Managing by the Numbers
Equilibrium Effects of Pay Transparency
Zoe Cullen & Bobak Pakzad-Hurson
NBER Working Paper, June 2021
Abstract:
The public discourse around pay transparency has focused on the direct effect: how workers seek to rectify newly-disclosed pay inequities through renegotiations. The question of how wage-setting and hiring practices of the firm respond in equilibrium has received less attention. To study these outcomes, we build a model of bargaining under incomplete information and test our predictions in the context of the U.S. private sector. Our model predicts that transparency reduces the individual bargaining power of workers, leading to lower average wages. A key insight is that employers credibly refuse to pay high wages to any one worker to avoid costly renegotiations with others under transparency. In situations where workers do not have individual bargaining power, such as under a collective bargaining agreement or in markets with posted wages, greater transparency has a muted impact on average wages. We test these predictions by evaluating the roll-out of U.S. state legislation protecting the right of workers to inquire about the salaries of their coworkers. Consistent with our prediction, the laws lead wages to decline by approximately 2% overall, but declines are progressively smaller in occupations with higher unionization rates. Our model provides a unified framework to analyze a wide range of transparency policies, and reconciles effects of transparency mandates documented in a variety of countries and contexts.
The Epidemic of Mental Disorders in Business -- How Depression, Anxiety, and Stress Spread across Organizations through Employee Mobility
Julia Kensbock, Lars Alkærsig & Carina Lomberg
Administrative Science Quarterly, forthcoming
Abstract:
Combining management research with infectious disease epidemiology, we propose a new perspective on mental disorders in a business context. We suggest that -- similar to infectious diseases -- clinical diagnoses of depression, anxiety, and stress-related disorders can spread epidemically across the boundaries of organizations via social contagion. We propose a framework for assessing the patterns of disease transmission, with employee mobility as the driver of contagion across organizations. We empirically test the proposed mental disorder transmission patterns by observing more than 250,000 employees and more than 17,000 Danish firms over a period of 12 years. Our findings reveal that when organizations hire employees from other, unhealthy organizations (those with a high prevalence of mental disorders), they “implant” depression, anxiety, and stress-related disorders into their workforces. Employees leaving unhealthy organizations act as “carriers” of these disorders regardless of whether they themselves have received a formal diagnosis of a mental disorder. The effect is especially pronounced if the newcomer holds a managerial position.
Health And Economic Outcomes Up To Three Years After A Workplace Wellness Program: A Randomized Controlled Trial
Zirui Song & Katherine Baicker
Health Affairs, June 2021, Pages 951-960
Abstract:
Workplace wellness programs aim to improve employee health and lower health care spending. Recent randomized studies have found modest short-run effects on health behaviors, but longer-run effects remain poorly understood. We analyzed a clustered randomized trial of a workplace wellness program implemented at a large multisite US employer. Twenty-five randomly selected treatment worksites received the program, with five of the worksites added at the trial’s midpoint, and 135 randomly selected control worksites did not. The program included modules on nutrition, physical activity, and stress reduction, implemented by registered dietitians. The effects of program availability and participation were assessed. At the end of three years, employees at the treatment worksites had better self-reported health behaviors, including a higher rate of actively managing their weight. No significant differences were found in self-reported health; clinical markers of health; health care spending or use; or absenteeism, tenure, or job performance. Improvements in health behaviors after three years were similar to those at eighteen months, but the longer follow-up did not yield detectable improvements in clinical, economic, or employment outcomes.
Humans judge, algorithms nudge: The psychology of behavior tracking acceptance
Roshni Raveendhran & Nathanael Fast
Organizational Behavior and Human Decision Processes, May 2021, Pages 11-26
Abstract:
This article examines employees’ acceptance of behavior tracking in the workplace. We theorize that people more willingly accept behavior tracking when it is conducted solely by technology (i.e., computer algorithms) rather than by humans. We posit that this is driven by the expectation that human-free tracking feels less judgmental and will, therefore, allow for a greater subjective sense of autonomy. The results of five experiments supported these predictions, revealing that participants were more likely to accept technology-operated than human-operated tracking (Experiments 1–5), an effect driven by reduced concerns about potential negative judgment, which, in turn, increased subjective sense of autonomy (Experiment 2). The stated purpose for tracking (Experiment 3), relation to the human tracker (Experiment 4), and type of behaviors tracked (Experiment 5) did not eliminate the effect. Technology-operated tracking also led to higher anticipation of intrinsic motivation (Experiments 3–4). Implications for research on the future of work are discussed.
Teams do not outperform individuals in a simple creative task
Uri Gneezy, Katharina Laske & Marina Schröder
Applied Economics Letters, forthcoming
Abstract:
We compare the performance of teams with that of individuals in a simple creative task – generating a title for a short video. To measure performance, we assess the quality of titles using click rate as well as subjective assessment of the fit between the title and the video. Although teams are costlier to organizations, we find no significant differences in the performance of teams relative to that of individuals. As a result, in the task we use in this paper, allocating creative work to individuals is more efficient than allocating it to teams.
Leadership and Organizations
Eric Alston, Lee Alston & Bernardo Mueller
NBER Working Paper, June 2021
Abstract:
To understand leadership, it is necessary to understand the purpose of an organization. Organizations are hierarchies with leaders at the top. Why do we have leaders instead of an algorithm making decisions? The theory of the firm recognizes benefits to centralizing authority but these organizational benefits from hierarchy have not been clearly separated from the specific contributions of leaders. Leadership is the ability to successfully manage transaction costs of an organization. Prominent amongst organizational transaction costs are agency and coordination costs. The balance between these two types of costs depends on the purpose of the organization. We hypothesize that changing leaders is likely to have a larger effect within organizations with relatively lower scope or scale of purpose because of the way in which decision rights tend to be relatively concentrated in such organizations. We test our hypotheses with data on NFL coaches, and deans of business and law schools.
