nep-hrm New Economics Papers
on Human Capital and Human Resource Management
Issue of 2019‒06‒24
nine papers chosen by
Patrick Kampkötter
Eberhard Karls Universität Tübingen

  1. Managing Employees 'Insides' to Remedy Agency Problems? A Model of Transformational Leadership By Donze, Jocelyn; Simard-Casanova, Olivier
  2. Is cash king for sales compensation plans? Evidence from a large scale field intervention By Viswanathan, Madhu; Li, Xiaolin; John, George; Narasimhan, Om
  3. In-Kind Incentives and Health Worker Performance: Experimental Evidence from El Salvador By Martinez, Sebastian; Bernal, Pedro
  4. What do student jobs on graduate CVs signal to employers? By Van Belle, Eva; Caers, Ralf; Cuypers, Laure; De Couck, Marijke; Neyt, Brecht; Van Borm, Hannah; Baert, Stijn
  5. Using Social Connections and Financial Incentives to Solve Coordination Failure: A Quasi-Field Experiment in India’s Manufacturing Sector By Afridi, Farzana; Dhillon, Amrita; Li, Sherry Xin; Sharma, Swati
  6. Training, Soft Skills and Productivity: Evidence from a Field Experiment in Retail By Prada, María Fernanda; Rucci, Graciana; Urzúa, Sergio
  7. Employee referral, social proximity and worker discipline: theory and suggestive evidence from India By Dhillon, Amrita; Iversen, Vegard; Torsvik, Gaute
  8. CEOs' Multicultural Experience, Firm Networks and Performance: Evidence from Firm-to-firm Transaction Data in Japan By ITO Tadashi; NAKAMURA Ryohei
  9. Designing Effective Teacher Performance Pay Programs: Experimental Evidence from Tanzania By Isaac Mbiti; Mauricio Romero; Youdi Schipper

