Simon Business School

Understanding Incentive

Understanding-Incentive.jpg

Jeanine Miklós-Thal and co-author Hannes Ullrich were looking for a way to test whether future career prospects affect current effort incentives when they hit upon the perfect testing ground: European soccer.

“Soccer is a nice way to test these incentives,” says Miklós-Thal, assistant professor of economics and marketing at the Simon School. “You need an environment where some people have a chance to be promoted and others do not. You can’t test the same thing in a business environment.”

The “promotion” in this case was an opportunity to play in the Euro Cup. The authors wanted to know whether the prospect of being selected to a Euro Cup national team affected players’ pre-cup performances on their club teams. They tracked the performance of roughly 250 players on all the club teams in the premiere league of Germany between the end of the World Cup in July 2006 and the end of the 2007-08 soccer season in May 2008. The Euro Cup began a few weeks later.

Like soccer clubs across Europe, German teams comprise players from many countries. Some of the players are nationals of countries that field a team for the Euro Cup. Other players on those same teams come from countries that don’t field a Euro Cup team; those players, ineligible to play in the cup, served as the control group for empirical and statistical analysis.

International soccer cups are a really big deal in most countries of the world. It is an honor for any player chosen to represent his country, but it’s also an important job forum for the players, who receive lucrative job offers and advertising contracts, Miklós-Thal says.

The authors found that players with average chances of being nominated to their national teams, many of them younger players still proving themselves, performed better in pre-cup club matches than teammates of other nationalities who had similar experience. Their performance was ramped up because they were competing with other players from their home country for a spot on the national team.

The authors, however, also found that players who have a high chance of placement on their national teams performed worse in club matches.

“An upcoming cup is to the detriment of clubs that employ regular players of qualified national teams,” they write. “Players who are already quite certain of being selected reduce their effort prior to the cup to avoid fatigue and injuries.”

The paper, “Career Prospects and Effort Incentives: Evidence from Professional Soccer,” is the first to show direct evidence that the prospect of future promotion can affect current actions. It’s also the first to find that those whose promotion is close to certain may perform worse than under regular circumstances, Miklós-Thal says.

The study has direct implications for business. Employees hoping for a promotion have incentives to increase or reduce efforts for similar reasons as the soccer players. Job efforts will be stronger from employees who think they have a fair chance of getting promoted.

“And staffers who have very good chances of promotion in the near future may actually reduce their effort in areas unrelated to the promotion,” Miklós-Thal says.

The study garnered wide attention in the German business press when a first version came out just before the World Cup in 2010.

 
   Back

Search

Back   

Events

   Back

Search

Back