We analyze the effects of introducing formal controls to communicate and reinforce corporate values among incumbent workers. Using data from a retail chain, we examine the intervention's impact on variables capturing behaviors consistent with those values. The intervention's effectiveness exhibited significant variation. Specifically, we find it to be more effective in stores with greater promotion opportunities-consistent with the system motivating increased effort where implicit incentives are stronger-and in stores with managers who had experience related to the implementation of the promoted values-consistent with the system benefiting from skills and expertise necessary for acting on core values. However, the intervention was counterproductive along various dimensions where leadership's actions were likely to be perceived as inconsistent with the espoused values. Our findings highlight important factors for instilling core values via formal management controls.

Physician burnout, which is prevalent in neurology, has accelerated in recent years. While multifactorial, a major contributing factor to burnout is a payment model that rewards volume over quality, leaving physicians overburdened and unfulfilled. The aim of this review was to investigate ways of reducing burnout while improving quality-based outcomes in a value-based health care model.

Purpose of Review:Physician burnout, which is prevalent in neurology, has accelerated in recent years. While multifactorial, a major contributing factor to burnout is a payment model that rewards volume over quality, leaving physicians overburdened and unfulfilled. The aim of this review was to investigate ways of reducing burnout while improving quality-based outcomes in a value-based health care model. Recent Findings:Burnout affects researchers, educators, clinicians, and administrators in all fields and tracks, but neurologists experience some of the worst burnout rates among specialties. Transitioning to a value-based health care model, which rewards quality and outcomes over volume, may contribute to reversing the burnout trend. However, this requires that physicians feel valued in the workplace in ways corresponding to their preferences. We propose to stratify neurologists using the "basket of motivators" framework, which operates multiple individual-based and team-based motivators including balance among work responsibilities, work-life balance, institutional pride, self-actualization at work, work environment, and finances. By tailoring individual-based and team-based financial and nonfinancial incentives, neurologists are empowered to work at the top of their license to provide high-impact clinical care while combating the most prominent causes of burnout. Summary:To address the neurologist burnout epidemic, a transition to value-based health care is needed that rewards quality-based performance outcomes through both individual-based and team-based approaches that apply financial and nonfinancial incentives. Understanding the underlying motivations behind neurologists' drives to work can inform tailored incentives that allow neurologists to provide value to their patients and feel valued by their organizations.

ABSTRACT Can managers use monetary incentives to elicit cooperation from workers they cannot reward for their efforts? I study “conduit incentives,” an innovative incentive design, whereby managers influence bonus-ineligible workers’ effort by offering bonus-eligible employees a monetary reward for performance that critically depends on the cooperation of the bonus-ineligible workers. Motivated by the reward, bonus-eligible employees use social motivators to elicit cooperation from their ineligible colleagues. I examine an intervention in a California hospital in which a one-time bonus program aimed to improve handwashing compliance. State regulation prevented physicians from receiving bonus payments. However, because physicians’ handwashing counted toward the bonus-related goal, bonus-eligible workers used social pressure to incentivize physicians’ performance, absent any tangible benefits for the physicians. The physicians improved performance during the intervention, and their improvements persisted beyond the removal of the incentives. The response to the temporary intervention significantly predicted the persistence of the performance improvements. Data Availability: The data used in this study are subject to a confidentiality agreement and cannot be shared without the hospital’s legal representatives’ explicit consent. JEL Classifications: I12; M4; M12; M14; M52.

ABSTRACTThis study examines how the design of incentive contracts for tasks defined as workers' official responsibilities (i.e., standard tasks) influences workers' propensity to engage in employee‐initiated innovation (EII). EII corresponds to innovation activities that are not formally assigned to workers but are nonetheless encouraged and considered to be important for the company's success. Like other extra‐role behaviors, EII is difficult to incentivize directly. Therefore, it is important to understand whether and how explicit incentive contracts designed for the workers' standard tasks may indirectly influence their EII activity. We use field data from a manufacturing company that uses a dedicated information system to track workers' EII idea submissions. We find theory‐consistent evidence that, compared to workers receiving fixed pay, employees rewarded for their standard tasks with variable compensation contracts exhibit a lower propensity to engage in EII. This result is concentrated among ideas benefiting other constituents and activities beyond the proponents' standard task (i.e., broad‐scope ideas). In contrast, we find no difference attributable to standard task incentive design in the proposal of innovation ideas narrowly focused on the proponent's standard task (i.e., narrow‐scope ideas). Our findings suggest that variable pay narrows employees' conceptual focus around the standard task and hinders employee engagement in broad‐scope innovation activities compared to fixed compensation contracts. We contribute to the literature on incentives for innovation by showing that standard task compensation contracts have spillover effects on EII behavior. We also contribute to the nascent literature on EII by showing that innovation types, defined based on their relation with the proponent's standard task, matter. Our results are relevant for practitioners in that managers relying on variable pay contracts to incentivize standard task performance should expect lower employee engagement in broad‐scope EII.

We examine the incentive effects of subjectivity in allocating tournament-based rewards and punishments. We use data from a company where reward and punishment decisions are based on a combination of objective metrics and subjective performance assessments. Rankings based on the objective metrics and the ultimate payoff allocations are disclosed to all members of the organization. This information allows employees to observe whether and how managers subjectively override the objective rankings. Consistent with expectancy theory, we predict and find that subjective rewards and punishments manifesting as favorable (unfavorable) deviations from formula-based payoff expectations are associated with subsequent performance improvements (declines). These performance responses are incremental to the effects of receiving a reward or punishment per se. Our results suggest that managers can benefit from using subjective rewards, but using subjective punishments can be very costly in the absence of sufficiently strong ex ante incentive effects associated with the prospect of subjective penalties. Our findings contribute to the literature on subjectivity in performance evaluations and have important practical implications for designing incentive systems. This paper was accepted by Brian Bushee, accounting. Funding: The authors appreciate the Harvard Business School for financial support during the development of this study. Supplemental Material: Data are available at https://doi.org/10.1287/mnsc.2022.4501 .

