Incentive Pay

Engineering, Construction and Architectural Management, 2020

Purpose-The purpose of this paper is to investigate the impact of incentive contracts in multi-partner project teams (MPPTs) on the agents' effort expenditure and project performance, analyze how the agents allocate their efforts between production and cooperation and offer suggestions for project managers on how to design incentive contracts. Design/methodology/approach-The paper proposes a model of MPPT in which agents are inequity-averse and their effort expenditures are exogenously bounded. An extensive numerical example is presented in online Appendix 2 to illustrate the theoretical results. Findings-The paper suggests that if the potential benefit of the agents' cooperation in MPPT is high or if both agents exhibit inequity aversion and the efforts' marginal costs are low, then group-based incentive contracts outperform individual-based incentive contracts. It also shows that the impact of the incentive contract on the agents' effort expenditure and project team performance is correlated with several critical project attributes. Originality/value-Fulfilling a need to study the design of incentive structures in MPPTs, the paper complements the existing literature in three ways. First, in contrast to single-partner project teams, it considers projects with multiple partners where cooperation between them enhances the project outcome. Second, rather than focusing on individual production problems, it considers multi-task projects with constrained efforts that must be allocated between production and cooperation. Third, it analyzes the effects of changes in the project attributes, incentive intensities and information transparency on the effectiveness of the contract.

Procedia Computer Science, 2011

Activities in an organization require a lot of interaction and communication between the people involved. Additionally, good activity often relies upon the ability of cross functional team to create a shared understanding of the task , the process and the respective roles of it's members. To effectively operate with teams , organization must know to make, use, and keep them and their members. This paper provide a survey of research on teamwork productivity and effectiveness base on rewards, leadership, training, goals, wage, size, motivation, measurement and information technology.

SSRN Electronic Journal

The performance of a work team commonly depends on the e¤ort exerted by the team members as well as on the division of tasks among them. However, when leaders assign tasks to team members, performance is usually not the only consideration. Favouritism, employees' seniority, employees' preferences over tasks, and fairness considerations often play a role as well. Team incentives have the potential to curtail the role of these factors in favor of performance-in particular when the incentive plan includes both the leader and the team members. This paper presents the results of a …eld experiment designed to study the e¤ects of such team incentives on task assignment and performance. We introduce team incentives in a random subsets of 108 stores of a Dutch retail chain. We …nd no e¤ect of the incentive, neither on task assignment nor on performance.

The Economic Journal, 2010

We use an experiment to study the impact of team-based incentives, exploiting rich data from personnel records and management information systems. Using a triple difference design, we show that the incentive scheme had an impact on team performance, even with quite large teams. We examine whether this effect was due to increased effort from workers or strategic task reallocation. We find that the provision of financial incentives did raise individual performance but that managers also disproportionately reallocated efficient workers to the incentivised tasks. We show that this reallocation was the more important contributor to the overall outcome.

2011

Nowadays teams are used in almost any organization as they are able to respond adequately to the changes from the business environment. Thus, the focus of this thesis is to analyse team working thoroughly by looking at individual team members satisfaction, ...

Journal of Managerial Psychology, 2009

Purpose-The purpose of this paper is to examine the effects of two key team-based pay characteristics-namely reward allocation procedures (i.e. reward based on norms of equity, equality or some combination of the two) and incentive intensity-on both the amount and type of help given to one another among members of outcome-interdependent teams. Design/methodology/approach-A total of 180 undergraduate students participate in a laboratory simulation with a 2 £ 3 experimental design. Servicing virtual "clients," participants receive pre-scripted requests for assistance from anonymous teammates. ANOVA and hierarchical regression analyses are used to test the hypotheses. Findings-Relative to equity-oriented group-based pay structures, equality-oriented pay structures are found to be associated with both significantly more help giving in general and more of the type of help likely to enhance group-level competencies (i.e. autonomous help). Incentive intensity strengthens the effects of reward allocation on the amount (but not the type) of help giving. Research limitations/implications-While the short time frame of the simulation poses a significant threat to external validity, the findings suggest that team-based compensation practices may provide organizational leaders with an important tool by which to shape critical, helping-related team processes, with potentially important implications for both team learning and performance. Practical implications-Managers interested in promoting capacity-building and helping among team members should avoid allocating team rewards strictly on the basis of the individual contribution. Originality/value-This paper provides the first empirical findings regarding how alternative modes of team-based reward distribution may influence key group processes among members of outcome interdependent teams.

The B.E. Journal of Economic Analysis & Policy

Heterogeneity in intrinsic motivation affects the optimal contract offered to employees in teams. Under individual incentives, the effort exerted by both motivated and selfish employees is distorted. This distortion is mitigated if employees receive a wage based on team performance. As a result, the principal prefers to use team incentives, while motivated employees are better off with individual incentives.

2017

Organizations are increasingly relying upon teamwork; however, little is known about the best fit among incentive system, team composition, and group performance. To further explore this issue this study examines whether the congruence between incentive system and locus of control (LoC) affects team performance. To reconcile opposite lines of argument in literature regarding the best incentive system for a team, this paper uses the social identity perspective and person-environment (P-E) fit theory to understand behavior in a group process. A laboratory experiment with postgraduate students is conducted to test the hypotheses. One hundred and five accounting students were assigned to three-person work groups, where they completed an independent task under one of two types of incentive—individual and group incentive systems—after their LoC was measured. The findings confirm the hypothesis. Group incentive results in an enhanced team performance. Team performance is better when there ...

Organizational Economics Proceedings, 2013

Workers in problem solving teams-these are short term teams that are set up to generate ideas for improving a production process or a product-are often rewarded through group incentive pay. This is even though group incentives give workers an incentive to free ride. In our paper, we show how problem solving creates implicit incentives to reduce free riding, which in turn lowers the cost of using group incentive pay. In fact, when an employer has initial bargaining power and implicit incentives are strong, group incentive pay yields higher profits than monitoring workers, even when monitoring is costless.