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Redesigning Teams and Incentives in a Merger: An Experiment with Managers and Students

  • Claude Montmarquette
  • Jean-Louis Rullière
  • Marie-Claire Villeval
  • Romain Zeiliger

After a merger, company officials face the challenge of making compensation schemes uniform and of redesigning teams with managers from companies with different incentives, work habits and recruiting methods. In this paper, we investigate the relationship between executive pay and performance after a merger by dissociating the respective influence of shifts, which occur in both compensation incentives and team composition. The results of a real effort experiment conducted with managers within a large pharmaceutical company not only show that changes in compensation incentives affect performance but also suggest that the sorting effect of incentives in the previous companies impact cooperation and efficiency after the merger. Replicating this experiment with students showed differences in strategy rather than in substance between the two groups of subjects with managers appearing performance driven while students are more cost driven. Suite à une fusion, les dirigeants doivent relever le défi d'offrir une nouvelle structure de rémunération incitative et de favoriser la coopération entre tous les membres de la nouvelle entreprise. Cette tâche n'est pas toujours facile: la culture d'entreprise, les modes de rémunération, les critères d'embauche et les habitudes de travail peuvent différer selon la firme d'origine. Dans cette recherche mobilisant l'économie expérimentale, nous traitons de cette question en dissociant les modes de rémunération de la composition des équipes. Les résultats d'une expérience avec effort réel, menée avec des gestionnaires d'une grande compagnie pharmaceutique, montrent que ces deux composantes affectent la performance des gestionnaires et que les expériences vécues par ces personnes avant la fusion ont aussi un impact sur leur coopération. En répliquant cette expérience avec des étudiants français et canadiens, nous observons que les différences avec les gestionnaires sont d'une nature stratégique plutôt que de substance: les gestionnaires sont guidés par la réalisation de l'objectif alors que les étudiants se préoccupent davantage des coûts.

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Paper provided by CIRANO in its series CIRANO Working Papers with number 2003s-69.

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Length: 52 pages
Date of creation: 01 Dec 2003
Date of revision:
Handle: RePEc:cir:cirwor:2003s-69
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