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  • February 2020
  • Article
  • Management Science

Effects of a Tournament Incentive Plan Incorporating Managerial Discretion in a Geographically Dispersed Organization

By: Carolyn Deller and Tatiana Sandino
  • Format:Print
  • | Pages:52
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Abstract

Using retail chain data, we study the effects of a tournament incentive plan based primarily on objective performance, but incorporating managerial discretion in the selection of winners. In principle, such plans could motivate employees to perform both at a high level, based on objective criteria, and in accordance with company values, considered via managerial discretion. However, such plans could be counterproductive if enough participants (especially those who don’t win) perceive that subjectivity (introduced via discretion) adds unfairness. We show that, on average, the tournament incentive plan was associated with improved store sales. We also find that such plans can be more beneficial for geographically distant participants, where the potential for improving alignment is greater. Lastly, we find some evidence that participants’ resource constraints (potentially affecting unfairness concerns) can impact outcomes under the plan.

Keywords

Tournaments; Subjectivity; Motivation and Incentives; Fairness; Performance Improvement; Geographic Location

Citation

Deller, Carolyn, and Tatiana Sandino. "Effects of a Tournament Incentive Plan Incorporating Managerial Discretion in a Geographically Dispersed Organization." Management Science 66, no. 2 (February 2020): 911–931.
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About The Author

Tatiana Sandino

Accounting and Management
→More Publications

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    Who Should Select New Employees, Headquarters or the Unit Manager? Consequences of Centralizing Hiring at a Retail Chain

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    Compensation Consultants and the Level, Composition, and Complexity of CEO Pay

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More from the Authors
  • From Online Content to Offline Results: Effects of a Best Practices Initiative on an Enterprise Social Network By: Shelley Xin Li and Tatiana Sandino
  • Who Should Select New Employees, Headquarters or the Unit Manager? Consequences of Centralizing Hiring at a Retail Chain By: Carolyn Deller and Tatiana Sandino
  • Compensation Consultants and the Level, Composition, and Complexity of CEO Pay By: Kevin J. Murphy and Tatiana Sandino
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