The doctoral dissertations of the former Helsinki University of Technology (TKK) and Aalto University Schools of Technology (CHEM, ELEC, ENG, SCI) published in electronic format are available in the electronic publications archive of Aalto University - Aaltodoc.
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The Impact of Pay Knowledge on Organisational Performance: Investigating Finnish Profit-Sharing Schemes

Christina Sweins

Doctoral dissertation for the degree of Doctor of Science in Technology to be presented with due permission of the School of Science for public examination and debate in Auditorium TU1 at the Aalto University School of Science (Espoo, Finland) on the 13th of May 2011 at 12 noon.

Overview in PDF format (ISBN 978-952-60-4104-9)   [570 KB]
Dissertation is also available in print (ISBN 978-952-60-4103-2)

Abstract

Many studies have been carried out on the impact of pay systems on both employee attitudes and organisational performance. However, it is still unclear how the outcomes are developed. In this thesis my aim has been to study the impact of pay knowledge on employee attitudes and organisational performance in the context of Finnish personnel funds, which are deferred profit-sharing schemes. The findings in this thesis are based on four separate articles.

By pay knowledge I mean employee knowledge of both joint and firm specific principles of personnel funds. The data used in the articles were collected using a questionnaire in 31 organisations and interviews in 36 organisations that have personnel funds. Additionally, financial data was gathered for personnel fund companies and comparison companies.

The results reveal that the impact of pay knowledge is directly connected to performance and not mediated through pay satisfaction as earlier research argues. This finding suggests that pay knowledge may have a stronger independent impact on the effectiveness of the pay system than previously believed. I argue further that actual knowledge is a more reliable measure than perceived knowledge in estimating the relationship between pay knowledge and pay effectiveness, and thus researchers should prefer measures of actual knowledge. To enhance knowledge about the personnel fund, it is not enough to just provide feedback on financial figures. Communication about fund related matters is important in order to increase pay knowledge and the employees' 'line of sight'.

The results suggest, moreover, that making subjective performance assessments based on uninformed respondents may be a more serious source of bias than single respondent bias. This would mean that many surveys on the financial impacts of the pay system could be done more economically since there would be less need to gather a large number of respondents from individual firms.

This thesis consists of an overview and of the following 4 publications:

  1. Sweins, C., Kalmi, P., & Hulkko-Nyman, K. (2009). Personnel knowledge of the pay systems, pay satisfaction and organizational outcomes: Evidence from Finnish personnel funds. The International Journal of Human Resource Management, 20(2), 457-477.
  2. Sweins, C., & Kalmi, P. (2008). Pay Knowledge, Pay Satisfaction and Employee Commitment: Evidence from Finnish Profit-sharing Schemes. Human Resource Management Journal, 18(4), 366-385.
  3. Sweins, C., & Jussila, I. (2010). Employee knowledge and the effects of a deferred profit-sharing system: A longitudinal case study of personnel funds in Finland. Thunderbird International Business Review, 52(3), 232-247.
  4. Kalmi, P., & Sweins, C. (2010). The performance effects of financial participation: subjective and objective measures compared. Advances in the Economic Analysis of Participatory and Labor-Managed Firms, 11, 73-92.

Keywords: profit-sharing, pay knowledge, performance effects, pay satisfaction, commitment

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© 2011 Aalto University

Last update 2011-05-26