A Comparative Analysis of the Incentive Systems under Taylorism and Fordism

This paper tries to fill the following gaps in the literature: the absence of a rigorous incentive-based analysis of Taylorism and the lack of a systematic analysis of the relation between the payment system and the organisational setting within Fordism. To accomplish this task I make use of agency theory and compare the stylised facts of these two contrasting managerial systems and show how the theory of agency can help explain Taylor’s and Ford’s different payment systems, that is Taylor’s performance-related pay versus Ford’s fixed pay. In particular, I claim that the divergence between both practices can be interpreted in terms of technology-related differences in i) responsiveness of workers’ effort to incentives and ii) responsiveness of employer’s proceeds to workers’ effort.