Does the Communication of Causal Linkages Improve Employee Effort Allocations and Firm Performance? An Experimental Investigation

ABSTRACT We use a multi-period production task to experimentally examine whether communication about causal linkages between actions today and performance tomorrow improves employee effort allocations and firm performance. We base our predictions on melioration theory, which anticipates that employees will allocate effort as though causal linkages were not there. We find that, absent communication about causal linkages, one-third of participants allocate effort without regard to causal linkages. Communicating qualitative information about linkages significantly improves effort allocations and performance. Communicating quantitative information about the linkage is no more beneficial than communicating qualitative information. Our results have implications for firms examining the benefits and costs of developing, validating, and quantifying causal linkages between performance measures, and they provide important evidence about how melioration theory can be extended to a rich context. Data Availability: Data used in this study are available from the authors upon request.