Behavioural economics of organization: Employees and managers

This short perspective article presents an overview of empirical evidence on the behavioural organizational economics on the basis of the extended standard model of worker’s behaviour. The advancements of behavioural economics theories, new detailed and structured data on actions of economic actors, and increasingly used fi elds experiments provide a strong basis for the creation of more precise and more robust models of the behaviour of employers and employees. In this article we analyse 4 stylized extensions of standard model of worker’s behaviour. Firstly, we give several examples of worker’s reference dependent decision-making. Secondly, we utilize Akerlof’s hypothesis on the relationship between an employer and an employee which is as predicted very reciprocal, similarly to the gifts exchange paradigm. We show that the more the employee thinks s/he is trusted by the employer, the harder and more effi ciently s/he works. Thirdly, we show several instances of the importance of extrinsic and intrinsic motivation in employees and how those two motivations interfere with each other and crowd each other out in some situations. The research shows that meaningfulness of the work can be a signifi cant driver of the employees’ effi ciency as well. In the last section devoted to employees we provide evidence on the impacts of relative performance compensation on cooperation, reciprocity, and sabotage in fi rms. The last part is devoted to analysing behavioural regularities of managers in their day-to-day decision-making. The overview briefly expands particularly on their over-optimism and on their possibly undeserved remuneration resulting from random events and market changes rather than from the managerial skills. The article concludes by proposing possible directions for further field research.

Citation: Houdek, P., & Koblovský, P. (2017). Behavioural economics of organization: Employees and managers. E&M Ekonomie a Management, 20(1), 4-15. doi: 10.15240/tul/001/2017-1-001