Abstract
Theory suggests that individual performance pay increases effort but may reduce the incentive to help co-workers. In an original survey of finance industry employees subject to individual performance pay, we demonstrate that those workers who report they do not help co-workers earn significantly more. This result is particularly strong for those workers with the strongest individual performance pay incentives. Moreover, when those workers report that their coworkers help them, they also earn significantly more. These dual results are consistent with a strong incentive to free-ride on the helping effort of others in the face of individual performance pay.
This is a preview of subscription content, log in via an institution to check access.
Similar content being viewed by others
Notes
Lecoux (2001) presents a third model reaching a similar conclusion that absolute individual based incentives reduce helping effort.
We recognize that the self-rating of performance may be influenced by the dollars actually earned but emphasize the relatively low correlation between this variable and the index of respondent’s helping effort. From our point of view we are trying to account, albeit imperfectly, for ability of the worker so as to influence on the earnings cost of helping effort.
Despite this theoretical suggestion, we note a relatively low positive correlation of .12 between helping effort and work unit size in the data.
In terms of Itoh’s (1991) model, if others are helping, it remains likely that tasks requiring helping effort or teamwork may be completed. Having these tasks completed can be seen as creating the necessary environment for individual tasks to be successful. Perhaps cleaning the shop is a team activity that makes individual drill press operatives more productive. Free riding on the cleaning of others yields more individual output than working in a dirty shop where no one cleans.
For example, in a 30-year review of articles published in the Journal of Applied Psychology, Personnel Psychology and the Academy of Management Journal, Aguinis et al. (2005) found that the overall mean observed size of moderating effects of categorical variables was 0.009, with a 95% confidence interval ranging from 0.006 to 0.012.
These estimates are available from the authors upon request.
References
Aguinis H (2004) Regression Analysis for Categorial Moderators. Guilford, New York
Aguinis H, Beaty JC, Boik RJ, Pierce CA (2005) Effect size and power in assessing moderating effects of categorical variables using multiple regression: a 30-year review. J Appl Psychol 90:94–107
Aiken LS, West SG (1991) Multiple Regression: Testing and Interpreting Interactions. Sage, Newbury Park
Auriol E, Friebel G, Pechlivanos L (2002) Career concerns in teams. J Labor Econ 20:289–302
Baker G (1992) Incentive contracts and performance measurement. J Polit Econ 100:598–614
Bandiera O, Barankay I, Rasul I (2004) Cooperation in the Workplace: Evidence from the Field. Department of Economics, London School of Economics, London Working Paper
Barron JM, Gjerde KP (1997) Peer pressure in an agency relationship. J Labor Econ 5:234–254
Carpenter JP, Seki E (2006) Competitive Work Environments and Social Preferences: Field Experimental Evidence from a Japanese Fishing Community. Contributions to Economic Analysis and Policy 5(2)
Dose J (1997) Work values: an integrative framework and illustrative application to organization socialization. J Occup Organ Psychol 70:219–240
Drago R, Turnbull G (1988) Individual and Group Piece Rates under Team Technology. J Jpn Int Econ 2:1–10
Drago R, Turnbull G (1991) Competition and cooperation in the workplace. J Econ Behav Organ 15:347–364
Drago R, Garvey G (1998) Incentives for helping on the job: theory and evidence. J Labor Econ 16:1–25
Encinosa W, Gaynor M, Rebitzer J (2007) The sociology of groups and the economics of incentives: theory and evidence on compensation systems. J Econ Behav Organ 62:187–214
FitzRoy FR, Kraft K (1986) Profitability and profit sharing. J Ind Econ 35(2):113–131
