Abstract
Work teams often receive feedback on how well their team is performing relative to their benchmarks. In this paper, we investigate experimentally how teams respond to relative performance feedback (RPF). We find that when subjects work under team incentives, then RPF on team performance increases the teams’ average performance by almost 10%. The treatment effect is driven by higher top performance, as this is almost 20% higher when the teams receive RPF compared to when the teams only receive absolute performance feedback (APF). The experiment suggests that top performers are particularly motivated by the combination of team incentives and team RPF. We also find notable gender differences. Females respond negatively to individual RPF, but even more positively than males to team RPF.
Highlights
People prefer high rank to low rank
Our results can be summarized as follows: We find that when subjects are exposed to team incentives, relative performance feedback (RPF) on how their team is doing compared to two other teams increases the team’s average performance by almost 10%
We investigate experimentally how teams respond to relative performance feedback (RPF)
Summary
“....rank among our equals, is, perhaps, the strongest of all our desires” wrote Adam Smith in 1759 Modern organizations utilize this basic human insight by providing employees with feedback on their relative performance in order to motivate them to work harder. More recent theories on competitive preferences and status concerns (Frank, 1985; Clark and Oswald, 1996; Auriol and Renault, 2008) suggest, that rank per se motivates effort.. More recent theories on competitive preferences and status concerns (Frank, 1985; Clark and Oswald, 1996; Auriol and Renault, 2008) suggest, that rank per se motivates effort.1 It has been demonstrated, through controlled experiments in the lab and in the field, that RPF affects individual behavior, even when relative performance does not affect pay. There are studies that do not find any positive effects of RPF. Guryan et al (2009), Eriksson et al (2009) and Bellemare et al (2010) find no significant effects, while Barankay (2012) find that removing RPF positively affected productivity
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