Distribution neglect in performance evaluations
Eli Awtrey et al.
Organizational Behavior and Human Decision Processes, forthcoming
Abstract:
Five empirical studies, including both laboratory experiments and an archival investigation, provide evidence that decision makers often fail to consider variability and skew when making judgments about performance. We term this distribution neglect. Participants’ spontaneous explanations for group differences in elite achievement overwhelmingly invoked mean differences rather than group differences in variability, even when the complete distribution and summary statistics were provided (Study 1). A longitudinal examination indicates that NBA teams overweight average performance and underweight consistency of performance when deciding players’ contracts (Study 2), providing evidence that neglecting variance information leads to suboptimal judgments. In a manufacturing scenario involving monitoring assembly line workers, participants were more accurate at identifying top (high mean) performers than consistent (low variability) performers (Study 3). In a hiring simulation, decision makers were more likely to factor in variance when performance data was presented visually as a histogram (Study 4). Finally, participants’ spontaneous explanations for others’ self-assessments of ability assumed egocentric bias, when a skewed performance distribution was also a plausible contributor (Study 5). Individual differences (need for cognition) and task differences (such as style of information display) were associated with increased distribution-based reasoning in multiple studies, suggesting potential boundary conditions for further investigation. Organizational implications, and additional potential remedies for distribution neglect, are discussed.
Reducing Burnout and Resignations among Frontline Workers: A Field Experiment
Elizabeth Linos, Krista Ruffini & Stephanie Wilcoxen
University of California Working Paper, May 2021
Abstract:
Government agencies around the world struggle to retain frontline workers, as high job demands and low job resources contribute to persistently high rates of employee burnout. Although four decades of research has documented the predictors and potential costs of frontline worker burnout, we have limited causal evidence on strategies that reduce it. In this article, we report on a multi-city field experiment (n=536) aimed at affirming social belonging among 911 dispatchers. We find that a six-week intervention that prompts dispatchers to share advice anonymously and asynchronously with their peers in other cities reduces burnout by 8 points (0.4 SD) and cuts resignations by more than half (3.6 percentage points) four months after the intervention ended. We provide supporting evidence that the intervention operates by increasing perceived social belonging in an online laboratory experiment (n=497). These findings suggest that low-cost belonging affirmation techniques can reduce frontline worker burnout and help agencies retain workers, saving a mid-sized city at least $400,000 in personnel costs.
Born to Be Managers? Genetic Links between Risk-Taking and the Likelihood of Holding Managerial Positions
Jinjie Lin & Bingxin Zhao
Purdue University Working Paper, April 2021
Abstract:
Do genes determine who will become managers? Using the UK Biobank data, we study the phenotypic and genetic correlations between the likelihood of holding managerial positions and physical, cognitive, and mental health traits (n = 297,591). Among all traits we examine, general risk tolerance and risky behaviors (e.g., automobile speeding and the number of sexual partners) have the strongest phenotypic and genetic correlations with holding managerial positions. For example, the genetic correlation between automobile speeding and being managers is 0.39 (P = 3.94E-16). Additionally, the genetic correlations between risk-taking traits and being managers are stronger for females. Genome-wide association study (GWAS) shows holding managerial positions is associated with rs7035099 (ZNF618, 9q32), which has been linked to risk tolerance and adventurousness. Overall, our results suggest individuals with risk-taking-related genes are more likely to become managers. To the best of our knowledge, this paper is the first GWAS of the genetic effects on leadership.
Just because you're powerless doesn't mean they aren't out to get you: Low power, paranoia, and aggression
Michael Schaerer et al.
Organizational Behavior and Human Decision Processes, July 2021, Pages 1-20
Abstract:
Due to its pervasive negative consequences, failing to understand the origins of paranoia can be costly for organizations. Prior research suggests that powerful employees are particularly likely to experience paranoia as others want to exploit the resources they control, implying that employees low in power should feel less paranoid. In contrast, we build on Conservation of Resources Theory and sociocultural perspectives of power to argue that the inherent vulnerability associated with being low power also evokes paranoia as a protection mechanism. Because paranoia causes employees to form malevolent attributions towards others, we predict that paranoia, in turn, leads to aggressive tendencies. Five studies (N = 2,341), including three experiments, a correlational study, and an experience sampling study, support our predictions. We further find that the effect of low power on paranoia is weaker when employees can rely on other valuable resources, including individual (socioeconomic status) and social (organizational support) resources.
Increasing Team Performance by Sharing Success
Hua Chen & Kevin Chung
Journal of Marketing Research, forthcoming
Abstract:
When using group-based commission plans to motivate their sales force, should firms always compensate salespeople based on the average of team members’ sales outcomes? The theory suggests that when team members are heterogeneous in sales abilities, the proposed Maximum contract (where the team output is set by the largest individual sales output) dominates the Average contract (where the team output is determined by the average output of team members) in terms of overall team effort. This is because the stronger team member will exert higher effort under the maximum contract, compared to the average contract, and this increase exceeds the decrease in the weaker team member’s effort. The authors validate the theoretical predictions by employing two laboratory experiments to provide a causal test of the theory, and two randomized field experiments to deliver additional corroborating evidence. The experimental results are overall consistent and broadly confirm the theoretical predictions, pointing to the substantial gains from implementing the maximum contract when team members are heterogeneous in abilities. Interestingly, the weaker team members exert similar effort across the maximum and average contracts, although the theory predicts higher effort under the latter.