Dynamic Incentive Effects of Relative Performance Pay: A Field Experiment

Abstract

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.

Team Incentives, Task Assignment, and Performance: A Field Experiment

“…Note, however, that Delfgaauw et al (2013) also studied a treatment where stores compete in groups of …ve without any monetary prizes, yielding e¤ects on performance of similar size. In Delfgaauw et al (2014), employees could earn a bonus of 5% of monthly pay when the store would outperform a benchmark by a small margin and a bonus of 10% when outperforming the benchmark by a large margin. It turned out to be hard to qualify for the bonus: less than 11% of the stores earned a bonus, with half of these winning the low bonus.…”

“…In Delfgaauw et al (2013Delfgaauw et al ( , 2014Delfgaauw et al ( , 2015, we implement comparable team-based tournament incentives schemes across shops of di¤erent retail chains and obtain average treatments e¤ects on performance ranging from 0% to 5% increase in sales. Friebel et al (2017) implement a (noncompetitive) team incentive based on performance targets in a German bakery chain and …nd an average treatment e¤ect of 3%.…”

Dynamic incentive effects of relative performance pay: A field experiment

“…We find no differences in the response to intermediate relative performance. The estimates are reported in Delfgaauw et al (2011a). 2 1 Note that our indicator of stores being close to winning, I t,w−1 , is defined as D t,w−1 > −5%, while the horizontal axis in Figure 8 plots the expected difference p CU t,w−1 − maxc t p CU ct,w−1 from the first-stage regression rather than our instrument Dt,w−1.…”

“…As a robustness check, we will also estimate (5) including region-specific weekfixed effects, see section 4.2. with superscript p denoting that the estimates relate to performance as dependent variable. 16 By adjusting E p CU t,w−1 to account for week-fixed effects, we ensure that the expected difference in intermediate performance, D t,w−1 , has the same meaning in each of the treatment weeks, independent of the realisation of the common shock θ w−1 . As week-fixed effects by definition show up in the best comparison store's cumulative performance, θ w−1 and D t,w−1 would be negatively correlated if we would not adjust E p CU t,w−1 to account for week-fixed effects.…”

Pushing Through or Slacking Off? Heterogeneity in the Reaction to Rank Feedback

“…They find that both under-performers and over-performers adapt their portfolios to their current relative performance. In a field experiment featuring a sales tournament with retail stores, Delfgaauw et al (2014) find that on average, tournament incentives do not lead to higher performance: They show that stores falling far behind do not respond to feedback, but performance increases once stores get within the reach of winning the bonus. In line with this, Casas-Arce and Martínez-Jerez (2009) also analyze a contest among retailers and show that effort decreases in 'leading' and 'trailing distance'.…”