Managerial Discretion and Task Interdependence in Teams

46 Pages Posted: 8 Dec 2014

See all articles by Markus C. Arnold

Markus C. Arnold

University of Bern - Institute for Accounting

Ivo Tafkov

Georgia State University

Multiple version iconThere are 3 versions of this paper

Date Written: November 17, 2014

Abstract

This study investigates whether the effect of managerial discretion over team members’ compensation on team performance depends on task interdependence. Task interdependence reflects the degree to which the increase in team performance resulting from a team member’s effort depends on the efforts and skills of the other team members. Consistent with our predictions, we find that, regardless of task interdependence, managers use their discretion over compensation to differentiate team members’ compensations. However, the effect of this differentiation on team performance depends on task interdependence. Specifically, our results show that managerial discretion over compensation has a positive effect on team performance when task interdependence is absent and negative effect on team performance when task interdependence is present. The results also suggest that predicted effects of task interdependence become more pronounced when task interdependence goes up. Supplemental analysis reveals that differentiating compensation among team members through managerial discretion hurts coordination and helping behavior among them. Our results have practical implications for firms, which have flexibility in designing their incentive systems in a team environment, because we identify conditions under which the effectiveness of granting managers discretion over team compensation is likely to vary.

Keywords: Team-based incentives, teams, discretion, task interdependence

Suggested Citation

Arnold, Markus C. and Tafkov, Ivo, Managerial Discretion and Task Interdependence in Teams (November 17, 2014). 2015 Canadian Academic Accounting Association (CAAA) Annual Conference, Available at SSRN: https://ssrn.com/abstract=2535204 or http://dx.doi.org/10.2139/ssrn.2535204

Markus C. Arnold (Contact Author)

University of Bern - Institute for Accounting ( email )

Engehaldenstr. 4
Bern, 3012
Switzerland

Ivo Tafkov

Georgia State University ( email )

35 Broad Street
Atlanta, GA 30303-3083
United States

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