Is employee-performance transparency really good for productivity?

How motivated are you when you’re working from home? More so or less so than when you’ve been in the office?

Apart from being in a different location, working from home also means a change in work culture.

For managers, new challenges include motivating and supervising employees remotely.

Some firms use ‘open’ video calls for employees to virtually replicate the experience of working quietly side-by-side. Some consider that sharing more performance information is an easy step for managers to motivate and oversee digitally connected teams.

But does this transparency really offer a more effective way of working together virtually, and maintaining or increasing productivity as a result?

Our research has found that transparency may have some unintended consequences.

If someone works really hard because they have no idea what other employees are doing, and their manager releases information showing that others aren’t working as hard, this could result in a reduction of their motivation and effort. This effect can be particularly salient for those who strongly identify with their workgroup or organisation.

For our study, we used data collected from three groups of workers in a Chinese state-owned electrical power plant.

Two of the groups received publicly disclosed performance information, with each employee aware of the performance of the other group members. The third group received individual performance scores communicated privately by the manager to each employee.

Apart from the different levels of transparency, all three groups were otherwise very similar in terms of team structure, tasks and demographics. Formal controls, like financial bonuses, were in place to encourage desired performance outcomes.

Group identity plays an important role in this study.

The employees in this study had been working within their teams for a long time. Psychologists have long identified the importance of group identity on individual behaviour.

Comparing the different transparency levels against monthly employee reports over a 4.5-year period, we were able to analyse the relationship between workers’ group identities and their individual performances.

To measure group identity, a survey that included employees rating responses to questions like: “When someone criticises my group, it feels like a personal insult” or “being a member of my group is a major part of who I am” or “my group members and I always share the same ambitions and visions at work”.

In the high-transparency groups, a strong group identity translated to more convergence in performance. That is, ‘better’ workers were withholding their performance levels and those of a lesser ability improved their performance to conform to others in their group.

In contrast, in the low-transparency group, this same strong group identity translated to enhanced performance by the ‘better’ workers but did not result in any significant influence in performance among those of a lesser ability.

These findings suggest that the two features associated with enlightened corporate management — creating an environment of high-performance transparency and encouraging strong group identity — may not work out as planned.

This is because when employees have information about each other’s performance — meaning that performance transparency is high — those with high group identity are motivated to adjust their actions to look more similar to other members in their group.

So, while some employees may work harder, others withhold their efforts to conform with others in the group.

Group dynamics play a part in determining the direction of this conformity. Group identity in such high-transparency groups is generally associated with downward conformity for high-ability employees and an upward conformity for low-ability employees.

We did not find a similar pattern in the groups with low-performance transparency.

This study tells us that managers need to be aware that the effects of performance transparency can be complex and not always positive.

We may assume that allowing colleagues to easily observe how their counterparts are performing drives motivation, but it is not always that as straightforward as that.

To what extent transparency is able to influence an employee’s performance depends on organisational culture and how managers disclose performance information.

Although this study documents that transparency could see higher-performing employees conform to others by lowering their standards, in a group made up mostly of high performers, transparency could, in fact, guide lower performers to increase productivity.

So, managers need to carefully consider whether to disclose performance information publicly within their teams. And if so, how.

This article was first published on Pursuit. Read the original article.