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Interactions Between Social Norms and Incentive Mechanisms in Organizations

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Coordination, Organizations, Institutions, Norms, and Ethics for Governance of Multi-Agent Systems XIV (COINE 2021)

Part of the book series: Lecture Notes in Computer Science ((LNAI,volume 13239))

Abstract

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.

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Notes

  1. 1.

    Note that along with social norms at the individual level, previous research also addresses social norms at the level of organizations: Dowling et al. [12], for example, conceptualize organizational legitimacy as congruence between the social values associated with an organization’s action and the norms of acceptable behavior in the social system of the organization. This paper, however, focuses on social norms within an organization.

  2. 2.

    For extensive discussions on the role of social norms in behavioral control, the reader is also referred to [25, 39], and most recently [29] and the literature cited in these studies.

  3. 3.

    In our context linear incentives are as efficient as other contracts inducing non-boundary actions. See [16, p. 1461].

  4. 4.

    We use the bidirectional ring network topology, in which each node is connected to exactly two other nodes with reciprocal unidirectional links, where nodes represent agents and the links represent sharing of information.

  5. 5.

    Levinthal [27] describes situations in which agents switch more than one decision at a time as long jumps and states that such scenarios are less likely to occur, as it is hard or risky to change multiple processes simultaneously.

  6. 6.

    Note that agents are homogeneous with respect to goals and that goals are constant over time.

  7. 7.

    For reliable results, we generate the entire landscapes before the simulation, which is computationally feasible for \(P=4\) given modern RAM sizes. Our sensitivity analyses with simpler models without entire landscapes, suggest that the results also hold for larger population sizes.

  8. 8.

    Please note that task complexity in Fig. 3(b) is relatively low, since every task is coupled with \(K+C \cdot S = 2\) other tasks. In Fig. 3(a), on the contrary, each task is coupled with \(K + C \cdot S = 3\) other tasks.

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Authors and Affiliations

  1. Digital Age Research Center, University of Klagenfurt, 9020, Klagenfurt, Austria

    Ravshanbek Khodzhimatov

  2. Department of Management Control and Strategic Management, University of Klagenfurt, 9020, Klagenfurt, Austria

    Stephan Leitner & Friederike Wall

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  1. Ravshanbek Khodzhimatov
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  2. Stephan Leitner
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Correspondence to Ravshanbek Khodzhimatov .

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  1. Umeå University, Umeå, Sweden

    Andreas Theodorou

  2. Umeå University, Umeå, Sweden

    Juan Carlos Nieves

  3. University of Bath, Claverton Down, UK

    Marina De Vos

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Khodzhimatov, R., Leitner, S., Wall, F. (2022). Interactions Between Social Norms and Incentive Mechanisms in Organizations. In: Theodorou, A., Nieves, J.C., De Vos, M. (eds) Coordination, Organizations, Institutions, Norms, and Ethics for Governance of Multi-Agent Systems XIV. COINE 2021. Lecture Notes in Computer Science(), vol 13239. Springer, Cham. https://doi.org/10.1007/978-3-031-16617-4_8

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  • DOI: https://doi.org/10.1007/978-3-031-16617-4_8

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