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Improving performance with data?

Thursday July 02, 2015 Written by  Stern School of Business
Companies should think twice before adopting data-driven management tools designed to spark friendly competition among employees.

While such tools may work well in company cultures that promote employee competition, they are likely to backfire in collaborative, team-based work environments and erode trust between employees and management, according to researchers from Columbia University and New York University’s Stern School of Business. They found the downside risk of data driven management is 3.5 times the upside potential.

The researchers conducted a study with a large U.S. logistics company that tracks employee driver performance on fuel efficiency. Half of the company’s work locations had recently adopted “lean management” principles, which are built on teamwork and collaboration and replaced a previous culture of individualism (“every man for himself”). At both the collaborative and individualistic locations, the researchers tested drivers’ reactions to posting a public performance ranking with each driver listed by name for all to see, a performance ranking listing just driver ID numbers so each driver could identify only his or her own score, and no performance ranking.

Drivers in the individualistic environments responded positively to public performance rankings listing drivers by name. These drivers improved their fuel efficiency by 3.75 per cent.

But drivers in the collaborative environments responded negatively to public performance rankings listing drivers by name, reducing their fuel efficiency by 13.4 per cent. This cost the company up to $1 million dollars over the course of one year.

There was minimal driver response to performance rankings in which drivers were listed by ID number and not identified by name.

“Our research suggests that data is not a panacea for getting more out of employees,” said professor Claudine Gartenberg with NYU’s Stern School of Business. “Companies with a collaborative work culture may see significant decreases in productivity and performance if they try to use data to foster employee competition.”

“The key take-away from this research is that there is no one-size-fits-all solution,” said professor Steven Blader, also with NYU’s Stern School of Business. “You can motivate employees in two ways: by promoting individual competition, or by encouraging employees to work together to help the organization succeed. It is important to tailor the motivation of employees to the company culture. Doing so is critical to building trust with workers.”

The researchers noted that their findings apply to any efforts companies make to boost competition among employees.

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