nep-hrm New Economics Papers
on Human Capital and Human Resource Management
Issue of 2017‒05‒14
ten papers chosen by
Patrick Kampkötter
Eberhard Karls Universität Tübingen

  1. Supervisors and Performance Management Systems By Frederiksen, Anders; Kahn, Lisa B.; Lange, Fabian
  2. HRM and Small-Firm Employee Motivation: Before and after the Recession By Bryson, Alex; White, Michael
  3. “Factors of Workplace Environment that Affects Employee Performance in an Organization”: A study on Greenwich University of Karachi By Zafar, Marium; Karim, Emadul; Abbas, Omair
  4. The Sequencing of Gift Exchange: A Field Trial By Carpenter, Jeffrey P.
  5. Earnings Inequality and the Global Division of Labor: Evidence from the Executive Labor Market By Schymik, Jan
  6. Are Mutual Fund Managers Paid For Investment Skill? By Ibert, Marcus; Kaniel, Ron; van Nieuwerburgh, Stijn; Vestman, Roine
  7. What Drives Differences in Management? By Bloom, Nicholas; Brynjolfsson, Erik; Foster, Lucia; Jarmin, Ron; Patnaik, Megha; Saporta-Eksten, Itay; Van Reenen, John
  8. Globalization and Executive Compensation By Wolfgang Keller; William W. Olney
  9. Optimal tournaments By Mikhail Drugov; Dmitry Ryvkin
  10. How post-crisis regulation has affected bank CEO compensation By Cerasi, Vittoria; Deininger, Sebastian; Gambacorta, Leonardo; Oliviero, Tommaso

  1. By: Frederiksen, Anders (Aarhus University); Kahn, Lisa B. (Yale University); Lange, Fabian (McGill University)
    Abstract: Supervisors occupy central roles in production and performance monitoring. We study how heterogeneity in performance evaluations across supervisors affects employee and supervisor careers and firm outcomes using data on the performance system of a Scandinavian service sector firm. We show that supervisors vary widely in how they rate subordinates of similar quality. To understand the nature of this heterogeneity, we propose a principal-agent model according to which supervisors can differ in their ability to elicit output from subordinates or in their taste for leniency when rating subordinates. The model also allows for variation in how informed firms are about this heterogeneity. Within the context of this model, we can discern the nature of the heterogeneity across supervisors and how informed firms are about this heterogeneity by relating observed supervisor heterogeneity in ratings to worker, supervisor, and firm outcomes. We find that subordinates are paid significantly more, and their pay is more closely aligned with performance, when they are matched to a highrating supervisor. We also find that higher raters themselves are paid more and that the teams managed by higher raters perform better on objective performance measures. This evidence suggests that supervisor heterogeneity stems, at least in part, from real differences in managerial ability and that firms are at least partially informed about these differences. We conclude by quantifying how important heterogeneity in supervisor type is for workers' careers. For a typical worker, matching to a high rater (90th percentile) relative to a low rater (10th percentile) for just one year results in an increase in the present discounted value of earnings equivalent to 7–14% of an annual salary.
    Keywords: labor, personnel economics, principal-agent, performance management systems, supervisors, organizational economics
    JEL: M5
    Date: 2017–04
  2. By: Bryson, Alex (University College London); White, Michael (Policy Studies Institute)
    Abstract: A long-running debate in the small firms' literature questions the value of formal 'human resource management' (HRM) practices which have been linked to high performance in larger firms. We contribute to this literature by exploiting linked employer-employee surveys for 2004 and 2011. Using employees' intrinsic job satisfaction and organizational commitment as measures of motivation we find the returns to small firm investments in HRM are u-shaped. Small firms benefit from intrinsically motivating work situations in the absence of HRM practices, find this advantage disturbed when formal HRM practices are initially introduced, but can restore positive motivation when they invest intensively in HRM practices in a way that characterizes 'high performance work systems' (HWPS) and 'strategic human resource management' (SHRM). Although the HPWS effect on employee motivation is modified somewhat by the recessionary transition, it remains rather robust and continues to have positive promise for small firms.
