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Economy in Schools and Business

The Economy in Schools and Business

The authors express the opinion that corporations implemented significant changes in managerial practice to ensure better performance and overall outcome. Pay-for-performance plans were created and realized using various compensations. It was proven historically that financial incentives motivate managers to better perform. The proven net return for the pay-for-performance investments was 134%.

The authors of the article believe supporters of the pay-for-performance system have no solid proof that it can work efficiently when designed intelligently, as the main pitfall remains. Managers are unaware of what they can do and what they know. Beer and Cannon focused their article on a single company and the managerial experiences and practices involved. Their goal was collecting and analyzing case data and focusing on the areas, ignored by other researchers. The base for the research was Hewlett-Packard, with 5 pay-for-performance systems launched on its sites. The advances of this study were significant compared to those conducted previously. The authors used multiple data instead of one program, and this allowed making case generalizations later. Managers were never interviewed before for such studies. Hewlett-Packard used the initiatives of the local managers, approved by the higher authorities.

HP commenced 13 different programs, based on skill and teamwork. Works sites were inside the US and abroad, involving mostly blue-collars. All initiatives were chosen by local management and supervised by the higher ranks since the company was getting into the experiment that could change the way it worked for the last decades. According to the local managers’ calculations, the benefits of the program did not exceed its costs. Thus, using the results obtained at 13 different sites, Hewlett-Packard high management decided to quit incorporating the pay-for-performance system for their company. The reasons were common for both local and main management: failing to prove the necessity of the system itself for an increase in positive results, current HP pay system proved to be better is satisfying the needs of employees.

When pay-for-performance systems are incorporated in companies like HP, managers play the key role in supporting the program and making important decisions. The authors believe managers were quite pragmatic, looking for ways of improving the company performance, not trying to improve the pay-for-performance system. They supported it, believing in its cost-efficiency, though still preferring to go back to the pay system, effective in the HP in the past. The problem existed in the gap between their expectations and the real outcomes. It was partially the managers’ fault in missing to explain to the workers how the new system works and making necessary adjustments to it. Both parties were disappointed with the system since managers did not get the savings they expected and workers did not get the additional pay. HP's top management decided to cancel the implication in the system without further research for understanding the possible reasons for its failure and options of improving and/or modifying it to be implied within the company eventually.

The authors believe HP managerial experience does not prove the failure of the pay-for-performance system to motivate the employees, but only shows the unreadiness of the management to take the next steps, modifying the program and implementing it further.

Heyneman and Loxley researched the way investors might support schools with certain goods or services to elevate and keep up a certain level of school performance. Another school-related research was based on studying the preschool influence on further academic success, which raised the disturbance level of many educators. Later school effects were studied more intensively, with distribution to various levels. The researchers used data from 6 different sources and included data from 29 countries throughout the world. The attention was accented to primary-school students and their achievements in science. The study reached for the countries from all continents, both with high and low national income levels per capita.

Analyzing the collected data, the authors discovered that some tests were designed for the later cross-cultural examination and comparison, while certain countries (e.g. Uganda) designed the test for the further use of its results in the country. Some countries used a different approach to the test, i.e. different outcomes were looked for. Secondly, some countries did not limit the test purely to science, thus comparing the results became more problematic. Thirdly, the test samples were not even in several participants, as some countries initially researched children of higher or lower age. Such results were excluded from the tests, and the representation of different countries was altered as well. Data was collected, using different approaches to administering the test, and in some cases, the results could be debatable. Lastly, each country used different regions for conducting the test – from the capital city in Argentina and Brazil to some urban areas or a set of diverse areas that cannot be compared between them.

The research results were all distributed by the levels of students’ achievements. National level results showed the basic differences in teaching from school to school, in different countries. Test results were compared to the level of prosperity of the country and the number of investments done by the government in education. The research allowed concluding that students who finish schools in countries with higher per capita income are more likely to have better knowledge in the field of science.

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The authors proved that the lack of socioeconomic variance cannot be a reason for better performance in high-income countries. Selectivity of children from the lower socioeconomic background was not approved as well, since no proof of it was found. Multicollinearity between school quality and socioeconomic status cannot be used for defining primary school achievements in low-income countries. The authors suggest looking for the answer to this question in further research.

The authors imply that if the perception of the schools in the high-income countries is not as crucial as in low-income countries, the school effects should not be as important in improving education.

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