Providing performance information of peers as a management tool?

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.

The complete study will soon be released under the following title:
Franziska Lauenstein; Daniel Newark Oliver Baumann, (2024) How Mixed Performance Feedback Shapes Exploration: The Moderating Role of Self-Enhancement. Organization Science 0(ja).

https://doi.org/10.1287/orsc.2021.15676

KLU, Kühne Logistics University, is a leading, state-recognized, international university based in Hamburg, Germany, with a second campus planned in Ho Chi Minh City, Vietnam. It offers English-taught Bachelor’s, Master’s, MBA, PhD, and Executive Education programs in business and management, data science and analytics, and notably, logistics and supply chain management.

Named after its founder and benefactor Klaus-Michael Kühne, one of Germany’s most successful business leaders, KLU is committed to empowering contemporary leaders with a strong operations mindset. Accordingly, its teaching and research activities blend academic excellence with a hands-on approach to ensure real-world applicability. Emphasizing digital transformation, entrepreneurship, and sustainability, KLU shapes leaders to drive responsible and sustainable change globally.

Students benefit from an exceptional professor-to-student ratio of approximately 1 to 12, affording them individual support from world-class, highly research-active professors. They can gain additional experience through integrated internships, participation in student and sports clubs, and international exchanges with prestigious business schools and universities. Tailored career coaching and partnerships with top companies ensure a successful career path.