Learning To Incentivize In Different Modes Of Coordination

The paper studies which incentive systems emerge in organizations when self-interested managers collaboratively search for higher levels of organizational performance and the headquarters learn about the success of the incentive systems employed. The study uses an agent-based simulation and, in particular, controls for different levels of intra-organizational complexity and modes of coordination, i.e., the way how preferences on the departmental site are aligned with each other in respect to the overall organizational objective. The results indicate that for different levels of intra-organizational complexity different incentive systems emerge: With lower intra-organizational complexity, in tendency, the less focus is put on firm performance and vice versa. However, results also suggest that the mode of coordination may considerably affect the emergence of the incentive structure. This provides support for the idea that multiple management controls, like the incentive system and the mode of coordination, should be regarded and designed as a system with interrelations among its components and not just as a collection of several control practices.