with Danielle Li and Kelly Shue
The best worker isn't always the best candidate for manager. In these cases, do firms promote the best potential manager or the best worker in their current job? Using microdata on the performance of sales workers at 214 firms, we find evidence consistent with the Peter Principle: firms prioritize current job performance when making promotion decisions at the expense of other observable characteristics that better predict managerial quality. We estimate that the costs of managerial mismatch are substantial, suggesting that firms make inefficient promotion decisions or the incentive benefits of emphasizing current performance is also high.
with Aaron Sojourner and Akhmed Umyarov
In three experiments, we examine the effects of employer reputation in an online labor market (Amazon Mechanical Turk) in which employers may decline to pay workers while keeping their work product. These three experiments test the value of the employer reputation system for workers, employers, and the market. Specifically, in audit study of employers by a blinded worker, we find that working only for good employers yields 40% higher wages. Second, in an experiment that varies reputation, we find that good-reputation employers attract work of the same quality but at twice the rate as bad-reputation employers. Lastly, we exploit the natural experiment of instances when the reputation system servers are down, and find that the reputation system is serving the market by attracting work to small, good employers who appear to rely on the system to attract workers, and apparently away from the largest and best-known among good employers. This is the first clean, field evidence that employer reputation serves as a collateral against opportunism in the absence of contract enforcement in online markets.
with Sima Sajjadiani
Shared bonus pools, in which a worker’s bonus depends both on a worker’s share of the pool (which serves as the incentive) and also on the size of the pool (which is largely outside of the worker’s control), are a common method for distributing bonus pay. Using variation in the size of the bonus pool generated by a manufacturing plant's gainsharing plan, which varies incentives for quality and worker engagement, we evaluate the conditions under which incentives distributed from bonus pools actually have incentive effects. Overall, results are cautionary: the evidence suggests gainsharing's benefits operate primarily through simultaneously-adopted process improvement practices rather than gainsharing's incentive effects, and incentives can backfire if they are too small or use plant-level performance metrics. We note that random variation in the size of bonus pools offers researchers a powerful, readily available, and underused tool for studying how workers respond to the strength of incentives.
with Ben Rissing
Do jobs filled by transfers tend to have higher subsequent performance than those filled by hires? Using data from a major U.S. retailer with 113,749 commissioned salespeople, 1,275,127 total employees, and 2,161 establishments (stores), we evaluate the relative performance of transfers versus hires. Our evaluation improves upon prior work by offering instrumental variables, objective and subjective assessments of performance, establishment-level analyses, and much greater statistical power. We find evidence that sales performance is greater when jobs are filled by transfers rather than hires, and that stores with a higher ratio of transfers to hires tend to outperform those with low ratios. Our results are most consistent with human capital and internal labor market theories.
with Danielle Li and Kelly Shue