Incentive-Related Pay Creates Positive Attitudes… If Done Right

— September 6, 2017

Incentive-Related Pay Creates Positive Attitudes… If Done Right

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Companies like Publix Super Markets have stood out as one of the “Best Places to Work” for years thanks to having what many call the best-in-industry employee benefits. Included in these benefits are stock options and bonuses tied to profits, which are popularly believed to increase employee motivation and thus retention.

On the contrary, however, employees observed in a recent study by University of East Anglia (UEA) in England have shown that profit-related pay and employee share-ownership return mixed or negative attitudes rather than motivating employees.

In the study, of the employee pay incentives measured, only performance-related pay produced consistently good attitudes. Which led me to wonder what employees are saying about Publix on Glassdoor; if they felt motivated by the benefits or if the study’s conclusion would hold true. What I found were mixed reviews.

Employee Share-Ownership

The UEA study showed that employee-ownership through stock options provided a negative relationship with job satisfaction and had no effect on commitment or trust in management.

On Great Place to Work, the following was said about Publix’s stock options:

Retirement: Publix’s employee stock ownership plan provides eligible full- and part-time associates with retirement savings at no cost to them. Most importantly, the distribution is calculated at the same percentage of wages regardless of the associate’s position.

Stock Purchase Plan: In addition to the employee stock ownership plan, Publix provides all eligible associates with an opportunity to purchase additional shares of our privately held stock.

The comments on Glassdoor seemed to prove the study is right as employees complained:

“Stock options (would be great if they continued the super performance it had years ago, now it’s just – hopefully – a booster for retirement).” – Current Technical Support Analyst in Lakeland, Florida

“Don’t get anything unless you’re full-time, and they wont give their employees full time so you just lose no matter what.” Current Deli Clerk in Daytona Beach, Florida

“If you work part time, the management ‘works’ hard not to give you enough hours for benefits.” – Former Publix Cashier in Boca Raton, Florida

Profit-Related Incentives

If distributed equally across the entire workforce, profit-related pay incentives were found by the study to have a positive relationship with job satisfaction and trust in management. However, if only distributed to a small portion of the workforce it had the opposite effect.

On Great Place to Work, the following was said of Publix’s profit-related plan:

Retail Bonus: Full-time and eligible part-time retail employees are rewarded for helping Publix generate sales and profits. Payments under this bonus plan are based on results of their store’s operations.

Based on my research on Publix it seems profit-related bonuses were downsized at some point and were now only being given to a smaller portion of the workforce which contributed to negativity on Glassdoor.

“Great if your full time…also no discounts whatsoever not even on lunch. If they cared about there associates they would not of taken away bonuses and at the same time gave all there managers a raise” – Current Employee in Bonita Springs, Florida

“[They took] away bonus and holiday pay” – FT Former Employee – Anonymous Employee.

Even though Publix is giving employees benefits that are better than anywhere else in the industry, employees seem to have negative attitudes or none at all toward them rather than finding them motivating.

Kevin Daniels, Professor of Organizational Behavior at UEA said that for profit-related pay to motivate employees leaders need to encourage fairness and the pay should be enough to make a financial impact that matters.

“Employers should ensure that mechanisms for distributing organizational profits are administered efficiently so that deserving employees are not missed out,” said Prof Daniels. “If profit-related pay is spread across the workplace, employees may show greater acceptance and respond with positive attitudes.”

Performance-Related Incentives

In the study, by UEA’s Norwich Business School, which involved 1,293 managers and 13,657 employees at 1,293 workplaces in the UK, performance-related incentives were the only incentives shown to get positive attitudes across the three categories being studied: job satisfaction, commitment, and trust in management.

There are still cons to performance-related pay as it’s been associated with more intense working. Employees can become stressed which can offset the benefits of performance-related pay.

Lead researcher Dr Chidiebere Ogbonnaya said:

“Our study is the first to show empirical support for claims that the productivity gains of these pay schemes might be associated with employees’ experience of more intense working. Performance-related pay in particular is associated with the feeling that work might be too demanding or that there is insufficient time to get work done.

“By tying employees’ performance to financial incentives, employers send signals to employees about their intention to reward extra work effort with more pay. Employees in turn receive these signals and feel obliged to work harder in exchange for more pay.

“Even though employees may value these earnings as a ‘good thing’, the ultimate beneficiary of their extra effort is the organization. As a consequence, performance-related pay may be considered exploitative, or a management strategy that increases both earnings and work intensification.”

Proceed With Caution

The lesson business leaders can learn from the UEA study is to proceed with extreme caution when implementing an incentive-related pay plan. If employee-share ownership or profit-related plans are going to be introduced it is imperative that benefits are distributed equally.

Performance based plans are most likely to lead to positive attitudes towards job satisfaction, commitment, and trust in management but they must maintain a balance with not overworking employees.

Overall, Publix is highly regarded and has gotten great reviews by employees along with winning awards for being a Great Place to Work. So providing incentive-related pay and other benefits does help with employee retention if done right.

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