This paper reports the results from a controlled field experiment designed to investigate the causal effect of unannounced, public recognition on employee performance. We hired more than 300 employees to work on a three-hour data-entry task. In a random sample of work groups, workers unexpectedly received recognition after two hours of work. We find that recognition increases subsequent performance substantially, and particularly so when recognition is exclusively provided to the best performers. Remarkably, workers who did not receive recognition are mainly responsible for this performance increase. Our results are consistent with workers having a preference for conformity and being reciprocal at the same time.JEL Classifications: C93, M52. Keywords: employee motivation, recognition, reciprocity, conformity, field experiment. * We gratefully acknowledge comments and suggestions by a Department Editor, an Associate Editor, three anonymous referees, Iwan Barankay, Gary Charness, Tore Ellingsen, Dirk Engelmann, Guido Friebel, David Gill, Michael Kosfeld, Steve Levitt, John List, Michel Maréchal, Dina Pommeranz, Ingrid Rohde, Marie Claire Villeval, and numerous seminar and conference participants. We thank Ann-Kathrin Koessler for excellent research assistance. The experiment has been conducted within the ethical guidelines of our home institutions.

We study optimal incentive contracts for workers who are reciprocal to management attention. When neither worker's effort nor manager's attention can be contracted, a double moral-hazard problem arises, implying that reciprocal workers should be given weak financial incentives. In a multiple-agent setting, this problem can be resolved using promotion incentives. We test these predictions using German Socio-Economic Panel data. We find that workers who are more reciprocal are significantly more likely to receive promotion incentives, while there is no such relation for individual bonus pay.

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in AbstractWe conduct a field experiment among 189 stores of a retail chain to study dynamic incentive effects of relative performance pay. Employees in the randomly selected treatment stores could win a bonus by outperforming three comparable stores from the control group over the course of four weeks. Treatment stores received weekly feedback on relative performance. Control stores were kept unaware of their involvement, so that their performance generates exogenous variation in the relative performance of the treatment stores. As predicted by theory, we find that treatment stores that lag far behind do not respond to the incentives, while the responsiveness of treatment stores close to winning a bonus increases in relative performance. On average, the introduction of the relative performance pay scheme does not lead to higher performance. JEL-Codes: C93, M52.

Die Dis cus si on Pape rs die nen einer mög lichst schnel len Ver brei tung von neue ren For schungs arbei ten des ZEW. Die Bei trä ge lie gen in allei ni ger Ver ant wor tung der Auto ren und stel len nicht not wen di ger wei se die Mei nung des ZEW dar.Dis cus si on Papers are inten ded to make results of ZEW research prompt ly avai la ble to other eco no mists in order to encou ra ge dis cus si on and sug gesti ons for revi si ons. The aut hors are sole ly respon si ble for the con tents which do not neces sa ri ly repre sent the opi ni on of the ZEW. Non-technical SummaryRecognition is an important source of employee motivation. But how should managers allocate recognition: should they praise all? Or should they recognize only extraordinary performances? This issue has not yet been addressed sufficiently. On the one hand, exclusive recognition might raise the performance of high-performers even further as they feel acknowledged and motivated by the public praise. However, this might come at the cost of discouraging and frustrating the non-recipients. On the other hand, non-recipients might respond positively as they are encouraged to catch up with the high-performers while the latter might rest on their laurels. We tackle this research question by conducting a field experiment which investigates the causal effect of recognition on work performance. We hired more than 300 workers for a three-hour data-entry job. After two hours of work, we randomized the provision of unannounced recognition by handing out a thank-you card, which was personally signed by the head of the research institute. By varying the number of recipients of the thank-you card we were able to study the effect of exclusive recognition. Depending on the treatment, we assigned a thank-you card either to the best one, the best three, or all workers of a work group. We find that recognition significantly increases subsequent performance, and in particular so if recognition is exclusively provided to the best performers. Recognition to the best three performers in a group yields the largest effect on workers' productivity in comparison with either recognition to all employees or recognition to the best performer. Interestingly, performance increases in response to exclusive recognition are mainly driven by strong positive effects of non-recipients. Conformity preferences are the most likely reason for these responses. Upon learning that one does not belong to the best three performers in a group of eight, non-recipients feel inclined to improve performance so as to adhere to the apparent group norm. In line with this interpretation, we find weaker (but still positive) responses of non-recipients when only the best performer in a group receives recognition as this provides a weaker signal of low relative performance than belonging to the bottom five out of eight workers. However, conformity preferences cannot explain all of our results. In particular, recipients of recognition do not decrease performance, as conformity would suggest, but rather (a...