    Keywords: small firms, human resource management, high performance work system, workplace motivation, intrinsic job satisfaction, organizational commitment
    JEL: L23 M50 M54
    Date: 2017–04
  3. By: Zafar, Marium; Karim, Emadul; Abbas, Omair
    Abstract: Nowadays, organizations are aware of the fact that employee performance is one of the key factors behind any business’s success, which is why the management is usually finding ways to increase the level of employee performance through various methods. It is the mission of organization to get people together to accomplish tasks and objectives by utilizing the resources effectively and efficiently. The basic objective of this study is to measure the impact of working environment factors on performance of employees working in Greenwich University (GU), through identifying the variables which includes leadership, organizational culture, training and development, rewards and incentives and stress. This study is quantitative in nature and is aimed to find out the relationship between the above mentioned variables and employee’s performance of Greenwich University (GU) and the sample size is of 50 current employees. The hypothesis will be proven will by using Multiple Regression Analysis which is in SPSS software the reason for using MLR is that the research contains 5 independent variables and their affects have to be seen on employee’s performance which is single dependent variable. The purpose of the study is to see the existing literature and theories in order to have a constructed framework of factors affecting employee performance. It was observed through the validity of the results that these environmental factors do have an impact on employee performance.
    Keywords: Employee Performance, Working Environment, Stress, Training and Development, Rewards, Culture, Leadership.
    JEL: M1 M12 M14
    Date: 2017–04–28
  4. By: Carpenter, Jeffrey P. (Middlebury College)
    Abstract: There is now an extensive literature on "gift exchange" showing that when principals and agents can trade "gifts" (rewards that should not emerge in a competitive equilibrium), exchange becomes more efficient. However, it is not obvious how gift exchange should be organized if the principal's goal is to increase the performance of a reciprocal agent. Specifically, who should make the first gift, the principal or the agent? Although both orderings, by themselves, have been hypothesized and examined in theory and experiments, the literature is largely silent on the comparison. I report the results of a field experiment that compares the principal-first and agent-first orderings to each other and a gift-less control. Consistent with the previous experimental literature, I find that principal-first, gifts do increase agent performance. Unlike the literature, however, I find that agent-first, gifts are also effective. Comparing the two, I see that the agent-first ordering works best, is clearly cheaper to implement and differences appear on both the extensive and intensive margins.
    Keywords: gift exchange, reciprocity, social norm, incentives, field experiment, charity, fundraising
    JEL: C93 D03 D64 H41 L30 M30
    Date: 2017–04
  5. By: Schymik, Jan
    Abstract: Many industrialized economies have seen a rapid rise in top income inequality and in the globalization of production since the 1980s. In this paper I propose an open economy model of executive pay to study how offshoring affects the pay level and incentives of top earners. The model introduces a simple principal-agent problem into a heterogeneous firm talent assignment model and endogenizes pay levels and the sensitivity of pay to performance in general equilibrium. Using unique data of manager-firm matches including executives from stock market listed firms across the U.S. and Europe, I quantify the model predictions empirically. Overall, I find that between 2000 and 2014 offshoring has increased executive pay levels, raised earnings inequality across executives and increased the sensitivity of pay to firm performance.
    Keywords: Offshoring; Earnings Structure; Inequality; Incentives; Executive Compensation
    JEL: D2 F1 F2 J3 L2
    Date: 2017–05
  6. By: Ibert, Marcus; Kaniel, Ron; van Nieuwerburgh, Stijn; Vestman, Roine
    Abstract: Compensation of mutual fund managers is paramount to understanding agency frictions in asset delegation. We collect a unique registry-based data set on the compensation of Swedish mutual fund managers. We find a concave relationship between pay and revenue, in contrast to how investors compensate the fund company (firm). We also find a surprisingly weak sensitivity of pay to performance, even after accounting for the indirect effects of performance on revenue. Firm-level revenues and profits add substantial explanatory power for compensation to manager-level revenue and performance, highlighting the importance of the mutual fund firm.
