Working Paper: NBER ID: w19412
Authors: Ann Bartel; Brianna Cardiff-Hicks; Kathryn Shaw
Abstract: Due to the limited availability of firm-level compensation data, there is little empirical evidence on the impact of compensation plans on personal productivity. We study an international law firm that moves from high-powered individual incentives towards incentives for "leadership" activities that contribute to the firm's long run profitability. The effect of this change on the task allocation of the firm's team leaders is large and robust; team leaders increase their non-billable hours and shift billable hours to team members. Although the motivation for the change in the compensation plan was the multitasking problem, this change also impacted the way tasks were allocated within each team, resulting in greater teamwork.
Keywords: compensation; incentives; multitasking; law firm; productivity
JEL Codes: J33; L23; L84
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Shift from high-powered individual incentives (D29) | Decrease in leaders' billable hours (J29) |
| Shift from high-powered individual incentives (D29) | Increase in leaders' nonbillable hours (J29) |
| Decrease in leaders' billable hours (J29) | Increase in subordinate team members' billable hours (M54) |
| Shift from high-powered individual incentives (D29) | Increase in associates' pay (M52) |
| Shift from high-powered individual incentives (D29) | Reduction in pay variance within the firm (J31) |