Bossy
Accountability and ideology: When left looks right and right looks left
Philip Tetlock et al.
Organizational Behavior and Human Decision Processes, September 2013, Pages 22-35
Abstract:
Managers face hard choices between process and outcome systems of accountability in evaluating employees, but little is known about how managers resolve them. Building on the premise that political ideologies serve as uncertainty-reducing heuristics, two studies of working managers show that: (1) conservatives prefer outcome accountability and liberals prefer process accountability in an unspecified policy domain; (2) this split becomes more pronounced in a controversial domain (public schools) in which the foreground value is educational efficiency but reverses direction in a controversial domain (affirmative action) in which the foreground value is demographic equality; (3) managers who discover employees have subverted their preferred system favor tinkering over switching to an alternative system; (4) but bipartisan consensus arises when managers have clear evidence about employee trustworthiness and the tightness of the causal links between employee effort and success. These findings shed light on ideological and contextual factors that shape preferences for accountability systems.
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The Dirty Laundry of Employee Award Programs: Evidence from the Field
Timothy Gubler, Ian Larkin & Lamar Pierce
Harvard Working Paper, February 2013
Abstract:
Many scholars and practitioners have recently argued that corporate awards are a "free" way to motivate employees. We use field data from an attendance award program implemented at one of five industrial laundry plants to show that awards can carry significant spillover costs and may be less effective at motivating employees than the literature suggests. Our quasi-experimental setting shows that two types of unintended consequences limit gains from the reward program. First, employees strategically game the program, improving timeliness only when eligible for the award, and call in sick to retain eligibility. Second, employees with perfect pre-program attendance or high productivity suffered a 6-8% productivity decrease after program introduction, suggesting they were demotivated by awards for good behavior they already exhibited. Overall, our results suggest the award program decreased plant productivity by 1.4%, and that positive effects from awards are accompanied by more complex employee responses that limit program effectiveness.
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Labor unions and tax aggressiveness
James Chyz et al.
Journal of Financial Economics, June 2013, Pages 675-698
Abstract:
We examine the impact of unionization on firms' tax aggressiveness. We find a negative association between firms' tax aggressiveness and union power and a decrease in tax aggressiveness after labor union election wins. This relation is consistent with labor unions influencing managers' in one, or both, of two ways: (1) constraining managers' ability to invest in tax aggressiveness through increased monitoring; or (2) decreasing returns to tax aggressiveness that arise from unions' rent seeking behavior. We also find preliminary evidence that the market expects these reductions around union elections and discounts firms that likely add shareholder value via aggressive tax strategies.
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The Determinants and Effects of CEO-Employee Pay Ratios
Olubunmi Faleye, Ebru Reis & Anand Venkateswaran
Journal of Banking & Finance, forthcoming
Abstract:
We study the determinants and effects of the relative compensation of top executives and lower-level employees. First, we show that CEO-employee pay ratios depend on the balance of power between the CEO (relative to the board) and ordinary employees (relative to management). Second, our results suggest that employees do not perceive higher pay ratios as an inequitable outcome to be redressed via costly behaviors that lower productivity. We do not find a negative relation between relative pay and employee productivity, either in our full sample or in subsamples where employees are well-informed about executive pay and are protected against career retributions. Rather, we find that productivity increases with relative pay when the firm has fewer employees who are well-informed, and when promotion decisions are predominantly merit-based. We also find that firm value and operating performance both increase with relative pay. We conclude that ordinary employees appear to perceive an opportunity in higher pay ratios but the extent to which such perception incentivizes them depends on the likelihood of success in a series of sequential promotion tournaments.
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Contributions of Managerial Levels: Comparing MLB and NFL
Goff Brian
Managerial and Decision Economics, forthcoming
Abstract:
Sports differ according to the number of players, interdependencies among them, complexity of strategy, and other dimensions. For example, baseball has been described as ‘an individual game in which a team score is kept'. These differences suggest differences in the relative importance of managerial inputs: owners, general managers, and managers (or head coaches). Using panels over 1970-2011, I estimate performance production regressions for Major League Baseball and the National Football League that permit the relative importance of these managerial inputs to be assessed within and across sports while taking explicit account of the hierarchical structure of management levels. In addition, with predicted individual effects, I present rankings of best and worst managers, general managers, and owners.
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Does Management Matter? Evidence from India
Nicholas Bloom et al.