    Keywords: financial sector income; mutual fund performance; Portfolio manager compensation
    JEL: G00 G23 J24 J31 J33 J44
    Date: 2017–04
  7. By: Bloom, Nicholas (Stanford University); Brynjolfsson, Erik (MIT Sloan School of Management); Foster, Lucia (U.S. Census Bureau); Jarmin, Ron (U.S. Census Bureau); Patnaik, Megha (Stanford University); Saporta-Eksten, Itay (Tel Aviv University); Van Reenen, John (MIT Sloan School of Management)
    Abstract: Partnering with the Census we implement a new survey of "structured" management practices in 32,000 US manufacturing plants. We find an enormous dispersion of management practices across plants, with 40% of this variation across plants within the same firm. This management variation accounts for about a fifth of the spread of productivity, a similar fraction as that accounted for by R&D, and twice as much as explained by IT. We find evidence for four "drivers" of management: competition, business environment, learning spillovers and human capital. Collectively, these drivers account for about a third of the dispersion of structured management practices.
    Keywords: learning, competition, productivity, management
    JEL: L2 M2 O32 O33
    Date: 2017–04
  8. By: Wolfgang Keller (University of Colorado); William W. Olney (Williams College)
    Abstract: This paper examines the role of globalization in the rapid increase in top incomes. Using a com- prehensive data set of thousands of executives at U.S. firms from 1993-2013, we find that exports, along with technology and firm size, have contributed to rising executive compensation. Isolating changes in exports that are unrelated to the executive’s talent and actions, we show that global- ization has affected executive pay not only through market channels but also through non-market channels. Furthermore, exogenous export shocks raise executive compensation mostly through bonus payments in poor-governance settings, in line with the hypothesis that globalization has en- hanced the executive’s rent capture opportunities. Overall, these results indicate that globalization has played a more central role in the rapid growth of executive compensation and U.S. inequality than previously thought, and that rent capture is an important part of this story.
    Keywords: Inequality, Executive Compensation, Globalization, Exports
    JEL: F16 F14 F66 M12 J31
    Date: 2017–04
  9. By: Mikhail Drugov (New Economic School and CEPR); Dmitry Ryvkin (Florida State University)
    Abstract: We study the optimal allocation of prizes, comparative statics and architecture of multi-prize rank-order tournaments. For a principal allocating a fixed budget, we show that the winner-take-all (WTA) prize schedule is optimal when the distribution of noise has increasing failure rate (IFR). For noise distributions with unimodal failure rates the optimal prize allocation moves closer to WTA as the distribution becomes smaller in the convex transform order. We also identify a natural ordering of prize schedules by how closely they approximate the WTA schedule and show that for log-concave noise distributions the equilibrium effort is monotone in this order. Comparing one-stage tournaments with parallel tournaments where players are split into subgroups competing for separate prizes, we show that the former architecture always dominates for IFR noise distributions. However, when comparing one-stage tournaments to a two-stage architecture where first-stage winners from parallel subgroups compete in the second-stage tournament, we show that either of the two architectures can be optimal depending on the details of the distribution of noise, including noise dispersion.
    Keywords: tournament, optimal allocation of prizes, unimodality, failure rate, comparative statics, architecture, dispersive order, convex transform order
    JEL: C72 D72 D82
    Date: 2017–05
  10. By: Cerasi, Vittoria; Deininger, Sebastian; Gambacorta, Leonardo; Oliviero, Tommaso
    Abstract: This paper assesses whether compensation practices for bank Chief Executive Officers (CEOs) changed after the Financial Stability Board (FSB) issued post-crisis guidelines on sound compensation. Banks in jurisdictions which implemented the FSB's Principles and Standards of Sound Compensation in national legislation changed their compensation policies more than other banks. Compensation in those jurisdictions is less linked to short-term profits and more linked to risks, with CEOs at riskier banks receiving less, by way of variable compensation, than those at less-risky peers. This was particularly true of investment banks and of banks which previously had weaker risk management, for example those that previously lacked a Chief Risk Officer.
    Keywords: Managerial compensation; Prudential regulation; risk-taking
    JEL: G21 G28 G32
    Date: 2017–04

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