Productivity dynamics, performance feedback and group incentives in a sales organization

Abstract

This paper investigates the effect of performance feedback on productivity in a company where workers operate in teams and receive a bonus that depends on both individual worker and team productivity. To address this issue, we employ weekly productivity and administrative data obtained from the customer service centre of an insurance company. We find evidence that performance feedback given each Monday morning about past team production and individual rank position within teams influences current individual productivity. The effect of rank position is strongest when bonuses depend on team performance. Overall, our findings suggest that team dynamics may alleviate the free-rider problem often associated with team bonuses, where it is essential that team leaders provide information about individual and team performance in previous periods.