Francisco J. Roman
Rice University
Abstract: This study uses a field method to examine the effects of a group incentive scheme on the performance of production teams in three independent subunits of the same manufacturing plant. The study investigates whether the use of an output-target based scheme and a gain-sharing scheme, offered in combination as part of a group compensation contract, motivates production teams to improve performance. The output-target based scheme is a linear budget-based incentive that rewards individual team performance, providing a bonus when quantity meets or exceeds a target and a low (penalty) wage when quantity or quality falls short of a target. The gain-sharing scheme rewards production teams for achieving plant-level quarterly targets on productivity and quality. The results indicate improvements in productivity and quality, as well as a reduction in absenteeism, turnover, and material waste. These findings suggest that the combination of schemes is effective in motivating group effort, promoting cooperation, and encouraging peer monitoring within and across production teams, leading to improvements in performance.
Back to Program
