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Worker Performance and Group Incentives: A Case Study

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  • Daniel G. Hansen

Abstract

The author uses monthly, individual-level data collected from two units within a large U.S. financial corporation to estimate employees' response to the introduction of a group incentive plan. The findings indicate that the incentive plan caused performance to converge to a standard: the initially least productive workers improved greatly, whereas the performance of the initially most productive workers did not change. However, the evidence suggests that the incentive plan was successful in increasing the average level of productivity across the work group.

Suggested Citation

  • Daniel G. Hansen, 1997. "Worker Performance and Group Incentives: A Case Study," ILR Review, Cornell University, ILR School, vol. 51(1), pages 37-49, October.
    • Handle: RePEc:sae:ilrrev:v:51:y:1997:i:1:p:37-49
    DOI: 10.1177/001979399705100103
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    References listed on IDEAS

    as
    1. Bruce Shearer, 1996. "Piece-Rates, Principal-Agent Models, and Productivity Profiles: Parametric and Semi-Parametric Evidence from Payroll Records," Journal of Human Resources, University of Wisconsin Press, vol. 31(2), pages 275-303.
    2. Charles Brown, 1990. "Firms' Choice of Method of Pay," ILR Review, Cornell University, ILR School, vol. 43(3), pages 165-1-182-, April.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Gaute Torsvik, 2017. "Workplace Productivity and Bonus Preferences: Why Do Men With Low Productivity Prefer Individual Pay?," Economica, London School of Economics and Political Science, vol. 84(335), pages 498-515, July.
    2. De Paola, Maria & Gioia, Francesca & Scoppa, Vincenzo, 2019. "Free-riding and knowledge spillovers in teams: The role of social ties," European Economic Review, Elsevier, vol. 112(C), pages 74-90.
    3. Brice Corgnet, 2018. "Rac(g)e Against the Machine? Social Incentives When Humans Meet Robots," Post-Print halshs-01984467, HAL.
    4. Joseph R. Blasi & Richard B. Freeman & Christopher Mackin & Douglas L. Kruse, 2010. "Creating a Bigger Pie? The Effects of Employee Ownership, Profit Sharing, and Stock Options on Workplace Performance," NBER Chapters, in: Shared Capitalism at Work: Employee Ownership, Profit and Gain Sharing, and Broad-based Stock Options, pages 139-165, National Bureau of Economic Research, Inc.
    5. Aakvik, Arild & Hansen, Frank & Torsvik, Gaute, 2017. "Productivity dynamics, performance feedback and group incentives in a sales organization," Labour Economics, Elsevier, vol. 46(C), pages 110-117.
    6. Carpenter, Jeffrey P., 2007. "Punishing free-riders: How group size affects mutual monitoring and the provision of public goods," Games and Economic Behavior, Elsevier, vol. 60(1), pages 31-51, July.
    7. Panos, Georgios A. & Theodossiou, Ioannis, 2010. "Unionism and Peer-Referencing," SIRE Discussion Papers 2010-122, Scottish Institute for Research in Economics (SIRE).
    8. Burkhard Hehenkamp & Oddvar Kaarboe, 2006. "When Should the Talented Receive Weaker Incentives? Peer Pressure in Teams," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 62(1), pages 124-148, March.
    9. Chris (hristos) Doucouliagos & Patrice Laroche & Douglas L Kruse & T.D. Stanley, 2018. "Where does profit sharing work best? A meta-analysis on the role of unions, culture and values," Post-Print hal-02976899, HAL.
    10. Barton H. Hamilton & Jack A. Nickerson & Hideo Owan, 2003. "Team Incentives and Worker Heterogeneity: An Empirical Analysis of the Impact of Teams on Productivity and Participation," Journal of Political Economy, University of Chicago Press, vol. 111(3), pages 465-497, June.
    11. Kato, Takao & Shu, Pian, 2008. "Performance Spillovers and Social Network in the Workplace: Evidence from Rural and Urban Weavers in a Chinese Textile Firm," IZA Discussion Papers 3340, IZA Network @ LISER.
    12. Uwe Jirjahn & Kornelius Kraft, 2010. "Teamwork And Intra‐Firm Wage Dispersion Among Blue‐Collar Workers," Scottish Journal of Political Economy, Scottish Economic Society, vol. 57(4), pages 404-429, September.
    13. Zeynep Hansen & Hideo Owan & Jie Pan, 2015. "The impact of group diversity on class performance: evidence from college classrooms," Education Economics, Taylor & Francis Journals, vol. 23(2), pages 238-258, April.
    14. Mary A. Burke & Kislaya Prasad, 2005. "Contracts with social multipliers," Working Papers 05-17, Federal Reserve Bank of Boston.
    15. Jeffrey Carpenter & Andrea Robbett & Prottoy A. Akbar, 2018. "Profit Sharing and Peer Reporting," Management Science, INFORMS, vol. 64(9), pages 4261-4276, September.
    16. Canice Prendergast, 1999. "The Provision of Incentives in Firms," Journal of Economic Literature, American Economic Association, vol. 37(1), pages 7-63, March.
    17. Joseph Blasi & Richard Freeman & Douglas Kruse, 2016. "Do Broad-based Employee Ownership, Profit Sharing and Stock Options Help the Best Firms Do Even Better?," British Journal of Industrial Relations, London School of Economics, vol. 54(1), pages 55-82, March.
    18. Kenneth L. Schultz & David C. Juran & John W. Boudreau, 1999. "The Effects of Low Inventory on the Development of Productivity Norms," Management Science, INFORMS, vol. 45(12), pages 1664-1678, December.
    19. Kenju Kamei & Thomas Markussen, 2023. "Free Riding and Workplace Democracy—Heterogeneous Task Preferences and Sorting," Management Science, INFORMS, vol. 69(7), pages 3884-3904, July.
    20. Irlenbusch, Bernd & Ruchala, Gabriele K., 2008. "Relative rewards within team-based compensation," Labour Economics, Elsevier, vol. 15(2), pages 141-167, April.
    21. Irlenbusch, Bernd & Ruchala, Gabriele K., 2006. "Relative Rewards within Team-Based Compensation," IZA Discussion Papers 2423, IZA Network @ LISER.
    22. Kangsik Choi & Jae-Joon Han & Minhwan Lee, 2018. "Peer Pressure with Inequity Aversion," Korean Economic Review, Korean Economic Association, vol. 34, pages 131-155.

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