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on Human Capital and Human Resource Management |
| By: | Heursen, Lea (HU Berlin) |
| Abstract: | In many organizations, productivity relies not just on individual effort but also on group morale, that is, the willingness of co-workers to help each other perform better at work. Relative performance evaluations (RPE) are known to increase individual work morale but may negatively affect group morale because they create a sense of competition among members of a reference group. In a novel experiment, I vary whether or not members of a reference group obtain relative performance information on a task that is relevant for their social image or self-image, a general knowledge test. I measure how this affects the subsequent willingness to help the productivity of others by sharing knowledge with them at a personal cost. I find that RPE cause members of a reference group to compete as intensely as under relative pay, compared to a baseline with no relative performance information and fixed piece-rates. It also increases the perceived social distance between them. Yet, I show that even after a performance competition, individuals are willing to help the productivity of others in the group. These findings advance our understanding of how relative concerns among co-workers affect the way they work together. |
| Keywords: | relative performance information; rank feedback; social incentives; on-the-job help; group productivity; social and self-image; experiment; |
| JEL: | D23 C92 J24 D91 |
| Date: | 2019–12–12 |
| URL: | http://d.repec.org/n?u=RePEc:rco:dpaper:213&r= |
| By: | Fahn, Matthias (JKU Linz and CESifo) |
| Abstract: | This paper explores the optimal provision of dynamic incentives for employees with reciprocal preferences. Building on the presumption that a relational contract can establish a norm of reciprocity, I show that generous upfront wages that activate an employee’s reciprocal preferences are more important when he is close to retirement. In earlier stages, “direct” performance-pay promising a bonus in exchange for effort is used more extensively. Then, a longer remaining time horizon increases the employer’s commitment which is generally determined by her future profits. Moreover, since future profits are affected by the employee’s reciprocal preferences, the norm of reciprocity already shapes the incentive system at the beginning of his career. I also show that more competition might magnify the use of reciprocity-based incentives, and that a formal commitment to paying nondiscretionary wages in the future can boost the employer’s credibibility. |
| Keywords: | reciprocity; relational contracts; dynamic incentives; |
| JEL: | C73 D21 D86 D90 D91 |
| Date: | 2019–11–08 |
| URL: | http://d.repec.org/n?u=RePEc:rco:dpaper:198&r= |
| By: | Addison, John T. (University of South Carolina); Teixeira, Paulino (University of Coimbra) |
| Abstract: | Using a cross section of matched data from the employee and management questionnaires of the European Company Survey, this paper investigates the determinants of worker commitment and the potential contribution of commitment to establishment performance. An index of worker commitment is constructed from employer perceptions of the motivation of workers and their retention and absenteeism propensities, while the determinants of commitment are fashioned from observations taken from the worker representation side ordered along dimensions such as perceived organizational trust and involvement. The commitment index is then linked to establishment performance outcomes. Key findings from the commitment equation are the positive role of trust in management, the quality of information exchanged, and the degree of worker representation influence in respect of major decisions taken by management. In turn, commitment emerges as a key correlate of establishment financial performance and labor productivity growth. Our supplemental sensitivity analysis is supportive of the interpretation of commitment as a driver of performance. |
| Keywords: | commitment, type of workplace representation, financial performance, labor productivity growth, European Company Survey |
| JEL: | J20 J50 |
| Date: | 2021–04 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp14290&r= |
| By: | Häusinger, Benjamin (LMU Munich) |
| Abstract: | Promotions serve two purposes. They ought to provide incentives for employees and to select the best employee for a management position. However, if non-contractible managerial decision rights give rise to private benefits and preference misalignment between managers and the firm, these two purposes are in conflict. This is because the worker with the largest private benefit as a manager has the strongest incentives to work hard to get promoted. This article shows how the interplay of managerial decision rights and performance-based promotions leads to a situation often referred to as the Peter principle: employees that create lower expected profits as managers have yet better promotion prospects. That finding still holds when the firm owner optimally chooses the promotion rule, the degree of delegation, and wage payments to both employees and managers. To optimize organizational design, the firm balances better worker incentivization but worse manager selection by using performance-based promotions and restricting managerial decision rights. |
| Keywords: | peter principle; promotion; delegation of decision rights; incentives; manager selection; organizational design ; |
