Employee productivity spillovers generated by incentive schemes

Abstract

Orientation: The introduction of various incentive schemes in the South African workplace creates incentive-induced employee productivity spillovers but could differ between industries and geographic areas.

Research purpose: The aim of the study was to determine the industry and geographic nature of incentive-induced employee productivity spillovers to inform managerial decision-making on intrinsic and extrinsic motivators.

Motivation for the study: The introduction of incentive schemes is an important motivator of employee productivity in the workplace. For this study, it was deemed important to indicate whether incentive-induced employee productivity spillovers differ between industries and geographic areas by taking into consideration firm-size, firm-profitability, different incentive schemes, trade union presence, employee age and skill levels.

Research approach/design and method: Fixed-effect panel data estimations were computed to predict incentive-induced employee productivity spillover effects based on secondary firm-based data sets.

Main findings: Incentive scheme-induced employee productivity spillover effects were generally similar for all the different industry and geographic areas. The spillovers increased with greater firm-sizes, higher profitability levels, introduction of greater levels of monetary-based incentive schemes (especially for unionised employee segments), and allocation of incentive schemes to the middle- age employee grouping (35 years–55 years) as well as higher skilled employees.

Practical/managerial implications: The effective introduction of incentive schemes in the workplace is an important mechanism for creating positive employee productivity spillover effects and it is generally common for all firms irrespective of the industry or geographic area.

Contribution/value-add: Improved understanding of incentive-induced employee productivity spillovers in the South African workplace will enable the effective alignment of incentive schemes with firm profitability.