The learning effects of monitoring
By: Dennis Campbell, Mark Epstein, F. Asis Martinez-Jerez
Contributors: Epstein, Mark; Martinez-Jerez, Asís; Harvard Business School
Series: Working paper / Harvard Business School -- 11-053; Working paper (Harvard Business School) -- 11-053.
Publisher: Harvard Business School
Published: 2011
Place of publication: [Boston]
Language: eng
Number of pages: 42
Description: This paper investigates the relationship between monitoring, decision-making, and learning among lower level employees. We exploit a field-research setting in which business units vary in the "tightness" with which they monitor employee decisions. We find that tighter monitoring gives rise to implicit incentives in the form of sharp increases in employee termination linked to "excessive" use of decision-rights. Consistent with these implicit incentives, we find that employees in tightly monitored business units are less likely than their loosely monitored counterparts to: (1) use decision-rights; and (2) adjust for local information, including historical performance data, in their decisions. These decision-making patterns are associated with large and systematic differences in learning rates across business units. Learning is concentrated in business units with "loose monitoring" and entirely absent in those with "tight monitoring". The results are consistent with an experimentation hypothesis in which tight monitoring of decisions leads to more control but less learning.
Notes: "November 2010, revised April 2011" -- Publisher's website.

"Current draft: November 2011" -- added t.p.

Includes bibliographical references.