| JEL: | D02 L22 M51 M52 |
| Date: | 2019–12–09 |
| URL: | http://d.repec.org/n?u=RePEc:rco:dpaper:209&r= |
| By: | Ashraf, Anik (LMU Munich) |
| Abstract: | Can a firm increase its workers' eff ort by introducing competition through performance-based ranking? On one hand such ranking can increase eff ort because of individuals' desire for status from high ranks, but on the other, it can demotivate them or make them wary of outperforming peers. This paper disentangles the e ffects of demotivation, social conformity, and status associated with ranking through a randomized experiment at a Bangladeshi sweater factory. Treated workers receive monthly information on their relative performance either in private or in public. Both a simple theoretical framework and empirical evidence from the field show that workers' intrinsic desire to be good at work induces privately ranked workers to increase eff ort upon receiving positive feedback, but they get demotivated and decrease e ffort upon receiving negative feedback. Public ranking lead to lower net eff ort relative to private ranking because of a strong preference not to outperform friends. The negative e ffects from demotivation and social conformity may explain why the existing literature finds mixed evidence of impact of ranking workers. |
| Keywords: | peer effects; productivity; rank incentives; |
| JEL: | D23 J53 O15 |
| Date: | 2019–11–04 |
| URL: | http://d.repec.org/n?u=RePEc:rco:dpaper:196&r= |
| By: | Fischer, Mira (WZB Berlin); Rilke, Rainer Michael (WHU - Otto Beisheim School of Management); Yurtoglu, B. Burcin (WHU - Otto Beisheim School of Management) |
| Abstract: | We analyze how the team formation process influences the ability composition and performance of teams, showing how self-selection and random assignment affect team performance for different tasks in two natural field experiments. We identify the collaboration intensity of the task as the key driver of the effect of self-selection on team performance. We find that when the task requires low collaborative efforts, the team performance of self-selected teams is significantly inferior to that of randomly assigned teams. When the task involves more collaborative efforts, self-selected teams tend to outperform randomly assigned teams. We observe assortative matching in self-selected teams, with subjects more likely to match with those of similar ability and the same gender. |
| Keywords: | team performance; self-selection; field experiment; education; |
| JEL: | I21 M54 C93 |
| Date: | 2020–05–04 |
| URL: | http://d.repec.org/n?u=RePEc:rco:dpaper:241&r= |
| By: | Ainhoa Aparicio Fenoll; Sarah Zaccagni |
| Abstract: | We conduct a randomized controlled trial to study the effect of gender composition of teams on performance, self-concept, working style, and individual satisfaction in endogenously and exogenously formed teams. We randomly divide a sample of high school students into two groups: we assign students in one group to teams of varying gender composition using random assignment and we allow the students in the other group to form teams freely. We find that students form disproportionately more male-predominant teams that those that would be formed under random assignment and that students in endogenously-formed gender-biased teams prefer even more gender-biased teams ex-post. Our results also show that female-predominant teams under-perform other types of teams but these differences disappear when teams are endogenously-formed. |
| Keywords: | team composition, gender, team formation, team dynamics, team performance, field experiment, decision-making. |
| JEL: | J16 I21 I24 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:cca:wpaper:646&r= |
| By: | Deversi, Marvin (LMU Munich); Kocher, Martin G. (IHS & University of Vienna); Schwieren, Christiane (University of Heidelberg) |
| Abstract: | We analyze cooperation within a company setting in order to study the relationship between cooperative attitudes and financial as well as non-financial rewards. In total, 910 employees of a large software company participate in an incentivized online experiment. We observe high levels of cooperation and the typical conditional contribution patterns in a modified public goods game. When linking experiment and company record data, we observe that cooperative attitudes of employees do not pay off in terms of financial rewards within the company. Rather, cooperative employees receive non-financial benefits such as recognition or friendship as the main reward medium. In contrast to most studies in the experimental laboratory, sustained levels of cooperation in our company setting relate to non-financial values of cooperation rather than solely to financial incentives. |
| Keywords: | cooperation; social dilemma; field experiment; company; |
| JEL: | C93 D23 H41 J31 J32 M52 |
| Date: | 2020–03–30 |
| URL: | http://d.repec.org/n?u=RePEc:rco:dpaper:233&r= |
| By: | Peter Wagner; Jan Knoepfle |
| Abstract: | This paper studies a principal who incentivizes an agent to achieve and maintain compliance and voluntarily disclose incidences of non-compliance. Compliance is modeled as a persistent binary process that jumps at random times arriving at a rate that depends on the agent's efforts. The state of compliance is verifiable by the principal only at isolated instances through costly inspections. We show that in principal-optimal equilibria, the principal attains maximum compliance by using deterministic inspections. The optimal equilibrium features periodic inspection cycles which are suspended during periods of self-reported non-compliance, in which the agent is fined. We explain how commitment to random inspections benefits the principal by relaxing the agent's incentive- compatibility constraints, and we discuss possible ways for the principal to overcome her commitment problem through third-party involvement. |
