The Provision of Relative Performance Feedback: An Analysis of Performance and Satisfaction

This paper studies the effect of providing relative performance feedback on individuals’ performance, under two incentive schemes. In a laboratory setup, agents perform a real‐effort task. We show that relative performance feedback increases performance when performance is related to pay (piece‐rate) but has no effect on performance when pay is independent of performance (flat‐rate). These effects are independent of the agent's relative position. Subjects are also asked to rate their satisfaction during the experiment. We find that under flat‐rate, feedback has no effect on agents’ satisfaction, while under piece‐rate, feedback about relative position affects satisfaction.     

Compensation as a signal of organizational culture: the effects of advertising individual or collective incentives

Beyond their impact on current employees, compensation systems are thought to convey important messages about an organization's values and practices to potential hires, but explicit empirical support for this belief is scant. In two experiments, US participants evaluated recruiting advertisements containing simple statements about bonuses, with performance basis manipulated between-subjects in the first experiment and within-subjects in the second. Advertising bonuses based on individual performance caused an organization to be perceived as likely to have a more individualist culture, whereas bonuses based on team or organizational performance led to perceptions of a more collectivist culture. When participants in the second study were asked to choose between hypothetical jobs at organizations with different advertised compensation systems, the relation between individual differences and job preference was contingent on their organizational culture perceptions. In contrast to previous research, no modal preference for individual over collective rewards was observed.     

The role of job assignment and human capital endowments in explaining gender differences in job performance and promotion

We test a job ladders theory of career progression within internal labor markets as developed by Lazear and Rosen (1990). The theory argues that gender promotion gaps are due to sorting of men and women into career tracks with different promotion opportunities based on ex ante quit probabilities. Analyzing US federal government employees using a dynamic unobserved panel data model, we find that job assignment is one of the strongest predictors of gender differences in promotion. We also find that women have to jump higher performance hurdles to promote across grades, but, within grades, their promotion probabilities are comparable to those of men. In this organization, women can be found in both fast- and slow-track jobs, based on their promotion history, suggesting that unobserved heterogeneity is revealed to the firm over the worker's career.     

Investment and concern for relative position

Economists typically analyze individuals' market behavior in isolation from their nonmarket decisions. While this research strategy has generally been successful, it can lead to systematic errors when agents' nonmarket behavior affects their market choices. In this paper we analyze how individuals' investment behavior changes as a result of nonmarket behavior. Specifically, we analyze a model in which individuals must decide how to allocate their initial endowment between two random investments, where the returns are perfectly correlated across individuals for the first investment but independent across individuals for the second. We consider an environment in which men and women match, with wealthier individuals more successful in matching. We show how individuals' concern about relative wealth can affect their investment decisions, and we provide conditions under which individuals bias their investments either toward or away from the investment with correlated returns. A modification of the model is used to explain why agents' investments might exhibit a home country bias.     

Justice in the workplace: the centrality of social versus judgmental predictors of performance varies by gender

Men and women are said to perceive justice differently, with women proposed to be more concerned with relational issues and men focused more on material issues. In this study, the potential for differential effects of justice on performance by gender was analyzed across the four contemporary types of justice. Respondents were 265 male and 113 female occupationally diverse employees in a single organization. The results show significant differences in how men and women respond to the four justice types with only one – informational justice – acting similarly by gender. The differential relationships between each of the justice types and the outcomes by gender highlight the utility of the four factor approach to measuring organizational justice. Women were more interested in maintaining social harmony than men. The results appear to strongly support the use of the justice judgment model over the group-value model as a means of explaining the gender differences. Implications for management include the importance of informational justice both generally and within the performance appraisal process.     

Do Overconfident Workers Cooperate Less? The Relationship Between Overconfidence and Cooperation in Team Production

The tendency to underestimate others' relative performance compared with one's own is widespread among individuals in all work environments. We examine the relationship between, and the driving forces behind, individual overconfidence and voluntary cooperation in team production. Our experimental data suggest an indirect and gender‐specific link: overconfident men hold more optimistic beliefs about coworkers' cooperativeness than men who lack confidence and are accordingly significantly more cooperative, whereas overconfidence, beliefs, and cooperativeness are not correlated in women. Copyright © 2014 John Wiley & Sons, Ltd.     

