Pulling in different directions? Exploring the relationship between vertical pay dispersion and high‐performance work systems

Abstract

Vertical pay dispersion (VPD), a hierarchical pay structure used to motivate employees, has traditionally been studied separately from high-performance work systems (HPWSs). As a component of HPWSs, incentive-based compensation schemes focus on employee-or team-level incentives. However, the influence of the simultaneous utilization of VPD and HPWS on performance remains understudied. This study addresses the question of whether these approaches to managing human capital serve as complements or substitutes to one another. VPD and HPWS are argued to substitute for one another with respect to motivation-and skill-enhancing practices. The opposite notion is true in regard to opportunity-enhancing HPWSs, which serve to amplify the effectiveness of VPD. In a multisource, longitudinal sample of South Korean firms, the hypothesized predictions are supported.Keywords: contingency theory, high-performance work systems, strategic HRM, tournament theory, vertical pay dispersion digitalcommons.unl.edu M e s s e r s m i t h e t a l . i n H u m a n R e s o u r c e s M a n a g e m e n t , 2 0 1 7 2

Still in search of strategic human resource management? A review and suggestions for future research with China as an example

“…Although financial reward, more often than not, forms part of the HRM bundles in SHRM research (Messersmith et al, 2018), its role and effect deserve more in‐depth study in the Chinese context to uncover the rationale, processes, pitfalls, and outcomes of various financial schemes. For instance, our fieldwork indicates that firms in China, in fierce competition for talent, may go round to poach from other firms instead of growing their own.…”

“…Alfes, Truss, Soane, Rees, and Gatenby (2013); Barber, Huselid, and Becker (1999); Boon and Kalshoven (2014); Bulter and Teagarden (1993); Foss, Pedersen, Reinholt Fosgaard, and Stea (2015); Hoque, Wass, Bacon, and Jones (2018); Kilroy, Flood, Bosak, and Chênevert (2017); McCowan, Bowen, Huselid, and Becker (1999); Messersmith, Kim, and Patel (2018); Neves, Almeida, and Velez (2018); Sanders and Yang (2016); Shen, Kang, and Dowling (2018)…”

Wage Inequality: Its Impact on Customer Satisfaction and Firm Performance

“…Second, our research also contributes by addressing the ambiguity in the effect of wage inequality on firm performance (Shaw 2014). Previous empirical research is divided on whether wage inequality affects firm performance positively, negatively, or not at all (e.g., Connelly et al 2016;Leonard 1990;Messersmith, Kim, and Patel 2018). Indeed, Shaw (2014) calls for researchers to disambiguate this relationship by simultaneously testing the direct and indirect effects of wage inequality on firm performance.…”

“…To operationalize wage inequality, we employ a ratio variable. The ratio variable is a widely accepted measure of wage inequality between top managers and employees in extant literature (e.g., Connelly et al 2016;Faleye, Reis, and Venkateswaran 2013;Greckhamer 2016;Messersmith, Kim, and Patel 2018) and the popular press (e.g., Cooper 2019). Importantly, the ratio variable equally accounts for changes in both employee and TMT wages.…”

“…The second major research gap we address is the ambiguity of prior research examining the impact of wage inequality on firm performance. In particular, previous empirical research suggests that wage inequality has a positive effect (Connelly et al 2016;Uygur 2019), a negative effect (Messersmith, Kim, and Patel 2018), or no statistically significant effect (Leonard 1990) on firm performance. Whereas studies on contingency factors are extensive (e.g., Pfeffer and Langton 1993;Shaw, Gupta, and Delery 2002;Trevor and Wazeter 2006), research has not simultaneously tested the direct and indirect effects of wage inequality on firm performance (Shaw 2014).…”