Performance Related Pay: A Case Study of a Small Business

Abstract

NERYS FULLER-LOVE IS DIRECTOR OF THE Centre of Business Studies at the University of Wales, Aberystwyth, Wales, and Professor R. W. Scapens is director of the Centre for Interdisciplinary Research in Accounting and Finance at the University of Manchester, England. This paper aims to investigate the impact of the implementation of performance related pay on a small company. Performance rewards schemes have been used for centuries to reward improved productivity through increased payments or benefits. Although there is evidence to show that these schemes do increase productivity there are also doubts as to their effectiveness. Small firms have several stages of growing pains on the way to success or failure. What are the characteristics of successful small firms? Willingness to improve management through training and by bringing in professional managers from outside have been found to be a positive factor in their success. This is principally because the stages of growth in a small firm involve different management skills. For example, how does a small firm move from direct supervision of a few workers to indirect management when the number of employees increases? This paper attempts to link together these two themes, that of performance reward schemes and the management and control of a small business. It illustrates how a small manufacturing company implemented a bonus scheme in order to improve productivity and ease the transition from an informal management system to more structured formal systems. The reason for introducing the bonus payments, how they were implemented and evaluated are examined in this case study. Some of the factors investigated include the impact on the organisation, the effect of change, the resistance to change.

Get full access to this article

View all access options for this article.

References

Ang, J. S. (1991), 'Small Business Uniqueness and the Theory of Financial Management', The Journal of Small Business Finance, Vol. 1 (1): ppl-13.

Blinder, A. S. (ed.) (1990), 'Paying for Productivity', The Brookings Institution, Washington.

Clifford, M. , Nilakant, V. , and Hamilton, R. T. (1991), 'Management Succession and the Stages of Small Business Development', International Small Business Journal,July-Sept., 1991, Vol. 9, No. 4.

Churchill, N. C. , and Lewis, V. L. (1983), 'The Five Stages of Small Business Growth', Harvard Business Review, 61, 3, May-June, pp 30-50.

Grieve, Smith, A. , and Fleck, V. (1987), 'Business Strategies in Small Hightechnology Companies', Long Range Planning, Vol. 20, 2, pp 66-68.

Kharbanda, O. P. , Stallworthy, E. A. (1991), 'Let's Learn fromjapan', Management Accounting, March, pp 26-33.

Keasey, K , and Watson, R. (1993), Small Firm Management, Ownership, Finance and Performance, Blackwell.

Kren, L. , and Liao, W. M. (1988), 'The Role of Accounting Information in the Control of Organisations: A Review of the Evidence',Journal of Accounting Literature, Vol. 7, pp 280-309.

Marks & Spencer (1995),Annual Report and Financial Statements.

10.

Milgrom, P. , Roberts,J. (1992), 'Economics, Organisation and Management', Prentice Hall Information.

11.

Mitchell, D.J. B. , Lewin, D. , and Lawler, E. E. (1990), 'Alternative Pay Systems, Firm Performance and Productivity', in Blinder et al, 'Paying for Productivity', the Brookings Institution, Washington, pp 15-94.

12.

Scase, R. , and Goffee, R. (1987), 'The Real World of the Small Business Owner', Routledge, London.

13.

Scapens, R. W. , and Roberts,J. (1991), 'Accounting and control: A Case Study of Resistance to Accounting Change', University of Manchester.

14.

Scapens, R. W. (1992), 'The Role of Case Study Methods in Management Accounting Research: A Personal Reflection and Reply', British AccountingReview, 24, pp 369-383.

15.

Scott, M. , and Bruce, R. (1987), 'Five Stages of Growth in Small Businesses', Long Range Planning, Vol. 20, No. 3, pp 45-52.

16.

Scott, M. , Roberts, I. , Holroyd, G. , and Sawbridge, D. (1989), Management and Industrial Relations in Small Firms', Research Paper 70, Department of Employment, London.

17.

Stanworth,J. , and Curran,J. (1973), 'Management Motivation in the Smaller Business', Gower Press.

18.

Stanworth, J. , and Curran, J. (1989), 'Employment Relations in Small Firms', in Burns, P. , and Dewhirst,J. (eds.), Small Business and Entrepreneurship, Macmillan, London.

19.

Stanworth,J. , and Gray, C. (1991), 'Bolton 20 Years On', Paul Chapman Publishing, London.

20.

Stanworth,J. , and Gray, C. (1992), 'Entrepreneurship and Education: Action-based Research and Training Policy Implications in Britain', International Small BusinessJournal, Jan.-March, 1992, Vol. 10, No. 2, pp 11-23.

21.

Storey, D. et al (1987), 'The Performance of Small Firms', Croom Helm, London.

22.

Taylor, F. W. , 'The Principles of Scientific Management', Harper and Brothers, 1911.

23.

Watkins, D. S. (1983), 'Development, Training and Education for the Small Firm; A European Perspective', European Small Business Journal, Vol. 3, pp 29-44.

24.

Weitzman, M. L. , and Kruse, D. L. (1990), 'Profit Sharing and Productivity', in Blinder, A. S. (ed.), Paying for Productivity, The Brookings Institution, Washington.

25.

Wynarcz et al (1993), Managerial Labour Markets in Small and Medium-sized Enterprises, Routledge.

26.

Yin, R. K (1989), 'Case Study Research; Design and Methods', Sage Publications, London.