Managing team coordination incentives: the effect of payoff differentials

  1. Tavana, Madjid 1
  2. Di Caprio, Debora 3
  3. Santos-Arteaga, Francisco J. 2
  1. 1 La Salle University
    info

    La Salle University

    Filadelfia, Estados Unidos

    ROR https://ror.org/02beve479

  2. 2 Universidad Complutense de Madrid
    info

    Universidad Complutense de Madrid

    Madrid, España

    ROR 02p0gd045

  3. 3 University of Trento
    info

    University of Trento

    Trento, Italia

    ROR https://ror.org/05trd4x28

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Revista:
Journal of Centrum Cathedra

ISSN: 1851-6599

Año de publicación: 2016

Volumen: 9

Número: 1

Páginas: 52-70

Tipo: Artículo

DOI: 10.1108/JCC-08-2016-0003 GOOGLE SCHOLAR lock_openAcceso abierto editor

Otras publicaciones en: Journal of Centrum Cathedra

Resumen

Purpose – The current paper presents a formal model illustrating how payoff imbalances among the members of a team of decision makers (DMs) who must undertake a project condition the final outcome obtained. This result builds on the fact that payoffs imbalances would lead to different performance levels among the employees and managers who compose a team. The analysis is applied to a strategic environment where a project requiring coordination among the DMs within the team must be developed. Design/Methodology/Approach – The intuition behind the strategic framework on which our results are based is twofold: (1) we build on the literature on social comparisons and assume that employees and managers acquire information on the payoffs received by other members of the team while being affected by the resulting comparisons; and (2) we follow the economic literature on firm boundaries determined via incomplete contracts. In this case, employees and managers may underperform if they feel aggrieved by the outcome of the contract, giving place to deadweight losses when developing the project. Findings – We illustrate how a team-based performance reward structure may lead to a coordinated equilibrium even when team managers and employees receive different payoffs and exhibit shading incentives based on the payoff differentials between them. We will also illustrate how identical shading intensities by both groups of DMs imply that shading by the managers imposes a lower cost on the profit structure of the firm, since it leads to a lower decrease in the cooperation incentives of the other members of the team. Finally, we show how differences in shading intensity between both types of DMs trigger a strategic defect mechanism within the team that determines the outcome of the project. Originality/Value – The novel environment of team cooperation and defection through shading introduced in this paper is designed to deal with the strategic decisions taken by DMs when undertaking a project within a group. In particular, the intensity of shading applied by the DMs will be endogenously determined by the relative payoffs received, which allows us to account for different scenarios where relative payoff differentials among DMs determine the outcome of the project.

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