Research on employee rankings

Posted by Marc Hodak on August 18, 2010 under Revealed preference, Unintended consequences | Be the First to Comment

Theory:  Ranking employees, and letting them know where they rank, inspires a competition to improve one’s performance, or to continue to excel.

Experimental result: Not

[Professor] Barankay [of Wharton] randomly divided workers into two groups — a control group receiving no ranking and a treatment group receiving feedback with a ranking. He then sent an e-mail to all of the workers inviting them to return to do more assignments. The content of all the e-mails was the same, except that individuals in the treatment group found out how they ranked in terms of their answers’ accuracy. The aim was to determine whether giving people feedback affected their desire to do more work, as well as the quantity and quality of their work. Of the workers in the control group, 66% came back for more work, compared with 42% in the treatment group. The members of the treatment group who returned were also 22% less productive than the control group.

Prof. Barankay also offered workers either a job where they would be ranked or one where they wouldn’t be.

[T]he job without the feedback attracted more workers — 254, compared with 76 for the job with feedback.

“This was a surprising outcome, but it speaks to the paradigm of revealed preferences,” he notes. “Economists are usually very skeptical about what people say they will do. We focus on what people actually choose to do. Their choices convey information about what they care about. In this case, it seems that people would rather not know how they rank compared to others, even though when we surveyed these workers after the experiment, 74% said they wanted feedback about their rank.”

So, people generally don’t like to be ranked against their peers, even though they say they do, and rankings appear to encourage the high performers to slack off and the poor performers to give up.  Contrary to theory, it also encourages high performers to leave and poor performers to stay.  High performers are given the confidence to go out and find new challenges, while poor performers appear to get demoralized, and may have fewer options besides.

This research stands in contrast to research on tournaments, which appear to motivate more productive behavior.  Thus, the research indicates that it depends on how the feedback and reward mechanisms interact.  Competition can breed excellence, and competition includes comparisons and consequences.  But comparison alone can breed complacency or demoralization.

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