The Effects of Tournament Incentive Contracts and Relative Performance Feedback on Task Effort, Learning Effort, and Performance

The Effects of Tournament Incentive Contracts and Relative Performance Feedback on Task Effort, Learning Effort, and Performance
Author: George Lee
Publisher:
Total Pages: 184
Release: 2015
Genre:
ISBN:

When employees work hard, they exert more effort on job tasks (task effort); and when employees learn hard, they exert more effort to learn (learning effort). Task effort and learning effort are important causes of improved performance. This thesis investigates whether the use of tournament schemes motivates employees to work harder and learn harder, and also whether providing performance feedback in tournament schemes has any impact on task effort and learning effort.This thesis has three goals. The first is to investigate the relationship between incentives, learning, and performance. The literature on whether learning interacts with incentives to improve performance is inconclusive, because no prior research has provided a good test of this question (as noted by Bonner and Sprinkle 2002; Bailey and Fessler 2011; Bailey et al. 1998, and as remains true today). The second goal is to investigate the motivational effect of tournament schemes on effort. The literature suggests that effort is difficult to observe directly or to quantify; as a result, it is hard to verify whether tournament schemes motivate employees' task effort and learning effort. This thesis uses an eye-tracking device to measure effort, by measuring eye position, eye movements, and pupil size. The third goal is to investigate the effect of performance feedback on task effort, learning effort, and performance in the tournament setting.I posit and show evidence that both task effort and learning effort are higher in multiple-winner schemes than in either winner-takes-all schemes or piece-rate schemes. Task effort is directly positively associated with performance, while learning effort causes learning transfer to a job task, also yielding a positive effect on performance. I find that providing relative performance feedback in the tournament setting has no significant impact on task effort or learning effort.These findings have practical value for many corporations, which are constantly re-evaluating the effectiveness of their incentive schemes and reporting systems while investing in learning initiatives to help employees transfer learned skills to job tasks. Organizations may use the insights of this thesis to help them design learning initiatives and motivate employees to transfer learned skills to their job tasks.

The Routledge Companion to Behavioural Accounting Research

The Routledge Companion to Behavioural Accounting Research
Author: Theresa Libby
Publisher: Routledge
Total Pages: 520
Release: 2017-11-06
Genre: Business & Economics
ISBN: 1317488008

Behavioural research is well established in the social sciences, and has flourished in the field of accounting in recent decades. This far-reaching and reliable collection provides a definitive resource on current knowledge in this new approach, as well as providing a guide to the development and implementation of a Behavioural Accounting Research project. The Routledge Companion to Behavioural Accounting Research covers a full range of theoretical, methodological and statistical approaches relied upon by behavioural accounting researchers, giving the reader a good grounding in both theoretical perspectives and practical applications. The perspectives cover a range of countries and contexts, bringing in seminal chapters by an international selection of behavioural accounting scholars, including Robert Libby and William R. Kinney, Jr. This book is a vital introduction for Ph.D. students as well as a valuable resource for established behavioural accounting researchers.

Feedback and Motivation in Dynamic Tournaments

Feedback and Motivation in Dynamic Tournaments
Author: Florian Ederer
Publisher:
Total Pages: 36
Release: 2015
Genre:
ISBN:

We investigate the choice to conduct interim performance evaluations in a dynamic tournament. When a worker's ability does not influence the marginal benefit of effort, the choice depends on the shape of the cost of effort function. When effort and ability are complementary, feedback has several competing effects: it informs workers about their relative position in the tournament (evaluation effect) as well as their relative productivity (motivation effect) and it creates signal-jamming incentives to exert effort prior to the performance evaluation. These effects suggest a trade-off of performance feedback between evaluation and motivation which is in accordance with organizational behavior research and performance appraisal practices.

