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service and greater volumes of traffic, dramatically STANDARD-BASED
increase productivity, improve profitability from once WORK PERFORMANCE
anemic levels, and improve safety—while at the same time
sharply lowering rates for shippers” (Association of Amer- Forces in the workplace such as organizational values,
ican Railroads, 2003). work cultures, and business goals shape the structures,
strategies, and human resource processes of most success-
Until 1995 the regulating agency for the railroads was
the Interstate Commerce Commission (ICC). The intent ful organizations. One change emerging from these forces
is the development and implementation of work stan-
of the Staggers Rail Act was to replace federal regulation
dards. Work standards deliver specific goals to employees,
with market competition. The ICC was charged by Con-
gress in the Staggers Rail Act to promote rail-to-rail com- helping them understand exactly what is expected of them
petition. Unfortunately, the ICC did not fully succeed in in order to earn a fair and equitable pay for their job per-
its charge. formance. These work standards also provide employers
with a reliable performance appraisal system. This com-
The ICC’s successor, the Surface Transportation pensation process is referred to as standard-based work
Board (STB) of the U.S. Department of Transportation,
performance.
was created by Congress in 1995. The STB retained
Standard-based work performance came into vogue
authority to set maximum rates or take other actions if a
railroad was found to have market dominance or to have in the 1990s, when many U.S. organizations began using
it in some way. Pay-for-performance, at-risk compensa-
engaged in competitive behavior. The STB is also respon- tion, and merit pay are other terms for standard-based
sible for railroad mergers, consolidations, and track age work performance. Standard-based pay is a form of com-
rights. Railroads largely control their pricing; changes, pensation known as incentive pay. With an incentive pay
however, must be approved by the STB and, if they are,
plan, pay increases are granted to employees based on
the railroad is not subject to antitrust regulations.
their rated performance in a given period. Pay increases
Since its beginnings in the 1830s, “the U.S. freight are granted with the goal of motivating future, and, it is
rail industry has seen many market improvements, mak-
hoped, more productive, performance. Some organiza-
ing today’s industry competitive against other modes of tions view standard-based work-performance compensa-
transport and vital to the economic health” (Association tion as a way to change behavior; others view it as a reward
of American Railroads, 2003) of the U.S. economy. The mechanism. Clearly for many, “incentive compensation is
Staggers Rail Act of 1980 has helped that happen.
the motivational tool that drives employees to meet their
SEE ALSO Transportation goals which in turn drives the company to new levels of
success” (Human Resource Department Ltd.).
Indeed, an effective compensation strategy is crucial
BIBLIOGRAPHY
Association of American Railroads. (2003). A trip through rail- to achieve organizational goals. A key element in compen-
road history. Retrieved December 10, 2005, from sation strategy is monitoring and improving employee
http://www.tomorrowsrailroads.org/industry/history.cfm performance and productivity. Compensation & Perfor-
Association of American Railroads. Policy and Economic mance Management stated that among other things, an
Department. (2005, June). Why the rail reregulation debate is effective compensation strategy helps a firm recruit and
important. Retrieved December 10, 2005, from retain valuable employees, ensure equitable pay levels, use
http://www.aar.org/About_AAR/about_aar.asp
compensation as a motivator, and manage compensation
Deregulations anniversary. (2005, October 10). Traffic World, costs.
269(41), 8.
Vantuono, W. C. (2005, July 7). Twenty-five years after Staggers:
New challenges, huge opportunities. Railroad Age, 206, STANDARD-BASED WORK-
22–26. PERFORMANCE PLAN
REQUIREMENTS
Key to success with standard-based work performance in
Phyllis Bunn
an organization is to have the appraisal system backed by
Laurie Barfitt
a clear sense of corporate purpose. Thus, designing and
implementing a new compensation program and appraisal
system requires a great deal of planning in deciding what
STANDARD & POOR’S action management wants to elicit from employees. Obvi-
ously, organizational and corporate culture and manage-
500 ment styles will determine how to implement the changes
SEE Stock Indexes in compensation. Generally, priority may be given to cor-

688 ENCYCLOPEDIA OF BUSINESS AND FINANCE, SECOND EDITION