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

Author

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

Abstract

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.

Suggested Citation

  • Claude Montmarquette & Jean-Louis Rullière & Marie-Claire Villeval & Romain Zeiliger, 2003. "Redesigning Teams and Incentives in a Merger: An Experiment with Managers and Students," CIRANO Working Papers 2003s-69, CIRANO.
  • Handle: RePEc:cir:cirwor:2003s-69
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    Cited by:

    1. Simon Gaechter & Georg von Krogh & Stefan Haefliger, 2006. "Private-Collective Innovation and the Fragility of Knowledge Sharing," Discussion Papers 2006-21, The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham.
    2. Waichman, Israel & Requate, Till & Siang, Ch'ng Kean, 2008. "Managers and Students Playing Cournot: Experimental Evidence from Malaysia," Economics Working Papers 2008-19, Christian-Albrechts-University of Kiel, Department of Economics.
    3. Sloof, Randolph & van Praag, C. Mirjam, 2010. "The effect of noise in a performance measure on work motivation: A real effort laboratory experiment," Labour Economics, Elsevier, vol. 17(5), pages 751-765, October.
    4. Gächter, Simon & von Krogh, Georg & Haefliger, Stefan, 2010. "Initiating private-collective innovation: The fragility of knowledge sharing," Research Policy, Elsevier, vol. 39(7), pages 893-906, September.
    5. David Masclet & Youenn Lohéac & Laurent Denant-Boèmont & Nathalie Colombier, 2008. "Une étude expérimentale du degré individuel et collectif d’aversion au risque," Économie et Prévision, Programme National Persée, vol. 185(4), pages 89-101.
    6. repec:eee:jeborg:v:149:y:2018:i:c:p:74-87 is not listed on IDEAS
    7. Waichman Israel & Requate Till & Siang Ch'ng Kean, 2010. "A Cournot Experiment with Managers and Students: Evidence from Germany and Malaysia," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 10(1), pages 1-17, April.
    8. Brice Corgnet, 2012. "Peer Evaluations And Team Performance: When Friends Do Worse Than Strangers," Economic Inquiry, Western Economic Association International, vol. 50(1), pages 171-181, January.
    9. Dickinson, David & Villeval, Marie-Claire, 2008. "Does monitoring decrease work effort?: The complementarity between agency and crowding-out theories," Games and Economic Behavior, Elsevier, vol. 63(1), pages 56-76, May.
    10. Brice Corgnet & Roberto Hernán-González & Eric Schniter, 2015. "Why real leisure really matters: incentive effects on real effort in the laboratory," Experimental Economics, Springer;Economic Science Association, vol. 18(2), pages 284-301, June.
    11. Özalp Özer & Yanchong Zheng & Kay-Yut Chen, 2011. "Trust in Forecast Information Sharing," Management Science, INFORMS, vol. 57(6), pages 1111-1137, June.
    12. Grund, Christian & Harbring, Christine & Thommes, Kirsten, 2015. "Cooperation in Diverse Teams: The Role of Temporary Group Membership," IZA Discussion Papers 8761, Institute for the Study of Labor (IZA).
    13. Brice Corgnet & Roberto Hernán-González & Stephen Rassenti, 2011. "Real Effort, Real Leisure and Real-time Supervision: Incentives and Peer Pressure in Virtual Organizations," Working Papers 11-05, Chapman University, Economic Science Institute.
    14. Bartuli, Jenny & Djawadi, Behnud Mir & Fahr, René, 2016. "Business Ethics in Organizations: An Experimental Examination of Whistleblowing and Personality," IZA Discussion Papers 10190, Institute for the Study of Labor (IZA).
    15. Sloof, Randolph & van Praag, C. Mirjam, 2008. "Performance measurement, expectancy and agency theory: An experimental study," Journal of Economic Behavior & Organization, Elsevier, vol. 67(3-4), pages 794-809, September.
    16. Corgnet, Brice & Sutan, Angela & Veszteg, Róbert F., 2011. "My teammate, myself and I: Experimental evidence on equity and equality norms," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 40(4), pages 347-355, August.
    17. Franco GANDOLFI & Magnus HANSSON, 2015. "A Global Perspective on the Non-Financial Consequences of Downsizing," REVISTA DE MANAGEMENT COMPARAT INTERNATIONAL/REVIEW OF INTERNATIONAL COMPARATIVE MANAGEMENT, Faculty of Management, Academy of Economic Studies, Bucharest, Romania, vol. 16(2), pages 185-204, May.
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    More about this item

    Keywords

    executive and team-based compensation; subject pool effects; real effort experiment; incentives; sorting; mergers; fusion d'entreprises; rémunération et composition d'équipe; expérience avec effort réel; comparaison de participants étudiants avec des gestionnaires d'entreprises;

    JEL classification:

    • C81 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Methodology for Collecting, Estimating, and Organizing Microeconomic Data; Data Access
    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
    • M52 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects

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