New study reveals how to reward employees fairly and boost team dynamics

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Researchers from the University of Waterloo and Wilfrid Laurier University have discovered effective ways to reward employees fairly and enhance team dynamics.

Their study reveals that requiring employees to explain their contributions leads to fairer bonus distribution and improved teamwork.

The study found that less skilled employees often exaggerate their achievements when they voluntarily report their performance.

These employees also tend to put in less effort and are less concerned about fairness when sharing their contributions without being prompted.

However, the researchers discovered a solution: requiring employees to explain their contributions.

This approach encourages honesty and diligence, helping managers make fairer decisions about bonuses and improving team dynamics.

Kelsey Matthews, a professor of accounting at Waterloo and co-author of the study, emphasized the importance of requiring explanations.

“If management wants performance information to be voluntarily provided, it is important to require an explanation to prevent self-interested bias among team members with lower abilities.

This bias not only decreases the usefulness of the communication but also compromises managers’ reward allocation decisions and team dynamics.”

The study involved 192 undergraduate students from a Canadian university, randomly assigned to different roles in a fictional company and placed in teams of four.

After completing decision-making tasks, participants filled out a questionnaire about the process and their demographics.

Matthews noted, “We also observe that among low-ability team members, the greater strategic bias observed when the relative contribution communication is voluntary, compared to mandatory, diminishes when an explanation is required.”

This research, conducted by Matthews along with Leslie Berger, Lan Guo, and Christopher Wong from Wilfrid Laurier University, was published in Behavioural Research in Accounting.

The study provides valuable insights for managers aiming to create fairer reward systems and improve teamwork within their organizations.

By requiring employees to explain their contributions, managers can reduce bias, make better-informed decisions, and foster a more collaborative and fair working environment.

Source: University of Waterloo.