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The timing to introduce flexibility and incentive scheme on employee learning

Tracks
Crystal 2
Tuesday, July 2, 2024
1:00 PM - 1:25 PM

Presenter

Dr Frank Ma
Lecturer
University of Auckland

The timing to introduce flexibility and incentive scheme on employee learning

Abstract

Prior studies in enabling control literature state firms should give employees immediate flexibility to override incomplete controls, facilitating learning by doing. Other studies suggest employees should observe how controls make decisions first, and only then are given the flexibility to override controls. In this study, we argue that one important variable that can explain the different predictions is employees’ incentive contracts. We hypothesize that a piece-rate financial incentive as opposed to a flat wage ensures employees exert more effort and seize more learning opportunities with immediate flexibility by overriding controls from the beginning. We conduct an experiment to examine whether employees’ incentive contract moderates the effect of the timing to introduce flexibility on employee learning. The findings support our hypothesis. Employees with incentive schemes and immediate flexibility better learn the task and improve their performance. This effect is due to a better understanding of control principle and more effort executed on learning. We further introduce a new task that shares the key features with the original task. We find employees with flat wages and late flexibility who adapt their behavior well to the original task cannot carry over the performance to the new task. Further analysis shows that these employees adapt to the desired behavior without understanding why the behavior is desired.

Biography

Frank Yuelong Ma is a lecturer in the Department of Accounting and Finance. Frank earned his Bcom. (hons) from the University of Queensland, and his Ph.D. from the University of Western Australia.

Discussant

James Wakefield
Associate Professor
University of Technology Sydney

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