Cognitive reflection and economic order quantity inventory management: An experimental investigation

We use laboratory experiments to evaluate the effects of individuals' cognitive abilities on their behavior in a finite horizon economic order quantity model. Participants' abilities to balance intuitive judgment with cognitive deliberations are measured by the cognitive reflection test (CRT). Participants then complete a sequence of ordering decisions. Our results show that participants with higher CRT scores on average earn greater profit and choose more effective policies. However, these gaps are transitory as participants with lower CRT scores exhibit faster learning. We also show gender differences in performance do not hold when we control for individual CRT scores.     

Gender Differences in Entrepreneurial Propensity*

Using data from representative population surveys in 17 countries, we find that the lower rate of female business ownership is primarily due to women's lower propensity to start businesses rather than to differences in survival rates across genders. We show that women are less confident in their entrepreneurial skills, have different social networks and exhibit higher fear of failure than men. After controlling for endogeneity, we find that these variables explain a substantial part of the gender gap in entrepreneurial activity. Although, of course, their relative importance varies significantly across countries, these factors appear to have a universal effect.     

The Rise of Individual Performance Pay

Existing empirical evidence suggests that individual performance pay is more prevalent in human‐capital‐intensive industries. We introduce a model that can contribute to explain this. In a repeated game model of relational contracting, we analyze the conditions for implementing peer‐dependent incentive regimes when agents possess indispensable human capital. We show that the larger the share of values that the agents can hold up, the lower is the implementable degree of peer‐dependent incentives. In a setting with complementary tasks, we show that although team‐based incentives are optimal if agents are dispensable, it may be costly, and, in fact, suboptimal, to provide team incentives when the agents become indispensable.     

Self‐managed work teams: An efficiency‐rationale for pay compression

This paper uncovers a novel mechanism through which pay dispersion can have a negative effect on firm performance, even in the absence of equity or fairness considerations. We use a stylized model of a self‐managed work team to show that, when team‐work involves heterogeneous tasks, the provision of incentives to exert effort conflicts with the provision of incentives to share information relevant for decision‐making. Pay dispersion deteriorates information sharing as it induces workers to conceal “bad news” to maintain their coworkers motivation. The practical implications of our theory are that team empowerment should go hand in hand with pay compression and that empowerment should be avoided when team production involves strongly heterogeneous tasks.     

A Mixed Contract with Alternative Performance Measures in a Multitask Agency

We compare the impact of two different mixed contracts on agent efforts when production depends on agent efforts at their own tasks as well as at helping others. The first contract combines compensation based on team output with that of a tournament where the bonus award is based on a ranking of individual output. The second contract also combines team output compensation with that of tournament except that the bonus award is based upon a relative ranking of an index constructed of alternative performance measures. We show that the latter contract can lead to higher levels of welfares than the former one. We also show that if the weights are properly constructed, the alternative contract can prompt agents into choosing first‐best levels of effort. Copyright © 2013 John Wiley & Sons, Ltd.     

The Effect of a Consciously Set and a Primed Goal on Fair Behavior

Three experiments were conducted to test whether an enhanced degree of fair behavior could be obtained by making justice a goal, whether consciously set, primed, or both. Each experiment assessed fairness in a competitive negotiation context. All participants, across the three experiments, were asked to attain a base‐level performance goal. The first experiment examined how a negotiation is affected by a consciously set goal for fairness as well as a primed fairness goal. The results revealed that both the conscious and the primed goal enhanced a participant's fairness. The second and third experiments examined the underlying mediating mechanisms of the effects found in the first experiment. Overall, the results of three experiments indicate that both conscious and primed goals, individually or in combination, can increase fair behavior by enhancing justice saliency. © 2015 Wiley Periodicals, Inc.     

Socio‐demographic factors and shared leadership behaviors in dispersed teams: Implications for human resource management

Companies increasingly make use of geographically dispersed teams to capture knowledge residing at different locations. In this context, shared leadership is considered a key enabler of team performance. Taking a functional perspective on shared leadership, we thus investigate the relationship between shared leadership behaviors and team performance in dispersed teams. Furthermore, we analyze how socio‐demographic factors that are characteristic for dispersed teams (i.e., high female‐to‐male ratio, high mean age, and high levels of national diversity) affect shared leadership behaviors. Based on data from 96 dispersed teams, we show that shared leadership behavior fosters team performance. Further, we find the socio‐demographic characteristics typical for dispersed teams to foster shared leadership. Theoretical and managerial implications for human resource management are discussed. © 2012 Wiley Periodicals, Inc.     

