December 7, 2016 Brian Silverman University of Toronto

Walid Hejazi, Brian S. Silverman, and Brent Perekoppi

(University of Toronto)

“Paying for Creativity: the Effect of Piece-rate vs. Time-rate Compensation on Quality of Work”


Wednesday, December 7th, 2016

6:30 p.m. to 8 p.m.

IAE de Paris – 12 rue Jean Antoine de Baïf, 75013 Paris
Room D5

Brian S. Silverman (University of Toronto)

« Paying for Creativity: the Effect of Piece-rate vs. Time-rate Compensation on Quality of Work »

Walid Hejazi (University of Toronto)
Brian S. Silverman, (University of Toronto)
Brent Perekoppi, (University of Toronto)

Abstract: Incentive-systems theory proposes generally that piece-rate compensation should yield higher quantity of output and, assuming that quality cannot be perfectly monitored, lower quality of output than time-rate compensation. But recent advances in psychology and behavioral economics suggest that such incentive compensation will elicit particularly poor quality results for non-routine tasks for which creative problem-solving is required. Using a unique database from the energy-related home services industry, we explore differences in quantity and quality outcomes between employee technicians who are paid a daily rate and contractor technicians who are paid by the job. Of particular interest, different job types require different levels of creative problem-solving, and calls are assigned to technicians independently of their compensation-scheme status. We find significant evidence that piece-rate workers indeed work faster and complete more jobs, with this advantage especially pronounced for routine jobs. We find mixed evidence regarding quality: piece-rate workers yield comparable quality for routine, low-creativity tasks, while their quality is significantly lower for high-creativity tasks. This study thus helps to reconcile prior results from conflicting theories.


Short bio: Brian Silverman is a Full Professor and holds the J.R.S. Prichard and Ann Wilson Chair in Management at the University of Toronto’s Rotman School of Management.

Prior to rejoining the Rotman School in 2001, Brian was Assistant Professor of Competition and Strategy at Harvard Business School, where he taught the core strategy course and jointly developed an elective on Technology and Competitive Strategy with faculty at the MIT Media Laboratory.  He has been a Visiting Professor at Columbia University, London Business School, New York University, Singapore Management University, Technion, Université de Paris 1 (Sorbonne), University of Cambridge, and the Wharton School.

Brian’s research focuses on the ways in which a firm’s competitive strategy and organizational structure interact to affect its performance – in particular, its ability to access and exploit technological capabilities. He has published 30 journal articles, five books (four as editor), and ten Harvard Business School cases.  His research has appeared in journals including Academy of Management Journal, Administrative Science Quarterly, American Journal of Sociology, Journal of Business Venturing, Journal of Law & Economics, Journal of Law, Economics & Organization, Journal of Economics and Management Strategy, Management Science, Research Policy, Strategic Management Journal, and Strategic Organization, and has been discussed in popular-press venues such as Business Week Online, Sloan Management Review, and The New York Times.  He currently serves on the editorial boards of Organization Science, Research Policy, and Strategic Organization, and is the series editor for Advances in Strategic Management.  He is the 2016-2017 Division Chair for the Business Policy & Strategy division of the Academy of Management.

Brian has taught in executive programs at Harvard Business School and the Rotman School, and has also delivered in-house management education programs. He has received numerous teaching awards. He has provided consulting and instruction to executives in North America, Asia, Europe, and Latin America, Clients have ranged from entrepreneurial ventures to Fortune 100 firms.  Brian has particular expertise in the information processing, consumer electronics, pharmaceutical/biotech, telecommunications, and transportation industries, and he has been cited as a « Noted Alliance Expert » by the Corporate Strategy Board.

Download the paper: Incentives Paper Dec 1 2016 BSS