Working Paper: CEPR ID: DP11057
Authors: Steven Blader; Claudine Gartenberg; Andrea Prat
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 "lean-management journey", which corresponds to an overhaul of the relational contract with its employees. 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 in determining the optimal set of managerial practices.
Keywords: management; relational contracts; relative ranking
JEL Codes: D2
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Public performance postings (L82) | Improved driver performance in non-lean sites (D29) |
| Public performance postings (L82) | Decreased driver performance in lean sites (D29) |
| Lean management intervention (L23) | Effectiveness of performance feedback mechanisms (L25) |
| Relational contract (L14) | Response to management practices (M54) |
| Relational contract influences (L14) | Optimal set of managerial practices (L23) |