Quarterly Journal of Economics, February 2013, Pages 1-51
Abstract:
A long-standing question is whether differences in management practices across firms can explain differences in productivity, especially in developing countries where these spreads appear particularly large. To investigate this, we ran a management field experiment on large Indian textile firms. We provided free consulting on management practices to randomly chosen treatment plants and compared their performance to a set of control plants. We find that adopting these management practices raised productivity by 17% in the first year through improved quality and efficiency and reduced inventory, and within three years led to the opening of more production plants. Why had the firms not adopted these profitable practices previously? Our results suggest that informational barriers were the primary factor explaining this lack of adoption. Also, because reallocation across firms appeared to be constrained by limits on managerial time, competition had not forced badly managed firms to exit.
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Tournament Incentives in the Field: Gender Differences in the Workplace
Josse Delfgaauw et al.
Journal of Labor Economics, April 2013, Pages 305-326
Abstract:
We ran a field experiment in a Dutch retail chain consisting of 128 stores. In a random sample of these stores, we introduced short-term sales competitions among subsets of stores. We find that sales competitions have a large effect on sales growth, but only in stores where the store's manager and a sufficiently large fraction of the employees have the same gender. Remarkably, results are alike for sales competitions with and without monetary rewards, suggesting a high symbolic value of winning a tournament.
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Is Corporate Social Responsibility Associated with Lower Wages?
Karine Nyborg & Tao Zhang
Environmental and Resource Economics, May 2013, Pages 107-117
Abstract:
Firms with a reputation as socially responsible may have an important cost advantage: If workers prefer their employer to be socially responsible, equilibrium wages may be lower in such firms. We explore this hypothesis, combining Norwegian register data with data on firm reputation collected by an employer branding firm. Adjusting for a large set of background variables, we find that the firm's social responsibility reputation is significantly associated with lower wages.
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Opening the Black Box: Internal Capital Markets and Managerial Power
Markus Glaser, Florencio Lopez‐De‐Silanes & Zacharias Sautner
Journal of Finance, forthcoming
Abstract:
We analyze the internal capital markets of a multinational conglomerate, using a unique panel data set of planned and actual allocations to business units and a survey of unit CEOs. Following cash windfalls, more powerful managers obtain larger allocations and increase investment substantially more than their less connected peers. We identify cash windfalls as a source of misallocation of capital, as more powerful managers overinvest and their units exhibit lower ex‐post performance and productivity. These findings contribute to our understanding of frictions in resource allocation within firms and point to an important channel through which power may lead to inefficiencies.
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The Cost of High-Powered Incentives: Employee Gaming in Enterprise Software Sales
Ian Larkin
Journal of Labor Economics, forthcoming
Abstract:
This paper investigates the pricing distortions that arise from the use of a common non-linear incentive scheme at a leading enterprise software vendor. The empirical results demonstrate that salespeople are adept at gaming the timing of deal closure to take advantage of the vendor's accelerating commission scheme. Specifically, salespeople agree to significantly lower pricing in quarters where they have a financial incentive to close a deal, resulting in mispricing that costs the vendor 6-8% of revenue. Robustness checks demonstrate that price discrimination by the vendor does not explain the identified effects.
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Small steps for workers, a giant leap for productivity
Igal Hendel & Yossi Spiegel
American Economic Journal: Applied Economics, forthcoming
Abstract:
We document the evolution of productivity in a steel mini mill with fixed capital, producing an unchanged product with Leontief technology. Despite the fact that production conditions did not change dramatically, production doubles within the sample period (almost 12 years). We decompose the gains into: downtime reductions, more rounds of production per time, and more output per run. After attributing productivity gains to investment and an incentive plan, we are left with a large unexplained component. Learning by experimentation, or tweaking, seems to be behind the continual and gradual process of productivity growth. The findings suggest that capacity is not as well defined, even in batch-oriented manufacturing.
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Jonathon Cummings et al.
Psychological Science, forthcoming
Abstract:
Heterogeneous groups are valuable, but differences among members can weaken group identification. Weak group identification may be especially problematic in larger groups, which, in contrast with smaller groups, require more attention to motivating members and coordinating their tasks. We hypothesized that as groups increase in size, productivity would decrease with greater heterogeneity. We studied the longitudinal productivity of 549 research groups varying in disciplinary heterogeneity, institutional heterogeneity, and size. We examined their publication and citation productivity before their projects started and 5 to 9 years later. Larger groups were more productive than smaller groups, but their marginal productivity declined as their heterogeneity increased, either because their members belonged to more disciplines or to more institutions. These results provide evidence that group heterogeneity moderates the effects of group size, and they suggest that desirable diversity in groups may be better leveraged in smaller, more cohesive units.
