Ian I. Larkin
7 Results
- 04 Mar 2013
- Working Papers
The Dirty Laundry of Employee Award Programs: Evidence from the Field
Many scholars and practitioners in human resource management have recently argued that awards and other forms of on-the-job recognition provide a "free" way to motivate employees. But are there unintended, negative effects of such awards? In this paper, the authors simultaneously examine the costs and benefits of an attendance award program that was implemented in an industrial laundry plant. The award used in the study was effective in that it reduced the average rate of tardiness among employees. However, it also led to a host of potential spillover effects that the plant manager readily admits were not considered when designing the program, and that reduced overall plant productivity. Overall, findings demonstrate that an award program that appears to be effective may also induce unintended consequences severely reducing the net value of the program. These results highlight the impact such a program can have on the overall performance of the firm and suggest caution when designing and implementing such programs. Read More
- 28 Dec 2010
- Working Papers
The Psychological Costs of Pay-for-Performance: Implications for Strategic Compensation
In studying pay-for-performance-based compensation systems, economic scholars often adhere to agency theory, which hypothesizes that firms should prominently use performance-based compensation—it alleviates the problems of employee "shirking" and ensures highly skilled employees' desire to work for the company. However, firms use performance-based pay far less frequently than agency theory predicts. This paper posits that the psychological costs of pay-for-performance systems often dominate their benefits to firms, and proposes an integrated theory of strategic compensation that takes into account the economic and psychological benefits and costs of pay-for-performance. Research was conducted by Harvard Business School professors Francesca Gino and Ian Larkin, and Lamar Pierce of Washington University. Read More
- 21 Apr 2010
- Working Papers
Why Do Firms Use Non-Linear Incentive Schemes? Experimental Evidence on Sorting and Overconfidence
The use of "non-linear" performance-based incentive contracts is very common in many business environments. The most well-known example is salesperson compensation, though many other types of performance-based pay, including stock options, bonus systems based on defined metrics, and pay based on subjective performance, often exhibit non-linear characteristics. Research has demonstrated that non-linear incentives are highly distortionary because employees manipulate their work in order to maximize their pay. While some scholars have recommended that companies stop using non-linear incentives, little research has been done to investigate the possible benefits of non-linear schemes. In this paper, HBS professor Ian Larkin and Ross School of Business professor Stephen Leider (HBS PhD '09) explore the role that the behavioral bias of overconfidence may play in explaining the prevalence of non-linear incentive schemes. They conclude that the linearity or non-linearity of an incentive system could play an important role in sorting employees according to their level of confidence; in addition, there may be three possible benefits to having overconfident employees. Read More
- 25 Mar 2009
- Working Papers
Demographics, Career Concerns or Social Comparison: Who Games SSRN Download Counts?
Why do certain individuals commit fraudulent acts—in this case repeatedly downloading their own working papers from the Social Science Research Network (SSRN) repository to increase the papers' reported download counts? HBS professors Benjamin G. Edelman and Ian I. Larkin study the relative importance of demographic, economic, and psychological factors leading individuals to commit this kind of gaming. Authors engage in deceptive self-downloading to improve a paper's visibility on SSRN, to obtain more favorable assessments of paper quality, and to obtain possible benefits for promotion and tenure decisions at those schools that consider download counts in tenure decisions. Data indicates that authors are more likely to inflate their papers' download counts when a higher count greatly improves the visibility of a paper on the SSRN network. Authors are also more likely to inflate their papers' download counts when their peers recently had successful papers—suggesting an "envy" effect in download gaming. Download inflations are also affected somewhat by career concerns (e.g. just before changing jobs) and by demographic factors, though these effects are smaller. On the whole, analysis suggests a heightened risk of fraudulent acts not only where economic returns are high, but also where prestige, status, or reputation are important. Read More