Relative rewards within team-based compensation

Irlenbusch, Bernd; Ruchala, Gabriele K.

doi:10.1016/j.labeco.2007.02.003

Cited by 58 publications

(53 citation statements)

References 60 publications

(55 reference statements)

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“…In contrast to a typical team setting where each team member receives a share of the generated output, our players participated in a winner-take-all tournament where only one of them earned the winner prize while the other received no payment. As the study of Irlenbusch and Ruchala (2008) shows, inducing a bonus payment for the highest contributor in a team-based compensation scheme reduced voluntary cooperation of the players and only enhanced effort if the bonus was sufficiently high. Hence, the study indicates that our payment structure will reduce the incentives to cooperate and to save the department in the severetreatment, which is in line with the effort ranking we observed.…”

Section: Discussionmentioning

confidence: 99%

Relative performance pay in the shadow of crisis

Kräkel

Nieken

2015

European Economic Review

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We analyze whether incentives from relative performance pay are reduced or enhanced if a department is possibly terminated due to a crisis. Our benchmark model shows that incentives decrease in a severe crisis, but are boosted given a minor crisis since efforts are strategic complements in the former case but strategic substitutes in the latter one. We tested our predictions in a laboratory experiment. The results confirm the effort ranking but show that in a severe crisis individuals deviate from equilibrium significantly stronger than in other situations. This behavior contradicts the benchmark model and leads to a five times higher survival probability of the department. We develop a new theoretical approach that may explain players' behavior.

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Section: Discussionmentioning

confidence: 99%

Relative performance pay in the shadow of crisis

Kräkel

Nieken

2015

European Economic Review

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“…Research on shared reward systems shows that when long term coordination is required, the optimal system is one where the team is rewarded based on relative performance. Individuals are motivated through peer sanctions and teams are incentivised through team rankings (Irlenbusch and Ruchala, 2008, Ishida, 2006, Knight et al, 2001. It is surprising that while a shared rewards system (R6) is appropriate for ASD (Boehm and Turner, 2004) both our case sites used individual based reward mechanisms thus running the risk of promoting dysfunctional behaviour and destroying intrinsic motivation (Cockburn, 2007).…”

Section: "You Can See What Everyone Else Is Doing and The Burn Down Rmentioning

confidence: 99%

A Performance Management Model for Agile Information Systems Development Teams

Lohan

Lang

Conboy

2013

Building Sustainable Information Systems

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The prevailing trend in ISD is one of poor project performance, with budget overruns commonly in excess of 300% and many failing altogether. To address this trend ISD research always focuses on the ISD process, user involvement, and the people involved. Rarely, if ever are wider organisational processes questioned. This paper argues for a cohesive and ongoing inclusion of wider organisational factors in efforts to address and improve ISD project performance. Given the poor budgetary performance of ISD projects, budgeting is one are we feel requires particular attention. Contemporary research in budgeting (e.g. Beyond Budgeting) and in ISD (e.g. agile methods) attempts to address similar issues albeit from a different angles. This paper draws on 2 case studies of 7 ISD teams to apply the Beyond Budgeting model to an ISD environment. We demonstrate the value of using the Beyond Budgeting model to develop a cohesive research agenda within ISD used to identify gaps and suggest improvements to agile methods, probably the most well known and accepted contemporary ISD approach.

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“…Experimental evidence for non-cooperative behavior and sabotage in tournaments shows that given the option, individuals exert considerable effort to sabotage direct competitors, thereby hurting overall efficiency (Harbring and Irlenbusch 2008). Irlenbusch and Ruchala (2008) showed that although tournament type incentives in the form of a bonus payment for the highest contributor in a team can increase individual efforts, they might also crowd out voluntary cooperation in the team.…”

Section: Direct Effect Of Competitionmentioning

confidence: 99%

Does competition foster trust? The role of tournament incentives

Keck

Karelaia

2011

Exp Econ

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Members of organizations are often called upon to trust others and to reciprocate trust while at the same time competing for bonuses or promotions. We suggest that competition affects trust not only within dyads including direct competitors, but also between individuals who do not compete against each other. We test this idea in a trust game where trustors and trustees are rewarded based either on their absolute performance or on how well they do relative to players from other dyads. In Experiment 1, we show that competition among trustors significantly increases trust. Competition among trustees decreases trustworthiness, but trustors do not anticipate this effect. In Experiment 2, we additionally show that the increase in trust under competition is caused by a combination of increased risk taking and lower sensitivity to non-financial concerns specific to trust interactions. Our results suggest that tournament incentives might have a "blinding effect" on considerations such as betrayal and inequality aversion.

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Relative rewards within team-based compensation

Cited by 58 publications

References 60 publications

Relative performance pay in the shadow of crisis

Relative performance pay in the shadow of crisis

A Performance Management Model for Agile Information Systems Development Teams

Does competition foster trust? The role of tournament incentives

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