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Talking about Performance or Paying for it? Evidence from a Field Experiment

Author

Listed:
  • Manthei, Kathrin

    () (RFH Koeln)

  • Sliwka, Dirk

    () (University of Cologne)

  • Vogelsang, Timo

    () (University of Cologne)

Abstract

We investigate the causal effect of conversations about performance and performance pay implementing a 2x2 field experiment in a retail chain. In the performance pay treatments, managers receive a bonus for profit increases. In the performance review treatments, managers have regular meetings with their supervisors discussing their activities to increase profits. We find that review conversations raise profits by 7%-8%. However, when additionally receiving performance pay this effect vanishes. Analyzing an extension of Bénabou and Tirole (2006), we rationalize this effect formally and provide empirical evidence that the use of performance pay changes the nature of conversations undermining their value.

Suggested Citation

  • Manthei, Kathrin & Sliwka, Dirk & Vogelsang, Timo, 2019. "Talking about Performance or Paying for it? Evidence from a Field Experiment," IZA Discussion Papers 12446, Institute of Labor Economics (IZA).
  • Handle: RePEc:iza:izadps:dp12446
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    References listed on IDEAS

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    Cited by:

    1. Eichhorst, Werner & Linckh, Carolin, 2019. "New Pay: Welche Anreize funktionieren überhaupt noch?," IZA Standpunkte 95, Institute of Labor Economics (IZA).

    More about this item

    Keywords

    performance pay; performance reviews; monitoring; feedback; field experiment; management practices;

    JEL classification:

    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
    • L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior
    • M5 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics
    • C93 - Mathematical and Quantitative Methods - - Design of Experiments - - - Field Experiments

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