Behavioral and Welfare Effects of Tournaments and Fixed Performance Contracts

Behavioral and Welfare Effects of Tournaments and Fixed Performance Contracts
Author: Steven Y. Wu
Publisher:
Total Pages: 0
Release: 2010
Genre:
ISBN:

Using experimental economics, we compare the efficiency and welfare effects of tournaments and fixed performance contracts. Our subjects (agents) were generally better off under fixed performance contracts, but the advantage of the fixed performance contract disappears if the relative magnitude of the standard deviation of the common shock exceeds a critical value. Efficiency wise, agents tend to exert higher effort under fixed performance contracts, on average. Additionally, an increase in the common shock standard deviation appeared to be associated with lower effort under tournaments. Our results shed light on the potential impact of legislative proposals to ban tournament contracts.

Advances in Management Accounting

Advances in Management Accounting
Author: Chris Akroyd
Publisher: Emerald Group Publishing
Total Pages: 194
Release: 2023-01-18
Genre: Business & Economics
ISBN: 1803820330

Volume 34 of Advances in Management Accounting uses a variety of methods, from experiments to surveys, to build upon existing knowledge within the management accounting discipline.

Behavioral and Welfare Effects of Tournaments and Fixed Performance Contracts

Behavioral and Welfare Effects of Tournaments and Fixed Performance Contracts
Author: Steven Wu
Publisher:
Total Pages: 0
Release: 2020
Genre:
ISBN:

Using experimental economics, we compare the efficiency and welfare effects of tournaments and fixed performance contracts. Our subjects (agents) were generally better off under fixed performance contracts, but the advantage of the fixed performance contract disappears if the relative magnitude of the standard deviation of the common shock exceeds a critical value. Efficiency wise, agents tend to exert higher effort under fixed performance contracts, on average. Additionally, an increase in the common shock standard deviation appeared to be associated with lower effort under tournaments. Our results shed light on the potential impact of legislative proposals to ban tournament contracts.

Relative Performance Information in Tournaments with Different Prize Structures

Relative Performance Information in Tournaments with Different Prize Structures
Author: Andrew H. Newman
Publisher:
Total Pages:
Release: 2014
Genre:
ISBN:

We investigate whether the effect of relative performance information on tournament performance depends on the tournament's prize structure. We focus on the effect of relative performance information on two tournament prize structures: a two-tier structure in which only the top performer receives a reward and all other contestants receive an equal payoff that is lower (reward tournament) and a three-tier prize structure in which the top performer receives a reward, the bottom performer receives a penalty equal to the amount of that reward, and all remaining contestants receive an equal intermediate payoff (reward and punish tournament). Drawing on both economic and psychology theory, we predict and find that, compared with when relative performance information is not present, relative performance information has a negative effect on performance in a reward tournament but a positive effect on performance in a reward and punish tournament. Supplementary analysis reveals that bottom and middle performers drive these differences in performance, which are due to both differences in effort and in adoption of overly risky strategies. Our results show that relative performance information can have a differential effect on performance depending on the tournament's prize structure. This insight can aid in the design of firm information systems and tournament incentive schemes.

The Effect of Incentive Contracts on Learning and Performance

The Effect of Incentive Contracts on Learning and Performance
Author: Geoffrey B. Sprinkle
Publisher:
Total Pages:
Release: 2014
Genre:
ISBN:

This paper reports the results of an experiment that examines how incentive-based compensation contracts compare to flat-wage compensation contracts in motivating individual learning and performance. I use a multiperiod cognitive task where the accounting system generates information (feedback) that has both a contracting role and a belief-revision role. The results suggest that incentives enhance performance and the rate of improvement in performance by increasing both: (1) the amount of time participants devoted to the task, and (2) participants' analysis and use of information. Further, I find evidence that incentives improve performance only after considerable feedback and experience, which may help explain why many prior one-shot decision-making experiments show no incentive effects. Collectively, the results suggest that incentives induce individuals to work longer and smarter, thereby increasing the likelihood that they will develop and use the innovative strategies frequently required to perform well in complex judgment tasks and learning situations.