Time is (Not) Money: Incentive Effects of Granting Leisure Time

Posted by ARC Commitee - Aug 13, 2022
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Employees spend a considerable amount of their working time enjoying on-the-job leisure. This on-the-job leisure time costs companies billions of dollars due to the reduction in effective working time. The most significant portion of this on-the-job leisure time is the private consumption of the internet during work time, despite companies employing costly monitoring software against it.  While this demonstrates a management control problem, it can also function as a novel domain for bonuses.

Considering the increasing preference for leisure time, and given that some working time is already used for private leisure, gifts of more off-the-job leisure time, as an informal management control that relies on signaling trust and kindness rather than restricting employee behavior, are an alternative worth exploring.

I examine how the gift of an intentional reduction of working time affects employee work behavior compared to a cash gift. A real-effort laboratory experiment shows that a cash gift neither alters employees’ on-the-job leisure time nor performance. A gift of more off-the-job leisure time, however, does reduce the on-the-job leisure time of employees and increases their performance. An analysis of post-experimental survey responses to a trust game suggested that stronger reciprocity for leisure time gifts helps explain the higher performance levels for leisure time gifts compared to cash gifts.

A follow-up vignette study among human resource (HR) professionals further provides external validity for these results. HR professionals anticipated that leisure time gifts would have a more positive impact on job satisfaction, organizational commitment, feelings of appreciation, and health than cash gifts. The majority of these factors also point to a positive reciprocal reaction when employees receive a leisure time gift, providing evidence consistent with the reciprocity evidence found in the lab experiment. HR professionals were also asked to evaluate how leisure time gifts versus cash gifts would influence employees’ on-the-job leisure time. The HR professionals expected a leisure time gift to reduce on-the-job leisure time significantly more than a cash gift, providing further external validity for the results of the lab experiment.

Overall, the results of this study add a novel tool to the literature on management controls regarding how to mitigate the problem of increased on-the-job leisure time. Moreover, these results add to the behavioral literature on reciprocity. I add to this line of literature by demonstrating that employees strive to balance mental budgets by reacting reciprocally within the same domain of the initial gift. Overall, my study suggests that managers seeking to reduce problems caused by too much on-the-job leisure time may benefit from using leisure time gifts as part of their management control system.

 

This paper is accepted for publication at the European Accoutning Review, and its link is:

https://www.tandfonline.com/doi/full/10.1080/09638180.2022.2096089

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