The Contingent Effect of Management Practices
New York University (NYU) - Department of Management and Organizational Behavior
Claudine Madras Gartenberg
New York University (NYU) - Leonard N. Stern School of Business
Columbia Business School - Finance and Economics
April 14, 2015
Columbia Business School Research Paper No. 15-48
This paper investigates how the success of a management practice depends on nature of the long-term relationship between the firm and its employees. A large US transportation company is in the process of fitting its trucks with an electronic on-board recorder (EOBR), which provide drivers with information on their driving performance. In this setting, a natural question is whether the optimal managerial practice consists of: (1) Letting each driver know his or her individual performance only; or (2) Also providing drivers with information about their ranking with respect to other drivers. The company is also in the first phase of a multi-year "lean-management journey". This phase focuses exclusively on changing employee values, mainly toward a greater emphasis on teamwork and empowerment. The main result of our randomized experiment is that (2) leads to better performance than (1) in a particular site if and only if the site has not yet received the values intervention, and worse performance if it has. The result is consistent with the presence of a conflict between competition-based managerial practices and a cooperation-based relational contract. More broadly, it highlights the role of intangible relational factors: the optimal set of managerial practices depends on the long-term relationship the company chooses to have with its workers.
Number of Pages in PDF File: 66
Keywords: Relational contracts, management practices, transportation, performance ranking
JEL Classification: M12, M14, M50, M54
Date posted: April 16, 2015
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