The effect of within-domain task changes and compensation contracts on performance

Abstract

Workers’ learning, and attempts at learning, affect their current and future performance. However, attempts at learning and learning likely differ across operational settings. We experimentally examine how a setting with a within-domain task change, relative to a setting where the same task continues over time, affects these elements. We further examine how the form of compensation contract moderates this effect. We find that, relative to a continuing task setting, a within-domain task change decreases (increases) current (future) period performance, consistent with increased attempts at learning in the current period. The reduction in current performance from a within-domain task change is amplified for performance-based (piece rate or relative performance) contracts relative to flat wages. However, attempts at learning fail to improve future performance following a within-domain task change under piece rates. Our results suggest that firms should consider the task horizon, job environment, and importance of learning when designing contracts.