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The Contingent Effect of Management Practices

70 Pages Posted: 16 Apr 2015 Last revised: 17 Sep 2016

Steven Blader

New York University (NYU) - Department of Management and Organizational Behavior

Claudine Madras Gartenberg

New York University (NYU) - Leonard N. Stern School of Business

Andrea Prat

Centre for Economic Policy Research (CEPR); Columbia Business School - Finance and Economics

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Date Written: September 2, 2016

Abstract

This paper investigates how the success of a management practice depends on the 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 initiative to remake its internal operations. This first phase corresponds to an overhaul of the relational contract with its employees, focusing exclusively on changing values 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 in determining the optimal set of managerial practices.

Keywords: Relational contracts, management practices, transportation, performance ranking

JEL Classification: M12, M14, M50, M54

Suggested Citation

Blader, Steven and Gartenberg, Claudine Madras and Prat, Andrea, The Contingent Effect of Management Practices (September 2, 2016). Columbia Business School Research Paper No. 15-48. Available at SSRN: https://ssrn.com/abstract=2594258 or http://dx.doi.org/10.2139/ssrn.2594258

Steven Blader

New York University (NYU) - Department of Management and Organizational Behavior ( email )

44 West 4th Street
New York, NY 10012
United States

Claudine Madras Gartenberg (Contact Author)

New York University (NYU) - Leonard N. Stern School of Business ( email )

44 West 4th Street
New York, NY NY 10012
United States

Andrea Prat

Columbia Business School - Finance and Economics ( email )

3022 Broadway
New York, NY 10027
United States

Centre for Economic Policy Research (CEPR)

77 Bastwick Street
London, EC1V 3PZ
United Kingdom

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