While budgetary controls with capital rationing are theoretically optimal and widespread in practice, empirical research documents their association with higher employee dishonesty compared to budgetary controls without rationing. In this study, we examine whether combining budgetary controls with mission statements in a system of management controls decreases employee dishonesty. We predict that the system's effect on dishonesty depends on the interaction of the social norms conveyed by each control instrument within the system. We study two types of budgetary controls that differ in whether they include budget rationing and two types of mission statements that differ in whether they emphasize integrity or financial values. We provide experimental evidence that mission statements reduce employee dishonesty more if combined with budget rationing controls than non-rationing budgetary controls. This effect is enhanced when the mission statement conveys a norm of integrity, as opposed to a norm of financial performance. Our results suggest that mission statements can mitigate the downsides of budget rationing, but this effect is less pronounced when the norms conveyed by each instrument are redundant.

ABSTRACT We use a health care application to illustrate how variance analysis can be used to benchmark costs across similar service delivery sites. Variances for personnel costs, typically the largest cost component in service organizations, are calculated for price, quantity, and skill mix components. Skill mix is important since employees with different compensation often work together to produce service outputs. We find that the joint variance, which arises when both prices and quantities differ, has more managerial implications when assigned to the quantity variance, rather than its traditional allocation to the price variance. Using time-driven activity-based costing also leads to a new variance that reflects the impact of personnel capacity differences between sites. Finally, we introduce two new visualization tools to display the variances. Educators can teach students how variance analysis reveals opportunities to reduce personnel costs by identifying and transferring best practices across sites.

We conducted a field experiment at a retailer to analyze the effects of introducing a values-based 360degree assessment system in a setting with pre-existing high-powered monetary incentives linked to financial performance. The retail chain’s managing director intended to use this system to encourage her managers not only to pursue values related to financial short-term goals but also values capturing the organization’s long-term goals. We explore the effect of the intervention and find that the values-based 360-degree system had more favorable effects for stores with greater promotion opportunities and for stores with managers with experience related to the implementation of values. We also find that management behavior that could be perceived to be inconsistent with the spirit of the system (i.e., delaying salary payments) had a detrimental effect on the intervention, leading to worse performance. Our findings highlight important factors for successfully implementing values-based 360-degree systems as complements to explicit incentives.

Mandatory measurement and disclosure of outcome measures are commonly used policy tools in healthcare. The effectiveness of such disclosures relies on the extent to which the new information produced by the mandatory system is internalized by the healthcare organization and influences its operations and decision-making processes. We use panel data from the Japanese National Hospital Organization to analyze performance improvements following regulation mandating standardized measurement and peer disclosure of patient satisfaction performance. Drawing on value of information theory, we document the absolute value and the benchmarking value of new information for future performance. Controlling for ceiling effects in the opportunities for improvement, we find that the new patient satisfaction measurement system introduced positive, significant, and persistent mean shifts in performance (absolute value of information) with larger improvements for poorly performing hospitals (benchmarking value of information). Our setting allows us to explore these effects in the absence of confounding factors such as incentive compensation or demand pressures. The largest positive effects occur in the initial period, and improvements diminish over time, especially for hospitals with poorer baseline performance. Our study provides empirical evidence that disclosure of patient satisfaction performance information has value to hospital decision makers.

Using detailed information from the largest proxy advisor in the U.S., Institutional Shareholder Services (ISS), we examine whether proxy advisors’ assessments of firms’ compensation practices are able to identify poor compensation practices as measured by subsequent performance. While prior research provides consistent evidence of an association between shareholder voting outcomes and proxy advisors’ Say-on-Pay recommendations, the evidence is mixed over whether their recommendations are informative about the quality of firms’ compensation practices. We find that ISS “Against” recommendations and negative assessments are associated with worse future accounting performance, consistent with ISS being able to detect low quality compensation packages. However, workload compression has an effect, as we find that the relation between assessments and future performance only occurs during the off season (i.e. for firms with non-December fiscal year ends).

This study examines the effect of psychological contract breach on budgetary misreporting. Psychological contracts are mental models or schemas that govern how employees understand their exchange relationships with their employers. Psychological contract breach leads to feelings of violation and can occur even when employees’ economic contracts are fulfilled. We study the effects of psychological contract breach on three common types of employee participation in budgeting that differ in the degree of employees’ influence over their approved budgets. These include affirmative budgeting (full influence), consultative budgeting (moderate influence), and authoritative budgeting (low influence). When organizations communicate that employees will be involved in budgeting, employees develop psychological contracts of affirmative budgeting. If employees subsequently experience authoritative or consultative budgeting, their psychological contracts are breached. Employees who experience psychological contract breach seek redress through budgetary misreporting. Experimental results indicate that psychological contract breach partially mediates the relation between budgeting type and budgetary misreporting. Results also indicate asymmetry in the effects of psychological contract breach versus repair. Effects of breach on budgetary misreporting persist even after the breach no longer occurs. This paper was accepted by Shivaram Rajgopal, accounting. The online appendix is available at https://doi.org/10.1287/mnsc.2018.3067 .