Tournaments Without Prizes: Evidence from Personnel Records

Vidal, Jordi Blanes i; Nossol, Mareike

doi:10.1287/mnsc.1110.1383

Cited by 244 publications

(119 citation statements)

References 44 publications

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“…Based on social comparison theory, prior studies argue that the presence of RPI motivates individuals to increase their effort because 12 they want to outperform their peers and avoid negative self-perceptions and shame (Festinger 1964;Beach and Tesser 1995;Suls and Wheeler 2000). Consistent with this argument, prior field and experimental studies find that RPI has a positive effect on workers' performance even when it does not affect their pay (Blanes i Vidal and Nossol 2011;Tafkov 2013). In this study, I argue that a potential downside to providing workers with RPI is that it could lead to the ineffective sorting of workers.…”

Section: Relative Performance Informationsupporting

confidence: 61%

Promotion, Relative Performance Information, and the Peter Principle

Chan

2017

The Accounting Review

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PROMOTION, RELATIVE PERFORMANCE INFORMATION, AND THE PETER PRINCIPLE Eric Wai Yeung Chan, PhDUniversity of Pittsburgh, 2015 My dissertation consists of two main parts. In the first part, I present my experimental study in which I examine the effects of providing workers with relative performance information (RPI) on employers' promotion decisions and the impact of those decisions on worker performance. In my experimental setting, the job after promotion requires higher-level abilities than the current job. I find that workers increase their effort to improve their current job performance after a promotion opportunity is announced because they expect this to increase their chances of promotion even though the new task requires higher-level abilities. Moreover, because employers anticipate that workers who have RPI will react negatively if they see that the best current job performer is not promoted, employers promote the best current job performer rather than the worker best suited for the next job more often when workers have RPI than when they do not. Finally, consistent with the Peter Principle, I find that the promoted worker's performance after promotion is lower when workers have RPI than when they do not because the v promoted worker lacks the ability to perform the new job well. My results suggest that providing workers with RPI can have a downside that offsets the benefits documented in previous studies.In the second part of my dissertation, I discuss how three common firm practices could potentially help firms mitigate the sorting problem I identified in my experimental study.Specifically, I discuss how the communication of the promotion criteria, group incentive plans, and subjective performance evaluation could help employers improve the sorting of workers through promotions. However, while each approach has advantages, each also has drawbacks. It appears that there is no promotion-based incentive system that provides optimal effort incentives to workers while simultaneously achieving the best match between workers and their jobs. This conflict between the incentive and sorting roles of promotion is difficult to resolve and firms must ultimately trade-off between them. INTRODUCTIONPromotions are integral to most organizations and serve two important and distinct roles (Milgrom and Roberts 1992, p.364). The first is to motivate and reward workers (incentive role) and the second is to sort workers into jobs that best match their abilities (sorting role). However, the incentive and sorting roles may conflict when the nature of the tasks changes between hierarchical job levels such that workers' performance in the current job is not fully informative about their performance in the next job. In such cases, the best performer at one level of the hierarchy is often not the best candidate for the next higher-level job.The situation described above occurs quite often, such as when salespersons are promoted to sales managers, engineers are promoted to project managers, and teachers are promoted ...

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Section: Relative Performance Informationsupporting

confidence: 61%

Promotion, Relative Performance Information, and the Peter Principle

Chan

2017

The Accounting Review

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“…9 The effect of relative performance feedback on performance has recently been studied in a variety of contexts, ranging from student test scores (Bandiera et al, 2009;Azmat and Iriberri, 2010;Tran and Zeckhauser, 2012), contributions to an online community (Chen et al, 2010), real-effort in the lab (Charness et al, 2012;Freeman and Gelber, 2010;Kuhnen and Tymula, 2012), to workers' performance in a real working environment (Falk and Ichino, 2006;Delfgaauw et al, forthcoming;Blanes i Vidal and Nossol, 2011;Barankay, 2011a,b). With the noteworthy exception of Barankay (2011a,b), all of these papers find that relative performance feedback has on average a positive effect on performance.…”

Section: Conformity Preferences Of Employeesmentioning

confidence: 99%

Employee Recognition and Performance: A Field Experiment

et al. 2016

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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...

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“…Furthermore, the amount of effort individuals put into an activity may be driven by analogous investments made by their peers. For example, disclosing relative pay information has a significant impact on workers' economic output (Blanes i Vidal andNossol 2011, Netessine andYakubovich 2012), providing relative performance feedback influences the academic performance of high school students (Azmat and Iriberri 2008), and reporting households' relative energy usage has a significant effect on energy consumption rates (Schultz et al 2007). As a consequence, social comparisons can have a profound impact on outcomes.…”

Section: Introductionmentioning

confidence: 99%

Optimal Design of Social Comparison Effects: Setting Reference Groups and Reference Points

Roels

2013

SSRN Journal

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In this paper, we study how social planners should exploit social comparisons to pursue their objectives. We consider two modes of social comparison, referred to as behind-averse and ahead-seeking behaviors, depending on whether individuals experience a utility loss from underperforming or a utility gain from overperforming relative to their peers. Modeling social comparison as a game between players, we find that ahead-seeking behavior leads to output polarization, whereas behind-averse behavior leads to output clustering. A social planner can mitigate these effects in two ways: (i) by providing the full reference distribution of outputs instead of an aggregate reference point based on the average output and (ii) by assigning players into uniform rather than diverse reference groups. Social planners may thus need to tailor the reference structure to the predominant mode of social comparison and their objective. A performance-focused social planner may set the reference structure so as to maximize the output of either the top or the bottom player depending on whether she puts greater marginal weight to larger or smaller outputs. When the social planner also cares about utility, she faces a dilemma because performance optimization may not be aligned with utility maximization. Inevitably, the social planner will have to confront equity issues because better performance may not reflect greater effort or greater ability. Xuanming SuThe Wharton School, University of Pennsylvania, 3730 Walnut Street, Philadelphia, PA 19104, USA, xuanming@wharton.upenn.edu In this paper, we study how social planners should exploit social comparisons to pursue their objectives.We consider two modes of social comparison, referred to as behind-averse and ahead-seeking behaviors, depending on whether individuals experience a utility loss from under-performing or a utility gain from overperforming relative to their peers. Modeling social comparison as a game between players, we find that aheadseeking behavior leads to output polarization whereas behind-averse behavior leads to output clustering.A social planner can mitigate these effects in two ways, (i) by providing the full reference distribution of outputs instead of an aggregate reference point based on the average output, and (ii) by assigning players into uniform rather than diverse reference groups. Social planners may thus need to tailor the reference structure to the predominant mode of social comparison and their objective. A performance-focused social planner may set the reference structure so as to maximize the output of either the top or the bottom player depending on whether she puts greater marginal weight to larger or smaller outputs. When the social planner also cares about utility, she faces a dilemma because performance-optimization may not be aligned with utility-maximization. Inevitably, the social planner will have to confront equity issues because better performance may not reflect greater effort or greater ability.

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Tournaments Without Prizes: Evidence from Personnel Records

Cited by 244 publications

References 44 publications

Promotion, Relative Performance Information, and the Peter Principle

Promotion, Relative Performance Information, and the Peter Principle

Employee Recognition and Performance: A Field Experiment

Optimal Design of Social Comparison Effects: Setting Reference Groups and Reference Points

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