Nonbinding Goals in Teams: A Real Effort Coordination Experiment

Abstract

Problem definition: We investigate the impact of nonbinding (wage-irrelevant) goals, set by a manager, on a team of workers with “weak-link” production technology. Can nonbinding goals improve team production when team members face production complementarity? Academic/practical relevance: Nonbinding goals are easy to implement and ubiquitous in practice. These goals have been shown to improve individual performance, but it remains to be seen if such goals are effective in team production when there is production complementarity among workers. Methodology: We first develop a theoretical model where goals act as reference points for workers’ intrinsic motivation to complete the task. We then test our hypotheses in a controlled, human-subjects experiment. In our experiment, participants act as managers or workers, and we examine the impact of nonbinding goals on team outcomes. Results: Consistent with our model, we find evidence that team production does increase when managers are able to set goals. This effect is strongest when goals are challenging but attainable for weak-link workers. However, we also find evidence that many managers assign goals that are too challenging for weak-link workers, resulting in suboptimal team production, lower profits, and higher wasted performance (performance above the weak-link level). Managerial implications: Our analysis indicates that goals are effective motivators in teams, but some managers may have difficulty overcoming personal biases when setting goals. The task of setting team goals is more complex than setting individual goals, and many managers can benefit from training on how to set good goals for the team. Moreover, our finding that suboptimal goals also increase wasted performance suggests that improving goal-setting strategies is especially important in production settings where overperformance is costly for the firm (scrap, energy use, inventory costs, lower prices as a result of oversupply, etc.).

Set a Goal for Yourself? A Model and Field Experiment With Gig Workers

“…(2008) and demonstrated that assigned goals should be challenging but attainable, and monetary incentives can magnify the motivational effects of goal setting. Fan and Gómez-Miñambres (2020) examined the effects of an assigned goal on team production using a coordination game with a goal-dependent non-monetary utility.…”

Supplier bottleneck and information dissemination

“…In essence, our supplier game resembles the weakest link coordination in the economic literature (Cooper & Weber, 2020; Van Huyck et al, 1990). In the area of operations management, the complementary relationship has been widely investigated in assembly systems (Davis et al, 2022; Hyndman et al, 2013) and teamwork (Bansal & Gutierrez, 2020; Fan & Gómez‐Miñambres, 2020; Shokoohyar et al, 2019). We add to this literature by exploring the horizontal coordination among complementary suppliers and identify whether the vertical information dissemination by a buyer can help the supplier coordination.…”

Supplier Bottleneck and Information Dissemination

“…In essence, our supplier game resembles the weakest link coordination in the economic literature (Cooper & Weber, 2020;Van Huyck et al, 1990). In the area of operations management, the complementary relationship has been widely investigated in assembly systems (Davis et al, 2022;Hyndman et al, 2013) and teamwork (Bansal & Gutierrez, 2020;Fan & G omez-Miñambres, 2020;Shokoohyar et al, 2019). We add to this literature by exploring the horizontal coordination among complementary suppliers and identify whether the vertical information dissemination by a buyer can help the supplier coordination.…”