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Designing incentives and performance measurement for advisors: How to make decision-makers listen to advice

Author

Listed:
  • Robert M. Gillenkirch

    (University of Osnabrück)

  • Julia Ortner

    (Johannes Gutenberg University Mainz)

  • Sebastian Robert

    (Rosenheim University of Applied Sciences)

  • Louis Velthuis

    (Johannes Gutenberg University Mainz)

Abstract

In a sequence of experiments, this study investigates how the design of an advisor's performance-dependent pay affects a decision-maker's reliance on advice. In all experiments, the decision-maker forms an initial judgment, receives advice and then makes a final judgment. The advisor's compensation is manipulated to be fixed, based on individual performance, or based on group performance. We find that performancedependent pay does not affect the decision-maker's reliance on advice unless performance measurement relates to group performance. Path model analyses show that the advisor's performance measurement affects the decision-maker's perceptions of responsibility and power, and that responsibility is the main driver of the decision-maker's cooperativeness, which mediates the relationship between performance measurement and reliance on advice. In contrast, a decision-maker's beliefs in the incentive effects of financial compensation on the quality of advice do not drive the results.

Suggested Citation

  • Robert M. Gillenkirch & Julia Ortner & Sebastian Robert & Louis Velthuis, 2023. "Designing incentives and performance measurement for advisors: How to make decision-makers listen to advice," Working Papers 2304, Gutenberg School of Management and Economics, Johannes Gutenberg-Universität Mainz.
    • Handle: RePEc:jgu:wpaper:2304
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    References listed on IDEAS

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    More about this item

    Keywords

    performance measurement; incentive design; reliance on advice; goal relatedness; incentives beliefs;
    All these keywords.

    JEL classification:

    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • M52 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects

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