  We focus on how individual behavior that complies with social norms
interferes with performance-based incentive mechanisms in organizations with
multiple distributed decision-making agents. We model social norms to emerge
from interactions between agents: agents observe other the agents' actions and,
from these observations, induce what kind of behavior is socially acceptable.
By complying with the induced socially accepted behavior, agents experience
utility. Also, agents get utility from a pay-for-performance incentive
mechanism. Thus, agents pursue two objectives. We place the interaction between
social norms and performance-based incentive mechanisms in the complex
environment of an organization with distributed decision-makers, in which a set
of interdependent tasks is allocated to multiple agents. The results suggest
that, unless the sets of assigned tasks are highly correlated, complying with
emergent socially accepted behavior is detrimental to the organization's
performance. However, we find that incentive schemes can help offset the
performance loss by applying individual-based incentives in environments with
lower task-complexity and team-based incentives in environments with higher
task-complexity.
