It's What You Say Not What You Pay. An Experimental Study of Manager-Employee Relationship in Overcoming Coordination Failure
AbstractWe 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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Bibliographic InfoPaper provided by Barcelona Graduate School of Economics in its series Working Papers with number 162.
Date of creation: Feb 2005
Date of revision:
Change; Incentives; Coordination; Communications; 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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