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Replacing trust with control: A field test of motivation crowd out theory
Niklas Bengtsson & Per Engstrom
Economic Journal, forthcoming
Abstract:
Results in behavioural economics suggest that material incentives can crowd out motivation if agents are mission-oriented rather than self-interested. We test this prediction on a sample of non-profit organisations in Sweden. Traditionally, contracts with the main principal (the Swedish foreign aid agency) have been based on trust and self-regulation. We designed a randomised policy experiment, effectively replacing the trust-based contract with an increased level of monitoring from the principal. Overall, using both self-reported and observed measures of outreach, we find that the intervention increased outreach, reduced expenditures and reduced the number of financial irregularities.
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Alicia Grandey, Nai-Wen Chi & Jennifer Diamond
Personnel Psychology, forthcoming
Abstract:
Does satisfaction from performing emotional labor (EL) - maintaining positive emotions with customers as part of the job - depend on the financial rewards available for good service? According to a "controlling perspective" of rewards, satisfaction from performing EL may be undermined by financial incentives, but based on a "valuing perspective" of rewards the relationship should be enhanced. We contribute to the literatures on EL and performance-contingent rewards with a "full-cycle" inquiry of this question conducted with 1) a field survey of diverse occupations in the U.S., 2) an experimental call center simulation with U.S. college students, and 3) a multi-level study of Taiwanese sales firms. Overall, financial rewards for service performance enhanced, rather than undermined, satisfaction from high EL job requirements and from EL by faking expressions (i.e., surface acting) with customers. Performing EL by modifying feelings (i.e., deep acting) was positively related to job satisfaction regardless of rewards, beyond rewards and personality traits. Results have implications for reward structures and enhancing job satisfaction for this increasingly common form of labor.
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A Two-Stage Double Bootstrap DEA: The Case of the Top 25 European Football Clubs' Efficiency Levels
George Halkos & Nickolaos Tzeremes
Managerial and Decision Economics, March 2013, Pages 108-115
Abstract:
This paper analyzes how European football clubs' current value and debt levels influence their performance. The Simar and Wilson (J Econometrics, 136: 31-64, 2007) procedure is used to bootstrap the data envelopment analysis scores in order to establish the effect of football clubs' current value and debt levels on their obtained efficiency scores. The results reveal that football clubs' current value levels have a negative influence on their performances, indicating that football clubs' high value does not ensure higher performance. At the same time, the empirical evidence suggests that football clubs' debt levels do not influence their efficiency levels.
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Hiring from High-Risk Populations: Lessons from the U.S. Military
Lauren Malone
Contemporary Economic Policy, forthcoming
Abstract:
In this study, we evaluate the performance of waivered recruits in the U.S. military. Unlike the private sector, the military has formal standards for identifying ideal recruits and uses a formal screening process to determine those within risky populations who are most likely to succeed. (Recruits who make it through the screening process are issued a waiver.) The military's establishment of waiver categories and its tracking of waiver status provide us with a case study for determining whether such risk-identification strategies work. Using FY99-FY08 service-level waiver and personnel data, we evaluate whether the military recruiting strategy has been successful and whether firms should consider adopting similar screening mechanisms. We estimate the effect of waiver status on attrition and promotion, our primary performance indicators, after controlling for other quality indicators. We find that waivered recruits, on the whole, are not particularly poor performers, although their inherent riskiness does vary by service and by waiver type.
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The Impact of Furloughs on Emotional Exhaustion, Self-Rated Performance, and Recovery Experiences
Jonathon Halbesleben, Anthony Wheeler & Samantha Paustian-Underdahl
Journal of Applied Psychology, forthcoming
Abstract:
The notion that strain can result as employees' resources are threatened or lost is well established. However, the transition from resource threats to resource losses is an important but understudied aspect of employee strain. We argue that the threat-to-loss transition triggers accelerated resource loss and a shift in how employees utilize their remaining resources unless employees engage in recovery experiences during the transition. Using a discontinuous change framework, we examine employee furloughs - the placement of employees on leave with no salary of any kind - in terms of the transition from resource threat to loss: Resources may be threatened when the furlough is announced and lost when the furlough occurs. Using 4 data collections with 180 state government employees, we found mean levels of emotional exhaustion increased and mean levels of self-reported performance decreased following the furlough. The discontinuous changes in exhaustion and performance were significantly impacted by employees' recovery experiences during the furlough. We discuss the implications of these findings for other threat-to-loss and recovery research as well as for organizations implementing furloughs.
