January 19, 2007
How do you motivate employees? With financial remuneration or by means of promotion opportunities? By encouraging them with career opportunities within or outside the company? Marco van Herpen wrote his PhD thesis on questions such as these in the field of ‘Personnel Economics’. He examined how employees value the concept of a remuneration system, the internal job market and external career opportunities and whether this has a positive effect on their performance.
Van Herpen investigated inter alia the effects of the remuneration system on employee motivation in two listed companies. The remuneration system is here divided into two components: financial remuneration and promotion opportunities. The results show that there is a positive relationship between the perception of ‘fairness’ and ‘manageability’ of the financial component of the remuneration system and extrinsic motivation. The prospect of a promotion also turns out to have a positive relationship with extrinsic motivation.
Van Herpen states that in particular large, profitable and growing companies let their employees enter at a lower level so they can follow an internal career path.
The PhD candidate discovered that switching to a new employer may have positive effects. For example, new skills can be combined with knowledge already present, resulting in a new and valuable form of human capital. This also illustrates how important it is for employees to be flexible in switching to a new employer and how they can create free positions for other employees to be promoted to.
These observations add new dimensions to the discussion about employees and termination of employment law; a more flexible job market may have a positive influence on the motivation and productivity of current as well as leaving employees.
Marco van Herpen (Heesch, 1978) studied Economics at Tilburg University. He conducted his research at SOM with a Marie Curie Fellowship from the EU. Van Herpen will be awarded his PhD in Economics on 25 January 2007 (1.15 p.m.). His supervisors are Prof. C. Cools and Prof. M. van Praag. His thesis is entitled Pay, promotions and performance: essays on personnel economics. Van Herpen currently works as a consultant for The Boston Consulting Group.
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