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It's what you say not what you pay
Brandts, Jordi; Cooper, David J.
Universitat Autònoma de Barcelona. Unitat de Fonaments de l'Anàlisi Econòmica; Institut d'Anàlisi Econòmica
We study manager-employee interactions in experiments set in a corporate environment where payoffs depend on employees coordinating at high effort levels; the underlying game being played repeatedly by employees is a weak-link game. In the absence of managerial intervention subjects invariably slip into coordination failure. To overcome a history of coordination failure, managers have two instruments at their disposal, increasing employees' financial incentives to coordinate and communication with employees. We find that communication is a more effective tool than incentive changes for leading organizations out of performance traps. Examining the content of managers' communication, the most effective messages specifically request a high effort, point out the mutual benefits of high effort, and imply that employees are being paid well.
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Working Paper
Working papers; 643.05

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