Performance Effects of Relative Performance Information and Mutual Monitoring

Abstract

Using an experiment in which workers pay depends only on their own performance (output), I examine the interactive effects of mutual monitoring (opportunity to observe peer effort) and relative performance information (RPI) on productivity (performance per unit of time spent). I predict and find a positive effect of mutual monitoring on productivity. I also predict and find that RPI provision moderates this effect, such that the positive effect of mutual monitoring on productivity is weaker in a setting with RPI compared to a setting without RPI. I highlight a downside of providing RPI to workers who can mutually monitor peer effort, as RPI decreases the effect of mutual monitoring on productivity. My results extend prior research on management control by identifying the substitutive effect of two common features of management control environment.