research@hec - Issue #29 - (Page 4)

HR research hec Managerial incentives: Life-cycles and the influence of learning processes Tomasz Obloj B iography Tomasz Obloj joined HEC Paris in September 2011. He obtained a PhD and master’s from INSEAD after undertaking most of his studies in Warsaw (Poland), where he also lectured. Tomasz Obloj is the recipient of the Wiley Blackwell Award, which is given to the best dissertation by the Business Policy and Strategy Division of the Academy of Management. Tomasz Obloj and Metin Sengul are interested in how individual and organizational learning processes can influence the evolution of the division of value between different economic actors. “Each rational economic actor seeks to appropriate a higher share of the value created in the exchange. Employees would like their employers to increase their salaries, suppliers seek higher prices and alliance partners would like better dividends”, explains Tomasz Obloj. In long-term relationships such as employment or strategic alliances, the division of value is determined by contractual agreements that secure the continuity of the relationship and joint value creation. Within companies, the corresponding arrangement is the structure of organizational incentives, which can be seen as an explicit contract specifying the division of value between a company and its employees. “As part of my dissertation, I began with a theoretical idea based on the observation that companies change incentive programs on average every one to two years”, says the researcher. “This is a relatively high frequency given the costs, worries, and uncertainty that result from any kind of organizational change.” THE LIFE-CYCLE OF INCENTIVE MEASURES By analysing data from a bank, the researchers were able to demonstrate the existence of an incentive-specific life-cycle. They observed that the creation of value (the sales revenue from primary loans) at each of the bank’s outlets and the value appropriation (the sum of the monthly bonuses earned by the employees) grew at a decreasing rate as employees gained experience under the new reward system. In parallel, the bank’s share (the percentage of value created by the outlets retained by the bank) increased at first before reaching a plateau and then decreasing continuously, indicating that the ability of the rewards to induce the intended results evolved over time. As Tomasz Obloj explains: “Every incentive system is likely to experience a life-cycle: it is more and more efficient as time progresses before reaching a tipping point, after which it becomes less and less so until the company changes it, as is the case for a product or particular technology”. Obloj continues: “At the beginning, the technology works increasingly well until it is replaced by a new technology that is even more efficient.” As well as documenting the 4 • october-november 2012

Table of Contents for the Digital Edition of research@hec - Issue #29

Cover & Contents
The Brand France, a source of great appeal
Managerial incentives: Life-cycles and the influence of learning processes
Searching for new sources of innovation: The role of consumers

research@hec - Issue #29