IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

Opportunity Counts: Teams and the Effectiveness of Production Incentives

  • Brent Boning
  • Casey Ichniowski
  • Kathryn Shaw

This paper investigates the individual and joint effects of group incentive pay and problem-solving teams on productivity. To estimate models of adoption of these work practices and models of the effects of the work practices on productivity, we constructed a data set on the operations of 34 production lines in U.S. steel minimills. Through site visits and interviews, we collected longitudinal data including precise measures on productivity, work practices, and technology of each of these production lines. We find strong support for the proposition that problem-solving teams are an important means for increasing the effectiveness of group incentive pay plans in establishments with complex production processes. With regard to adoption of work practices, we find that problem-solving teams are adopted only in the presence of incentive pay plans, and that more technologically complex production lines are much more likely to adopt teams. The latter result implies that teams are more valuable in these types of production environments. We also present estimates of the productivity effects of adopting these work practices. Group-based incentive pay, on average, raises productivity, and the adoption of teams in addition to incentive pay leads to a further increase in productivity. The average effect of teams together with group incentives is economically important, corresponding to an annual increase of over 3000 additional tons of steel with a value of over $1.4 million. We also find that the productivity effect of teams is significantly larger in more complex production lines, consistent with the result that more complex production lines are more likely to adopt problem-solving teams. Finally, we show that our estimates of the productivity effects of these work practices are little changed by corrections for possible selectivity bias.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.nber.org/papers/w8306.pdf
Download Restriction: no

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 8306.

as
in new window

Length:
Date of creation: May 2001
Date of revision:
Publication status: published as Boning, Brent, Casey Ichniowski, and Kathryn Shaw. "Opportunity Counts: Teams and the Effectiveness of Production Incentives." Journal of Labor Economics 25, 4 (October 2007): 613-50.
Handle: RePEc:nbr:nberwo:8306
Note: LS PR
Contact details of provider: Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
Phone: 617-868-3900
Web page: http://www.nber.org
Email:


