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Team Structure and the Effectiveness of Collective Performance Pay

Author

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  • Ratto, Marisa

    () (Université Paris-Dauphine)

  • Tominey, Emma

    () (University of York)

  • Vergé, Thibaud

    () (CREST)

Abstract

The adoption of performance related pay schemes has become increasingly popular in the public sector of several countries. In the UK, the scheme designers favoured collective performance pay with the aim to foster cooperation across offices. The resulting team structure included several offices (subteams) within the same team, defined by the remuneration scheme. In this paper we analyse the strategic interactions across subteams created by a two-level team structure, in order to assess whether rewarding collective performance necessarily promotes cooperation. We show that such team structure creates conflicting incentives to free-ride across and within subteams. Moreover, the relative size of subteams can be a powerful means to deliver incentives when funds for performance rewards are limited. Using data for one of the incentive schemes piloted in the UK, we analyse the role of the target level and of the relative size of subteams on subteams' performance.

Suggested Citation

  • Ratto, Marisa & Tominey, Emma & Vergé, Thibaud, 2012. "Team Structure and the Effectiveness of Collective Performance Pay," IZA Discussion Papers 6747, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp6747
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    References listed on IDEAS

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    1. Simon Burgess & Carol Propper & Marisa Ratto & Emma Tominey, 2004. "Incentives in the Public Sector: Evidence from a Government Agency," The Centre for Market and Public Organisation 04/103, Department of Economics, University of Bristol, UK.
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    More about this item

    Keywords

    incentives; teams performance; sub-teams; cooperation;

    JEL classification:

    • M52 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects
    • M54 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Labor Management
    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods

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