Life-cycle patterns in male/female differences in job search

We investigate whether women search longer for a job than men and whether these differences change over the life cycle. Our empirical analysis exploits German register data on highly attached displaced workers. We apply duration models to analyze gender differences in job search taking into account observed and unobserved worker heterogeneity and censoring. Simple survival functions show that displaced women take longer to find a new job than comparable men. Disaggregation by age groups reveals that these differences are driven by differential behavior of women in their prime-childbearing years. There is no significant difference in job search duration among the very young and older workers. These differential outcomes remain even after we control for differences in human capital and when unobserved heterogeneity is incorporated into the model.     

Team Production with Punishment Option: Insights from a Real‐Effort Experiment

This paper analyzes the consequences of allowing for punishment in a real‐effort pair production experiment. The behavior of the best performer in the team differs on whether he or she can impose a sanction on the less performing partner. When sanctions are not allowed, good performers reduce their effort in response to the advantageous difference in scores; when they can impose sanctions, their change in effort is no longer related to the difference in scores. To some extent, a sanction mechanism allows good performers to focus on their own performance. In the case of costless sanctions, not sanctioning a partner who under‐performs, what we refer to as forgiveness, prompts the latter to improve his or her performance, but applying the sanction has a stronger push effect. Copyright © 2014 John Wiley & Sons, Ltd.     

The Gender Wage Gap in Europe: Job Preferences,Gender Convergence and Distributional Effects

The gender wage gap has declined over time. However, most of the remaining gap is unexplained, partly because of gender convergence in wage‐determining characteristics. In this paper, we show the degree of convergence differs substantially across Europe. In some countries, predominantly in Eastern Europe, the gender wage gap is entirely unexplained. However, in other countries, differences between the characteristics of men and women explain a relatively large proportion of the wage gap. Gender differences in job preferences contribute 10% to the wage gap, which is more than job tenure, previous employment status or field of study. The role of job preferences is particularly strong at the top of the wage distribution.     

Revisiting the income penalty for behaviorally gay men: Evidence from NHANES III

Four studies published in the last ten years use the General Social Surveys (GSS) to show that behaviorally gay/bisexual men earn 15–30 percent less than other men. In this paper I use independent data on sexual behavior from the Third National Health and Nutrition Examination Surveys (NHANES III) and find that same-sex behaving men experience a statistically and economically significant income penalty on the order of 23–30 percent. Moreover, the strongest evidence for an income penalty is found for those men most likely to have a gay sexual orientation based on their lifetime sexual behavior. That the penalty for same-sex behaving men is robust across data sources suggests the need for more research into its causes and consequences.     

Blending service provider–client project teams to achieve client trust: Implications for project team trust,cohesion, and performance

The objective of the present research is to examine the effectiveness of “teaming with the client,” using blended service provider–client teams as an organizational strategy for achieving effective co‐production engagements. The results show that having a blended team creates a more trusting relationship between the project manager and client. The client's trust results in greater team trust, team cohesion, and team performance. However, the research also demonstrates an important limitation to the use of blended teams. In blended teams, when the client does not trust the project manager, significant problems arise for the team itself as compared to non‐blended teams.     

Team Incentives and Reference‐Dependent Preferences

We investigate a multi‐agent moral‐hazard model where agents have expectation‐based reference‐dependent preferences à la K?szegi and Rabin (2006, 2007). We show that even when each agent's probability of success in a project is independent, a principal may employ team incentives. Because the agents are loss averse, they have first‐order risk aversion to wage uncertainty. This causes the agents to work harder when their own failure is stochastically compensated through other agents' performance. In the optimal contract, agents with high performance are always rewarded, whereas agents with low performance are rewarded if and only if other agents' performance is high.     

The Effects of Incentive Mechanism on Knowledge Management Performance in China: The Moderating Role of Knowledge Attributes

Knowledge management of a new product development project team is critical for a firm's competitive advantage, and incentive mechanism is one of the most effective knowledge management drives. In this paper, we examined the effects of non‐financial incentive and team‐based financial incentive on knowledge management performance in China and identified the moderating effects of knowledge attributes (codifiability and teachability). Our findings indicate that non‐financial incentive and team‐based financial incentive have positive effects on knowledge management performance. Codifiability and teachability enhance the team‐based financial incentive–knowledge management performance relationship. Finally, implications for research and practice are discussed.