By Florian Englmaier*
Until the 1970s, a major share of the workforce performed predominantly manual and repetitive routine tasks with little need to coordinate in teams. Since then, we have witnessed a rapidly changing work environment. Nowadays, work is frequently organized in teams and a large share of the workforce performs tasks that require much more cognitive effort rather than physical labor. Examples include teams of IT professionals, teams of specialist doctors, as well as teams of management consultants. These teams often face a series of novel and complex problems and need to gather, evaluate, and re-combine information in order to succeed, frequently within a limited amount of time.
Autor, Levy, and Murnane (2003) analyze task input in the US economy using four broad task categories: routine manual tasks (e.g., sorting or repetitive assembly), routine analytical and interactive tasks (e.g., repetitive customer service), non-routine manual tasks (e.g., truck driving) and non-routine analytical and interpersonal tasks (e.g. forming and testing hypotheses) and document a strong increase in non-routine analytical and interpersonal tasks between 1970 and 2000. Given the pervasiveness of these tasks in modern economies and their importance for innovation and growth, understanding the determinants of performance in these tasks is crucial.
Despite this described prevalence of non-routine analytical team tasks in modern economies, little is known about how incentives influence performance in these tasks. In a field experiment with more than 3000 participants, we (Englmaier, Grimm, Schindler, and Schudy, 2018) document a positive effect of bonus incentives on the probability of completion of such a task.
For this series of studies, we leverage an established partnership with a commercial provider of so-called real life escape games. In these complex and non-routine team challenges, teams have 60 minutes to “escape” a themed room. The classic James Bond situation (nuclear bomb, countdown is ticking, and you must find and defuse the device before the countdown expires) is a prominent example. The task requires teams to solve a series of complex and novel problems. Teams need to collect and recombine information and have to solve analytical and cognitively demanding tasks that require thinking outside the box. Team members have to collaborate with each other, discuss possible actions, and develop ideas jointly. The task thus requires teams to coordinate well and stay motivated when they get stuck in the process of forming and testing hypotheses in order to succeed. So while the escape room setting is clearly different from a job, still the task at hand share many similarities to the tasks relevant in modern workplaces.
A key advantage of the escape game setting is that it allows us to exogenously vary incentive conditions across a large number of teams solving comparable problems. Further, the environment provides a salient and objective measure of team performance: solution times. In addition, we can measure “originality” as we observe whether teams are coming up with innovative solutions themselves or whether they ask for (up to five available) hints to complete the task (which is akin to copying existing solutions to problems).
Our large-scale field experiment shows that bonus incentives causally increase team performance in this non-routing analytical task. Additional experimental variations allow us to show that bonuses work well due to the reward rather than the performance threshold they provide. We also investigate the framing of bonuses as gains or losses which turns out to play only a minor role. Additional experiments in a sample of presumably less motivated workers underline the robustness of the performance effect. However, incentives somewhat reduce these workers’ willingness to “explore” original solutions.
While the channel through which performance increases in routine-manual tasks (think of strawberry pickers or assembly line workers) is often obvious (more sweat and toil), it is less obvious how the performance effect came about in the problem-solving-task at hand. To shed light on this, we conducted ex-post surveys, in which teams in the bonus condition self-reported to be better led and organized.
The survey responses inspired us to investigate the leadership channel further. In ongoing work, Englmaier, Grimm, Grothe, Schindler, and Schudy (2020), we conduct another field experiment set in the same environment to study the causal effect of inducing problem solving teams to choose a leader.
A large number of studies in psychology and management emphasize the importance of how groups of workers are organized and led (e.g., House, 1977; Bass, 1998, 1999; Howell and Avolio, 1993; Bass, 1990; and many others). Despite their eminence, such issues are scarcely studied in economics, especially not in complex production environments including teamwork. As argued above, since the 1970s complex production environments have been increasing in importance and prominence. These environments are often characterized by flat hierarchies and may lack clear outcome measures which are needed to make the use of pay-for-performance feasible. Hence, the question of how to organize and lead teams is very pertinent.
In the ongoing study, we encourage a randomly selected set of problem-solving teams to determine a leader before they start the task and “escape the room”. Our preliminary analysis indicates that suggesting to teams to select a leader induces a substantial number of teams to explicitly determine a leader. Moreover, this increased prevalence of leadership has a substantial and positive effect on team performance. Teams in the treatment condition are significantly more likely to finish the task than teams in the control condition (absent the suggestion to pick a leader). This does not seem to come at the cost of originality as teams encouraged to pick a leader are not asking for more hints (if anything they ask for fewer hints).
Anecdotal observations from the study indicate that, along the lines suggested in the literature, see Zehnder, Herz, and Bonardi (2017), effective teams were led by communication (e.g., inspirational messages), and actions (e.g., setting an example).
Englmaier, Grimm, Schindler, and Schudy (2018) The Effect of Incentives in Non-Routine Analytical Team Tasks - Evidence from a Field Experiment. CEPR DP 13226
Florian Englmaier, Stefan Grimm, Dominik Grothe, David Schindler, and Simeon Schudy (2020) A Field Experiment on Leadership and Team Performance in Non-Routine Analytical Team Tasks
*Florian Englmaier* is Professor for Organizational Economics at LMU Munich and a newly elected member of SIOE's board. This essay introduces him to SIOE.org's readers.