The influence of group incentives, training and other human resource practices on firm performance and productivity

This study examines the relationship between training, group incentive practices (profit sharing; Employee Stock Ownership Plans (ESOPs); and gainsharing plans), and other human resource policies, and their independent and interactive effects on firm financial performance and productivity. One hundred and twenty five companies from four different industries were surveyed about group incentives, training, and other human resource practices. The senior or a referred human resource officer in each firm was the point of contact for the survey. The survey was merged with financial and organizational information from Standard and Poor's COMPUSTAT. OLS and logit regression on firm performance levels and growth were used to estimate effects of group incentive practices, training, and other human resource factors on firm performance. Factor analysis was employed to see if an underlying factor structure existed for the human resource practices.; Cross sectional and panel comparisons were conducted for analysis of the data. One hundred and twenty five cases were usable for the cross sectional analysis, while one thousand six hundred and sixty seven cases extending over twenty years were usable for the panel regression. Log of sales, log of Tobins Q, and return on assets served as the three dependent variables in this study. Results supported previous findings demonstrating that adoption of profit sharing plans had a strong and beneficial effect on changes in firm productivity. Those firms adopting profit sharing plans experienced an average 9.1 percent change in productivity. Adoption of cash profit sharing plans, in particular, had a beneficial effect on firm productivity with an average 10.6 percent change in productivity for those firms adopting cash profit sharing plans. Results also supported previous literature findings that a group of complementary human resource practices had a positive and significant effect on log of sales and return on assets to a larger extent than individual human resource practices. The addition of each complementary human resource practice within a human resource enhancement factor produced a 2.7 percent rise in log of sales and a 1.4 percent rise in return on assets. Few interactions between compensation, human resource and training measures significantly enhanced firm performance.