Compensation Policy and Organizational Performance: The Efficiency, Operational, and Financial Implications of Pay Levels and Pay Structure

Mark P. Brown, Bradley University
Michael C. Sturman, Cornell University School of Hotel Administration
Marcia J. Simmering, Louisiana Tech University

© Academy of Management. Reprinted by special permission of the publisher.

Abstract

In this study, we investigated the relationship between organization-level compensation decisions and organizational performance. Specifically, we examined how companies' pay structures and pay levels relate to resource efficiency, patient care outcomes, and financial performance. We expected both nonlinear and interactive effects. Results from a large database of hospitals support our predictions. We discuss the implications for practice and compensation research theory development in light of the study's results.