The Effectiveness of Alternative Programs of Management by Objectives on Firm Performance: An Experimental Study. (Draft Paper)
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.
|Date of creation:||Jan 1999|
|Date of revision:||12 Jun 2008|
|Contact details of provider:|| Postal: via Inama, 5 -- I-38100 Trento TN|
Web page: http://www.unitn.it/disa
More information through EDIRC
|Order Information:|| Postal: DISA Università degli Studi di Trento via Inama, 5 I-38122 Trento TN Italy|
Web: http://www.unitn.it/disa Email:
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.:
- 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.
- repec:bla:joares:v:23:y:1985:i::p:81-120 is not listed on IDEAS
- 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.
- Bull, Clive & Schotter, Andrew & Weigelt, Keith, 1985. "Tournaments and Piece Rates: An Experimental Study," Working Papers 85-21, C.V. Starr Center for Applied Economics, New York University.
- Ernst Fehr & Simon Gachter & Georg Kirchsteiger, 2001. "Reciprocity as a Contract Enforcement Device," Levine's Working Paper Archive 563824000000000143, David K. Levine.
- 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. Full references (including those not matched with items on IDEAS)
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)
If references are entirely missing, you can add them using this form.