Feedback and Motivation in Dynamic Tournaments

Abstract:     
We investigate the choice of organizations to conduct interim performance evaluations in a dynamic tournament model. When workers do not differ in ability or ability does not influence the marginal benefit of effort, the choice between a full feedback and a no feedback policy depends on the shape of the cost of effort function. However, when effort and ability are complementary, feedback policies have two competing effects: they inform workers about their relative position in the tournament (evaluation effect) as well as their relative productivity (motivation effect). In addition, performance appraisals create signal-jamming incentives for workers to exert effort prior to performance evaluation in order to influence the inference process of their competitors in the tournament. The choice of the optimal feedback policy therefore depends on the relative strength of the evaluation, motivation and signal-jamming effects. The interplay of these effects also suggests a fundamental trade-off of interim performance evaluations between evaluation and motivation which is in accordance with both organizational behavior research and performance appraisal practices.

Number of Pages in PDF File: 33

Keywords: Feedback, Motivation, Tournaments, Interim Evaluation

JEL Classification: M12, M51

Accepted Paper Series