Performance Measurement and Reward Systems, Trust, and Strategic Change

Abstract

This study examines the extent to which a manufacturing company used performance measurement and a gain-sharing reward system to achieve strategic change over a 15-year period. The case examines the initial impact of the gain-sharing scheme in overcoming inherent hostility within the workforce, its continued success in gaining the cooperation of employees to work toward the successful implementation of strategic initiatives and, finally, its limitations in sustaining ongoing strategic change after a ten-year period of apparent success. The firm eventually adopted team-based structures to complement gain sharing and sustain commitment to strategic change. We explain the apparent success of the gain-sharing scheme over the first ten-year period in terms of the role of organizational trust. Gain sharing is a mechanistic form of control system, and hence may be compatible with organizational trust. After this initial success, managers believed that the level of employee cooperation to sustain strategic change was insufficient to maintain high performance in an increasingly competitive environment. The firm then introduced team-based structures to enhance employee enthusiasm to work toward sustaining strategic change. The adoption of teams promotes personal trust and the sharing of values and goals. The team-based initiatives did not result in significant performance improvements. We attribute this result, in part, to the continued role of gain sharing, a mechanistic control, which inhibited the development of personal trust.