Human Resource Management and Nudging: An Experimental Analysis on Goal Settings in German Companies

Abstract

We analyse how human resource managers and directors in German companies can become aware of the application of incentive systems like goalsetting and performance-based pay. In particular, we analyse to what extent a nudge can increase the interest of experts in goalsetting and performance-based pay. The nudge consists of giving information concerning the diffusion rate of goalsetting and performance-based pay, as well as the potential productivity increase. In fact, surveyed HR managers who received the information reported a higher interest in goalsetting and performance-based pay compared to the control group of HR managers without such information. Furthermore, the study showed a consistent answering behaviour between statements about intended activities with the performance management and statements about the actual implementation one year later.Keywords: behavioural economics, human resources, managers, compensation Behavioural Economics in OrganisationsDuring the last thirty years, business sciences have expanded their research methods and objects of investigation by insights from other domains like psychology, sociology and neurology. One important insight for managers in companies is that people are much more often guided and influenced by emotions and external factors than had been assumed so far. For example, behavioural economics research shows that fairness and inequality aversion plays an important role for performance evaluation by managers (e.g. Kampkötter & Sliwka, 2016). In general, behavioural economics research findings prove to be well reproducible. Camerer et al. (2016) conducted worldwide replications from particularly well-known behavioural economics studies, with the result that 78 percent of the research findings could be replicated and the rest of the findings just shortly missed the level of significance.Behavioural economics expands standard economic theory with psychological factors. For example, the suggestion that a human implements all available information in his decision making could not be proven by various studies (e.g. Altmann et al., 2011). In fact, in the face of cognitive limitations, he will concentrate on fewer pieces of particularly important information. Not just marketing experts take advantage of this phenomenon; election researchers also use it to motivate non-voters. For instance, Gerber and Rogers (2009) informed US citizens about the high voter participation during the last election and showed that the voter participation of these citizens was on average three percent higher compared to citizens who did not get such information. This information has this effect because most people are interested in the behaviour and activities of others and seek to imitate it. This is called herding behaviour.In this study, herding behaviour will be analysed as a causing channel of the behavioural economics treatment with human resource managers and directors, who will be called -HR-managers‖ in what follows. HR managers are a particularly interesting group to study beca...

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