Non-Verifiable Communication in Homogeneous and Heterogeneous Teams

This study investigates whether non-verifiable communication from team members to a manager responsible for allocating performance-based bonuses increases team performance. Specifically, we investigate whether allowing individual team members to make bonus allocation recommendations provides information that enhances the contribution-reward relation, and, therefore, increases team effort and performance. Drawing on both economic and behavioural theories, we predict that non-verifiable communication has a positive effect on team performance. Further, we predict that the effect is greater when team members have homogeneous (i.e., equal) abilities compared to when team members have heterogeneous (i.e., unequal) abilities. We design an experiment to test these predictions. Consistent with our predictions, non-verifiable communication has a positive effect on team performance, however, the effect is more muted for heterogeneous teams. Results of our study contribute to both theory and practice in that they help build our understanding of the role of non-verifiable communication in motivating effort in teams. Given that the composition of real-world teams varies along a continuum of abilities, our study helps to inform practitioners regarding the design of appropriate control systems in team settings.

This seminar is organised by the Erasmus Accounting Research Group.