LEVELING THE COMPETITION

Motivating employees at different positions within a firm’s performance management system poses a problem for management. Prior research indicates that motivating high-positioned individuals often comes at the expense of low-positioned individuals, or vice versa. In this study, I examine how the type of leaderboard (tier-based versus list-based) and the position on the leaderboard (low versus middle versus high) influence motivation and performance. Specifically, I am interested in the psychological effects of having a high, middle, or low position on a firm leaderboard and how individuals respond to firms using a tier-based leaderboard structure versus a list-based leaderboard structure. My theory suggests that tier-based leaderboards alter the field of comparison for individuals and allow them to make social comparisons at a more homogeneous level of perceived skill. In turn, tier-based leaderboards could lead to high motivation and performance for individuals, specifically high-positioned and low-positioned individuals who can exhibit demotivation when a list-based leaderboard is used. I conduct an experiment to test my predictions and theory. In line with my predictions, tier-based leaderboards result in significantly higher motivation when an employee is positioned either high or low on the leaderboard. Furthermore, individuals in low positions also exhibit higher performance with a tier-based leaderboard. I perform a follow-up experiment to better examine my proposed theory. Results support my theory that tier-based leaderboards lead individuals to assess that they are comparing themselves to peers with a similar level of skill. In addition, my tests of theory indicate that this perception is premised on individuals viewing tier-based leaderboards as a fairer system of comparison and to reducing feelings related to giving up on competitions. Overall, my study and theory provide new insights for academics and practitioners and extend prior research.