More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Ichniowski, Casey & Shaw, Kathryn & Prennushi, Giovanna, 1997. "The Effects of Human Resource Management Practices on Productivity: A Study of Steel Finishing Lines," American Economic Review, American Economic Association, vol. 87(3), pages 291-313, June.
  2. Edward P. Lazear, 1998. "Globalization and the Market for Teammates," NBER Working Papers 6579, National Bureau of Economic Research, Inc.
  3. James Heckman & Hidehiko Ichimura & Jeffrey Smith & Petra Todd, 1998. "Characterizing Selection Bias Using Experimental Data," NBER Working Papers 6699, National Bureau of Economic Research, Inc.
  4. Jeffrey B. Arthur, 1992. "The link between business strategy and industrial relations systems in American steel minimills," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 45(3), pages 488-506, April.
  5. Douglas L. Kruse, 1993. "Profit Sharing: Does It Make a Difference?," Books from Upjohn Press, W.E. Upjohn Institute for Employment Research, number ps, November.
  6. Erik Brynjolfsson & Lorin M. Hitt, 2000. "Beyond Computation: Information Technology, Organizational Transformation and Business Performance," Journal of Economic Perspectives, American Economic Association, vol. 14(4), pages 23-48, Fall.
  7. Jeffrey B. Arthur, 1992. "The Link between Business Strategy and Industrial Relations Systems in American Steel Minimills," ILR Review, Cornell University, ILR School, vol. 45(3), pages 488-506, April.
  8. Heckman, James J. & Lalonde, Robert J. & Smith, Jeffrey A., 1999. "The economics and econometrics of active labor market programs," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 31, pages 1865-2097 Elsevier.
  9. George Baker & Robert Gibbons & Kevin J. Murphy, 2002. "Relational Contracts And The Theory Of The Firm," The Quarterly Journal of Economics, MIT Press, vol. 117(1), pages 39-84, February.
  10. Black, Sandra E & Lynch, Lisa M, 1996. "Human-Capital Investments and Productivity," American Economic Review, American Economic Association, vol. 86(2), pages 263-67, May.
  11. Kreps, David M, 1997. "Intrinsic Motivation and Extrinsic Incentives," American Economic Review, American Economic Association, vol. 87(2), pages 359-64, May.
  12. Baker, George & Gibbons, Robert & Murphy, Kevin J, 1994. "Subjective Performance Measures in Optimal Incentive Contracts," The Quarterly Journal of Economics, MIT Press, vol. 109(4), pages 1125-56, November.
  13. Holmstrom, Bengt & Milgrom, Paul, 1987. "Aggregation and Linearity in the Provision of Intertemporal Incentives," Econometrica, Econometric Society, vol. 55(2), pages 303-28, March.
  14. John MacDuffie, 1995. "Human resource bundles and manufacturing performance: Organizational logic and flexible production systems in the world auto industry," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 48(2), pages 197-221, January.
  15. Paul Osterman, 1994. "How Common is Workplace Transformation and Who Adopts it?," ILR Review, Cornell University, ILR School, vol. 47(2), pages 173-188, January.
  16. Kandel, Eugene & Lazear, Edward P, 1992. "Peer Pressure and Partnerships," Journal of Political Economy, University of Chicago Press, vol. 100(4), pages 801-17, August.
  17. repec:eme:rlepps:v:18:y:1999:i:1999:p:177-242 is not listed on IDEAS
  18. W. Bentley MacLeod & Daniel Parent, 1998. "Job Characteristics and the Form of Compensation," CIRANO Working Papers 98s-08, CIRANO.
  19. Rosemary Batt, 1999. "Work Organization, Technology, and Performance in Customer Service and Sales," ILR Review, Cornell University, ILR School, vol. 52(4), pages 539-564, July.
  20. Paul Osterman, 1994. "How common is workplace transformation and who adopts it?," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 47(2), pages 173-188, January.
  21. Itoh, Hideshi, 1994. "Job design, delegation and cooperation: A principal-agent analysis," European Economic Review, Elsevier, vol. 38(3-4), pages 691-700, April.
  22. Susan Athey & Scott Stern, 1998. "An Empirical Framework for Testing Theories About Complimentarity in Organizational Design," NBER Working Papers 6600, National Bureau of Economic Research, Inc.
  23. Rosemary Batt, 1999. "Work organization, technology, and performance in customer service and sales," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 52(4), pages 539-564, July.
  24. Holmstrom, Bengt & Milgrom, Paul, 1994. "The Firm as an Incentive System," American Economic Review, American Economic Association, vol. 84(4), pages 972-91, September.
  25. Timothy F. Bresnahan & Erik Brynjolfsson & Lorin M. Hitt, 1999. "Information Technology, Workplace Organization and the Demand for Skilled Labor: Firm-Level Evidence," NBER Working Papers 7136, National Bureau of Economic Research, Inc.
  26. Holmstrom, Bengt & Milgrom, Paul, 1991. "Multitask Principal-Agent Analyses: Incentive Contracts, Asset Ownership, and Job Design," Journal of Law, Economics and Organization, Oxford University Press, vol. 7(0), pages 24-52, Special I.
  27. Paul Osterman, 2000. "Work Reorganization in an Era of Restructuring: Trends in Diffusion and Effects on Employee Welfare," ILR Review, Cornell University, ILR School, vol. 53(2), pages 179-196, January.
  28. Milgrom, Paul & Roberts, John, 1995. "Complementarities and fit strategy, structure, and organizational change in manufacturing," Journal of Accounting and Economics, Elsevier, vol. 19(2-3), pages 179-208, April.
  29. Canice Prendergast, 1999. "The Provision of Incentives in Firms," Journal of Economic Literature, American Economic Association, vol. 37(1), pages 7-63, March.
  30. Heckman, James J, 1990. "Varieties of Selection Bias," American Economic Review, American Economic Association, vol. 80(2), pages 313-18, May.
  31. Bengt Holmstrom, 1981. "Moral Hazard in Teams," Discussion Papers 471, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  32. John Paul Macduffie, 1995. "Human Resource Bundles and Manufacturing Performance: Organizational Logic and Flexible Production Systems in the World Auto Industry," ILR Review, Cornell University, ILR School, vol. 48(2), pages 197-221, January.
  33. Andrews, Donald W K & Schafgans, Marcia M A, 1998. "Semiparametric Estimation of the Intercept of a Sample Selection Model," Review of Economic Studies, Wiley Blackwell, vol. 65(3), pages 497-517, July.
  34. Ashenfelter, Orley C, 1978. "Estimating the Effect of Training Programs on Earnings," The Review of Economics and Statistics, MIT Press, vol. 60(1), pages 47-57, February.
  35. Michael C. Jensen & William H. Heckling, 1995. "Specific And General Knowledge, And Organizational Structure," Journal of Applied Corporate Finance, Morgan Stanley, vol. 8(2), pages 4-18.
  36. Prendergast, Canice J, 1995. "A Theory of Responsibility in Organizations," Journal of Labor Economics, University of Chicago Press, vol. 13(3), pages 387-400, July.
  37. Paul Osterman, 2000. "Work reorganization in an era of restructuring: Trends in diffusion and effects on employee welfare," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 53(2), pages 179-196, January.
  38. Edward P. Lazear, 1999. "Personnel Economics: Past Lessons and Future Directions," NBER Working Papers 6957, National Bureau of Economic Research, Inc.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:8306. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.