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The Hidden Costs of High-Performance Work Practices: Evidence from a Large German Steel Company

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  • Bernd J. Frick
  • Ute Goetzen
  • Robert Simmons

Abstract

The authors use monthly data from 25 production units in a German steel plant over the period 1992 to 2001 to test for impacts of teamwork and performance-related pay on productivity, accidents, and absence rates. They find that teamwork and performance pay provide incentives to workers to increase quantity at the expense of quality and to run the machines for long hours instead of spending time on maintenance. Absenteeism increases when a combination of teamwork and performance pay is applied to production units that previously had neither. Results suggest that teamwork and performance pay can create hidden costs for manufacturers and do not necessarily increase worker productivity.

Suggested Citation

  • Bernd J. Frick & Ute Goetzen & Robert Simmons, 2013. "The Hidden Costs of High-Performance Work Practices: Evidence from a Large German Steel Company," ILR Review, Cornell University, ILR School, vol. 66(1), pages 198-224, January.
    • Handle: RePEc:sae:ilrrev:v:66:y:2013:i:1:p:198-224
    DOI: 10.1177/001979391306600108
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    2. Jed DeVaro, 2022. "Performance pay, working hours, and health‐related absenteeism," Industrial Relations: A Journal of Economy and Society, Wiley Blackwell, vol. 61(4), pages 327-352, October.
    3. Mehrzad B. Baktash & John S. Heywood & Uwe Jirjahn, 2022. "Performance pay and alcohol use in Germany," Industrial Relations: A Journal of Economy and Society, Wiley Blackwell, vol. 61(4), pages 353-383, October.
    4. Benjamin Artz & Colin P. Green & John S. Heywood, 2021. "Does performance pay increase alcohol and drug use?," Journal of Population Economics, Springer;European Society for Population Economics, vol. 34(3), pages 969-1002, July.
    5. Bryson, Alex & Clark, Andrew E. & Freeman, Richard B. & Green, Colin P., 2016. "Share capitalism and worker wellbeing," Labour Economics, Elsevier, vol. 42(C), pages 151-158.
    6. Ung Leng Yean, 2016. "The Impact of Minimum Wage Policy on Small Medium Enterprises� Productivity in the Manufacturing Sector," GATR Journals jber120, Global Academy of Training and Research (GATR) Enterprise.
    7. Jaren Haber, 2016. "Institutionalized Involvement: Teams and Stress in 1990s U.S. Steel," Industrial Relations: A Journal of Economy and Society, Wiley Blackwell, vol. 55(4), pages 632-661, October.

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