The impact of formal incentives on teams: Micro-evidence from retail
Francisco Brahm (London Business School); Antoine Feylessoufi (University College London); Marcos Singer (Pontifical Catholic University of Chile)
Abstract
The impact of formal incentives on team productivity is not fully understood. A handful of field experiments have documented a small or null impact of incentives on teams, but could not rule out the possibility of incentives being ineffective on individuals to begin with. In this paper we estimate the impact of incentives both on individuals and on teams, within the same setting. We find that incentives improve productivity by 19% on individuals; however, they have a null effect on teams. We show that this null effect is not because incentives do not work—on the contrary, they strongly boost team productivity via effort complementarity—but because there is no need for them: teams without incentives display larger social incentives than teams with incentives.