  1. By: Donze, Jocelyn; Simard-Casanova, Olivier
    Abstract: We consider a leader who can choose between a transactional or a transformational style of leadership to motivate a team of followers, in presence of moral hazard and free riding. Transformational leadership extends transactional leadership by allowing the leader to deliver a motivational message in addition to standard monetary incentives. When followers adhere to the leader's message, they get more motivated and exert more effort. We show that there is a complementary between monetary incentives and the motivational message. Furthermore followers are better off under transformational leadership. We also show that when the team size increases, transformational leadership - even if it comes at a fixed implementation cost - becomes less and less profitable for the leader compared to transactional leadership, at least when the size increase does not reinforce too much the social incentives to adhere to the leader's vision. When the size increase makes social incentives sufficiently stronger, transformational leadership regains interest and can even remedy the free-riding and moral hazard problems. Our results are in line with the empirical literature on leadership.
    Keywords: leadership, teams, agency problems, incentives, motivational message.
    JEL: D2 D8 D9 M5
    Date: 2018–06–13
  2. By: Viswanathan, Madhu; Li, Xiaolin; John, George; Narasimhan, Om
    Abstract: The pervasive use of merchandise (i.e., non-cash) incentives in sales compensation plans is an empirical and theoretical puzzle given the supposed superiority of cash incentives in the standard theory (i.e., principal-agent models) and the scant, and contradictory empirical evidence. We conducted a large scale field intervention that switched 580 salespeople at a large frozen food manufacturer away from their cash plus “ merchandise points” bonus to a commensurate all-cash bonus. After controlling for salesperson, seasonality, year, and target effects, we estimated that sales, on average, dropped by 4.36%. Further, we estimated individual-level sales changes and effort changes to validate our incentive-effort-sales causal chain. Our results show that the top salespeople experienced the largest drops. A post-intervention survey of social and individual difference variables reveals that salespeople from households with more discretionary financial resources, and those who think more abstractly about the uses of cash income exhibited smaller reductions in effort and sales. While the absence of a control group prevents us from making strong causal inferences, this set of results nevertheless provides descriptive and suggestive evidence for separate mental accounts as the most promising explanation for the greater utility provided by merchandise incentives.
    Keywords: Incentives; non-monetary compensation; field experiments; salesforce; mental accounting
    JEL: J50
    Date: 2018–06–01
  3. By: Martinez, Sebastian; Bernal, Pedro
    Abstract: Maintaining high standards of care from doctors, nurses and other health professionals is of critical importance for an effective and efficient health system. Yet deficient levels of health worker performance, including low effort, absenteeism, and lack of compliance with clinical guidelines, have been documented across numerous countries and contexts. In response, various pay-for-performance interventions that reward providers based on measures of quality of care and health outcomes have been tested, with mixed results. This study experimentally evaluates the effects of team in-kind incentives on health worker performance in El Salvador. Thirty-eight out of 75 community health teams were randomly assigned to receive in-kind incentives linked to performance over a 12-month period. All 75 teams received monitoring, performance feedback and recognition for their achievements, allowing us to isolate the impacts of the incentive. While both treatment and control groups exhibit improvements in performance measures over time, the in-kind incentives generated significant improvements in community outreach, quality of care, timeliness of care, and utilization of services after 12 months. Contrary to conventional knowledge, gains are largest for health teams at the bottom and top of the baseline performance distribution. These results suggest that even small in-kind incentives can be a powerful tool to improve health worker performance and may be a viable alternative to monetary incentives in certain contexts.
    JEL: I12 C93 I18 I15
    Date: 2019–06
  4. By: Van Belle, Eva; Caers, Ralf; Cuypers, Laure; De Couck, Marijke; Neyt, Brecht; Van Borm, Hannah; Baert, Stijn
    Abstract: Due to the prevalence and important consequences of student work, the topic has seen an increased interest in the literature. However, to date the focus has been solely on measuring the effect of student employment on later labour market outcomes, relying on signalling theory to explain the observed effects. In the current study, we go beyond measuring the effect of student work and we examine for the first time what exactly is being signalled by student employment. We do this by means of a vignette experiment in which we ask 242 human resource professionals to evaluate a set of five fictitious profiles. Whereas all types of student work signal a better work attitude, a larger social network, a greater sense of responsibility, an increased motivation, and more maturity, only student employment in line with a job candidate’s field of study is a signal of increased human capital and increased trainability.
    Keywords: Student employment,signalling,hiring chances,vignette study
    JEL: C91 I21 J22 J24
    Date: 2019
  5. By: Afridi, Farzana (Indian Statistical Institute, Delhi); Dhillon, Amrita (King’s College London); Li, Sherry Xin (University of Arkansas); Sharma, Swati (Indian Statistical Institute, Delhi)
    Abstract: Production processes are often organized in teams, yet there is limited evidence on whether and how social connections and financial incentives affect productivity in tasks that require coordination among workers. We simulate assembly line production in a lab-in-the-field experiment in which workers exert real effort in a minimum-effort game in teams whose members are either socially connected or unconnected and are paid according to the group output. We find that group output increases by 18% and coordination improves by 30-39% when workers are socially connected with their co-workers. Connected groups also coordinate better when we introduce a lump sum bonus, suggesting that financial and social incentives can be complementary in this setting. These findings can plausibly be explained by trust between co-workers in socially connected teams.
    Keywords: caste-based networks, social incentives, financial incentives, minimum effort game, coordination, trust JEL Classification: C93, D20, D22, D24, J33
    Date: 2019
  6. By: Prada, María Fernanda; Rucci, Graciana; Urzúa, Sergio
    Abstract: Understanding the causal association between skills and productivity is essential for designing effective training programs. This paper evaluates an intervention aimed at boosting leadership and communication skills among store managers and sales associates from a large Latin American retailer. The empirical analysis is carried out using longitudinal information gathered by the firm and through two skills surveys. The Identification exploits the experimental design in the context of a difference-in-difference strategy. The results indicate large positive effects of the training program on store-level productivity. We further link these Findings to individual-level performance measures. In particular, we document positive effects on total sales and numbers of transactions for all workers. Regarding the mechanisms, we provide evidence suggesting that the intervention was more effective in boosting leadership skills than communication skills. Spillovers from trained managers to untrained sales representatives also contribute to the main effects. Our findings point towards the possibility of increasing productivity through training programs targeting critical skills.
    JEL: J24 C93 O15 M53
    Date: 2019–06
  7. By: Dhillon, Amrita (King’s College, London); Iversen, Vegard (University of Greenwich); Torsvik, Gaute (University of Oslo)
    Abstract: We propose a new theory to explain why employers mobilize workplace insiders for the hiring of new staff. In settings with incomplete contracts, we show how workplace insiders can help employers tackle recruit discipline challenges at a lower cost. A key idea is that the employer can use sanctions against the referee to keep the new hire in line. Our model predicts that employers will use existing staff of stature and with accumulated goodwill within the firm as referees, since such staff have a personal stake in their choice of recruit. The model also predicts a strong social tie between the referee and the recruit to ensure that the recruit internalizes the costs to the referee of own misbehavior or underperformance. We use a small, in-depth dataset from India to scrutinize how well the predictions of our theory and of the main rival explanations for referral align with hiring patterns, wage and labor turnover observations. We find suggestive support for our theory and argue that these findings are hard to reconcile with rival referral explanations.
    Keywords: networks, low- and unskilled jobs, India, moral hazard, employee referrals, efficiency wages, referee incentives, strength of ties. JEL Classification: J41, J31, D82, D86, O12, O17
    Date: 2019
  8. By: ITO Tadashi; NAKAMURA Ryohei
    Abstract: This paper postulates a hypothesis that the more diverse background a firm CEO has, the more extended firm-to-firm networks the firm constructs, which in turns leads to higher firm performance. Using the firm level data of firm CEOs' backgrounds and firm-to-firm networks, this paper corroborates the hypothesis by showing that firms whose CEOs are non-local-born are more likely to have more extended firm-to-firm transaction networks and consequently have better firm performance. Aside from this main finding, it also finds that the CEOs' graduated schools' level in terms of difficulty of entrance exams, which we consider as a proxy for CEOs' innate ability, has a strong positive nexus with the firm performance. The finding suggests an importance of human resource mobilization for growth.
    Date: 2019–05
  9. By: Isaac Mbiti; Mauricio Romero; Youdi Schipper
    Abstract: We use a field experiment in Tanzania to compare the effectiveness on learning of two teacher performance pay systems. The first is a Pay for Percentile system (a rank-order tournament). The second rewards teachers based on multiple proficiency thresholds. Pay for Percentile can (under certain conditions) induce optimal effort among teachers, but our threshold system is easier to implement and provides teachers with clearer goals and targets. Both systems improved student test scores. However, the multiple-thresholds system was more effective in boosting student learning and is less costly.
    JEL: C93 H52 I21 M52 O15
    Date: 2019–05

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