| Keywords: | Relational contracts, compliance, costly inspections, commitment, randomization |
| JEL: | C73 D82 D83 D86 L51 |
| Date: | 2021–04 |
| URL: | http://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2021_295&r= |
| By: | Audinga Baltrunaite (Bank of Italy); Giulia Bovini (Bank of Italy); Sauro Mocetti (Bank of Italy) |
| Abstract: | We examine the role of managerial talent and its interaction with managerial practices in determining firm performance. We build a matched firm-director panel dataset for the universe of limited liability companies in Italy, tracking individuals across different firms over time. We define managerial talent as management's capacity to boost firms' total factor productivity, estimated using a two-way fixed effects model. Combining the data with survey information on a representative sample of firms, we then document that our measure of talent correlates with ex-ante and ex-post indicators of ability, i.e. managers' educational attainment and their forecast precision with respect to the firm's future performance. Most important, we leverage information on the adoption of managerial practices within the firm to examine potential synergies between managerial talent and structured managerial practices, thus bridging two separate strands of the literature. While talent and structured practices do boost firm productivity on their own, there is evidence of complementarities between the two. These findings hold both in a cross-sectional setting and in a panel analysis that accounts for time-invariant firm heterogeneity. Overall, our results indicate that the effectiveness of managerial practices depends on managers' ability to implement them. |
| Keywords: | Board of directors, managers, corporate governance, productivity, managerial practices |
| JEL: | G34 M10 D24 |
| Date: | 2021–04 |
| URL: | http://d.repec.org/n?u=RePEc:bdi:wptemi:td_1335_21&r= |
| By: | Jeppe Christoffersen; Felix Holzmeister; Thomas Plenborg |
| Abstract: | We systematically examine which characteristics of a business opportunity – such as the likelihoods of potential gains and losses – affect managers' perception of risk and attractiveness. In an online experiment with a sample of 4,287 managers from small- and medium-sized enterprises in Denmark, we present participants with a hypothetical investment prospect in a business context, and elicit their perception of risk associated with the project and their perception of the investment's attractiveness. The experimental data is merged with a set of background variables on the company, which allows controlling for firm-specific effects. We find that risk perception is driven by the likeli hood and the return associated with the worst-case scenario as well as the size of the required investment. Managers' perception of attractiveness is affected not only by the worst-case scenario but also by the characteristics of the base-case and the best-case outcomes. Furthermore, we provide evidence that managers' perception of the project's attractiveness is significantly affected by their individual-level risk preferences and the interaction effect with risk perception. This implies that not only the characteristics of the different scenarios but also individuals' risk preferences play an important role when assessing the attractiveness of a business opportunity. |
| Keywords: | risk perception, risk preferences, attractiveness of investment project, business opportunity |
| JEL: | D81 D91 M10 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:inn:wpaper:2021-14&r= |
| By: | Dirk van Straaten (Paderborn University) |
| Abstract: | The success of e-commerce is strongly affected by customer review systems, since they are the most important trust-building device in online shopping. However, participation in these systems is biased as certain customer groups do not provide insights from their experience with the purchased goods. This study aims to stimulate the participation in customer review systems by implementing financial incentives. By conducting an economic laboratory experiment, subjects are treated with different types of incentives, namely unconditional rebates (i.e., gifts) or conditional rebates (i.e., rebates in return) for providing customer reviews. Through this process, providing gifts triggers reciprocity and rebates in return rather address economic motives for providing reviews. Finding no evidence for peer reciprocity, we identify seller reciprocity, economic incentives, and altruism as the drivers for providing customer reviews. In particular, we find that conditional rebates strongly increase the quantity of customer ratings but crowd out ratings that are motivated by altruism. In comparison, unconditional rebates result in a lower increase of customer ratings but show the advantage of not crowding out intrinsically motivated customer ratings. |
| Keywords: | Customer Rating, Altruism, Reciprocity, Incentives, Crowding out |
| JEL: | C91 D82 L81 L86 |
| Date: | 2021–04 |
| URL: | http://d.repec.org/n?u=RePEc:pdn:dispap:71&r= |