Providing performance information of peers is effective management tool if done in correct setting, study finds

More and more companies are gathering performance data on their employees and sharing that data among their staff. Their hope: that those employees who receive feedback that their own performance is lower than their colleagues’ will be more motivated to change the way they work and are more motivated to explore. But is this approach truly effective and sensible? In a new study, experts from KLU (Kühne Logistics University), the HEC Paris, and the University of Southern Denmark take a closer look.

The study is published in the journal Organization Science.

In an experiment, participants were provided information on their colleagues’ performance. Some received information from one other person that normally performed above or below average. The point of this additional information is not to rank employees, or to punish or reward them. Rather, the idea is to give people in the experiment the chance to assess their own performance in comparison to others and make better choices on that basis.

“The assumption is that especially those employees who aren’t currently performing as well will reexamine how they go about their work—and ideally, find new and creative solutions,” says Prof. Franziska Lauenstein. “But that’s not always what happens. Our study shows that, when this information is provided, the majority of participants keep doing things the way they always have. If you’re looking to boost efficiency, that can be a good thing; if you’re after future-proof solutions instead, it can be counterproductive.”

Positive self-image influences responses to feedback

Why do the majority continue with business as usual? On the one hand, those participants whose performance is better than that of their peers have very little incentive to change strategies. On the other, those participants who receive negative feedback often ignore it or reinterpret it into something positive. This response depends on whether or not they tend to have a positive self-image and to engage in “self-enhancement.”

“Individuals who tend to self-enhance look for positive affirmations of their self-image and ignore or reinterpret negative feedback,” Lauenstein explains. “For instance, they focus on the fact that their own performance improved, even if it was poor compared to others. In many real-world situations, this can be helpful.”

Creating the right framework conditions

Is information on coworkers’ performance poorly suited as a motivating management tool? “Providing performance data offers staff an excellent opportunity to make better choices on their own. But it’s important to create the right setting first,” says Lauenstein.

For instance, when being informed that other employees are outperforming them can endanger their own self-image, employees shy away from this comparison. And those employees already delivering good performance feel confident in continuing with business as usual, since they’re doing better than their peers.

“As a result, this can even lead to less exploration of new ideas throughout the company as a whole,” says Lauenstein.

“As such, companies have to ensure that the information can be seen as an opportunity for staff to learn from others and improve their own performance. Then it can produce positive effects and foster innovation.” For example, employees should receive this information directly, not in front of others. In addition, there should be little competition in the working environment.

“Then providing performance data can be a helpful tool, particularly for companies that want to give their employees information as the basis for making their own decisions, rather than micro-managing them or giving strict instructions,” Lauenstein concludes.