Are Joint Performance Measures Complements or Substitutes for Good Team Players?

This paper investigates performance measurement in a team production task that involves synergies. Specifically, I ask whether contracting on team performance, rather than on individual performance, is more valuable if a team’s members are better collaborators. The results of this analytical model show that the better (worse) a firm’s employees are at collaborating, the more the firm’s owners benefit from rewarding employees based on individual (team) performance. That is, in team settings, performance measurement is best aimed at covering weaknesses rather than building strengths