Peer Evaluation and Team Performance: An Experiment on Complex Problem Solving

Organizations succeed when they are capable of solving complex, non-routine problems. Often, these tasks are done by teams of individuals, usually after the individuals alone have had a chance to think through the issues and possibilities. The interplay of incentives and performance on complex choices is not well understood, neither theoretically nor empirically. In particular, an objective measure of performance is often not available, and thus less-studied incentives relying on subjective evaluation are needed. We use a laboratory experiment to study incentives for individual and group performance in a novel complex and non-routine task: guesstimations. In this task, first subjects work individually, then decide on the final answer in a group of three. While group performance, as measured by the quality of the answer, is unaffected by both group and individual incentives, group processes differ. In particular, relative to a setting with a flat wage, in the presence of both a group piece rate as well as a payoff-relevant peer evaluation groups more often use creative steps to approach the problem and spend more time deliberating, but individuals enter the group stage more often without an individual guess. Evaluating voting behaviour in the peer evaluation, creative individual inputs are significantly and positively related to being voted the most valuable group member, while having the best individual answer is not.With John Morgan and Susanne Neckermann