Huber. 1993. Fit, equifinality, and organizational effectiveness: A test of two configurational theories. Academy of Management Journal 36 1196-1250.
[5] Gomez-Mejia, L.R. 1992. Structure and Process of Diversification, Compensation Strategy, and Firm Performance. Strategic Management Journal 13(5) 381-397.
[6] Gomez-Mejia, L.R., D.B. Balkin. 1992.
Compensation, Organizational Strategy, and Form Performance. South-Western, Cincinnati.
[7] Gomez-Mejia, L.R., T.M. Welbourne. 1988.
Compensation strategy: An overview and future
steps. Human Resource Planning 11(3) 173-189.
[8] Govindarajan, V. 1988. A contingency approach to strategy implementation at the business-unit level: Integrating administrative mechanisms with strategy, Academy of Management Journal 31(4) 828-853.
[9] Kerr, J.L., J.W. Slocum. 1987. Managing corporate culture through reward systems.
Academy of Management Executive 1(2) 99-108.
[10] McNally, K.A., 1992. Compensation as a strategic tool. HRMagazine 37(7) 59-62.
[11] Miles, R., C.C. Snow. 1978. Organizational Strategy, Structure, and Process. New York, McGraw-Hill, Inc.
[12] Rynes, S.L. 1987. Compensation strategies for recruiting. Topics in Total Compensation 2(2) 185-196.
