Business excellence practice: efficiency wages versus individual economic incentives

Abstract

The objective of this conceptual paper is to analyse why the use of efficiency wages accompanied by informative feedback can be a substitute for the use of individual economic incentives. Efficiency wages lead to the same positive outcomes as these incentives, but without incurring their multiple dysfunctionalities, which are difficult for companies to manage. The research methodology followed is an integrative literature review of different conceptual schools of thought: economics, experimental economics and behavioural economics. The result is the design of a conceptual framework that offers a new perspective on how companies can motive more effectively employees while achieving organisational objectives. Efficiency wages can attract employees that are more productive and motivate them to be more diligent. When accompanied by informative feedback, they can also orientate employees’ behaviours towards the achievement of organisational objectives. Efficiency wages fulfil therefore the objectives of incentives, but they are a fairer and less discriminatory alternative. This paper makes two relevant contributions. First, it offers managers an alternative to the use of individual incentives, and a powerful mechanism in the achievement of business excellence. Second, it promotes the academic analysis of novel hypothesis and research perspectives, constituting thus a relevant step for further theory development.

Keywords:

• Efficiency wages
• individual economic incentives
• motivation
• business excellence
• informative feedback

Disclosure statement

No potential conflict of interest was reported by the author(s).