Analysing the relationship between QM, performance appraisal and pay for performance

Abstract

The purpose of this paper is to analyse the relationship between quality management, performance appraisal and pay for performance in a sample of 203 manufacturing plants (including firms that do not apply quality management) in Spain employing at least 20 workers. We make a distinction between collaboration with suppliers, customer focus and the use of quality tools. This consideration of quality management as multidimensional will help to disentangle the complex interrelationships with performance appraisal and pay for performance. Our findings point to a positive association of customer focus, collaboration with suppliers and quality tools with performance appraisal evaluating results and behaviours. Regarding pay for performance, closer collaboration with customers is positively related to individual pay for performance. The use of quality tools is positively related to individual and firm pay for performance. The managerial implications point out that there is still room for improving the effectiveness of quality initiatives by incorporating changes in pay for performance and performance appraisal oriented to the adaptation to the principles of quality management. From the theoretical perspective, our paper underlines the importance of not considering quality management as a unidimensional reality when examining its relationship with other management practices.