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Other-regarding preferences and management styles
Martin Kocher, Ganna Pogrebna & Matthias Sutter
Journal of Economic Behavior & Organization, April 2013, Pages 109-132
Abstract:
We use a laboratory experiment to examine whether and to what extent other-regarding preferences (efficiency, inequality aversion and maximin concerns) of team managers influence their management style in choice under risk. We find that managers who prefer efficiency are more likely to exercise an autocratic management style by ignoring preferences of their team members. Equality concerns have no significant impact on management styles. Elected managers have a higher propensity than exogenously assigned managers to use a democratic management style by reaching team consensus. We also find that male managers employ a democratic style more often than women.
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The hidden costs of surveillance for performance and helping behavior
Aisling O'Donnell, Michelle Ryan & Jolanda Jetten
Group Processes & Intergroup Relations, March 2013, Pages 246-256
Abstract:
Common sense and prior research into performance suggests that people will work harder and more productively when they are monitored. However, we predict that there are boundary conditions to this effect. High levels of surveillance may undermine aspects of people's performance and their willingness to provide extra help, especially when they expect to share a sense of identity with those in power. In an experimental study (N = 98) we demonstrated that, compared to low surveillance, high surveillance led to higher productivity on a task, but also that the quality of work suffered. Additionally, we demonstrated that when surveillance was low, individuals offered more help to a leader they shared identity with, rather than to an outgroup leader. However, the beneficial effect of shared identity disappeared when surveillance was high. The results point to the rather paradoxical finding that surveillance, where it is not needed, can do more harm than good.
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Helping and Quiet Hours: Interruption-Free Time Spans Can Harm Performance
Philipp Käser, Urs Fischbacher & Cornelius König
Applied Psychology, April 2013, Pages 286-307
Abstract:
Whereas helping is costly for the helper, it is beneficial for the person who requests help. However, there is only scarce evidence on the relative costs and benefits of helping and this evidence is mixed. In addition, hardly any research investigates how these costs and benefits can be manipulated. With a laboratory experiment, we first examined how helping affects the performance of the helper, the help requester, and the dyad. Second, we investigated whether quiet hours that structure time into spans with interruptions and spans without interruptions decrease the costs of helping while keeping its benefits. We found that the requester's performance was higher and the helper's performance lower when help requests were permitted at any time rather than when no help was allowed. However, overall performance fell short of being significantly higher with help at any time. In addition, the helper's performance failed to be higher with quiet hours compared to interruptions at any time. Instead, both the helper's and the requester's performance were lower with quiet hours, resulting also in a lower overall performance. In search of an explanation, our data indicate that structuring time into spans with and without interruptions might generate costs of their own that could be reduced by setting fewer but longer spans without interruptions.
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Ilse Cornelis et al.
Journal of Experimental Social Psychology, July 2013, Pages 605-613
Abstract:
Previous studies on procedural fairness have largely neglected to examine factors that influence leaders' enactment of fairness. Two controlled laboratory experiments and a field study with leaders working within organizations investigated the combined impact of follower belongingness needs and leader empathy. It was revealed that leaders are more apt to enact fair procedures when followers' belongingness needs are high rather than low. This effect was further moderated by leader empathy, such that highly empathic leaders, either because of individual differences or through situational induction, take followers' belongingness needs more into account. The relevance of these findings for procedural rule adherence and violation as a dependent variable and empathic leadership is discussed.
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Effects of power on social perception: All your boss can see is agency
Aleksandra Cislak
Social Psychology, Spring 2013, Pages 138-146
Abstract:
Three studies explored the relationship between power and the perception of others in terms of agency and communion. In Study 1, participants taking a manager perspective were more interested in the agency of their future employee than those asked to take a subordinate perspective were in the agency of their future employer. Moreover, they showed more interest in the agency than in the communion of their future employee. Study 2 extended these findings to perceptions of others unrelated to the context of work. In Study 3, participants taking the manager perspective favored agency traits in their employee more than those taking the subordinate perspective favored agency in their employer. This effect was mediated by an increased task orientation among those in positions of greater relative power. Using two manipulations and three dependent measures, power was found to enhance the focus on the agency dimension across the three studies, mediated by increases in orientation to tasks versus relationships.
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Does risk management matter? Evidence from the U.S. Agricultural industry
Jess Cornaggia
Journal of Financial Economics, forthcoming
Abstract:
This article constructs triple-difference tests around shifts in the supply of risk management instruments available to agricultural producers to reveal a positive relation between risk management and productivity. This relation is more robust when producers adopt instruments with payoffs linked to group performance and weaker when payoffs are linked to individual performance. Additionally, productivity is particularly high among risk-managing producers in counties containing high levels of bank deposits, a proxy for access to finance. Overall, this article illuminates the relation between hedging and real firm outcomes as well as the interaction between access to finance and firms' risk management choices.