How the Design of Ranking Systems and Ability Affect Physician Effort

Although relative performance feedback in the form of rankings appears to be effective in improving health outcomes, it may have either motivating or demotivating effects for individual physicians. Potential factors influencing such effects include a physician’s ability and the design of the ranking system itself; however, there is limited understanding of these factors. Using a controlled lab-in-the-field experiment with practicing and future physicians as subjects ([Formula: see text]), we systematically analyze effort within small teams under different ranking systems. Exogenously varying the number and position of the thresholds defining the ranking system, we observe that the addition of a threshold to create a new rank is motivating—that is, increases effort—only among individuals capable of exceeding that threshold; the effort of other individuals may remain unchanged or even decrease. In particular, a highly granular ranking system with ranks spanning the entire range of possible outcomes maximizes overall physician effort; high thresholds serve to motivate high-ability individuals, whereas moderate and low thresholds provide opportunities for improvement to lower-ability individuals who cannot reach the high thresholds. Our results suggest that, to motivate their teams effectively, clinical leaders should provide rank feedback using a system under which physicians of all ability types can improve their rank through increased effort. This paper was accepted by Stefan Scholtes, healthcare management. Funding: This work was supported by C-SEB Center for Social and Economic Behavior at the University of Cologne (Junior Startup Grant No: Rd04-2016-JSUG-Huesmann) and the School of Business and Economics at the University of Münster (Junior Researcher Promotion Fund). This research was initiated while Daniel Wiesen was employed at the Institute of Health and Society at the Department of Health Management and Health Economics, University of Oslo (Norway), supported by the Research Council of Norway [IRECOHEX, Grant No. 231776]. Y. S. Ndiaye gratefully acknowledges support by the German Science Foundation through Germany’s Excellence Strategy [EXC 2126/1 390838866]. Supplemental Material: The online appendix and data files are available at https://doi.org/10.1287/mnsc.2022.00990 .