IDEAS home Printed from
   My bibliography  Save this paper

The Effectiveness of Alternative Programs of Management by Objectives on Firm Performance: An Experimental Study. (Draft Paper)


  • Alessandro Rossi
  • Massimo Warglien


The research focuses on the use of laboratory experimentation in order to design an effective MBO program for the executives of an italian electric utility corporation (Enel). A game theoretical formulation of the MBO program currently adopted by Enel is given (baseline model) and laboratory experiments are implemented to test (a) how experimental subjects behave within the stylized MBO program and (b) the relative effectiveness on subjects performance of the introduction of two different institutions (liability and tournament rules). Results highlight that: 1) the baseline model resembles what has been observed in Enel: targets negotiated between principals and agents are easy to fulfill and a large majority of executives reach the MBO prize. 2) Liability rules increase the bargaining position of principals and result overall in higher levels of target assigned to agents and higher levels of performance of them; conversely no savings are observed in terms of cost of the MBO program. 3) Tournament rules allow to save more in MBO program costs; on the other side performance are, on average, similar to the baseline and variance is higher since the population splits into two sub-groups where a majority of agents shows performance levels close to the case of the liability rule while a minority of them shirk and decrease their working effort until the minimal performance. Some indications on the use of laboratory experimentation as a tool of organization design are finally suggested.

Suggested Citation

  • Alessandro Rossi & Massimo Warglien, 1999. "The Effectiveness of Alternative Programs of Management by Objectives on Firm Performance: An Experimental Study. (Draft Paper)," ROCK Working Papers 004, Department of Computer and Management Sciences, University of Trento, Italy, revised 12 Jun 2008.
  • Handle: RePEc:trt:rockwp:004

    Download full text from publisher

    File URL:
    Download Restriction: no

    References listed on IDEAS

    1. repec:bla:joares:v:23:y:1985:i::p:81-120 is not listed on IDEAS
    2. Ernst Fehr & Simon Gachter & Georg Kirchsteiger, 2001. "Reciprocity as a Contract Enforcement Device," Levine's Working Paper Archive 563824000000000143, David K. Levine.
    3. Busch, Tor, 1998. "Attitudes towards management by objectives: An empirical investigation of self-efficacy and goal commitment," Scandinavian Journal of Management, Elsevier, vol. 14(3), pages 289-299, March.
    4. Fehr, Ernst, et al, 1998. "When Social Norms Overpower Competition: Gift Exchange in Experimental Labor Markets," Journal of Labor Economics, University of Chicago Press, vol. 16(2), pages 324-351, April.
    5. Bull, Clive & Schotter, Andrew & Weigelt, Keith, 1987. "Tournaments and Piece Rates: An Experimental Study," Journal of Political Economy, University of Chicago Press, vol. 95(1), pages 1-33, February.
    Full references (including those not matched with items on IDEAS)

    More about this item


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:trt:rockwp:004. 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: (Loris Gaio). General contact details of provider: .

    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 CitEc recognized a reference but did not link an item in RePEc 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 RePEc Author Service 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.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.