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What does it take for effective teamwork in business? Here's what lab experiments conclude

What does it take for effective teamwork in business? Here's what lab experiments conclude

Should we motivate with carrots, sticks, or collective strength? A lab study tested several ways to stimulate team effort. While financial rewards boost performance, they can also create tension.

Teamwork has become dominant in companies since the end of the 20th century, as the founder of human resource economics, Edward P. Lazear, pointed out in an article co-authored with Kathryn L. Shaw. The successes of the Japanese automobile industry, a pioneer in this field, popularized this organizational style. It increases employee involvement, stimulates mutual assistance and the transfer of skills, offers flexibility in the face of uncertainties in production or demand, and improves the rationality of employee decisions.

But it also has drawbacks. Coordination problems can arise in the absence of a clear decision-making process. Collective work can also dilute incentives for effort, as Bengt Holmström demonstrated, for example, if compensation is based on collective performance and the proceeds of individual efforts are shared among team members.

Several mechanisms designed to prevent the dilution of incentives within work teams have been analyzed. These are either centralized mechanisms based on a team objective or competition between teams, as studied by Haig Nalbantian and Andrew Schotter, or decentralized mechanisms based on peer pressure, that is, social disapproval of team members with opportunistic behavior, introduced into economic analysis by Eugene Kandel and Edward P. Lazear .

The study of these mechanisms has been the subject of numerous theoretical and experimental studies. But their effectiveness has not yet been directly compared.

This is the subject of an economic experiment conducted by Marc Lebourges and David Masclet . Laboratory experiments have emerged in recent decades as a powerful tool for analyzing economic behavior. In economics, a laboratory experiment is a research method in which economic behavior is observed in a controlled environment (the laboratory) and participants are compensated based on their decisions. According to Gary Charness and Peter Kuhn, it is a preferred tool for studying incentives in business because it allows factors to be controlled better than any other approach, and is also very flexible and inexpensive .

Marc Lebourges and David Masclet's experiment is inspired by an effort game created by Haig Nalbantian and Andrew Schotter to model corporate teamwork in the laboratory. In this effort game, each participant decides, by choosing a number, their contribution to their team's output. Each team's output depends on the sum of its members' contributions and determines their income. Each participant's gain corresponds to the difference between, on the one hand, their share of the team's income and, on the other hand, the cost of the effort required to contribute to their team's output, a function of the number they chose.

The game is repeated several times, and at the end of the experimental session, each participant receives a sum of money based on the winnings they accumulated during the session. In this game, participants have an incentive to be opportunistic, that is, not to contribute in the hope that others will contribute in their place. These sessions took place on computers in the economics laboratory at the University of Rennes.

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The experiment compares participants' production levels and earnings between a reference treatment where income is shared without incentive mechanisms, a peer pressure mechanism where teammates can sanction each other, and centralized mechanisms based either on a team objective or on competition between teams. The analysis also examines whether the appointment of leaders within work teams improves the coordination of peer pressure and reduces its social cost. Finally, the opportunity given to leaders to set an example for their teammates is assessed.

In the absence of incentive mechanisms, we observe an excessively low level of effort, although to a lesser extent than predicted by theory. Peer pressure increases the level of effort, but it remains far from optimal. Moreover, it does not improve participants' gains, because the benefits of increased cooperation are offset by the costs of mutual sanctions, for both those who sanction and those who are sanctioned.

Centralized mechanisms increase effort more than peer pressure. Team goals lead to the highest level of effort, but to low payoffs for participants. This is because a high proportion of teams fail to achieve the goal, and their members are penalized as a result. Team tournaments significantly increase the level of effort, but without increasing the average payoffs of participants and with high inequalities between them, due to transfers between winning and losing teams.

The introduction of team leaders has a positive and lasting effect on effort if they can both set an example and sanction their teammates, even when they are randomly selected. But a randomly selected team leader has a negative effect on their team's performance if their role is limited either to setting an example without being able to sanction, or to sanctioning without being able to set an example. Finally, the effectiveness of a team leader with the power to sanction their peers increases if they are chosen by their peers rather than randomly.

The results of the experiment lead to the following suggestions: centralized mechanisms based on monetary incentives are more effective than peer pressure to increase effort. However, they risk generating very low or very unequal gains for employees. Moreover, team objectives or competition between teams can degrade the work environment or, worse, encourage harmful behaviors, such as sabotaging the work of rival teams or cheating to artificially improve one's team's performance, as Gary Charness, David Masclet, and Marie-Claire Villeval observed in the case of individual tournaments.

The experiments of Klaus Abbink and his colleagueshave also shown that team tournaments risk generating conflicts between teams with very high costs. Companies must therefore be cautious when implementing this type of mechanism.

Finally, concentrating sanctioning power in the hands of a leader can harm team performance if the choice of leader is perceived as arbitrary and if the power to sanction is not accompanied by the power to set an example. But a leader who sets an example and can sanction sustainably improves their team's performance.

These experiments provide simplified models of real-world mechanisms used in business. In a laboratory experiment, especially one that doesn't involve real effort, there are no intrinsically meaningful tasks to be performed.

In business, however, job content plays an important role in motivation and provides a lever through which managers can inspire, recognize, and motivate their employees. However, the intrinsic interest of the work to be done does not negate the effects of incentive mechanisms revealed by laboratory experiments. In reality, well-designed incentive mechanisms contribute, like the intrinsic interest of the work, to team performance.

SudOuest

SudOuest

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