Relationships between individual preferences and organizational designs: an experiment

Abstract

Most of managerial theories are based on the assumption of Homo Economicus which announces human nature is selfish. In contrast with this assumption, more and more behavior researches suggest that substantial fraction of human beings exhibit heterogeneity of individual preferences rather than “just selfish”. The inaccurate assumption of individual preferences may lead to ineffective organizational design. The objective of this paper is seeking to understand how the individual preferences (selfishness, trusting, trustworthiness and interpersonal sensitivity) influence the performances under different organizational designs (by two dimensions: communications and incentives). Focusing on empirical data the paper finds that less selfishness plays a significant role in increasing others members’ performances. Also, interpersonal sensitivity has a tiny negative relationship with performance increased when the organizational design changes from non-communication to communication, as well as controlling the incentive as individual-based pay. When the incentives are changed from individual-based pay to group-based pay, holding the communication environment fixed, the association between individual preferences and performances is complicated; the empirical findings do not support strong statements concerning the effects of incentives on performance.