The effect of using competition to induce employee effort on employee cooperation in multitask job environments

Abstract

Many companies use competition for either monetary or non-monetary rewards to induce employee effort. Pitting employees against each other in a competition could come at a thus far insufficiently considered cost of leading to lower employee cooperation. We examine how competition for monetary rewards in the form of tournament incentives or non-monetary rewards in the form of standing in uncompensated public rankings affects employee cooperation with former competitors in a subsequent task where the extent of the cooperation does not affect the welfare or social standing of the person deciding to cooperate. We hypothesize that competition in the first task negatively affects cooperation in the second task. We further predict that competition leads to psychological pressure, which mediates differences in cooperation. Our results support our hypotheses. In addition, we find that the decrease in cooperation results from the behavior of low performers, whereas cooperation by high performers is not affected. Our findings are important because they show that inducing effort in one dimension leads to an unintended cost in the form of lower cooperation in another dimension. This cost occurs for both types of competition – competition for monetary payoffs and for non-monetary rewards. Ultimately, the size of this cost depends on the marginal benefit from any cooperation of low performers.

Keywords: Incentives, Knowledge Sharing, Tournament, Piece-Rate Incentives, RPI Disclosure, Altruism