Invoking social comparison to improve performance by ranking employees: The moderating effects of public ranking, rank pay, and individual risk attitude

Abstract Inspired by social-comparison theory, we examine the effectiveness of relative performance ranking as an inherent incentive mechanism to enhance productivity, specifically testing the possibility that the effect is moderated by two features of the feedback design: private/public ranking (whether ranking information was released privately to each individual or announced publicly to all) and fixed/rank pay (whether pay is fixed or positively and monotonically based on rank). Furthermore, generalizing from the theoretical and experimental literature on bids in contests, we introduce individual attitudes toward risk as a potential moderator associating stronger incentive effects of feedback with those who are more tolerant toward risk. We test our hypotheses through a real-effort lab experiment with university students and a companion lab-in-field experiment with full-time employees. We empirically demonstrate both the positive effect of performance-ranking feedback on performance for those sufficiently tolerant of risk and also the statistically significant and practically important moderating effect of risk attitude for both students and factory employees. However, we also find important differences between the two populations regarding public ranking, rank pay and risk attitudes, illustrating the limitations of examining workplace phenomena using exclusively student populations.