Employment Relationships
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Gaming Aspects of Employment
Multiple employees
Competition among employees for promotion
The ginger root get the
promotion because the
ginger root is qualified.
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Do you want to know
how Jacobs beat out
Jackson for the
promotion? I’ll tell you
how he did it . Steroids.
Great looking tie!
2
Gaming Aspects of Employment
How should the company manage this
“game” for promotion among its
employees?
How does the introduction of technology
affect this game situation? Impact for the
company?
• If employees use technology in effort to gain
promotion instead of productivity gains, then
company loses!
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The productivity paradox
As computers become more ubiquitous in the
1970’s and 1980’s, the prediction was that
productivity would rise dramatically, but …
Solow (1987): “You can see the computer age
everywhere but in the productivity statistics”
Brynjolfsson, Erik (1993). "The productivity
paradox of information technology".
Communications of the ACM 36 (12): 66–77.
Is the investment in IT justified for companies?
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“Office Politics” vs. “Real Work”
Employees compete for promotion.
In doing so, they may be devoting time to improve their
promotion chances, instead of working directly to benefit
the firm.
Mis-alignment of objectives between employees and the
firm!
Competition among employees for promotion, bonus, perks,
etc.
Employer should not ignore this competition for promotion.
• If the internal labour market is perceived a a random process, then
employees do not bother to compete and company do not even get
peripheral benefits.
Manager’s problem: how to direct employees’ resources
towards productive activities?
Should company provide employees with IT tools?
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Example – Government Service
Why do Governments produce and share information (e.g.
trade statistics, maps)?
“public good” – Government duty to provide service to
society.
“racing form” – everyone would spend effort to gather
this info anyway; if the Government does it,
duplication of effort is avoided.
• But people might then spend more effort to gain even more
data for competitive advantage!
Why do Google provide Googlemaps for free?
What about GoogleEarth?
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Promotion Game (Pingry and Issac, 1991)
Internal labour market: employees compete for promotion.
Each employee choose to engage in:
• Shirking
• Productive effort
• Office politics (“brilling”) – efforts directed at gaining promotion
Brilling usually benefits the firm, but may not be the most
effective for the firm.
Brilling need not be purely opportunistic for personal gain.
Individual may be trying to do the “best job”, just not the most
beneficial for the company, e.g.
• Employee produces a report with NO typos, but the last three typos took
2 days to find! Employee has produced a perfect report (beyond the
necessary quality) and does not have enough time to properly do the
next report!
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Promotion Game (Pingry and Issac, 1991)
Two employees (equally qualified) are in contention for a
promotion.
The promotion will be given to the one deemed most
productive.
Employees can “brill” to appear more productive,
• e.g. devote part of their time to do additional background research
for the company; these are somewhat useful but waste valuable
resources.
For the company, the brilling adds value Vf no matter how
many employees brill, but the cost Cf to the firm increases
with number of employees brilling.
For the employee, the value of the promotion is Ve and
brilling costs Ce.
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The Promotion Game
Expected Payoff to B
Expected Payoff to Firm
Expected Payoff to A
Brill
Miss A
Not brill
Mr. B
Brill
Not brill
Ve/2 – Ce
Vf – 2 Cf
Ve/2 - Ce
Ve – Ce
Vf – Cf
0
0
Vf – Cf
Ve - Ce
Ve/2
0
Ve/2
Prisoners’ dilemma for the employees!
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Analysis of the Promotion Game
For the employee:
If Ve – Ce < 0, then it is a dominant strategy “not to brill”!
If Ve – Ce > Ve/2, then it is a dominant strategy to “brill”!
For the company:
Suppose Vf – 2 Cf < 0, then it would not be useful for the
company to have both employees “brill”.
What can the managers do about this?
By offering technological tools, the manager may change
the costs of brilling or the benefits generated by real work
or brilling.
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Analysis of the Promotion Game
Suppose currently Ce > Ve/2, then each employee
has a dominant strategy not to “brill”.
If company provides technological tools (e.g. Iphone, Blackberry) to increase productivity, this
may lower Ce, making “brilling” dominant --- to
the detriment of the firm (if Vf – 2Cf < 0)!
On the other hand, if Vf – 2Cf > 0, then it is
worthwhile for the company to provide IT tools to
induce brilling from employees.
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Technology impacts
Should company provide Blackberry/I-phones?
Cost of brilling reduced, may induce employees to brill --- to the
detriment of the company.
• Employees may have bought their own blackberries anyway.
• Now company provides the tool, but employees use it for self-interest (to
win promotion) rather than for the firm’s benefit!
Depending on the relative costs and benefits, both employees may be
encouraged to brill, benefiting the company but employees worse off!
Other situations, brilling diverts attention of employees to office
politics, and productivity lowered to the detriment of company!
In brilling, employees amass private information and relationships,
which is not shared to benefit the company.
Employee behaviour may be induced by payoffs or corporate culture.
Sometimes, company may prefer a particular equilibrium, but cannot
enforce it.
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What can managers do?
Monitoring
Change incentives of the game
• Lower promotion bonus,
• Flatten the hierarchy (lower probability of promotion, fewer
positions to aspire to),
• Announce that “frills” are not valued.
Restrict the number of people playing the game.
Changing organisational structure
• If company centrally controlled, then networking and gaming of
less value.
• Work is clearly specified, effort measured, less asymmetry of info,
(e.g. blue-collar work).
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