Effects of discontinuing performance pay : a qualitative analysis inthree brances of SpareBank 1 SMN

2014

SpareBank 1 SMN, a regional bank consisting of 50 branches, recently decided to change

their compensation policy. That meant for the bank to discontinue its performance pay

scheme, and replace it with a new fixed pay scheme, namely a career model. The change

happened due to a general dissatisfaction amongst the management with the consequences of

using performance pay as a part of the compensation system, and it was in 2013 decided to

discontinue further use of it and instead implement a career model based on fixed pay.

This research was done using a qualitative method. In total, 17 interviews with employees

working at 3 different branches (Stjørdal, Malvik, and Meråker) were conducted. The aims

of the research was to find the employees’ perceptions and opinions concerning being

deprived performance pay, in addition to reveal possible multitask problems that could have

occurred due to the bank’s performance pay schemes.

The findings revealed that the perceptions of the most recent performance pay schemes

varied to a great extent. Performance pay seems to have motivated the majority of the

interviewees, but the thesis also proposes that employee loyalty, and the level of effort put

in, did not change significantly because of its discontinuation. However, the discontinuation