Freeman R, Kleiner M (2005) The last American shoe manufacturers: decreasing productivity and increasing profits in the shift from piece rates to continuous flow production. Ind Relat 44:207–230
Garicano L, Palacios-Herta I (2001) An Empirical Examination of Multidimensional Effort in Tournaments. Department of Economics, Brown University, Providence. Working Paper No. 2001–14
Gibbons R (1998) Incentives in organizations. J Econ Perspect 12(4):115–132
Green F (2004) Why has work effort become more intense? Ind Relat 43:709–741
Green F, McIntosh S (1998) Union power, cost of job loss and worker’s effort. Ind Labor Relat Rev 51:363–384
Griffin G (1985) White Collar Militancy. Croom Helm, Sydney
Hamilton BA, Nickerson JA, Owan H (2003) Team incentives and worker heterogeneity: an empirical analysis of the impact of teams on productivity and participation. J Polit Econ 111:465–497
Hansen D (1997) Worker performance and group incentives: a case study. Ind Labor Relat Rev 51:37–49
Heywood JS, Jirjahn U, Tsertsvadze G (2005) Getting along with colleagues: does profit sharing help or hurt? Kyklos 58:557–574
Hill J (1983) From Subservience to Strike. University of Queensland Press, St. Lucia
Holmstrom B, Milgrom P (1991) Multitask principal–agent analyses: incentive contracts, asset ownership and job design. J Law Econ Organ 7:24–52
Ishida J (2006) Team incentives under relative performance evaluation. J Econ Manag Strategy 15:187–206
Itoh H (1991) Incentives to help in multi-agent situations. Econometrica 59:611–636
Kandel E, Lazear EP (1992) Peer pressure and partnerships. J Polit Econ 100:801–817
Kasser T, Ryan RM (2001) Be careful what you wish for: optimal functioning and the relative attainment of intrinsic and extrinsic goals. In: Schmuck P, Sheldon KM (eds) Life Goals ad Well-Being. Hogrefe and Huber, Seattle, pp 116–131
Kerr S (1975) On the folly of rewarding a, while hoping for b. Acad Manage J 18:769–783
Kessler I, Purcell J (1992) Performance related pay: objectives and application. Hum Resour Manage J 2:16–33
Kitay J (1999) Change in Tandem: Employment Relations in Australian Retail Banks. In: Regini M, Kitay J, Baethge M (eds) From Tellers to Sellers: Changing Employment Relations in Banks. MIT, Cambridge
Lazear EP (1989) Pay equality and industrial politics. J Polit Econ 87:1261–1284
Lazear EP (1998) Personnel Economics for Managers. Wiley, Hoboken
Lecoux M-J (2001) The Effect of Bonus-Sharing and Cohesion on Team Behavior and Performance. Dissertation, University of Waterloo, Waterloo, Ontario, Canada
MacDonald G, Marx L (2001) Adverse specialization. J Polit Econ 109:864–899
Morehead A, Steele M, Alexander M, Stephen K, Duffin L (1997) Changes at Work: the 1995 Australian Workplace Industrial Relations Survey. Longman, Sydney
Morrison AD, Wilhelm WJ (2004) Partnership firms, reputation, and human capital. Am Econ Rev 94:1682–1692
Nickerson C, Schwarz N, Diener E, Kahneman D (2007) Zeroing in on the dark side of the American dream: a closer look at the negative consequences of the goal. Psychol Sci 14:531–536
Rees DI, Zax JS, Herries J (2003) Interdependence in work productivity. J Applied Econom 18:585–604
Rotemberg J (1994) Human relations in the workplace. J Polit Econ 102:685–717
Winkelmann R, Boes S (2006) Analysis of Microdata. Springer, Berlin
Author information
Authors and Affiliations
Corresponding author
Additional information
The authors thank the Miegunyah Fellowship Fund at the University of Melbourne for allowing the authors to work together in Melbourne in 2007. The authors would be pleased to help with any replication attempts and appreciate the comments of the reviewer and editor.
Rights and permissions
About this article
Cite this article
Brown, M., Heywood, J.S. Helpless in Finance: The Cost of Helping Effort Among Bank Employees. J Labor Res 30, 176–195 (2009). https://doi.org/10.1007/s12122-009-9063-8
Received:
Accepted:
Published:
Issue Date:
DOI: https://doi.org/10.1007/s12122-009-9063-8