Publication Date

October 1994


Despite the documented increased use of skill or knowledge based pay programs in organizations, little evidence exists to demonstrate whether these plans achieve the results that are intended. This study, a quasi-experimental, empirical test of the organizational outcomes from the introduction of a skill based pay program, addresses this need. Using time series data from nonequivalent groups, productivity, quality, labor cost and injury outcomes are examined over a 37 month period. The results support greater potential workforce flexibility, greater productivity (48$), and lower labor cost per part (16$). Compared to a control group, experimental group data also demonstrate more favorable quality outcomes. Injury frequency outcomes are not supported by the data, and in fact suggest that injuries may increase with the introduction of skill based pay. These results support both the behavioral and operations theories underlying skill based pay and add significantly to the knowledge regarding compensation interventions in general.


Suggested Citation
Murray, B. & Gerhart, B. (1994). A field study of early organizational outcomes from the introduction of a skill based pay program (CAHRS Working Paper #94-26). Ithaca, NY: Cornell University, School of Industrial and Labor Relations, Center for Advanced Human Resource Studies.