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It's What You Say Not What You Pay

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Author Info
Jordi Brandts ()
David J. Cooper ()
Abstract

We study manager-employee interactions in experiments set in a corporate environment where payoffs depend on employees coordinating at high effort levels; the underlying game being played repeatedly by employees is a weak-link game. In the absence of managerial intervention subjects invariably slip into coordination failure. To overcome a history of coordination failure, managers have two instruments at their disposal, increasing employees' financial incentives to coordinate and communication with employees. We find that communication is a more effective tool than incentive changes for leading organizations out of performance traps. Examining the content of managers' communication, the most effective messages specifically request a high effort, point out the mutual benefits of high effort, and imply that employees are being paid well.

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Publisher Info
Paper provided by Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC) in its series UFAE and IAE Working Papers with number 643.05.

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Length: 46
Date of creation: 18 Feb 2005
Date of revision:
Handle: RePEc:aub:autbar:643.05

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Related research
Keywords: Change; Incentives; Coordination; Communication; Experiments; Organizations;

Find related papers by JEL classification:
C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production
M52 - Business Administration and Business Economics; Marketing; Accounting - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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  2. Ichniowski, Casey & Shaw, Kathryn & Prennushi, Giovanna, 1997. "The Effects of Human Resource Management Practices on Productivity: A Study of Steel Finishing Lines," American Economic Review, American Economic Association, vol. 87(3), pages 291-313, June. [Downloadable!] (restricted)
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    Other versions:
  4. Foss, Nicolai J, 2001. "Leadership, Beliefs and Coordination: An Explorative Discussion," Industrial and Corporate Change, Oxford University Press, vol. 10(2), pages 357-88, June.
  5. C. Mónica Capra & Tomomi Tanaka & Colin Camerer & Lauren Munyan & Veronica Sovero & Lisa Wang & Charles Noussair, 2005. "The Impact of Simple Institutions in Experimental Economies with Poverty Traps," Emory Economics 0508, Department of Economics, Emory University (Atlanta). [Downloadable!]
    Other versions:
  6. David J. Cooper & John H. Kagel, 2005. "Are Two Heads Better Than One? Team versus Individual Play in Signaling Games," American Economic Review, American Economic Association, vol. 95(3), pages 477-509, June. [Downloadable!]
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  10. Van Huyck, John B & Battalio, Raymond C & Beil, Richard O, 1990. "Tacit Coordination Games, Strategic Uncertainty, and Coordination Failure," American Economic Review, American Economic Association, vol. 80(1), pages 234-48, March. [Downloadable!] (restricted)
  11. Chaudhuri, A. & Schotter, A. & Sopher, B., 2001. "Talking Ourselves to Efficiency: Coordination in Inter-Generational Minimum Games with Private, Almost Common and Common Knowledge of Advice," Working Papers 01-11, C.V. Starr Center for Applied Economics, New York University. [Downloadable!]
  12. Crawford, Vincent, 1998. "A Survey of Experiments on Communication via Cheap Talk," Journal of Economic Theory, Elsevier, vol. 78(2), pages 286-298, February. [Downloadable!] (restricted)
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