Narcissism in the workforce: How employees respond to contract frame

Abstract

Narcissism in the general population has risen over time; thus, it is likely that firms will hire a greater proportion of more narcissistic employees into their ranks. In two experiments, we examine whether and how narcissism impacts employees’ contract preferences and performance depending on the contract frame. When contracts are assigned, more narcissistic employees perform worse than less narcissistic employees under a penalty-framed contract and no different from less narcissistic employees under a bonus-framed contract. When employees have contract choice, more narcissistic employees prefer bonus-framed contracts over penalty-framed contracts while less narcissistic employees are relatively indifferent between them. Even so, this preference does not appear to impact performance as more narcissistic employees continue to perform worse than less narcissistic employees under a penalty-framed contract and no different from less narcissistic employees under a bonus-framed contract in our condition with contract choice. Therefore, narcissism is an important individual characteristic to consider when designing incentive contracts.